accounting method choice opportunistic behavior efficient contracting and information perspectives abstract three alternative but not mutually exclusive perspectives on accounting method choice are contrasted the opportunistic behavior efficient contracting and information perspectives much of the empirical work on accounting method choice is based on the opportunistic behavior perspective the malmquist and main and smith papers are attempts to view accounting method choice as a means of improving the monitoring capabilities of contracts which rely on accounting numbers the papers serve as useful vehicles for illustrating the difficulties of delineating a set of maintained assumptions that result in hypotheses about how accounting method choice affects the monitoring characteristics of contracts and distinguishing between hypotheses based on the three perspectives on accounting method choice

growth and unemployment this paper analyses the effects of growth on long run unemployment using a search model of equilibrium unemployment where growth arises explicitly from the introduction of new technologies that require labour reallocation for their implementation the analysis uncovers and compares between two competing effects of growth on unemployment the first is a capitalisation effect whereby an increase in growth raises the capitalised returns from creating jobs and consequently reduces the equilibrium rate of unemployment the second is a creative destruction effect whereby an increase in growth reduces the duration of a job match thereby raising the equilibrium level of unemployment both directly by raising the job separation rate and indirectly by discouraging the creation of job vacancies this paper asks the question of how the rate of economic growth affects unemployment in the long run the main consideration that leads us to think that this is an interesting question has to do with the re allocative aspect of growth in the long run faster economic growth must come from a faster increase in knowledge to the extent that the advancement of knowledge is embodied in industrial innovations it is likely to raise the job destruction rate through automation skill obsolescence and the bankruptcy associated with the process of creative destruction in short increased growth is likely to produce an increased rate of job turnover and the search theories of lucas and prescott 1974 and pissarides 1990 imply that an increased rate of job turnover will result in a higher natural rate of unemployment this conclusion is also consistent with the empirical results of davis and haltiwanger 1990 which show that periods of high unemployment tend to be periods of high job turnover at the establishment level it suggests the possibility of a positive longrun tradeoff between growth and unemployment at least over some range there has been relatively little attention paid to our question in the literature on longrun determinants of unemployment for example the recent empirical examination by layard nickell and jackman 1991 of unemployment rates among oecd countries did not even consider the rate of economic growth as a possible explanatory variable this is consistent with the seminal theoretical work of phelps 1968 which implies that the natural rate of unemployment is independent of the rate of productivity growth the only

indeterminacy of stationary equilibrium in stochastic overlapping generations models abstract in this paper we consider the local uniqueness properties of stationary rational expectations equilibria ree in a stochastic overlapping generations olg model it is known that in non stochastic olg models steady state equilibria are locally isolated although there may exist indeterminate non stationary perfect foresight equilibria we show by construction that in the stochastic model even stationary equilibrium may be indeterminate we also show that this result is robust in the sense that there exists a non empty open set of economies for which the result is true

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

technology shocks and labor market dynamics some evidence and theory a positive technology shock may lead to a rise or a fall in per capita hours depending on how hours enter the empirical var model we provide evidence that independent of how hours enter the var a positive technology shock leads to a weak response in nominal wage inflation a modest decline in price inflation and a modest rise in the real wage in the short run and a permanent rise in the long run we then examine the ability of several competing theories to account for this var evidence our preferred model features sticky prices sticky nominal wages and habit formation the same model also does well in accounting for the labor market evidence in the post volcker period

the ir relevance of real wage rigidity in the new keynesian model with search frictions we explore the role of real wage dynamics in a new keynesian business cycle model with search and matching frictions in the labor market both job creation and destruction are endogenous we show that the model generates counterfactual inflation and labor market dynamics in particular it fails to generate a beveridge curve vacancies and unemployment are positively correlated introducing real wage rigidity leads to a negative correlation and increases the magnitude of labor market flows to more realistic values however inflation dynamics are only weakly affected by real wage rigidity this is because of the presence of labor market frictions which generate long run employment relationships the measure of real marginal cost that is relevant for inflation dynamics via the phillips curve contains a dynamic component that does not necessarily move with real wages

discretionary accounting choices and the predictive ability of accruals with respect to future cash flows using a sample of restatement firms and a meet or beat model to classify firms as making discretionary accounting choices for opportunistic meet or beat op mb reasons we show that originally reported earnings and accrual components are less predictive of future cash flows relative to the restated numbers we find the opposite is true for firms classified as making discretionary accounting choices for non op mb reasons we consider a number of competing explanations for these latter results our findings are most consistent with the informational hypothesis weakly consistent with conservative motivated efficient contracting hypotheses but inconsistent with opportunistic contracting and misapplication errors of gaap explanations

production function regressions returns to scale and externalities a number of recent papers have used simple linear regressions in an attempt to identify market structure the extent of returns to scale and possible external effects in u s manufacturing industries the results obtained from these regressions have important implications for several branches of modern macroeconomics as a result the macro literature frequently cites specific numerical evidence from caballero and lyons 1992 and hall 1990 which suggests that there are quantitatively significant increasing returns to scale or external effects in u s manufacturing in contrast it is the argument of this paper that this evidence is not convincing the most robust evidence suggests that the typical u s manufacturing industry displays constant returns with no external effects on the other hand there is significant heterogeneity across industries

labor market frictions human capital accumulation and long run growth positive analysis and policy evaluation we construct a search model with endogenous human capital and labor participation to study the growth effects of short run frictions and the effectiveness of human capital policies employment learning effort and output growth increase with more effective learning better labor market matching lower job separation or less costly vacancy creation although output growth employment vacancy creation and learning and search effort are most responsive to changes in a human capital policy that directly affects learning effort such a policy need not be more beneficial for welfare the effects of human capital policies become larger as the severity of labor market frictions rises

measures of technology and the business cycle empirical evidence on the relationship between technology shocks and e g hours worked hinges crucially on the identification of the unobservable technological progress in this paper we study different measures of technology in order to find out i to what extent they capture the same underlying phenomenon and ii whether the implications for macroeconomic theory are robust across the approaches several versions of the productions function approach and structural var models are investigated our main finding is that the different technology measures are highly correlated however the exact formulation of the identifying restrictions seems to matter for the results while we replicate the standard finding of a strongly procyclical solow residual all other measures of technology are either acyclical or countercyclical

the economic determinants of accounting choices the unique case of equity carve outs under sab 51 abstract since 1983 parents carving out subsidiaries have faced two unusual accounting choices first whether to take the carve out gain into income or directly to equity second whether to provide a book tax on the gain or not we find that parent leverage unexpected write offs in the carve out year the carve out gain size and unexpected future earnings generate predicted probabilities that are concordant with 78 of the observed equity versus net income choices and 73 of tax versus no tax choices we conclude that parents sab 51 decisions reflect forces from efficient contracting earnings management and information signaling theories of accounting choice

efficient contracting and the choice of accounting method in the oil and gas industry abstract this paper s results are consistent with the choice of accounting method in the oil and gas industry being dominated by measurable characteristics of firms and guided by the principles of efficient contracting the results are inconsistent with an alternative hypothesis opportunistic behavior by managers the efficient contracting explanation is also consistent with the empirical findings from earlier studies e g lilien and pastena 1982 and deakin 1979

evaluating an estimated new keynesian small open economy model abstract this paper estimates and tests a new keynesian small open economy model in the tradition of christiano et al 2005 nominal rigidities and the dynamic effects of a shock to monetary policy journal of political economy 113 1 1 45 and smets and wouters 2003 an estimated stochastic dynamic general equilibrium model of the euro area journal of the european economic association 1 5 1123 1175 using bayesian estimation techniques on swedish data to account for the switch to an inflation targeting regime in 1993 we allow for a discrete break in the central bank s instrument rule a key equation in the model the uncovered interest rate parity uip condition is well known to be rejected empirically therefore we explore the consequences of modifying the uip condition to allow for a negative correlation between the risk premium and the expected change in the nominal exchange rate the results show that the modification increases the persistence in the real exchange rate and that this model has an empirical advantage compared with the standard uip specification

wage rigidities and labor market adjustment in europe based on an ad hoc firm level survey on wage and pricing policies conducted in a large number of european countries this study finds that about 60 of firms change base wages once a year with some clustering of wage changes observed in january differences in the frequency of wage changes between firms are mainly attributable to the institutional framework of the labor market in which they operate there is evidence of both nominal and real downward wage rigidity moreover when facing a negative shock european firms prefer to reduce the amount of labor rather than cutting wages among those that decide to cut wages a majority prefers to cut flexible wage components rather than base wages the rigidity of base wages is largely explained by fairness and efficiency considerations jel e24 j30

factors associated with the year end decline in working capital working capital is an important indicator of firm operational efficiency all else being equal lower levels signal greater efficiency managers are thus likely to be motivated to report lower levels of working capital at times of greater external attention we find that working capital levels decrease in the fourth fiscal quarter significantly more than expected conditional on seasonal changes in economic activity the decrease subsequently reverses in the following first fiscal quarter evidence indicates that firms manage down year end working capital through transactions that increase year end operating cash flow and that firms spread this activity over all working capital accounts finally the temporary decrease in year end working capital is correlated with compensation benchmarks and analysts annual cash flow forecasts the temporary drop is also more pronounced for firms with industry dominance this paper was accepted by mary barth accounting

the economic consequences of accounting choice implications of costly contracting and monitoring abstract in this paper we review research into the economic consequences of voluntary and mandatory choices of accounting techniques and standards we discuss how the predictions of extant economic consequence theories are driven by contracting and monitoring costs associated with management compensation contracts bond covenants regulation and or political visibility we review empirical tests of economic consequence theories categorize those tests and discuss their strengths and weaknesses the empirical tests reveal two systematic associations with accounting choice size a proxy for political visibility and leverage a proxy for contracting and monitoring costs of lending agreements interpretation of the results is difficult due to general limitations of the tests we conclude by suggesting some directions for future research based on our analysis of the potential payoffs associated with different types of empirical tests

determinants of intramethod choice in the oil and gas industry abstract procedural flexibility can have a substantial impact on reported costs revenues expenses and balance sheet valuations until 1978 oil and gas companies had considerable flexibility in applying full cost and successful efforts a unique opportunity to measure the income effect of firms procedural choices occurred when the sec specified the exact procedures that must be followed by oil and gas producers when they account for exploratory and development costs under both the full cost and successful efforts methods in complying with the new rules firms were required to adjust retained earnings retroactively to reflect what it would have been if the new procedures had been in effect all along these retained earnings adjustments provide a measure of the income effect of procedural choices this study shows that economic incentives influence the procedural accounting choices which were made by oil and gas producers the same economic incentives also influence the choice of full cost or successful efforts finally the discriminatory ability of firms economci incentives is most powerful when firms reporting strategies are defined in terms of both choice of accounting methods and procedural applications within those methods

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

solution and estimation of re macromodels with optimal policy macro models of monetary policy typically involve forward looking behavior except in rare circumstances we have to apply some numerical method to find the optimal policy and the rational expectations equilibrium this paper summarizes a few useful methods and shows how they can be combined with a kalman filter to estimate the deep model parameters with maximum likelihood simulations of a macro model with staggered price setting interest rate elastic output and optimal monetary policy illustrate the properties of this estimation approach

debt covenant violation and manipulation of accruals abstract this paper examines the abnormal accruals of a sample of 94 firms that reported debt covenant violations in annual reports we expect debt covenant restrictions to influence accounting choices in the year preceding and the year of violation time series and cross sectional models are used to estimate normal accruals in the year prior to violation both models indicate that abnormal total and working capital accruals are significantly positive in the year of violation there is evidence of positive abnormal working capital accruals after controlling for management changes and auditor going concern qualifications

the investment opportunity set and accounting procedure choice abstract this paper provides evidence on the cross sectional relation between firms investment opportunities their debt and compensation contracts their size and financial leverage and their accounting procedure choices this evidence is important because previous studies hypothesize that the link between firms investment opportunities and their accounting choices helps explain extant results on the size debt equity and bonus plan hypotheses however while i find that firms investment opportunities do affect the nature of their contracts i also find that the traditional explanations for accounting choice are important after controlling for the effects of the investment opportunity set

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

comparative statics and perfect foresight in infinite horizon economies does a pure exchange economy with an infinite time horizon have determinate perfect foresight equilibria when there is a finite number of infinitely lived agents equilibria are generically determinate this is not true with overlapping generations of finitely lived agents we ask whether the initial conditions together with the requirement of convergence to a steady state locally determine an equilibrium price path in this framework there are many economies with isolated equilibria many with continua of equilibria and many with no equilibria at all with two or more goods in every period not only can the price level be indeterminate but relative prices as well furthermore such indeterminacy can occur whether or not there is fiat money and whether or not the equilibria are pareto efficient this paper considers whether infinite horizon economies have determinate perfect foresight equilibria this question is of crucial importance if instead equilibria are locally indeterminate not only are we unable to make comparative static predictions but the agents in the model are unable to determine the consequences of unanticipated shocks the idea underlying perfect foresight is that agents expectations should be the actual future sequence predicted by the model if the model does not make determinate predictions the concept of perfect foresight is meaningless we consider two extreme cases the first with a finite number of infinitely lived consumers and the second with an infinite number of finitely lived consumers an overlapping generations model both are models of stationary pure exchange economies no production including the storage of goods between periods can occur these models are unrealistic but are the easiest to study extensions of the results of this paper to models with production infinitely lived assets and mixtures of the two types of consumers are presented by muller and woodford 29 when there is a finite number of infinitely lived consumers we argue that equilibria are generically determinate this is because the effective number of equations determining equilibria is not infinite but equal to the number of agents minus one and must determine the marginal utility of income for all but one agent generically near an equilibrium these equations are independent and exactly determine the unknowns when there are infinitely many overlapping generations this reasoning breaks down an infinite number of equations is not necessarily sufficient to determine

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

endowments stability and fluctuations in og models abstract in the present paper we consider a stationary overlapping generations model with many commodities and many different consumers and investigate how the distribution of endowments influences the dynamical properties of the model such as stability of steady states and existence of cycles our main results are 1 1 preferences place no restrictions on stability properties of steady states 2 2 cycles exist for all aggregate savings real or nominal and 3 3 equilibria of economies with equilibria close to a no trade equilibrium with constant prices are either steady states or equilibria which converge to a steady state in backward time and another steady state in forward time these results are obtained generically in utility functions and do not depend on whether the utility functions are of the discounted form or not

empirical research on accounting choice abstract we review research from the 1990s that examines the determinants and consequences of accounting choice structuring our analysis around the three types of market imperfections that influence managers choices agency costs information asymmetries and externalities affecting non contracting parties we conclude that research in the 1990s made limited progress in expanding our understanding of accounting choice because of limitations in research design and a focus on replication rather than extension of current knowledge we discuss opportunities for future research recommending the exploration of the economic implications of accounting choice by addressing the three different reasons why accounting matters

real price and wage rigidities with matching frictions abstract frictional unemployment means that workers for some time are a firm specific factor of production this paper models the resulting interaction of wage bargaining and price setting at the firm level in a new keynesian model with labor market matching frictions real rigidities arise and the labor share ceases to be a good proxy for marginal costs the model replicates the impulse responses of an svar for u s data better than alternatives in which the real rigidities arising at the firm level are absent in addition it implies reasonably low degrees of nominal rigidity whereas the alternatives do not the interaction of wage and price setting at the firm level is important for the macroeconomic dynamics

when is discretion superior to timeless perspective policymaking the monetary policy literature assumes increasingly that policy is formulated according to the timeless perspective woodford 1999a however by treating appropriately the auxiliary state variables that characterize the timeless perspective equilibrium when evaluating policy performance this paper shows that discretionary policymaking can be superior to timeless perspective policymaking and identifies model features that make this outcome more likely using standard new keynesian dsge models discretion is found to dominate timeless perspective policymaking when the price wage phillips curves are relatively flat due perhaps to firm specific capital or labor and or kimball 1995 aggregation in combination with nominal rigidities these results suggest that studies applying the timeless perspective might also usefully compare its performance to discretion paying careful attention to how policy performance is evaluated

introduction to a general equilibrium approach to economic growth abstract endogenous growth theory has had some success in explaining the observed data related to the process of economic growth however the results of the models in this literature are typically very sensitive to their micro economic structure it is therefore important to understand how the growth process behaves under more general specifications of such features as the number of commodities the number and preferences of consumers the factors of production and the financial and information structures in other words valuable insights can be gained by integrating growth theory into the framework of general equilibrium theory the summary of the papers in this volume focuses on seven issues that are crucial to this integration and highlights the contributions of the papers to the resolution of these issues journal of economic literature classification numbers c61 d50 d90 f43 o30 o41

mandated accounting changes and debt covenants the case of oil and gas accounting abstract the relationships among mandated accounting changes bond covenants and security prices has been the focus of several studies these studies have provided mixed evidence on the existence of a bond covenant effect on security prices this paper suggests that inconclusive prior results are a consequence of inappropriately measuring the default risk of debt using an option pricing framework it is shown that the debt to equity alone is not an adequate measure of default risk in particular both the debt to equity ratio and the total risk of the firm are necessary to adequately model the bond covenant effects of an accounting change these theoretical propositions are supported by the empirical analysis of the security market reaction to changes in oil and gas accounting

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

unemployment responses to skill biased technology shocks the role of labour market policy do skill biased shocks that increase the spread of labour productivities interacting with different policy regimes explain the rise in unemployment in europe relative to the united states in the 1980s and 1990s the hypothesis is an implication of a version of the mortensen and pissarides 1994 model of equilibrium unemployment which allows for worker heterogeneity a calibrated version of the model implies that a similar unemployment increase would have occurred in the united states over this period given changes in relative productivity by education implied by observed wage changes had unemployment compensation and employment protection policies been at european levels

trend breaks long run restrictions and contractionary technology improvements abstract structural vector autoregressions with long run restrictions are extraordinarily sensitive to low frequency correlations recent literature finds that the estimated effects of technology shocks are sensitive to how one treats hours per capita however after allowing for statistically and economically significant trend breaks in productivity results are much less sensitive hours fall when technology improves the issue is that the common high low high pattern of productivity growth and hours i e the low frequency correlation inevitably leads to a positive estimated response the trend breaks control for this correlation this example suggests a practical need for care in using long run restrictions

market participation and sunspot equilibria we investigate the structure of competitive equilibria in an exchange economy parametrized by i endowments and ii restrictions on market participation for arbitrary regular endowments if few consumers are restricted there are no sunspot equilibria if endowments are allowed to vary while restrictions on market participation are fixed there is a generic set of preferences such that sunspot equilibria exist for a non empty subset of endowments our analysis extends to the general case of an arbitrary number of restricted consumers the results of cass and shell for the polar cases in which either i no consumers are restricted or ii all consumers are restricted

growth wealth and the natural rate is europe s jobs crisis a growth crisis abstract the effect of faster technical progress is studied in our labour turnover model of the natual rate of unemployment in its closed economy version the model implies that in the limit as the steady growth rate is approached the increase in the rate of progress is neutral for the natural unemployment rate its effects are completely offset by the equal increase in the rate of interest it induces however of two small open economies having the same technology level at some date the one where technical progress has always been and always will be faster will have the lower wealth relative to its wage and a lower wage rate relative to future wage rates both effects operate to reduce the natural rate of unemployment whether this theory based hypothesis will be confirmed empirically is a question needing extensive study but a quick comparison of the g7 countries confirms that the proportionate increase of the unemployment rate in recent decades tended to be greater the more pronounced the productivity slowdown

multiplicity of equilibria a pure exchange general equilibrium model is considered and the equilibrium set is studied it is shown for all total endowments and an open and dense set of preferences that if there arel 2 commodities andm 2 consumers then there exists a set of distributions of endowments with nonempty interior such that the associated economies have at leastl 1 min l m equilibria forl min l m even and at leastl 2 min l m equilibria forl min l m odd journal of economic literature classification number d51

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

unemployment and growth some empirical evidence from structural time series models this study investigates the empirical relationship between unemployment and growth in a number of oecd economies a structural time series model is used for labour productivity growth to demonstrate that in most economies there seems to be a negative correlation between unemployment and labour productivity growth the results provide little support for the theory that recessions may stimulate productivity growth the use of a structural time series approach allows an attempt to model the underlying dynamics of productivity growth jointly with the effect of unemployment

measuring core inflation in this paper we argue that measured rpi inflation is conceptually mismatched with core inflation the difference is more than just measurement error we propose a technique for measuring core inflation based on an explicit long run economic hypothesis core inflation is defined as that component of measured inflation that has no medium to long run impact on real output a notion that is consistent with the vertical long run phillips curve interpretation of the co movement in inflation and output we construct a measure of core inflation by placing dynamic restrictions on a vector autoregression var system

productivity shocks and real business cycles abstract productivity shocks play a central role in real business cycles as an exogenous impulse to macroeconomic activity however measured solow prescott residuals do not behave as an exogenous impulse rather econometric evidence provided in this paper indicates that 1 money interest rates and government spending granger cause these impulses and 2 a substantial component of the variance of these impulses between one quarter and one half is attributable to variations in aggregate demand these results are robust to a number of econometric issues including measurement errors specification of the production function and certain forms of omitted real variables

a north south model of trade with search unemployment abstract in this paper i build a north south model of international trade economic growth and search frictional unemployment in the north growth is driven by a process of creative destruction in the north followed by imitation in the south i study the effects of intellectual property rights protection and trade liberalization on unemployment and welfare in the north intellectual property rights protection decreases unemployment and increases welfare trade liberalization increases welfare but has an ambiguous effect on unemployment it decreases unemployment if workers in the north have a high outside option and increases it if their outside option is low i provide empirical evidence in support of the last result using data for 20 oecd countries

the new keynesian phillips curve and staggered price and wage determination in a model with firm specific labor we develop a dsge model with rm speci c labor where rm level wage bargaining and price setting are subject to calvo type staggering this is in general an intractable problem due to complicated intertemporal dependencies between price and wage decisions however the problem is signi cantly simpli ed if we in line with empirical evidence assume that prices can be changed whenever wages are we show that the price and wage setting relationships are substantially altered by the introduction of rm speci c labor speci cally the in ation response is substantially dampened whereas the wage in ation response is increased as compared to models with freely mobile labor these distinctive features of the model with rm speci c labor is supported by empirical evidence from a structural var

asset bubbles labour market frictions and r d based growth employing an overlapping generations model of research and development r d based growth with labor market frictions this paper examines how employment changes induced by labor market frictions influence asset bubbles and long run economic growth asset bubbles can cannot exist when the employment rate is high low which leads to higher lower economic growth through labor market efficiency we also explore the steady state and transitional dynamics of bubbles economic growth and employment furthermore we show that policy or parameter changes that have a negative influence on the labor market can lead to a bubble burst

growth unemployment and labor market policy the role of passive labor market policy as a possible reason for the run up in relative unemployment rates in europe in the 1980s has been extensively studied more recently the focus have shifted to lagging growth rates in europe the lisbon strategy reflects these concerns by calling for reforms that ease market access promote flexible labor markets and simplify taxes and market regulation the principal purpose of this paper is to build a simple model in which the possible effects of payroll taxes and employment protection policies on both unemployment and growth can be studied the model is constructed of off the shelf parts found in the literatures on equilibrium unemployment and endogenous growth of the schumpeterian variety the model identifies channels though which both taxes and employment protection mandates can adversely affect growth though innovation jel e24 o40 j64 o31

the causes of spanish unemployment a structural var approach abstract in this paper we review the main causes of spanish unemployment and weight them by estimating a simple macroeconomic model using the structural var methodology by using this methodology we associate different causes of unemployment with shocks of different nature which have long lasting effects due to full hysteresis we claim that such an extreme assumption on state dependency is reasonable at least as a local approximation for the period and the economy at hand our results suggest that the combination of a plausible mixture of different types of shock and extreme persistence in their propagation mechanisms can satisfactorily explain the dismal performance of the spanish labour market during the last two decades