implications of energy subsidy reform in india abstract this paper analyses welfare impact of energy subsidy reform in india based on the data from 1970 71 to 2014 15 to this end auto regressive distributed lag ardl model and error correction model ecm have been estimated to quantify the short run and long run price and the income elasticity of various energy products the results show that the price elasticity of demand for all fossil fuels is low but the respective income elasticity is higher therefore an increase in the general price level caused by the subsidy reform will lead to the erosion of real income and will have related welfare implications in india the results also reveal that energy expenditure will obviously increase and hence energy consumption will decline depending upon the extent of the withdrawal of subsidy therefore policy makers in india while undertaking further reforms must ensure that the subsidy reaches to those who truly deserve so that the socioeconomic casualty of reforms can be minimized along with achieving fiscal goals

optimal unemployment insurance for older workers this paper studies the optimal unemployment insurance for older workers in a repeated principal agent model where the search intensity of risk averse workers the agents is not observed by the risk neutral insurance agency the principal when unemployment benefits are the only available tool the insurance agency is not able to induce older workers to search for a job this is because of the short time horizon of workers close to retirement we propose to introduce a pension tax dependent on the length of the unemployment spell we show that this device performs better than a wage tax after re employment first it makes jobs more attractive as they are free of tax second because re employment will be short lived a pension tax is a more powerful incentive than a wage tax and provides more substantial fiscal gains to the agency finally a pension tax allows those workers near retirement who still do not exercise job search to smooth their consumption during their unemployment spell as if they could borrow against their future pension

environmental efficiency and market segmentation an empirical analysis of china s thermal power industry abstract dominated by state owned administrative monopolistic enterprises china s power industry faces a dilemma that is being provoked by market oriented reforms regional protectionism makes it more difficult for those more efficient but non local power generators to enter into the local market thereby causing significant market segmentation ms in view of regional technology heterogeneity a meta frontier non radial slacks based measure model is used to evaluate the environmental efficiency ee of china s thermal power industry further we utilize a panel data tobit model and apply counterfactual analysis to explore the impacts of ms on ee the results show that 1 technology gaps exist between the group frontier and the meta frontier exhibiting greater potential for improvement 2 the degree of ms in thermal power industry in most provinces fluctuates within a narrow range from 2006 to 2015 and peaks during the period from 2008 to 2010 3 ms negatively affects ee performance both significantly and robustly with up to a 15 loss of thermal power generation due to ms in 2009 4 significant regional technology heterogeneity exists along with a widening technology gap ratio between developed and underdeveloped areas this study provides insightful policy implications for the sustainable development of china s thermal power industry

is there an energy efficiency gap many analysts have argued that energy efficiency investments offer an enormous win win opportunity to both reduce negative externalities and save money this overview paper presents a simple model of investment in energy using capital stock with two types of market failures first uninternalized externalities from energy consumption and second forces such as imperfect information that cause consumers and firms not to exploit privately profitable energy efficiency investments the model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision energy efficiency subsidies and standards may be merited this chapter therefore reviews the empirical work on the magnitude of profitable unexploited energy efficiency investments a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured these problems notwithstanding recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering accounting studies suggest finally there is tremendous opportunity and need for policy relevant research that utilizes randomized controlled trials and quasi experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs

fiscal spillovers in the euro area this paper analyses the dynamic effects of fiscal imbalances in a given emu member state on the borrowing costs of other countries in the euro area the estimation of a multivariate multi country time series model specifically a global var or gvar using quarterly data for the emu period suggests that euro denominated government yields are strongly linked with each other however financial markets seem to be able to discriminate among different issuers consequently fiscal imbalances in italy and in other peripheral countries should be closely monitored by their emu partners and the european institutions

life cycle equilibrium unemployment this paper extends the job creation job destruction approach to the labor market to take into account a deterministic finite horizon as hirings and separations depend on the time over which investment costs can be recouped the life cycle setting implies age differentiated labor market flows while search by the unemployed falls with age the separation rate is rather u shaped over the life cycle worker heterogeneity in the context of undirected search implies an intergenerational externality which is not eliminated by the hosios condition we show that age specific policies are required to attain the first best allocation

random walk expectations and the forward discount puzzle nber working paper seriesrandom walk expectations and the forward discount puzzlephilippe bacchettaeric van wincoopworking paper 13205http www nber org papers w13205national bureau of economic research1050 massachusetts avenuecambridge ma 02138june 2007we are grateful to adriano rampini for comments the paper was written while van wincoop visitedthe hong kong institute for monetary research van wincoop acknowledges financial support fromthe institute bacchetta acknowledges financial support by the national centre of competence in research financial valuation and risk management nccr finrisk the views expressed herein are thoseof the author s and do not necessarily reflect the views of the national bureau of economic research 2007 by philippe bacchetta and eric van wincoop all rights reserved short sections of text notto exceed two paragraphs may be quoted without explicit permission provided that full credit including notice is given to the source

are unemployment and out of the labor force behaviorally distinct labor force states this paper tests the hypothesis that the classifications unemployed and out of the labor force are behaviorally meaningless distinctions this hypothesis is rejected distinct behavioral equations govern transitions from out of the labor force to employment and from unemployment to employment the evidence reported in this paper is broadly consistent with versions of search theory in which unemployment is a state that facilitates the job search process in an appendix we demonstrate that log concavity of the wage offer distribution implies that the exit rate from unemployment is an increasing function of the rate of arrival of job offers

on the importance of the participation margin for labor market fluctuations abstract conventional analyses of labor market fluctuations ascribe a minor role to labor force participation we show by contrast that flows based analyses imply that the participation margin accounts for around one third of unemployment fluctuations a novel stock flow apparatus establishes these facts delivering three further contributions first the role of the participation margin appears robust to adjustments for spurious transitions induced by reporting error second conventional stocks based analyses are subject to a stock flow fallacy neglecting offsetting forces of worker flows on the participation rate third increases in labor force attachment among the unemployed during recessions are a leading explanation for the role of the participation margin

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

misclassification errors and the underestimation of the us unemployment rate using recent results in the measurement error literature we show that the official u s unemployment rates substantially underestimate the true levels of unemployment due to misclassification errors in labor force status in current population surveys our closed form identification of the misclassification probabilities relies on the key assumptions that the misreporting behaviors only depend on the true values and that the true labor force status dynamics satisfy a markov type property during the period of 1996 to 2009 the corrected monthly unemployment rates are 1 to 4 6 percentage points 25 to 45 higher than the official rates and are more sensitive to changes in business cycles labor force participation rates however are not affected by this correction we also provide results for various subgroups of the u s population defined by gender race and age

exchange rate regimes and asset prices abstract we study the implications of alternative exchange rate regimes for asset prices in a portfolio balance model motivated by the recent us china experience we establish that asset price responses to various shocks differ across a flexible regime and a unilateral peg but the differences for most shocks tend to be rather small moreover while both monetary and public debt expansions have inflationary effects on equity prices the latter s impact is stronger under a flexible exchange rate regime these two findings suggest that a flexible usd rimni rate would not have limited the recent asset price inflation in the us

the cyclicality of separation and job finding rates this paper uses cps gross flow data to analyze the business cycle dynamics of separation and job finding rates and to quantify their contributions to overall unemployment variability cyclical changes in the separation rate are negatively correlated with changes in productivity and move contemporaneously with them while the job finding rate is positively correlated with and tends to lag productivity contemporaneous fluctuations in the separation rate explain between 40 and 50 percent of fluctuations in unemployment depending on how the data are detrended this figure becomes larger when dynamic interactions between the separation and job finding rates are considered

cross sectional efficiency and labour hoarding in a matching model of unemployment we study positive and normative aspects of steady state equilibrium in a market where firms of endogenous size experience idiosyncratic shocks and undergo a costly search process to hire their workers the stylized model we propose highlights interactions between job security provisions and sectoral shocks in determining the natural rate of unemployment the allocation of labour and the extent of labour hoarding and rationalizes cross sectional asymmetries of gross employment flows at the firm level in our model where productivity and search costs are dynamically heterogeneous across firms decentralized wage bargains imply important cross sectional inefficiencies which overshadow the static search inefficiencies on which simpler models focus

how do policies for efficient energy use in the household sector induce energy efficiency innovation an evaluation of european countries abstract research on innovation induced by climate mitigation policy has been focused predominantly on the supply side of the energy system despite considerable climate mitigation potential on the demand side less attention is given to the innovation effect of policies addressing the household sector based on a comprehensive data set including 550 policy measures over 30 years 1980 2009 and covering 21 european countries we find based on econometric estimations that policies targeting efficient energy use in the household sector significantly increase the number of patented energy efficiency inventions a comparison of the different policy types reveals a particularly strong influence from financial subsidies and energy labels the results indicate that policies supporting early market adoption of energy efficient technologies are effective in fostering innovation

unemployment and nonemployment heterogeneities in labor market states abstract the determination of how to distinguish between unemployment and nonparticipation is important and controversial the conventional approach employs a priori reasoning together with self reported current behavior this paper employs an evidence based classification of labor force status using information about the consequences of the behavior of the nonemployed we find that marginal attachment defined as desiring work although not searching is a distinct labor market state lying between those who do not desire work and the unemployed furthermore important heterogeneities exist within these nonemployment states two subsets of nonparticipants both engaged in waiting display behavior similar to the unemployed

towards a micro founded theory of aggregate labour supply we build a heterogeneous agents life cycle model that captures a large number of salient features of individual male labour supply over the life cycle by education both along the intensive and extensive margins the model provides an aggregation theory of individual labour supply firmly grounded on individual level micro evidence and is used to study the aggregate labour supply responses to changes in the economic environment we find that the aggregate labour supply elasticity to a transitory wage shock is 1 75 with the extensive margin accounting for 62 of the response furthermore we find that the aggregate labour supply elasticity to a permanent compensated wage change is 0 44

convergence rates to purchasing power parity for traded and nontraded goods this article estimates the speed of the adjustment coefficient in structural error correction models we use a system method for real exchange rates of traded and nontraded goods by combining a single equation method with hansen and sargent s instrumental variables methods for linear rational expectations models we apply these methods to a modified version of mussa s model our results show that the half lives of purchasing power parity deviations for the rates of traded goods are less than 1 year and are shorter than those for general price and for nontraded goods in most cases implying a faster adjustment speed to parity

irving fisher and the fisher relation setting the record straight william j crowder 1997 1124 1127 states that the fisher hypothesis represents one of the oldest and most basic equilibrium relationships in financial economics the fisher equation encapsulates the simple relationship hypothesized to exist between nominal interest rates and expected inflation first delineated by irving fisher 1930 whose name has been associated with the equation ever since crowder s first sentence is indisputable the other sentence quoted presents a belief that seems almost universal in the literature on the fisher relation as distinct from the history of economic thought literature about irving fisher it credits fisher with one of the few innovations in the area for which he does not deserve and did not claim credit neglects what he did contribute on related topics and views the theory of interest 1930 as his first presentation of the relationship a third of a century later than his classic reformulation of the relation the celebrated equation which appears in fisher s american economic association monograph appreciation and interest 1896 and in an appendix to his the rate of interest 1907 does not appear in the theory of interest where the treatment of the relation in chapters 2 and 19 is verbal supplemented with diagrams but no equation in appreciation and interest 1896 fisher drew attention to statements by william douglass john stuart mill alfred marshall jacob de haas and john bates clark of how expected inflation or deflation affects nominal interest and he made no claim to originality on the point writing at the end of a thirty year period of declining prices fisher referred in his title to appreciation of the purchasing power of money rather than to depreciation fisher was the first to write down the relation as an equation but not the first to articulate the relation while endorsing

recessions growth and banking crises abstract we examine the relationship of banking crises with economic growth and recessions our data cover 21 economies from around the world most from 1870 to 2009 with the rest starting in 1901 or earlier the data include capital investment and human capital formation we have two major findings first there is very large heterogeneity in growth of gross domestic product gdp and capital investment after banking crises most strikingly twenty five percent of counties experience no decrease in real gdp per capita in the year of the crisis or the following two years some countries see an increase in long run growth after a crisis while others see a fall with no clear overall pattern second we find clear evidence consistent with zarnowitz s law if there is a contraction in economic activity after a banking crisis larger decreases in real gdp per capita are followed by faster subsequent growth

the rationale for energy efficiency policy assessing the recognition of the multiple benefits of energy efficiency retrofit policy the rationale for energy efficiency policy can be framed in terms of a variety of different benefits this paper considers how different benefits have been used within the overall rationale for energy efficient retrofit policy in different contexts we posit that different rationales may be used for the same policy response and that the form of rationale used may affect the design delivery or the level of policy support with different rationales making it easier to account for different results considering retrofit policy in the contexts of the uk germany new zealand and ireland we characterise policy rationale in each case assessing what the key perceived benefits have been and whether they have changed over time the analysis identifies some marked differences between cases with the recognition of benefits and the ensuing policy rationale resulting from a complex mix of political social and economic influences we find that recognition of multiple benefits may not equate with multiplied policy support and instead it is more likely that different rationales will have relevance at different times for different audiences the findings highlight that alongside evidence for policy it is important to also consider how the overall rationale for policy is eventually framed

macroeconomic adjustment and the history of crises in open economies abstract this paper investigates the impact of the history of crises on macroeconomic performance we first study the impact of past banking crises on the probability of a future banking crisis we do not detect a learning process from past banking crises countries that have already experienced one banking crisis generally have a higher likelihood of experiencing another crisis and the depth of the crisis does not appear to be affected by the previous historical experience with crisis events evidence also suggests that in middle income countries higher de jure capital account openness is associated with lower likelihood of a banking crisis a lower ratio of non performing loans during the crisis and higher levels of forgone output in the crisis aftermath in contrast we find that past crisis experience has a significant impact on savings when facing considerable political risk the past does seem to matter countries with more people who were exposed over their lifetime to larger disasters will tend to save more this association however does not hold for countries with more stable political systems

the impact of us economic variables on bank of canada policy direct and indirect responses abstract the impact of us economic variables on canadian monetary policy is assessed using quarterly data for 1963 88 canadian monetary base growth is regressed upon the least squares predictors of 11 us and canadian variables using a generalized least squares procedure that permits isolation of i direct responses by the monetary authority to its expectations of the us variables and ii indirect responses to past us influences that impact upon the current fitted values of the canadian variables the results reveal significance of both direct and indirect us influences on canadian policy across fixed and floating exchange rate regimes

green insurance subsidy for promoting clean production innovation abstract green insurance is introduced to advance green development in recent years and this article addresses the effects of insurance subsidy with game theory model some useful results are achieved first uncertainty deters firms innovation while both mature technology and high production efficiency stimulate firms innovation second interestingly green insurance cannot improve innovation and expect profits of firms but green insurance reduces risk finally both green insurance subsidy and governmental subsidy promotes firms innovation but green insurance subsidy owns lower risk than direct subsidy to innovate

evaluating the performance of the search and matching model abstract does the search and matching model fit aggregate u s labor market data while the model has become an important tool of macroeconomic analysis recent literature pointed to some significant failures in accounting for the data this paper aims to answer two questions i does the model fit the data and if so on what dimensions ii does the data fit the model i e what are the data which are relevant to be explained by the model the analysis shows that the model fits certain specifications of the data on many dimensions though not on all this includes capturing the high persistence and high volatility of most of the key variables the negative co variation of unemployment and vacancies and the behavior of the worker job finding rate a key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate the latter is a major component of the rate discounting the future value of the job worker match the paper offers a workable empirically grounded version of the model for the analysis of aggregate u s labor market dynamics

the steel industry a mathematical model under environmental regulations abstract in this work a spatial equilibrium problem is formulated for analyzing the impact of the application of the eu ets on the steel industry that has historically seen europe as one of its major producers the developed model allows us to simultaneously represent the interactions of several market players to endogenously determine output and steel prices and to analyze the investment in the carbon capture and storage ccs technology in addition the proposed model supports the evaluation of the co2 emission costs on the basis of directive 2009 29 ec the 20 20 20 targets and the energy roadmap 2050 in this light two main processes for steelmaking have to be considered integrated mills bof and electric arc furnace eaf in minimills

search frictions and labor market participation abstract cross country differences in labor market participation are often larger than differences in unemployment rates the same holds true across demographic groups within a given economy we argue that the interaction between labor force participation decisions and labor market frictions can help us understand these patterns this interaction highlights dynamic aspects of the participation decision in contrast to standard textbook treatments that emphasize static costs and benefits of participation we extend the standard labor market search problem to allow for a third state non participation and assumes that stochastic participation costs precipitate flows into and out of non participation we fully characterize the worker s decision problem and use numerical simulations to demonstrate how participation patterns vary with individual characteristics and with labor market conditions

comparison of energy efficiency subsidies under market power abstract energy efficiency subsidies are very popular all over the world for energy conservation and emission reduction by using a game theory model this article captures the differences of two important types of subsidies fixed subsides and output subsidies some interesting conclusions are achieved and some social phenomena are rationally explained firstly increasing total subsidies increases the number of subsidized firms moreover fiercer competition produces more firms to be subsidized thus the number of subsidized firms depends on the competition in this industry secondly output subsidies achieve a higher consumer surplus and a lower producer surplus than do fixed subsidies therefore consumers like output subsidies while firms like fixed subsidies finally output subsidies achieve a more favorable environmental impact and subsidize more firms than do fixed subsidies that is the environmental effects of output subsidies dominate those of fixed subsidies in summary based on both the effects on the environment and the consumer surplus this article supports output subsidies and explains the advantages of output subsidies

unemployment insurance takeup rates and the after tax value of benefits the recent decline in the unemployment insurance ui takeup rate has puzzled researchers using administrative data with accurate information on the potential level and duration of benefits we examine whether a separating employee receives ui we find a strong positive effect of the benefit level on takeup and smaller effects of the potential duration and the tax treatment of benefits simulations indicate that the recent inclusion of ui in the income tax base can account for most of the previously unexplained decline in ui receipt

subsidies in carbon finance for promoting renewable energy development abstract faced with decreasing exhaustible nonrenewable resources and climate change resulting from the use of fossil energy it is urgent to accelerate the development of renewable energy but the development of renewable energy requires abundant financial support both from banks and governments this article considers bank loans to develop renewable energy and highlights the effects of government subsidies by using a microeconomic model and taking all stakeholders including the government banks and shareholders of the firm into consideration this study finds that government subsidies raise outputs and debt levels of renewable energy firms and improve shareholder value as well more importantly financial debts stimulate firms outputs but decrease the net profit per unit of debt due to the limited liability effects finally subsidy policy plays a critical role in renewable energy development because environmental efficiencies of subsidies decrease with the subsidy degree other valuable conclusions would be achieved if principal agent problem and other corporate governance factors are employed

equilibrium relationships between money and other economic variables central to the quantity theory of money are a number of important propositions about the long run equilibrium effects of changes in the nominal stock of money on other economic variables a standard way of testing these propositions is to use quarterly or annual data explicitly model the lag structure and then derive the long run solution of the model from the empirical estimates an alternative is to use some type of smoothing procedure to approximate positions of equilibrium and then to use these transformed data directly in testing hypotheses the national bureau technique of averaging data over reference cycle phases is one such method robert lucas s application of fourier transforms in two illustrations of the quantity theory of money 1980 is another and john geweke s method 1982 of frequency decomposition is a third an entirely different way of approaching the problem is to use cross country average rather than time series data as the basic units of observation the advantage according to lucas is that since the two quantity theoretic laws that he examines are obtained as characteristics of steady states or limiting distributions of theoretical models the ideal experiment for testing them would be a comparison of long term average behavior across economies with different monetary policies but similar in other respects p 1006 in this paper i conduct such an experiment the data that i use are for 20 oecd countries over the period 1956 80 the specific relationships that i examine are those between money and the price level money and real income money and interest rates and money and exchange rates in the main the data accord well with the quantity theoretic model classical neutrality holds there is evidence of a fisher effect albeit a less than complete effect on interest rates finally the data are consistent with long run purchasing power parity and hence correspondingly with a long run monetary approach to exchange rate determination

labor market shocks and retirement do government programs matter abstract this paper argues that labor market conditions are an important and often overlooked determinant of retirement transitions in our analysis we examine how the unemployment rate affects retirement and whether the social security ss system and unemployment insurance ui system influence how older workers respond to labor market shocks we use pooled cross sectional data from the march current population survey cps in our analysis we find that downturns in the labor market increase retirement transitions and that the magnitude of this effect is comparable to that associated with moderate changes in financial incentives to retire and to the threat of a health shock facing older workers interestingly retirements only increase in response to an economic downturn once workers become ss eligible suggesting that retirement benefits may help to alleviate the income loss associated with a weak labor market we also estimate the impact of ui generosity on retirement and find little consistent evidence of an effect this suggests that in some ways ss may serve as a more effective form of unemployment insurance for older workers than ui

tariff regulation with energy efficiency goals we study the optimal tariff structure that could induce a regulated utility to promote energy efficiency by its customers given that it is privately informed about the effectiveness of its effort on demand reduction the regulator should optimally offer a menu of incentive compatible two part tariffs if the firm s energy efficiency activities have a high impact on demand reduction the consumer should pay a high fixed fee but a low per unit price approximating the tariff structure to a decoupling policy which strengthens the firm s incentives to pursue energy conservation instead if the firm s effort to adopt energy efficiency actions is scarcely effective the tariff is characterized by a low fixed fee but a high price per unit of energy consumed thus shifting the incentives for energy conservation on consumers the optimal tariff structure also depends on the cost of the consumer s effort in case the consumer can also adopt energy efficiency measures and on the degree of substitutability between the consumer s and the firm s efforts

i discovered the peso problem irving fisher and the uip puzzle abstract irving fisher was the first economist to posit what has come to be known as uncovered interest parity relation he was also the first to offer a peso problem type explanation for important episodes in which it was violated after reviewing his theoretical and empirical work on this subject we go on to reexamine both his data and several other bodies two consisting of multi country panel data and a third consisting of a two century long time series for the united states and the united kingdom we find evidence in these data of the important role played by episodic phenomena in disturbing the uip relation like fisher we find that the influence of such phenomena dissipates over time over the long term these errors prove to be less important and uip receives empirical support

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

job search and savings wealth effects and duration dependence this article studies a risk averse worker s optimal savings and job search behavior as she moves back and forth between employment and unemployment we show that job search effort is negatively related to wealth under the assumption of additively separable utility consequently job search exhibits positive unemployment duration dependence because wealth is drawn down to smooth consumption as the spell progresses finally given optimal search savings still provide imperfect insurance against income fluctuations precautionary savings are built up during employment spells and run down during unemployment spells but the consumption path will not be perfectly smooth over states

unemployment fluctuations over the life cycle abstract in this paper we show that i the volatility of worker flows increases with age in us cps data and ii a search and matching model with life cycle features endogenous separation and search effort is well suited to explain this fact with a shorter horizon on the labor market older workers outside options become less responsive to new employment opportunities thereby making their wages less sensitive to the business cycle their job finding and separation rates are then more volatile along the business cycle the horizon effect cannot explain the significant differences between prime age and young workers as both age groups are far away from retirement a lower bargaining power on the youth labor market brings the model closer to the data

tagging and targeting of energy efficiency subsidies corrective taxation is a common approach to addressing externalities internalities and other market distortions these distortions are often heterogeneous for example some cars pollute more than others and many people consume alcohol rationally even as present biased individuals might over consume such heterogeneity raises the question of whether a corrective tax is well targeted does it primarily affect individuals subject to relatively large distortions a tax set at the average level of the distortion could actually reduce welfare if the marginal individuals were already making relatively undistorted decisions this paper studies the targeting of corrective subsidies for energy ef cient durable goods such as air conditioners insulation and cars these subsidies are justi ed by multiple distortions primarily including environmental externalities credit constraints landlord tenant information asymmetries imperfect information and behavioral biases such as inattention to energy costs allcott and greenstone 2012 gillingham newell and palmer 2009 we rst argue that these distortions are heterogeneous on observables wealthy people are less credit constrained homeowners are unaffected by the landlord tenant problem and we show empirically that environmentalists are more attentive to energy costs and believe that energy ef cient goods save more money we then show that

a quantile approach to assess the effectiveness of the subsidy policy for energy efficient home appliances evidence from rizhao china abstract a one year subsidy program for energy efficient home appliances has been implemented in china we construct a dataset consisting of participant and non participant households in both urban and rural areas of rizhao city by applying a quantile regression and counterfactual analysis this study disentangles the impact of this subsidy program and inherent household attributes on per capita residential electricity consumption first contrary to the mean regression the elasticity of electricity consumption to household s income age education and energy saving awareness varies markedly across the electricity consumption distribution and shows discrepancy between urban and rural areas second while inherent household attributes are identified as a primary determinant to the changes in residential electricity consumption the effect induced by the subsidy incentive is more significant at the middle of the electricity consumption distribution than at the tails third there are significant rebound effects that lead to overall increase in household electricity consumption our results suggest that the disparity between urban and rural regions and targeted consumer behavior changes should be taken into account to ensure the effectiveness of a future energy efficient subsidy program

distance to retirement and older workers employment the case for delaying the retirement age this paper presents empirical evidence and a theoretical foundation in favor of the view that the retirement age decision affects older workers employment prior to retirement to the extent that there are search frictions on the labor market the return on jobs is determined by their expected duration the time to retirement is then key to understanding older workers employment countries with a retirement age of 60 are indeed characterized by lower employment rates for workers aged 55 59 based on the french labor force survey we show that the likelihood of employment is significantly affected by the distance to retirement in addition to age and other relevant variables we then extend mccall s job search model by explicitly integrating life cycle features with the retirement decision using simulations we show that the distance effect in interaction with the generosity of unemployment benefits and the depressed demand for older workers explains the low rate of employment just before the eligibility age for the social security pension finally we show that implementing actuarially fair schemes not only extends the retirement age but also encourages a more intensive job search by older unemployed workers jel j22 j26 h55

distributional effects of subsidy removal and implementation of carbon taxes in mexican households abstract this paper presents a microsimulation using data from the national households income and expenditure survey nhies from 1994 to 2010 to determine the distributional effects of the price changes arising from energy and environmental policies and their impact on mexican households we reported simulations of several changes in energy prices as a result of partial or total energy subsidy removal including carbon tax in order to examine whether the subsidy mechanism and carbon tax tend to be progressive or regressive we evaluated the households burden in different income levels these simulations respond to the need for an assessment of economic and environmental impacts of energy subsidies in mexico this is of great importance for mexico because of effort that has been taken in the development of energy policies and the rising interest of the mexican government in mitigating carbon dioxide co2 emissions and their concomitant environmental damage

wage risk and employment risk over the life cycle we specify a structural life cycle model of consumption labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects the sources of risk are shocks to productivity job destruction the process of job arrival when employed and unemployed and match level heterogeneity our model allows for four main social insurance programmes in contrast to simpler models that attribute all income fluctuations to shocks our framework allows us to disentangle the effects of the shocks from the responses to these shocks estimates of productivity risk once we control for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving increases in employment risk have large effects on output and primarily through this channel affect welfare the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides partial insurance against employment risk and no insurance against persistent shocks

fiscal impacts of energy efficiency programmes the example of solid wall insulation investment in the uk programmes supporting the installation of energy efficiency measures typically incur a cost in the form of subsidies as well as lost vat income due to reduced energy consumption those costs are to some extent offset by the tax receipts and other revenue streams generated as a result of the activities promoted under the programme in this paper we analyse the budgetary effects of energy efficiency programmes focusing on the example of solid wall insulation in the uk three distinct subsidy options have been defined and modelled for the purpose of this research including two policies with varying degrees of direct subsidy and a low interest loan scheme our analysis shows that a significant amount of the cost of a scheme funding solid wall insulation would be offset by increased revenues and savings a loan scheme due to the high leverage achieves not only budget neutrality but generates additional revenue for the exchequer

towards a quantitative theory of automatic stabilizers the role of demographics employment volatility is larger for young and old workers than for the prime aged at the same time in countries with high tax rates the share of total hours supplied by young old workers is lower these two observations imply a negative correlation between government size and business cycle volatility this paper assesses in a heterogeneous agent olg model the quantitative importance of these two facts to account for the empirical relation between government size and macroeconomic stability

unemployment participation and worker flows over the life cycle we estimate and report life cycle transition probabilities between employment unemployment and inactivity for male workers using current population survey monthly files we assess the relative importance of each probability in explaining the life cycle profiles of participation and unemployment rates using a novel decomposition method a key robust finding is that most differences in participation and unemployment over the life cycle can be attributed to the probability of leaving employment and the probability of transiting from inactivity to unemployment while transitions from unemployment to employment the job finding probability play secondary roles we then show that a simple life cycle extension of a three state labor search model with leisure shocks can qualitatively replicate the empirical unemployment and participation life cycle profiles without introducing age or worker heterogeneity in market abilities we conclude that models that seek to explain life cycle work patterns should not ignore transitions to and from inactivity

interrelations between the united states and the united kingdom 1873 1975 abstract this article is an excerpt from a monograph monetary trends in the united states and the united kingdom their relation to income prices and interest rates 1867 1975 that the university of chicago press has scheduled for publication in july 1982 earlier in the monograph we estimate a single demand curve for money for the united states and the united kingdom and also show that velocity in the two countries had parallel movements and that the rates of change of velocity were nearly identical in the two countries for most of the century we cover similar behavior of velocity in the two countries requires in addition to a largely common demand curve similar behavior of the variables affecting the demand for money chapter 7 from which this excerpt is taken begins by examining the interrelations between velocity in the two countries the excerpt though self contained is clearly incomplete note that the basic data are geometric averages of annual data for cycle phases expansions or contractions which average 2 0 years in length for the united states 2 8 years for the united kingdom rates of change g with a subscript for the variable for a phase are the slopes of straight lines fitted to the logarithms of three successive phase averages the phase in question the prior phase and the following phase money refers to currency plus adjusted demand and time deposits of commercial banks held by the public income refers to net national product nominal money m or income y is income in dollars or pounds at current prices prices p refer to the implicit price index obtained by dividing national product in current prices by national product in constant 1929 prices velocity v is the ratio of nominal income to nominal money short term interest rates refer to the us commercial paper rate and the uk rate on 3 month bank bills demand shift and postwar readjustment effects refer to the values of dummy variables in the demand curves for each country these effects allow for an upward shift in the demand for money during selected phases of economic uncertainty and for readjustments in the demand for money following world wars i and ii

aggregate implications of indivisible labor incomplete markets and labor market frictions this paper analyzes a model that features frictions an operative labor supply margin and incomplete markets we flrst provide analytic solutions to a benchmark model that includes indivisible labor and incomplete markets in the absence of trading frictions we show that the steady state levels of aggregate hours and aggregate capital stock are identical to those obtained in the economy with employment lotteries while individual employment and asset dynamics can be difierent second we introduce labor market frictions to the benchmark model we flnd that the efiect of the frictions on the response of aggregate hours to a permanent tax change is highly non linear we also flnd that there is considerable scope for substitution between voluntary and frictional nonemployment in some situations

on the cyclical behavior of employment unemployment and labor force participation abstract in this paper i evaluate to what extent a real business cycle rbc model that incorporates search and home production decisions can simultaneously account for the observed behavior of employment unemployment and out of the labor force this contrasts with the previous rbc literature which analyzed employment or hours fluctuations either by lumping together unemployment and out of the labor force into a single non employment state or by assuming a fixed labor force once the three employment states are explicitly introduced i find that the rbc model generates highly counterfactual labor market dynamics

energy subsidies structure of electricity prices and technological change of energy use abstract this paper addresses the impact of the structure of energy prices on technological change in renewable energy sources it operates on two fields of research that are often not related to each other firstly the increasing interest in environmental economics for the determinants of green technological change and secondly the impact of government policies aimed at subsidizing energy prices recent research claims a positive relationship between energy prices and the number of patents in the fields of energy efficiency this paper extends this research by investigating the impact of the price structure of electricity on patent counts in 1 renewable energy sources 2 wind energy and 3 solar power in nearly all oecd countries in the period 1990 2006 industrial energy users pay a lower price per energy unit than households due among others to government subsidy policies the empirical results show that reducing government subsidies and hence increasing the electricity price of large industrial electricity users relative to the price paid by small residential users provides a clear incentive to increase inventions as measured by number of patents in the technical fields of solar and wind energy these results are an important input in the debate on reducing government support to large energy users

two questions about european unemployment a general equilibrium search model makes layoff costs affect the aggregate unemployment rate in ways that depend on equilibrium proportions of frictional and structural unemployment that in turn depend on the generosity of government unemployment benefits and skill losses among newly displaced workers the model explains how before the 1970s lower flows into unemployment gave europe lower unemployment rates than the united states and also how after 1980 higher durations have kept unemployment rates in europe persistently higher than in the united states these outcomes arise from the way europe s higher firing costs and more generous unemployment compensation make its unemployment rate respond to bigger skill losses among newly displaced workers those bigger skill losses also explain why u s workers have experienced more earnings volatility since 1980 and why especially among older workers hazard rates of gaining employment in europe now fall sharply with increases in the duration of unemployment

the measurement of unemployment an empirical approach although the unemployment rate is one of the most widely cited and closely monitored economic statistics the definition and measurement of unemployment remain controversial an important issue is whether non employed persons who display a marginal attachment to the labor force for example those who are available for and desire work but are not searching for work should be classified as unemployed or non participants although this issue has been extensively debated it has never been tested empirically this paper carries out empirical tests of this and related hypotheses using a unique longitudinal data set from canada we find within the marginally attached a waiting group whose behavior indicates that they would be more appropriately classified as unemployed rather than out of the labor force the remainder of the marginally attached exhibit behavior between that of the unemployed and the balance of non participants suggesting that the desire for work among non searchers conveys substantial information about labor force attachment and future employment status our methods also apply to heterogeneity within the unemployed and we investigate behavioral variation linked to differences in job search methods and reasons for entry into unemployment although those using passive job search do exhibit behavior somewhat distinct from active searchers our results reject the practice of classifying passive job searchers as out of the labor force overall our results indicate that the non employed are very heterogeneous so that any single division into unemployment and out of the labor force is unlikely to fully capture the variety of degrees of labor force attachment this abstract was borrowed from another version of this item

life cycle economies and aggregate fluctuations do the implications for business cycle issues change when we switch from studying infinitely lived representative agent models to more sophisticated demographic structures with finitely lived agents this article addresses that question by using a large overlapping generations model that is calibrated to u s demographic properties microeconomic evidence and national income and product accounts the finding is that the answers obtained are basically the same for the two kinds of models the article also explores the relative volatility of hours across age groups an issue that cannot be addressed by using the infinitely lived representative agent abstraction

a model of exchange rate dynamics this model treats the exchange rate as an asset price that depends on expectations concerning exogenous real and monetary factors that will affect relative prices and absolute price levels in future periods changes in exchange rates reflect both expected changes in these exogenous factors and changes in expectations occasioned by new information the model explains the random component in exchange rate behavior the source of divergences from purchasing power parity the anticipatory response of exchange rates to future expected disturbances and the causes of exchange rate overshooting

age dependent employment protection this paper examines the age related design of firing taxes by extending the theory of job creation and job destruction to account for a finite working life time we first argue that the potential employment gains related to employment protection are high for older workers as they are magnified by the proximity to retirement but higher firing taxes for these workers increase job destruction rates for the younger generations furthermore from a normative standpoint when firms cannot ex ante age direct their search the impact of each generation of unemployed workers on the average return on vacancies makes the internalization of the search costs for the other generations imperfect through the ex post nash bargaining process we show that the first best age profile of firing taxes is typically hump shaped partially in contradiction with existing policies in some european countries taking into account the fact that the human capital of older workers is more specific than general tends to exacerbate these results

alternative approaches to analyzing economic data this paper compares two approaches to the analysis of economic data the exclusively econometric approach recommended by hendry and ericsson and the more eclectic approach that we employed in our books monetary history and monetary trends it concludes that the article by hendry and ericsson is mislabeled their article is not in any relevant sense an evaluation of our empirical model of u k money demand rather it uses one equation from our book as a peg on which to hang an exposition of sophisticated econometric techniques insofar as their empirical findings do bear on ours they simply confirm some of our principal results and contradict none jel 036 212

realignment expectations and the us dollar 1890 1897 was there a peso problem we investigate dollar sterling exchange rate expectations during the period 1890 1908 we show that the dollar faced a peso problem in that for much of the period financial markets expected it to depreciate against sterling but this never in fact happened i e expectations were persistently biased drawing on the economic history of the period we identify 11 events which probably gave rise to realignment expectations once the dollar s adherence to the gold standard was settled as a political matter in the 1896 presidential election expectations of dollar realignment abruptly subsided and united states interest rates fell relative to british rates

two illustrations of the quantity theory of money of two central implications of the quantity theory of money that a given change in the rate of change in the quantity of money induces i an equal change in the rate of price inflation and ii an equal change in nominal rates of interest the illustrations were obtained by comparing moving averages of the three variables in question using quarterly u s time series for the period 1953 77 readers may find the results of interest as additional confirmation of the quantity theory as an example of one way in which the quantity theoretic relationships can be uncovered via atheoretical methods from time series which are subject to a variety of other forces or as a measure of the extent to which the inflation and interest rate experience of the postwar period can be understood in terms of purely classical monetary forces the theoretical background of the study is reviewed very briefly as it is familiar material in the next section the data processing methods are described and rationalized in section ii the illustrations

agricultural pollution and regulation how to subsidize agriculture agricultural pollution is extremely serious in china and agricultural output quantity subsidy makes it even worse this paper captures the impacts of agricultural subsidy including quantity subsidy and innovation subsidy on agricultural pollution agriculture output quantity total pollution or emission equilibrium price consumer and producer surplus government budget and social welfare are all addressed in this study the results show that emission reducing innovation subsidy is better than quantity subsidy because it reduces the pollution from agriculture and profits for the agricultural firm are higher under innovation subsidy than under quantity subsidy more importantly output quantity and consumer surplus under innovation subsidy are also larger than those under quantity subsidy if the subsidy rate is not too high this study finds that the importance of the environment to the consumer marginal emission and pollution tax will decrease output quantity consumer and producer surplus and social welfare however agricultural subsidy increases them furthermore this study indicates that innovation subsidy can alleviate the food quantity safety and quality of environment dilemma in agriculture