exchange rate pass through in u s manufacturing industries this paper studies exchange rate pass through in u s manufacturing industries and its cross sectional variation through an adapted dixit stiglitz model of product differentiation the paper predicts that pass through is positively related to the degree of product differentiation and inversely related to the elasticity of marginal cost with respect to output empirical estimates of the pass through elasticities show that pass through is incomplete and varies across industries the degree of pass through is found to be positively correlated to different proxies for product differentiation and negatively to a proxy for the elasticity of marginal cost

housing prices and the savings of renters abstract this paper studies the effects of housing prices on the net worth of young households because prospective homeowners must accumulate down payments a change in housing prices can change their savings patterns theoretically the effect of increases in house prices on savings is ambiguous because households can increase their saving to afford the larger down payment or decrease their saving because they have chosen to delay or forego purchasing a house using data from the 1984 panel study of income dynamics 27 i show that empirically the effect of increased housing prices on saving is positive and quite large relative to the savings of young households young renter households living in cities with high housing prices have more net worth than those living in cities with lowering housing prices controlling for both the income of the households as well as the per capita income of the city in which they live

the future of macroeconomics macro theory and models at the bank of england abstract the adoption as policy models by central banks of representative agent new keynesian dynamic stochastic general equilibrium models has been widely criticised including for their simplistic micro foundations at the bank of england the previous generation of policy models is seen in its 1999 medium term macro model mtmm instead of improving that model to correct its considerable flaws many shared by other non dsge policy models such as the federal reserve s frb us it was replaced in 2004 by the dsge based beqm though this clearly failed during and after the global financial crisis it was replaced in 2011 by the dsge compass complemented by a suite of models we provide a general critique of dsge models for explaining forecasting and policy analyses at central banks and suggest new directions for improving current empirical macroeconomic models based on empirical modelling broadly consistent with better theory rather than seeking to impose simplistic and unrealistic theory

the impact of house prices on consumption in the uk a new perspective this paper proposes an alternative approach to the question of how house prices influence household consumption by focusing on their impact on mortgage equity withdrawal and household saving household level data are used to derive a measure of expected and unexpected changes in house prices these are then incorporated into a recursive bivariate probit model of the decision to withdraw housing equity and save the results suggest that households respond to changes in their housing wealth primarily by increasing their mortgage borrowing rather than by decreasing their savings although this is mainly for younger households however while changes in housing wealth do not have a direct impact on household saving they do have an important indirect impact since they increase the likelihood that the household will withdraw equity which in turn has a negative impact on household saving

employer matching and 401 k saving evidence from the health and retirement study abstract employer matching of employee 401 k contributions is often touted as a powerful incentive to save for retirement and is a key component in pension plan design in the united states using detailed administrative contribution earnings and pension plan data from the health and retirement study this analysis formulates a life cycle consistent econometric specification of 401 k saving and estimates the determinants of saving accounting for non linearities in the household budget set induced by matching the participation estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401 k participation by 5 percentage points the parametric and semi parametric estimates for saving indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401 k saving by 365 in 1991 dollars overall the analysis reveals that the 401 k saving response to matching is quite inelastic and hence matching is a rather poor policy instrument with which to raise retirement saving

does inequality matter for the consumption wealth channel empirical evidence abstract this paper studies the heterogeneity of the marginal propensity to consume out of wealth based on french household surveys this heterogeneity is driven by differences in both wealth composition and wealth levels we find a decreasing marginal propensity to consume out of wealth across the wealth distribution for all net wealth components the marginal propensity to consume out of financial assets tends to be higher compared with the effect of housing assets except at the top of the wealth distribution the marginal propensity to consume out of housing wealth increases with debt pressure and depends on debt composition based on a simulation exercise we find a limited effect of wealth shocks on consumption inequality an increase in stock prices tends however to slightly increase consumption inequality especially at the top of the distribution

taking the high road compliance with commuter tax allowances and the role of evasion spillovers abstract this paper provides evidence of evasion in the context of a widely used commuter tax allowance and explores evasion spillovers as a determinant of the individual compliance decision for this purpose we exploit discontinuities in the commuter allowance scheme and employ a research design resting on a large panel of individual tax returns we find that around 30 of all allowance claims are overstated and consistent with deliberate tax evasion we observe sharp reactions of taxpayers to thresholds where the allowance discretely jumps to a higher amount further we use variation in job changes to uncover spillover effects from the work environment on the individual compliance decision these effects appear to be asymmetric job changers moving to companies with a higher fraction of cheaters increase their cheating in contrast movers to companies with a lower fraction of cheaters tend not to alter their reporting behavior we provide suggestive evidence that the spillover has more to do with an information environment but can ultimately not reject other behavioral explanations such as asymmetric persistence of norms

effects of a holiday trip on health and quality of life evidence from a natural experiment in south korea abstractwe examine whether having a holiday trip affects an individual s well being namely quality of life health status stress level and health behaviours we use the two stage estimation method to control for endogeneity of a travel experience exploiting a natural experiment of distributing travel vouchers at random among qualified applicants in south korea in 2012 we find that for applicants whose decision to travel is influenced by receiving a voucher a travel experience has no significant effects on the traveller s well being measured 3 12 months later we also find that the ols estimates overstate benefits of a travel

the economic value of teeth abstract this paper examines the effect of oral health on labor market outcomes by exploiting variation in fluoridated water exposure during childhood the politics surrounding the adoption of water fluoridation by local governments suggests exposure to fluoride is exogenous to other factors affecting earnings exposure to fluoridated water increases women s earnings by approximately 4 percent but has no detectable effect for men furthermore the effect is largely concentrated amongst women from families of low socioeconomic status we find little evidence to support occupational sorting statistical discrimination and productivity as potential channels with some evidence supporting consumer and possibly employer discrimination

the role of information on retirement planning evidence from a field study i introduction modern financial planning is dominated by discussions of one topic retirement savings retirement planning behaviors are widely studied yet population data show perplexing patterns of savings especially among households who reasonably should expect to live long and healthy lives after separating from the workforce savings choices are increasingly focused on the decisions of individuals rather than on public plans or employer mandated pensions poterba 2014 however policymakers attempts to stimulate more individual level savings have not shown strong effects duflo et al 2007 one problem appears to be related to people failing to fully plan ahead for retirement and neglecting longer run financial management in general ameriks caplin and leahy 2003 according to the employee benefit research institute 2015 more than one in four workers have less than 1 000 in retirement savings fewer employees today have access to defined benefit pensions than they did in the past and instead rely on employer based 401 k savings accounts and nonemployer based individual retirement accounts iras munnell 2006 however participation rates remain low 43 of private sector workers of age 25 64 take part in retirement savings programs calabrese 2011 even among active savers there are concerns about how well people are able to manage their retirement accounts in ways that reflect optimal planning horizons several policies have been designed to increase participation in retirement plans first firm level programs requiring employees to opt out vs opt in to a 401 k plan have increased participation in retirement savings plans madrian and shea 2001 however as choi laibson and madrian 2011 highlight because individuals have heterogeneous savings preferences these default options may be costly to individuals as some might save more in the absence of the default and others might prefer to save less second government designed tax breaks for individuals investing in retirement accounts and increases in maximum income deferral limits for these accounts could increase retirement savings however income tax deductions and credits can be costly tax expenditures and individuals especially lower and middle income savers may not respond to these incentives engen gale and scholz 1996 third firms can try to help people better understand their savings options and make plans for retirement effectively lowering the costs of information with workshops and or counseling retirement planning requires information in order to form expectations about lifetime income years of work expected investment returns adjusted for risk and consumption levels in retirement people who lack information about these issues may fail to make a plan or proceed to design a plan based on incomplete information educational programs targeted to workers hold promise to help people recalibrate their expectations and shift their savings behavior well targeted financial education might facilitate people to pursue their individual retirement saving preferences in ways that default rules or incentives alone cannot this article studies the effect of financial education on retirement savings offered to employees in an online format online information offers several advantages over traditional seminars for example online courses can be delivered to a large audience and at a lower cost per participant than classroom delivery it also poses relatively low marginal costs to the employee because of the flexibility and convenience of the mode of delivery it may serve employees who would not attend in person sessions while participants in online education do not benefit from group interactions online delivery provides participants privacy to explore financial issues that they might shy away from in more public settings several studies document that employer based education is associated with improvements in employees financial knowledge clark and d ambrosio 2002 holland goodman and stich 2008 skimmyhorn forthcoming

getting to the top of mind how reminders increase saving we provide evidence from field experiments with three different banks that reminder messages increase commitment attainment for clients who recently opened commitment savings accounts messages that mention both savings goals and financial incentives are particularly effective whereas other content variations such as gain versus loss framing do not have significantly different effects nor do we find evidence that receiving additional late reminders has an additive effect these empirical results do not map neatly into existing models so we provide a simple model where limited attention to exceptional expenses can generate undersaving that is in turn mitigated by reminders data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2296 this paper was accepted by teck hua ho behavioral economics

exchange rate pass through in canadian manufacturing its direct and indirect components changes in the exchange rate have direct and indirect effects on the prices of domestically produced goods and imports in the domestic market the direct effects originate with the impact of the exchange rate on the marginal cost of imports the indirect effects with its impact on the price of materials used by domestic producers and hence on their marginal costs direct and indirect exchange rate pass through elasticities are estimated for 37 canadian manufacturing industries and their determinants are examined in a cross section analysis it is found that the direct and indirect elasticities are approximately equal in size for domestic goods while the direct effect is dominant for imports for a small number of industries the net result of the direct and indirect effects is that a depreciation of the domestic currency increases the competitiveness of imports contrary to conventional analysis important determinants of the direct indirect elasticities are the import share and non tariff barriers t

the illusory effects of saving incentives on saving the authors evaluate research on how tax based saving incentives iras and 401 k s affect saving previous research overstates the impact of the incentives on saving by failing to account for several issues households with saving incentives have stronger tastes for saving than others saving incentives have interacted with debt nonfinancial assets financial markets and pensions and saving incentives represent pretax balances whereas taxable accounts represent posttax balances accounting for these issues essentially eliminates the impact of saving incentives on saving the authors conclude that little if any of the contributions to existing saving incentives have raised saving

saving incentives for low and middle income families evidence from a field experiment with h r block this paper analyzes the effects of a large randomized field experiment carried out with h r block offering matching incentives for ira contributions at the time of tax preparation about 15 000 h r block clients in 60 offices in predominantly low and middle income neighborhoods in st louis were randomly offered a 20 percent match on ira contributions a 50 percent match or no match the control group brookings institute

do first time house buyers receive financial transfers from their parents using danish longitudinal data with information about wealth for a sample of first time house buyers and their parents we test whether there are direct financial transfers from parents to children in connection with the house purchase or in connection with unemployment spells occurring just after the purchase when children typically hold few liquid assets first we document that child and parent financial resources are correlated then we introduce conditioning variables and exploit the panel aspect of the data to also condition on fixed unobserved factors which arguably govern preferences and or productivity we find no evidence of direct financial transfers

do tax incentives for saving in pension accounts cause debt accumulation evidence from danish register data abstract this paper applies a quasi experimental research design on a danish 2010 policy that reduced tax incentives for saving in annuity pension schemes to show significant substitution of savings from retirement accounts to gross debt repayments we find that for every 1 danish currency unit reduction in retirement savings 31 cents goes to debt repayments taking into account all types of savings we find full crowding out consistent with previous findings we document that the effect is driven by a minority about 23 percent who actively rebalance their savings

taxpayers responses to tax based incentives for retirement savings evidence from the saver s credit notch abstract this paper uses the saver s credit to analyze taxpayers understanding of and responses to tax incentives the saver s credit is a tax credit designed to encourage retirement savings among low and middle income households however the credit s structure creates notches or discontinuous jumps within a household s budget constraint these notches provide an incentive to manipulate adjusted gross income to fall just below the level where the credit decreases i use public use tax files from the internal revenue service to test whether taxpayers bunch their income at the notch created by the saver s credit i find strong evidence that bunching occurred in response to the credit which implies that taxpayers claiming the credit understood the incentives for bunching and indeed manipulated their incomes accordingly i then exploit the discontinuity in credit rates to analyze the credit s impact on retirement contribution behavior using a regression discontinuity approach and find that the credit failed to generate a statistically significant effect on the level of retirement contributions these results imply that the saver s credit is more effective at providing transfers to low and middle income taxpayers than at increasing retirement contributions

how retirement saving programs increase saving this paper summarizes the authors work on the effect of ira and 401 k contributions on net personal saving they consider many different nonparametric approaches to controlling for heterogeneity in individual saving behavior and conclude that the weight of the available evidence suggests that contributions to both iras and 401 k s largely represent new saving the authors devote particular attention to reconciling their results with the findings in other studies that reach different conclusions sometimes using the same databases that the authors analyze methodological limitations that undermine the reliability of results in other studies explain many of these disparities

potential competition in preemption games we consider a preemption game with two potential competitors who come into play at some random secret times the presence of a competitor is revealed to a player only when the former moves which terminates the game we show that all perfect bayesian equilibria give rise to the same distribution of players moving times moreover there exists a unique perfect bayesian equilibrium in which each player s behavior from any time on is independent of the date at which she came into play we flnd that competitive pressure is nonmonotonic over time and that private information tends to alleviate rent dissipation our results have a natural interpretation in terms of eroding reputations

wealth and health behavior testing the concept of a health cost wealthier individuals engage in healthier behavior this paper seeks to explain this phenomenon by exploiting both inheritances and lottery winnings to test a theory of health behavior we distinguish between the direct monetary cost and the indirect health cost value of health lost of unhealthy consumption the health cost increases with wealth and the degree of unhealthiness leading wealthier individuals to consume more healthy and moderately unhealthy but fewer severely unhealthy goods the empirical evidence presented suggests that differences in health costs may indeed partially explain behavioral differences and ultimately health outcomes between wealth groups

the short run and long run effects of behavioral interventions experimental evidence from energy conservation we document three remarkable features of the opower program in which social comparison based home energy reports are repeatedly mailed to more than six million households nationwide first initial reports cause high frequency action and backsliding but these cycles attenuate over time second if reports are discontinued after two years effects are relatively persistent decaying at 10 20 percent per year third consumers are slow to habituate they continue to respond to repeated treatment even after two years we show that the previous conservative assumptions about post intervention persistence had dramatically understated cost effectiveness and illustrate how empirical estimates can optimize program design jel d12 d83 l94 q41

the uk consumption boom of the late 1980s aggregate implications of microeconomic evidence two competing explanations of the uk consumer boom in the late 1980s are the financial liberalisation imperfect housing market hypothesis of muellbauer and murphy and the expectations hypothesis of king we use 15 years of family expenditure surveys and cohort analysis to investigate to what extent these two hypotheses agree with observed changes in consumption patterns we find that the housing markets explanation accounts for much of the increase by older cohorts but cannot be reconciled with the marked rise in expenditure levels of younger households a simple simulation exercise shows instead that the expectations hypothesis can generate increases of expenditure by young consumers of the magnitude observed in our data

does front loading taxation increase savings evidence from roth 401 k introductions can governments increase private savings by taxing savings up front instead of in retirement roth 401 k contributions are not tax deductible in the contribution year but withdrawals in retirement are untaxed the more common before tax 401 k contribution is tax deductible in the contribution year but both principal and investment earnings are taxed upon withdrawal using administrative data from eleven companies that added a roth contribution option to their existing 401 k plan between 2006 and 2010 we find no evidence that total 401 k contribution rates differ between employees hired before versus after the roth introduction which means that the amount of retirement consumption being purchased by 401 k contributions increases after the roth introduction a survey experiment suggests two behavioral factors play a role in the unresponsiveness of contribution rates to their tax treatment 1 employee confusion about or neglect of the tax properties of roth balances and 2 partition dependence

effects of individual development accounts on asset purchases and saving behavior evidence from a controlled experiment abstract we evaluate the first controlled field experiment on individual development accounts idas including their own contributions and matching funds treatment group members in the tulsa oklahoma program could accumulate 6750 for home purchase or 4500 for other qualified uses almost all treatment group members opened accounts but many withdrew all funds for unqualified purposes among renters at the beginning of the experiment the ida increased homeownership rates after 4 years by 7 11 percentage points and reduced non retirement financial assets by 700 1000 the ida had almost no other discernable effect on other subsidized assets overall wealth or poverty rates

the role of sales agents in information disclosure evidence from a field experiment with a large nationwide retailer we run a natural field experiment to measure the effects of energy use information disclosure customer rebates and sales agent incentives on demand for energy efficient durable goods although a combination of large rebates plus sales incentives substantially increases market share information and sales incentives alone each have zero statistical effect and explain at most a small fraction of the low baseline market share sales agents strategically comply only partially with the experiment targeting information to more interested consumers but not discussing energy efficiency with the disinterested majority these results suggest that seller provided information is not a major barrier to energy efficiency investments at current prices in this context data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2327 this paper was accepted by john list behavioral economics

testing for unit roots in panel data are wages on different bargaining levels cointegrated theoritical considerations suggest that spillover forces equalize wages for similar jobs thus it is expected that firm wages are cointegrated with the corresponding wage rates on an industrial level in this paper we apply various unit root tests to a panel of wage data we show that the familiar techniques can be adopted to this type of data allowing for unobserved heterogeneity and common time effects our results suggest that firm and industry wages both possess a unit root in the autoregressive representation however ther is only weak evidence for a cointegration realtionship

measuring consumer expenditures with payment diaries payment diaries measure consumer expenditures by tracking authorization of payments by instrument cash check debit or credit card etc three notable results emerge from comparing the 2012 diary of consumer payment choice dcpc to other estimates of consumer expenditures 1 dcpc payments are 75 higher than consumer expenditure survey estimates 2 dcpc consumption estimates are 17 higher than comparable personal consumption expenditure estimates and 3 dcpc payments roughly equal comparably adjusted national income and product accounts personal disposable income the dcpc s relative success stems from measuring expenditures aggregated into lumpy payments shopping baskets relatively low respondent burden and effective random sampling jel e21 d12 d14

regulation and preemptive technology adoption two rival firms must decide if and when to adopt a new technology knowing how adoption costs decline over time and how profit flows vary with adoption patterns in many cases price and entry regulations beneficially slow technology adoption by making preemption strategies less attractive in some cases these regulations can so discourage a firm from preemption as to change the order in which firms adopt new technologies speeding one firm s adoption date and slowing the other s in the context of a particular scenario for cable and telephone companies adoption of new fiber optic technologies the case for lifting the cross ownership ban depends on the extent to which telephone companies are able to implement a superior technology reregulation of cable companies strengthens this case

saving more in groups field experimental evidence from chile abstract we test the impact of a peer group program on savings in a sample of microcredit clients we conduct two randomized trials among these 2687 microcredit clients the first finds that a savings group treatment which combines public goal setting monitoring in the group and non financial rewards increases savings in a new savings account significantly the number of deposits grows 3 7 fold and the average balance almost doubles in contrast a more classical measure a substantially increased interest rate has no effect for most participants and raises the savings balance only for the very top of the distribution a second experiment conducted a year later tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages without meetings rewards or peer pressure given that participants are borrowing at 90 apr we discuss how and when saving more could be harmful or beneficial

a test based on panel refreshments for panel conditioning in stated utility measures adapting a methodology proposed in das et al 2011 this paper uses panel refreshments as a natural experiment to determine whether trends in stated utility measures observed in panel data are genuine or rather caused by measurement issues

house prices and consumption inequality i characterize how house price shocks affect consumption inequality using a life cycle model of housing and nonhousing consumption with incomplete markets i derive analytical expressions for the dynamics of inequalities and use these to analyze large house prices swings seen in the uk i show that movements in consumption inequality were large that they correspond with the theoretical predictions qualitatively and that the model explains a large fraction of the movements quantitatively i demonstrate the accuracy of this analysis using an extended model s full non linear solution finally accounting for house price shocks alters estimates of labour income risks using cross sectional data

the scandinavian fantasy the sources of intergenerational mobility in denmark and the us this paper examines the sources of differences in social mobility between the us and denmark measured by income mobility denmark is a more mobile society but not when measured by educational mobility there are pronounced non linearities in income and educational mobility in both countries greater danish income mobility is largely a consequence of redistributional tax transfer and wage compression policies while danish social policies for children produce more favorable cognitive test scores for disadvantaged children they do not translate into more favorable educational outcomes partly because of disincentives to acquire education arising from the redistributional policies that increase income mobility

wage subsidies and fair wages abstract wage subsidies can be provided directly to the worker or indirectly by subsidizing the employer with reduced cost of labor employers offer higher wages the standard literature stipulates that this statutory incidence bears no implications for the economic incidence we propose and test a mechanism by which indirect subsidies lead to higher social welfare studies show that workers reciprocate higher wages with higher effort indirect subsidies are shifted to the workers as higher wages leading workers to reciprocate with higher effort and productivity a controlled laboratory experiment supports our behavioral hypotheses and confirms the behavioral and welfare implications

participation in and contributions to 401 k pension plans evidence om plan data k plans differ from traditional employer sponsored pension plans in that employees are permitted to make voluntary pre tax contributions hence the sensitivity of participation and contributions to plan charac teristics notably the employer matching rate may play a critical role in retirement saving using plan level data from form 5500s filed annu ally with the internal revenue service ifind that substantial increases occur when an employer moves from a zero to a small or moderately sized match but that at higher match rates employee contributions fall

nudges at the dentist abstract we implement a field experiment to study the impact of reminder messages on dental health prevention patients who are due to schedule a check up receive no reminder a neutral reminder postcard or reminders including additional information on the benefits of prevention our results document a strong impact of reminders within one month after receiving a reminder the fraction of patients who make a check up appointment more than doubles the effect declines slightly over time but remains economically and statistically significant including additional information in the reminders does not significantly increase response rates relative to the neutral reminder finally our data indicates that applying reminders repeatedly neither strengthens nor weakens their effects

innovation timing games a general framework with applications abstract we offer a new algorithm for analyzing innovation timing games its main advantage over the traditional approach is that it applies to problems that had previously been intractable we use the algorithm to examine two classical innovation problems we find that the competition takes the form of a waiting game with a second mover advantage either for any level of r d costs process innovation or for high r d costs product innovation moreover both models predict that the second mover advantage is monotonically increasing in the costs of r d

booms and busts consumption house prices and expectations over much of the past 25 years house price and consumption growth have been closely synchronized three main hypotheses for this have been proposed increases in house prices raise household wealth and so their consumption house price growth reduces credit constraints by increasing the collateral available to homeowners and house prices and consumption are together influenced by common factors using microeconomic data we find that the relationship between house prices and consumption is stronger for younger than older households contradicting the wealth channel we suggest that common causality has been the most important factor linking house prices and consumption

do house prices affect consumption a re assessment of the wealth hypothesis this paper revives the debate in the literature about the relationship between house prices and consumption by exploring conflicting results in the uk campbell and cocco 2007 find that old owners benefit most from a house price increase and young renters least confirming the so called wealth hypothesis in contrast attanasio et al 2009 find that house prices have the same impact on consumption across age groups we rule out several potential explanations related to data construction and provide evidence that the functional form can reconcile the conflicting results in the two papers

housing wealth and labor supply evidence from a regression discontinuity design abstract this paper uses the discontinuity in house size generated by chinese housing policies to identify the effect of housing wealth on labor supply the analysis finds a substantial deterrent effect of housing wealth on labor supply much of the housing wealth effect comes from the labor participation decision with the effect on employed workers being ambiguous females young generation and households with high repayment capacity are more responsive to gains in housing wealth

reputations in the adoption of a new technology abstract this paper studies the effects of uncertainty on the timing of adoption of a new technology in a duopoly firms are uncertain of the innovative capabilities of their rivals and about the profitability of adoption these features lead to a richer and in some respects more plausible theory of adoption in which rents from delayed adoption are always realized and returns are not equalized across adoption times

wealth effects and macroeconomic dynamics the effect of wealth on consumption is an issue of long standing interest to economists conventional wisdom suggests that fluctuations in household wealth have driven major swings in economic activity both in the united states and abroad this paper considers the so called consumption wealth effects there is an extensive existing literature on wealth effects that has yielded some insights for example research has documented the relationship between aggregate household wealth and aggregate consumption over time and a large number of household level studies suggest that wealth effects are larger for households facing credit constraints however there are also many unresolved issues regarding the influence of household wealth on consumption we review the most important of these issues and argue that there is a need for much more research in these areas as well as better data sources for conducting such analysis

is the uk balance of payments sustainable the uk current account deficit john muellbauer and anthony murphy the uk has a large and persistent current account deficit policy makers argue that the deficit is easily financed temporary and therefore not a sign of structural weakness we examine the conditions in which it is appropriate for a country to overspend its current income with the intention of repaying loans out of future income these include an increase in international capital mobility larger net holdings of foreign assets and expectations of faster productivity growth all three apply to the uk so official reasoning is in part correct even so for several decades there has been a trend deterioration of uk trade performance most markedly in manufacturing and we detect no underlying improvement in the 1980s we highlight structural deficiencies in both demand and supply on the demand side we show the importance of rising house prices and easier consumer credit in fuelling the consumer boom to an unwarranted extent this we trace to unjustifiable subsidies to house ownership on the supply side we stress vastly inadequate investment in skill formation education and physical capital these structural deficiencies lead us to a less optimistic view than official policy we draw the policy lessons for the uk and consider whether continental europe will face similar problems as financial markets are liberalized

can survey participation alter household saving behaviour we document an effect of survey participation on household saving identification comes from random assignment to modules within a population representative internet panel the saving measure is based on linked administrative wealth data households that responded to a detailed questionnaire on needs in retirement reduced their non housing saving rate by 3 5 percentage points on a base of 1 5 the survey may have acted as a salience shock possibly with respect to reduced housing costs in retirement our findings present an important challenge to survey designers they also add to the evidence of limited attention in household financial decision making

decomposing the wealth effect on consumption we decompose the wealth effect on consumption into two components first we distinguish between exogenous and endogenous wealth changes second we distinguish between anticipated and unanticipated exogenous changes we estimate the impact of exogenous components using data from the 2008 2010 panel of the italian survey of household income and wealth the wealth effect is about 3 cents per unexpected euro increase in wealth and driven by house price changes the consumption response to anticipated changes in wealth is of similar magnitude and also driven by housing we show that these findings are consistent with binding borrowing constraints

innovation in a generalized timing game we examine innovation as a market entry timing game with complete information and observable actions we characterize all pure strategy subgame perfect equilibria for the two player symmetric model allowing both the leader s and the follower s payoff functions to be multi peaked non monotonic and discontinuous we provide sufficient conditions for when the equilibria can be pareto ranked and when the equilibrium is unique economic applications discussed include process and product innovation and the timing of the sale of an asset

insurance credit and technology adoption field experimental evidence from malawi this brief summarizes the insurance credit and technology adoption field experimental evidence from malawi the farmers were offered loans for the november 2006 planting season does production risk suppress the demand for credit the author implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology the study sample was composed of roughly 800 maize and groundnut farmers in malawi where by far the dominant source of production risk is the level of rainfall the author randomly selected half of the farmers to be offered credit to purchase high yielding hybrid maize and groundnut seeds for planting in the november 2006 crop season the other half of farmers were offered a similar credit package but were also required to purchase at actuarially fair rates a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall surprisingly take up was lower by 13 percentage points among farmers offered insurance with the loan take up was 33 0 percent for farmers who were offered the uninsured loan there is suggestive evidence that reduced take up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract insured loan take up was positively correlated with farmer education income and wealth which may proxy for the individual s default costs by contrast take up of the uninsured loan was uncorrelated with these farmer characteristics

beauty and the sources of discrimination we analyze discrimination against less attractive people on a tv game show with high stakes the game has a rich structure that allows us to disentangle the relationship between attractiveness and the determinants of a player s earnings unattractive players perform no worse than attractive ones and are equally cooperative in the prisoner s dilemma stage of the game nevertheless they are substantially more likely to be eliminated by their peers even though this is costly we investigate third party perceptions of discrimination by asking subjects to predict elimination decisions subjects implicitly assign a role for attractiveness but underestimate its magnitude

smart money the effect of education on financial outcomes household financial decisions are important for household welfare economic growth and financial stability yet our understanding of the determinants of financial decision making is limited exploiting exogenous variation in state compulsory schooling laws in both standard and two sample instrumental variable strategies we show that education increases financial market participation measured by investment income and equities ownership while dramatically reducing the probability that an individual declares bankruptcy experiences a foreclosure or is delinquent on a loan further results and a simple calibration suggest that the result is driven by changes in savings or investment behavior rather than simply increased labor earnings

household debt and spending during the financial crisis evidence from danish micro data abstract we use data for nearly 500 000 danish households to study the relationship between household leverage prior to the financial crisis of 2007 2009 and the development in spending over the course of the crisis we find a strong negative correlation between pre crisis leverage and the change in spending during the crisis this reflects that highly levered households spent a larger share of their income than their less levered peers prior to the crisis resulting in larger increases in debt in these years once we condition on the size of the pre crisis change in debt a high level of debt is no longer associated with a larger spending decline our results suggest that the larger decline in spending among high leverage households is the result of a spending normalization pattern that is also found in other years rather than a causal effect of high debt levels suppressing household spending during the crisis

the tradeoff between mortgage prepayments and tax deferred retirement savings abstract many households face the tradeoff between paying an extra dollar off the remaining mortgage on their house and saving that extra dollar in tax deferred accounts tdas used for retirement we show that under certain conditions it becomes a tax arbitrage to reduce mortgage prepayments and to increase tda contributions because of the tax deductibility of mortgage interest and tax exemption of qualified retirement savings using data from the survey of consumer finances we document that a significant number of households that are accelerating their mortgage payments instead of saving in tdas forgo a profitable tax arbitrage opportunity finally we show empirically that this inefficient behavior is unlikely to be driven by liquidity or other financial constraints rather the observed behavior can be attributed to a certain extent to the reluctance of many households to participate in financial markets as either lenders or borrowers

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

housing wealth effects evidence from an australian panel we explore the positive relationship between house prices and household spending by following a panel of australian households no evidence for traditional housing wealth effects is found with young homeowners exhibiting the largest wealth effects young renters also exhibit a positive consumption response to house prices although less so than young homeowners this suggests that increasing house prices raise spending via easing credit constraints and a common association between house prices and a third factor results from a cohort level panel are similar to those using household level data suggesting that pseudo panels may be used as a partial substitute for actual panels

conclusions regarding cross group differences in happiness depend on difficulty of reaching respondents a growing literature explores differences in subjective well being across demographic groups often relying on surveys with high nonresponse rates by using the reported number of call attempts made to participants in the university of michigan s surveys of consumers we show that comparisons among easy to reach respondents differ from comparisons among hard to reach ones notably easy to reach women are happier than easy to reach men but hard to reach men are happier than hard to reach women and conclusions of a survey could reverse with more attempted calls better alternatives to comparing group sample averages might include putting greater weight on hard to reach respondents or even extrapolating trends in responses

house prices wealth effects and labour supply we examine the impact of house prices on labour supply decisions using uk microdata we combine household survey data with local level house price measures and controls for local labour demand our microdata also allow us to control for individual level income expectations we find significant house price effects on labour supply consistent with leisure being a normal good labour supply responses to house prices are concentrated among young married female owners and older owners this finding suggests that house prices affect the decisions of marginal workers in the economy our estimates imply that house prices are economically important in the participation decisions for these workers

pensions and household wealth accumulation abstract economists have long suggested that higher private pension benefits crowd out other sources of household wealth accumulation we exploit detailed information on pensions and lifetime earnings for older workers in the 1992 wave of the health and retirement study and employ an instrumental variable iv identification strategy to estimate crowd out the iv estimates suggest statistically significant crowd out each dollar of pension wealth is associated with a 53 67 cent decline in nonpension wealth with less precision we use an instrumental variable quantile regression estimator and find that most of the effect is concentrated in the upper quantiles of the wealth distribution

continuous time games of timing abstract we address the question of existence of equilibrium in general timing games with complete information under weak assumptions any two player timing game has a markov subgame perfect e equilibrium for each e 0 this result is tight for some classes of games symmetric games games with cumulative payoffs stronger existence results are established

price and control elasticities of demand for savings assumptions about individual demand for savings underlie workhorse models of macroeconomics intertemporal choice and intra household bargaining and policy interventions in a randomized experiment a philippine bank tested sensitivity to interest rates and account ownership requirements in 10 000 door to door solicitations for a commitment savings account the price elasticity is not significantly different than zero for both the full sample and subgroups of plausibly marginal savers and it has an upper bound that implies an elasticity of intertemporal substitution below the 0 7 emphasized by attanasio and weber 2010 nor do we find sensitivity to ownership requirements in the full sample or sub groups

price setting in online markets basic facts international comparisons and cross border integration we document basic facts about prices in online markets in the united states and canada which is a rapidly growing segment of the retail sector relative to prices in regular stores prices in online markets are more flexible and exhibit stronger pass through 60 75 percent and faster convergence half life less than two months in response to movements of the nominal exchange rate multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks properties of goods sellers and markets are systematically related to pass through and the speed of price adjustment for international price differentials

clustering in n player preemption games we study a complete information preemption game in continuous time a finite number of firms decide when to make an irreversible observable investment upon investment a firm receives flow profits which decrease in the number of firms that have invested the cost of investment declines over time exogenously we characterize the subgame perfect equilibrium outcome which is unique up to a permutation of players when the preemption race among late investors is sufficiently intense the preemption incentive for earlier investors disappears and two or more investments occur at the same time we identify a sufficient condition in terms of model parameters clustering of investments occurs if the flow profits from consecutive investments are sufficiently close this shows how clustering can occur in the absence of coordination failures informational spillovers or positive payoff externalities

housing and the macroeconomy inflation and the financial accelerator three themes connecting housing and the macroeconomy are discussed first evidence is presented for the property market as one of the drivers of u s consumer price inflation second key drivers of house prices are explained to account for the remarkable diversity of international experience finally three potential links between housing credit and the financial accelerator are discussed these are the consumption channel the investment channel and feedback between bad loans and risk spreads via the financial system and how institutional differences between countries can explain the presence absence and magnitudes of these linkages

preemption games with private information preemption games are widely used to model economic problems such as patent races we introduce private information into these games and allow for this information to stochastically change over time this reflects e g how r d competitors improve their innovations over time and keep these innovations secret before patenting them the analysis initially appears intractable because of the complexity of the equilibrium updating of beliefs on opponents information however we demonstrate the existence of a class of equilibria and calculate these equilibria in closed form we find that the expected durations in these equilibria are longer than when players information is public but in some cases shorter than in the collusive outcome hence r d secrecy slows down innovation disclosure

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

savings and prize linked savings accounts abstract many households have insufficient savings to handle moderate and routine consumption shocks many of these financially fragile households also have the highest lottery expenditures as a proportion of income this combination suggests that prize linked savings pls accounts combining security of principal with lottery type jackpots can increase savings among these at risk households results from an online experiment show that the introduction of pls accounts increase total savings and reduce lottery expenditures significantly especially among individuals with the lowest levels of savings and income the results imply that pls accounts offer a plausible market based solution to encourage individuals to increase savings

housing wealth and consumption a micro panel study there is strong evidence that house prices and consumption are synchronised there is however disagreement over the causes of this link this study examines if there is a wealth effect of house prices on consumption using a household level panel data set with information about house ownership income wealth and demographics for a large sample of the danish population in the period 1987 96 we model the dependence of the growth rate of total household expenditure with unanticipated innovations to house prices controlling for factors related to competing explanations we find little evidence of a housing wealth effect

intertemporal consumption and credit constraints does total expenditure respond to an exogenous shock to credit there is continuing controversy over the importance of credit constraints this paper investigates whether total household expenditure and debt is affected by an exogenous increase in access to credit provided by a credit market reform that enabled danish house owners to use housing equity as collateral for consumption loans we find that the magnitude of the response is correlated with the amount of equity released by the reform and that the effect is strongest for younger households even for this group the response was moderate the aggregate effect of the reform was significant but small

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

patent rights and innovation disclosure this article studies optimal patents with respect to the timing of innovation disclosure in a simple model we identify forces that lead firms to either suboptimally patent too early or too late in equilibrium and we determine conditions so that stronger patents induce earlier or later equilibrium disclosure then by solving an infinite multistage patent game with a more explicit structure we describe innovation growth and derive detailed predictions that can be used for policy experiments as an application we calibrate our multistage game using summary statistics from the seeds breeding industry we find that weaker patent rights may result in welfare gains of 46 relative to the status quo the gains are achieved because weaker patents reduce competition thus leading firms to postpone patenting

imputing consumption from income and wealth information we investigate the feasibility of deriving a measure of total expenditure at the household level from administrative micro data on income and wealth we use danish administrative data that provides measures of disposable income and the holding of different assets at the end of the year the ability to link the households in the 1994 6 danish expenditure survey to their administrative data for the years around the survey year offers a unique possibility for constructing a measure of total expenditure and of checking directly on the reliability of the imputation the results are promising

100 bills on the sidewalk suboptimal investment in 401 k plans we identify employees at seven companies whose 401 k investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty free 401 k withdrawals for any reason because they are older than 59 at the average firm 36 of match eligible employees over 59 forego arbitrage profits that average 1 6 of their annual pay or 507 a survey educating employees about the free lunch they are foregoing raised contribution rates by a statistically insignificant 0 67 percent of income among those completing the survey

active vs passive decisions and crowd out in retirement savings accounts evidence from denmark using 41 million observations on savings for the population of denmark we show that the effects of retirement savings policies on wealth accumulation depend on whether they change savings rates by active or passive choice subsidies for retirement accounts which rely on individuals to take an action to raise savings primarily induce individuals to shift assets from taxable accounts to retirement accounts we estimate that each 1 of government expenditure on subsidies increases total saving by only 1 cent in contrast policies that raise retirement contributions if individuals take no action such as automatic employer contributions to retirement accounts increase wealth accumulation substantially we estimate that approximately 15 of individuals are active savers who respond to tax subsidies primarily by shifting assets across accounts 85 of individuals are passive savers who are unresponsive to subsidies but are instead heavily influenced by automatic contributions made on their behalf active savers tend to be wealthier and more financially sophisticated we conclude that automatic contributions are more effective at increasing savings rates than subsidies for three reasons i subsidies induce relatively few individuals to respond ii they generate substantial crowd out conditional on response and iii they do not increase the savings of passive individuals who are least prepared for retirement jel codes h2 h3

exchange rate pass through and its determinants in canadian manufacturing industries in this paper the pass through of exchange rate changes into the real prices of domestically produced and imported goods in canadian manufacturing industries is examined through industry estimates of the pass through elasticities and a cross section analysis of their determinants we find that the domestic pass through elasticity increases with the effect of the exchange rate on domestic costs of production the export share the elasticity of substitution between imports and domestic goods and the domestic advertising intensity the import elasticity increases with the elasticity of substitution and the rate of price protection and decreases with advertising intensity jel classification l60 f14 les effets de changements dans le taux de change sur les prix reels dans les industries manufacturieres canadiennes ce memoire examine les effets des changements dans le taux de change sur les prix reels des biens produits au canada ou importes pour les industries manufacturieres canadiennes en construisant des estimes par secteur des elasticites de transfert et en examinant leurs determinants dans une analyse trasnversale on montre que l elasticite de transfert domestique s accroit a proportion que l effet du taux de change sur les couts internes de production la part des exportations l elasticite de substitution entre importations et biens domestiques et l intensite de publicite au plan interne sont importants l elasticite des importations s accroit avec l elasticite de substitution et le taux de protection des prix et decroit avec le niveau d intensite de la publicite

savings incentives for low and moderate income families in the united states why is the saver s credit not more effective this paper uses data from the largest tax preparer in the united states to estimate the impact of the saver s credit a us federal program providing financial incentives to encourage retirement savings on the decision to contribute to an ira it finds significant but very modest effects this is contrasted with results from a field experiment showing much larger impacts of clearly presented matching incentives various explanations are discussed for why the saver s credit is not more effective jel h00 h31 c93 d14

house price shocks negative equity and household consumption in the united kingdom we examine the impact of unanticipated housing capital gains on consumption behavior using data from the british household panel survey and county level house price data we condition the models on household financial expectations and on household real financial capital gains imputed from the family resources survey we find a marginal propensity to consume out of unanticipated shocks to housing wealth of 0 01 omitting the measure of financial expectations biases the results upward we find little evidence of heterogeneity in responses of young and old homeowners but differences between owners and renters we also find asymmetric behavior between house price rises and falls and a disproportionate impact on saving if the household had negative housing equity at the start of the period jel d91 e21 r31 c 2010 by the european economic association

housing wealth and household consumption in urban china using a large chinese household survey data set we investigate the effect of home value appreciation on urban household consumption the paper identifies the causal effect of housing wealth using

explaining the wealth holdings of different cohorts productivity growth and social security in this paper we explore the reasons why different generations accumulate different amounts of wealth we use basic economic theory to propose two indicators of the economic conditions under which households accumulate wealth the first one represents productivity differences across cohorts the aggregate level of gross national product per capita around the time the head of the household entered the labor market the second measure summarizes the changes in social security during the head of household s working life using panel data from the dutch socio economic panel we show that productivity growth can explain all the cohort effects present in income data while productivity growth and the generosity of social security can explain all the cohort effects present in household net worth we also find a limited offset of social security on wealth holdings

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association