testing intertemporal budget constraints theory and applications to u s federal budget and current account deficits this paper extends previous tests of intertemporal budget balance and present value relationships by expanding the set of allowable deficit processes and by deriving a testable condition that is sufficient to ensure intertemporal budget balance as long as the expected discount rate is strictly positive using these tests the authors find that both the postwar federal budget deficit process and the process governing accumulation of u s assets by foreigners are consistent with intertemporal budget balance copyright 1991 by ohio state university press

common trends the government s budget constraint and revenue smoothing abstract the requirement that the government s budget be balanced in present value terms is shown to be equivalent to the condition that government expenditures inclusive of interest tax receipts and seignorage be cointegrated the condition is in fact stronger requiring that the deficit inclusive of interest be stationary stationarity of the net of interest deficit is neither necessary nor sufficient for intertemporal budget balance however it does have implications for barro s tax smoothing hypothesis data for the period 1890 1986 are consistent with intertemporal budget balance but not with tax smoothing

international evidence on fiscal solvency is fiscal policy responsible abstract we conduct a cross country empirical analysis of fiscal solvency based on dynamic stochastic general equilibrium conditions the results show evidence of fiscal solvency in the form of a robust positive conditional response of the primary balance to changes in public debt in panels for emerging and industrial economies and in a combined panel emerging economies show a stronger response and hence converge to lower mean debt output ratios as observed in the data the results are weaker for countries with debt ratios exceeding panel means and medians hence we can separate countries where fiscal solvency holds from those where it remains in doubt

the sustainability of government deficits implications of the present value borrowing constraint this paper introduces a new methodology for evaluating the sustainability of fiscal policy the new methodology is distinguished from most existing tests in two important respects first it allows for stochastic real interest rates and second it is both necessary and sufficient results from the application of the new test suggest that recent fiscal policy in the united states has not been sustainable the paper contrasts its findings with those of james d hamilton and marjorie a flavin 1986 copyright 1989 by ohio state university press

a life course trajectory framework for understanding the intracohort pattern of wage inequality much research has been devoted to cross sectional and intercohort patterns of wage inequality but relatively little is known about the mechanisms for the intracohort pattern of wage inequality to fill this intellectual gap this article establishes a life course trajectory lct framework for understanding the intracohort pattern of wage inequality first the author proposes and conceptualizes three essential properties of the lct framework random variability trajectory heterogeneity and cumulative advantage that are used to establish a mathematical formalization of the lct framework both the conceptualization and the formalization imply that intracohort wage inequality will increase over the life course due to random variability trajectory heterogeneity and cumulative advantage finally the author combines the lct framework with the multilevel growth curve model then applies the model to data from the nlsy79 and finds support for the significance of random variability trajectory heterogenei

the rise of intra occupational wage inequality in the united states 1983 to 2002 wage inequality has increased dramatically in the united states since the 1980s this article investigates the relationship between this trend and occupational structure measured at the three digit level using the current population survey from 1983 to 2002 we find that the direct association between occupations and wage inequality declined over this period as within occupational inequality grew faster than betweenoccupational inequality we estimate multilevel growth models using detailed occupational categories as the unit of analysis to assess how the characteristics of occupations affect changes in mean wages and levels of wage inequality across this time period the results indicate that changes in mean wages across occupations vary depending on the characteristics of individuals in those occupations and that intraoccupational inequality is difficult to predict using conventional labor force data these findings seem largely inconsistent with the common sociological view of occupation as the most fundamental feature of the labor market correspondingly a more comprehensive approach one that incorporates the effects of organizational variables and market processes on rising wage inequality in the new economy is warranted

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

the incentive effect of fiscal equalization transfers on tax policy abstract a theoretical analysis considers the impact of a typical system of redistributive fiscal equalization transfers on the tax effort of local jurisdictions more specifically it shows that the marginal contribution rate i e the rate at which an increase in the tax base reduces those transfers might be positively associated with the local tax rate while the volume of grants received is likely to be inversely related to the tax rate these predictions are tested in an empirical analysis of the tax policy of german municipalities in order to identify the incentive effect the analysis exploits discontinuities in the rules of the fiscal equalization system as well as policy changes the empirical results support the existence of an incentive effect suggesting that the high marginal contribution rates induce the municipalities to set significantly higher business tax rates compared with a situation without fiscal equalization

knowledge beliefs and game theoretic solution concepts in situations of strategic interaction it is important for agents to consider not only what their rivals will do but also what they know what they know about what they know and so on formal models of knowledge have been developed to help us keep track of these levels of knowledge this paper provides a non technical introduction to one of these models and investigates its foundations it is then shown how the model can be used to analyse game theoretic solution concepts in particular nash equilibrium copyright 2002 oxford university press

u s deficits since world war i the tax smoothing theory suggests that deficits would respond particularly to recession temporarily high government spending and anticipated inflation my empirical estimates indicate that a relation of this type is reasonably stable in the u s since at least 1916 in particular the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions further the deficits for 1982 3 and popular projections formed in 1984 for 1984 5 are consistent with the previous structure the high values of these deficits reflect the customary response to substantial recession interacting with big government and to expected inflation

sustainability of the deficit process with structural shifts this article discusses the condition for deficit sustainability and searches for shifts in the structure of u s deficit policy i show that contrary to the current literature cointegration between revenues and expenditures inclusive of debt payment is not a necessary but a sufficient condition for a strict interpretation of deficit sustainability the necessary condition requires that debt grow slower than the borrowing rate for tests on structural shifts i use a test for structural change that searches for shifts in the rank of the cointegrating matrix i find that there is a shift in deficit policy in the early 80s so that cointegration between revenue and expenditure inclusive of interest payments holds only up to 1980 i show however that the deficit process is still sustainable despite the failure of cointegration in the 80s the finding of shifts in the deficit process is more uncertain when i normalize by gross national product or population but the deficit is shown to be sustainable regard

the protestant fiscal ethic religious confession and euro skepticism in germany during the european sovereign debt crisis most countries that ran into fiscal trouble had catholic majorities whereas countries with protestant majorities were able to avoid fiscal problems we find that christian conservative members of the german parliament from constituencies with higher shares of protestants were more likely to vote against a third bailout for greece survey data show that views on the euro differ between german protestants and non protestants at the individual level too among protestants concerns about the euro have compared to non protestants increased during the crisis we show that this increase in concern is linked to a reduction of protestants subjective well being we use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns emphasis on moral hazard concerns in protestant theology may thus still shape economic preferences jel d72 e00 i31 z12

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

unions norms and the rise in u s wage inequality from 1973 to 2007 private sector union membership in the united states declined from 34 to 8 percent for men and from 16 to 6 percent for women during this period inequality in hourly wages increased by over 40 percent we report a decomposition relating rising inequality to the union wage distribution s shrinking weight we argue that unions helped institutionalize norms of equity reducing the dispersion of nonunion wages in highly unionized regions and industries accounting for unions effect on union and nonunion wages suggests that the decline of organized labor explains a fifth to a third of the growth in inequality an effect comparable to the growing stratification of wages by education

how to assess debt sustainability some theory and empirical evidence for selected euro area countries in this article we elaborate on the test proposed by bohn 1998 that suggests to study whether the primary surplus relative to gross domestic product gdp is a positive function of the public debt to gdp ratio in order to detect whether debt policies are sustainable we argue that this should be complemented by additional tests for countries with rising debt to gdp ratios we then apply that test to some countries of the euro area in addition we perform stationarity tests with respect to the real deficit inclusive of interest payments in order to gain additional insight we conclude that there is empirical evidence that the chosen paths of fiscal policies are sustainable for the countries we consider although there are country specific differences in debt policies

the impact of high government debt on economic growth and its channels an empirical investigation for the euro area abstract this paper investigates the average impact of government debt on per capita gdp growth in twelve euro area countries over a period of about 40 years starting in 1970 it finds a non linear impact of debt on growth with a turning point beyond which the government debt to gdp ratio has a negative impact on long term growth at about 90 100 of gdp confidence intervals for the debt turning point suggest that the negative growth effect of high debt may start already from levels of around 70 to 80 of gdp the channels through which government debt is found to have a non linear impact on the economic growth rate are private saving public investment and total factor productivity

fiscal dimensions of emu the issue of fiscal policy in a monetary union has once again become very topical as the eu deadline for emu approaches and as countries take seriously the need to meet the maastricht fiscal criteria but are by no means certain to succeed in attaining them by the time a first decision on participation is made moreover germany has thrown open the issue of whether the fiscal criteria are adequate to ensure the needed discipline and has proposed more ambitious targets and monetary sanctions for non compliance with the 3 deficit ceiling in this paper i shall discuss what i consider to be the three essential issues with respect to fiscal policy and emu i the debt and deficit criteria as conditions for qualifying for emu membership 2 the need for fiscal discipline and policy coordination in emu and the role of the criteria in achieving them and 3 the desirability of and prospects for creating a supranational fiscal authority in the eu to accompany monetary union naturally these three issues have already achieved considerable attention in the literature and i will not be able to do justice to that literature by providing a proper survey instead i will provide my own views and be selective in my discussion of those of others

are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint abstract time series related to fiscal and external deficits are commonly subjected to stationarity and cointegration tests to assess if the deficits are sustainable such tests are incapable of rejecting sustainability the intertemporal budget constraint proves to be satisfied if either the debt series or the revenue and with interest spending series are integrated of arbitrarily high order i e stationary after differencing arbitrarily often revenues and spending do not have to be cointegrated rejections of low order difference stationarity and of cointegration are thus consistent with the intertemporal budget constraint error correction type policy reaction functions are suggested as more promising for understanding deficit problems

the optimality of a monetary union without a fiscal union the paper explores the case for monetary and fiscal unification monetary policy suffers from an inflation bias because the monetary authorities are not able to commit with international risk sharing fiscal discipline suffers from moral hazard an inflation target alleviates the inflation bias but weakens fiscal discipline in a monetary union however this adverse effect on fiscal discipline is weaker this advantage of monetary unification may outweigh the disadvantage of not being able to employ monetary policy to stabilise country specific shocks while monetary unification may thus be optimal international risk sharing may be undesirable because it weakens fiscal discipline

the race is to the swift socioeconomic origins adult education and wage attainment the winners in today s winner take all labor markets are differentiated by advanced levels of educational attainment especially higher degrees this article applies a sociological model of cumulative dis advantage to the baby boom cohort to examine whether life course timing differences in educational attainment help explain wage differentials by midlife it finds that advantaged social origins lead to early postsecondary completion of degrees which in turn yield higher wages a pathway of cumulative disadvantage is also evident where those least advantaged exit schooling early in life do not return as adults and earn low wages in a middle path advantaged social origins promote adult school attainment primarily for those without degrees but generally without the wage boosts associated with attainment earlier in life

current and anticipated deficits interest rates and economic activity abstract there is a widespread feeling that current deficits in europe and the u s may hurt rather than help the recovery this paper examines some of the issues involved through a sequence of three models the first model focuses on sustainability and characterizes its determinants it suggests that the issue of sustainability may indeed be relevant in some countries the second model focuses on the effects of fiscal policy on real interest rates and in particular on the relative importance of the level of deficits and the level of debt in determining interest rates the third model focuses on the effects of fiscal policy on the speed of the recovery it shows how a sharply increasing fiscal expansion might be initially contractionary rather than expansionary

government budget deficits and trade deficits are present value constraints satisfied in long term data abstract we test whether long term data from the u s and u k are consistent with the intertemporal government budget constraint and external borrowing constraint both individually and simultaneously a very strong test is provided by our focus on whether the present value constraints pvcs continue to hold despite unusual events such as wars that cause a structural break in the short run dynamic behavior of the variables we find that the pvcs hold over the whole sample period the data also indicate that the pvcs continue to hold following events that cause a structural break in the short run dynamics

output fluctuations and fiscal policy u s state and local governments 1978 1994 abstract we study the cyclical properties of u s state and local government fiscal policy the budget surpluses of both are procyclical over short and medium term horizons procyclical surpluses are the result of strongly procyclical revenue and weakly procyclical expenditure these results hold whether aggregate u s wide fluctuations are controlled for or not federal grants to state and local governments are procyclical but this is due to aggregate output fluctuations with respect to state level output fluctuations federal grants are countercyclical the budget surpluses of trust funds and utilities are also procyclical but there is no evidence that this effect is stronger in states where balanced budget rules are tighter the cyclical patterns of state and local budget surpluses are affected by various political institutions for example budget surpluses are less procyclical in conservative states in an election year that occurs in good times state governments refrain from accumulating a larger surplus in bad times no such asymmetry between election and non election years is apparent

moonlighting over the business cycle i introduction during economic downturns employment levels fall unemployment rates increase and real wages drop as such real wages are considered somewhat procyclical yet very little is known about the cyclicality of multiple job holding from a graphical analysis of national time series moonlighting data during the 1960s and 1970s stinson 1987 finds evidence of large increases in moonlighting during expansionary periods likewise partridge s 2002 findings support the possibility of procyclical multiple job holding yet the popular media and employment think tanks discuss moonlighting as a by product of financial pressures 1 furthermore the idea that individuals may hold multiple jobs during an economic downturn in order to supplement family income is consistent with the so called added worker effect in the labor economics literature why should we care about the cyclicality of multiple job holding in the economy there are numerous reasons first moonlighting has played and can be expected to continue to play a visible role in the u s workforce the moonlighting rate was 5 2 as of 1970 with 7 0 of male workers and 2 2 of female workers holding multiple jobs this moonlighting rate remained practically unchanged over the course of the next 30 yr yet its gender incidence did fluctuate in particular the female moonlighting rate grew over the past several decades from the above listed 2 2 in 1970 to 3 8 in 1980 and to 5 9 in 1991 and exceeded the male rate for the first time in 1995 6 5 vs 6 3 in may 2007 the moonlighting rate was still similar to the moonlighting rate in 1970 i e 5 3 although now females are much more likely to moonlight than men with rates of 4 9 vs 5 7 2 considered over the course of an entire year vs at a point in time an even larger percent age of workers hold second jobs in this regard paxson and sicherman 1996 p 357 note that approximately 20 of male workers and 12 2 of female workers hold second jobs in any given year 3 as these numbers suggest moonlighting is a substantively important labor market phenomenon however it is much understudied in fact our review of the literature to follow will show that only a handful of research papers have studied this phenomenon thus our primary motivation for writing the paper is to shed light on a poorly understood yet numerically important feature of the labor market a second reason for examining the cyclicality of multiple job holding is the potential importance of moonlighting in facilitating labor supply adjustments during temporary economic downturns or upturns 4 through a description of moonlighters our analysis will shed light on how workers respond to fluctuations in job opportunities across the business cycle macroeconomists and labor micro economists have long studied employment cyclicality in an attempt to improve the explanations of the changing composition of the labor force over business cycles for example the added and discouraged worker effects 5 third as one part of the broader picture of economic cyclicality our study fits nicely into the ongoing debate concerning the cyclicality of real wages 6 considerable research effort has been devoted to understanding the nature of real wage fluctuations across business cycles yet these studies are muddied by a glossing lack of distinction between workers average real wages across all jobs and their wages in the primary job alone understanding the role that moonlighting may play in employment cyclicality may inform the debate concerning the measurement of real wages when studying real wage cyclicality a final and policy relevant motivation for this research refers to the structure of employment taxes affecting secondary jobs as explained by anderson and meyer 2003 unemployment insurance ui payroll taxes are highly regressive in large part because benefits are structured in the same way

on the political and fiscal determinants of income redistribution under federalism and democracy evidence from germany several recent studies suggest that transfers from central to regional governments are motivated by political considerations in this paper we examine if this is also the case for transfers from regional to central governments in the context of the german fiscal equalization system we examine the factors that contribute to differences in tax revenues across german states the evidence indicates that both fiscal incentives and political factors can explain these differences although in germany the former are more important moreover accounting for fiscal institutions has important consequences for the empirical assessment of political influences on taxation overall we find that the political affiliation of the state governor is an important factor in explaining differences in state tax revenues thus the right wing party cdu csu is effective in relaxing the tax burden at the state level in contrast partisan alignment between the state government and the federal government loses its importance once fiscal conditions enter the empirical model

unemployment over the life cycle racial differences and the effect of changing economic conditions an analysis of the unemployment experience of white and nonwhite male heads of household was conducted using methods of partial likelihood the results show job tenure to be the most important determinant of unemployment experience but point to the complications involved in interpreting its effects when the sample studied has mixed levels of age and job quality nonwhites differ in unemployment experience from whites mostly at low tenure levels but they tend to be more sensitive to recessions at higher levels of tenure as well

fiscal transfers and fiscal sustainability we examine whether the u s and german state governments pursue sustainable fiscal policies taking into account fiscal transfers using panel data techniques we investigate whether the debt to gdp ratio had a positive influence on the primary surplus bohn model we show that including excluding fiscal transfers changes the results if fiscal transfers are not included in the primary surplus the test results do not indicate that the u s and german state governments pursued sustainable fiscal policies our results also suggest that fiscal transfers were positively related to debt these findings indicate that intergovernmental transfers have implicitly subsidized debts

cumulative gender disadvantage in contract employment women s wages do not grow with experience or tenure as much as men s do many accounts of this cumulative gender disadvantage attribute it to women s underinvestment in firm specific skills yet if that were true this disadvantage would not exist where firm specific skills are not rewarded by the labor market this article investigates this argument in the context of contract employment where demand for firm specificity is minimal contrary to expectations men still receive higher rewards than women over time drawing on quantitative evidence and qualitative fieldwork using job histories of high skill contractors affiliated with a staffing firm the author finds support for two sources of women s disadvantage lower rates of movement across clients on the supply side and unmeasured demand side factors by which similar levels of tenure and client transitions accrue lower rewards to women implications for research on gender stratification and career advancement in nonformalized labor markets are discussed

the dynamics of municipal fiscal adjustment abstract the dynamic fiscal policy adjustment of local jurisdictions is investigated empirically using a panel of more than 1000 u s municipalities over a quarter of a century distinguishing own source revenue grants expenditures and debt service the analysis is carried out using a vector error correction model which takes account of the intertemporal budget constraint the results indicate that a large part of the adjustment in response to fiscal imbalances takes place by offsetting changes in future expenditures in addition the results show that fiscal imbalances are financed to a significant extent by subsequent changes in grants decomposition of the sample according to average city population reveals that the basic pattern of fiscal adjustment is robust although intergovernmental grants play a much more pronounced role in maintaining budget balance for large cities