the political economy of ngos and information sharing abstract to a large extent information sharing is what nongovernmental organizations ngos do and the costs of sharing information are falling dramatically joining politics and economics this paper builds an analytical framework to illuminate how these falling costs are affecting information intensive ngos in latin america case studies describe the various information sharing outputs and inputs of nonprofit ngo production i argue that the participatory activity of ngos affects both political and economic realms and that as the costs of sharing information fall ngos will be a more powerful link in the changing balance between states markets and civil society

differences in the properties of large scale macroeconometric models the role of labour market specifications this paper examines important differences in simulation properties of four leading uk macroeconometric models that arise from features of their labour market specifications econometric evaluation of model equations and their subsequent re specification together with sensitivity analysis of simulation results explains and resolves differences in overall model properties the examples cover the determination of non manufacturing employment the modelling of employment unemployment and the working population and the effect of the retention ratio on wage determination increased attention to systematic comparison and testing leads to increased convergence of model simulation results or as second best increased understanding of the reasons for divergence

the market value of outstanding government debt 1919 1975 abstract several new series on the market value of outstanding government debt are reported and their methods of construction described the new series on federal debt are compared with other existing estimates and are shown to be markedly superior to them

interest rates and budget deficits cross country evidence from the period 1924 1938 abstract this paper examines the question of whether budget deficits raise nominal interest rates the empirical analyses make use of cross country data from 16 countries covering the period 1924 1938 contrary to some recent studies by e g evans it turns out that budget deficits affect nominal rates positively and thus the ricardian equivalence proposition can be questioned

the state popular participation and the voluntary sector abstract a key determinant in the development contribution of nongovernment organizations ngos is the relationship between ngos and the state ngos may run parallel activities they may play oppositional roles or they may represent weaker members of society organizing them to become more influential in decision making and resource allocation this civil society function entails moving from a supply side approach concentrating on project delivery to a demand side emphasis helping communities articulate their concerns and participate in development processes donors can use the policy dialogue to encourage governments to foster a more enabling environment for ngo activities

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

new tests of the life cycle and tax discounting hypotheses abstract we first test a version of the permanent income consumption function recently suggested by barro the results support the theory except that consumption expenditures show sensitivity to transitory income next we use the consumption model to test the tax discounting hypothesis which is strongly supported this support for tax discounting disagrees with results from some earlier studies using more traditional specifications of the consumption function however we show that when certain obviously inadequate estimation procedures are corrected the traditional models also support tax discounting this uniform support for tax discounting suggests that the sensitivity of consumption to transitory income is not due to liquidity constraints

tax smoothing with stochastic interest rates a reassessment of clinton s fiscal legacy the return to sound fiscal policy after the high budget deficits of the 1980s and early 1990s has been hailed by many as the clinton administration s most important achievement we evaluate post war u s fiscal policy using a generalized tax smoothing model that allows for stochastic interest rates and growth rates we show that contrary to conventional wisdom the evolution of the u s debt gdp ratio during the 1980s was remarkably consistent with the tax smoothing paradigm in fact a more substantial departure occurred during the late 1990s when the debt gdp ratio fell more rapidly than predicted by optimal tax smoothing

how sensitive are retirement decisions to financial incentives a stated preference analysis we study the effects of financial incentives on retirement decisions using stated preference data dutch survey respondents were given hypothetical retirement scenarios describing age s of partial and full retirement and replacement rate s a stylized model is estimated in which utility is the discounted sum of within period utilities that depend on employment status and income parameters of the utility function vary with observed and unobserved characteristics simulations show that the income and substitution effects of pensions as a function of the retirement age are substantial and larger than according to studies using data on actual retirement decisions in the netherlands

exogenous tax changes and interest rates testing for ricardian equivalence using an efficient markets model this article tests the ricardian theory i e barro 1974 using mishkin s 1981 1982 efficient markets model of interest rates employing romer and romer s 2010 measure exogenous tax changes i am able to test whether the u s bond market reacts in a keynesian or ricardian manner to exogenous tax policy changes this helps avoid the endogeneity problems associated with measuring the interest rate effects of deficits and provides a cleaner test of the pure ricardian thought experiment i find a significant negative relationship between tax changes and interest rates which is inconsistent with the ricardian model and support the keynesian crowding out framework

the behavior of treasury securities monthly 1942 1984 abstract the monthly market value statistics on outstanding united states treasury debt are reported for the 1981 1984 period in addition a monthly series on privately held gross federal debt is reported for the extended 1942 1984 period together with monthly security price indices for various federal debt aggregates examination of the stochastic structure of t bill prices indicates that the riskiness of t bills has increased dramatically in recent years

the quantity and quality of life and the evolution of world inequality gdp per capita is usually used to proxy for the quality of life of individuals living in different countries welfare is also affected by quantity of life however as represented by longevity this paper incorporates longevity into an overall assessment of the evolution of cross country inequality and shows that it is quantitatively important the absence of reduction in cross country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity throughout the post world war ii period health contributed to reduce significantly welfare inequality across countries this paper derives valuation formulas for infra marginal changes in longevity and computes a full growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000 incorporating longevity gains changes traditional results countries starting with lower income tended to grow faster than countries starting with higher income we estimate an average yearly growth in full income of 4 1 percent for the poorest 50 percent of countries in 1960 of which 1 7 percentage points are due to health as opposed to a growth of 2 6 percent for the richest 50 percent of countries of which only 0 4 percentage points are due to health additionally we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups we show that mortality from infectious respiratory and digestive diseases congenital perinatal and ill defined conditions mostly concentrated before age 20 and between ages 20 and 50 is responsible for most of the reduction in life expectancy inequality at the same time the recent effect of aids together with reductions in mortality after age 50 due to nervous system senses organs heart and circulatory diseases contributed to increase health inequality across countries

mortality transition and differential incentives for early retirement existing studies investigating the effect of mortality decline on retirement age usually specify the human mortality pattern in a parametric way and consider the derivative of optimal retirement age with respect to a change in the survival parameter however a survival parameter change affects the mortality rates at different ages simultaneously motivated by the stylized fact that mortality decline affects primarily younger people in the early phase of a mortality transition but mainly older people in the later phase we study the more fundamental question of how a mortality change at an arbitrary age affects optimal retirement age by using the volterra derivative for a functional we show that a mortality decline at an older age unambiguously leads to a later retirement age but a mortality decline at a younger age may lead to earlier retirement because of the substantial increase in the individual s expected lifetime human wealth

the importance of the distinction between long and short term unemployment in uk macroeconometric models this paper examines the degree of support for distinct duration effects on wages across a variety of wage equations and investigates their importance in full simulations with three large scale uk macroeconometric models the paper begins by highlighting deficiencies both in the way that existing models determine the duration structure of unemployment and in the specification of long term unemployment in the wage equation by constructing a single preferred wage equation we test hypotheses relating to duration effects and although tests are not conclusive find some support for the use of short term unemployment in the wage equation however it is also shown that the response of wages to changes in unemployment is similar regardless of whether aggregate or short term unemployment is used in the wage equation although this does not hold when the duration structure of unemployment changes radically by substituting revised equations into the models we show that these results carry over to full model simu

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

the differing effects of pre and post 1981 federal budget deficits on tax adjusted real interest rates this paper employs an estimating equation relating tax adjusted real interest rates to deficits and other economic variables to examine the differing effects of pre and post 1981 federal budget deficits on ex ante and ex post real tax adjusted short term interest rates over the period 1961 1 1992 2 the results for the 1961 1 1992 2 period taking into account a shift in the linkage between the ratio of alternative measures of the deficit to potential gdp occurring in 1981 1 indicate that the ratio of both the nipa deficit and the cyclically adjusted deficit to potential gdp have a significant effect on ex ante and ex post real tax adjusted interest rates for the post 1981 period but no significant effect before 1981

job displacement and the transitions to re employment and early retirement for non employed older workers abstract despite the relatively higher frequency of job displacement among older workers in europe little is known about its effect on the work retirement decision employing individual data from the european community household panel for a number of countries with differences in their institutional environments the effect of job displacement for non employed workers is identified separately for the transitions into re employment and retirement the findings suggest that in countries with relatively more generous unemployment insurance provisions for the older unemployed which offer a pathway to early retirement older displaced workers exhibit lower re employment and higher retirement rates compared to the non displaced these results are robust to dynamic selection due to unobserved heterogeneity and to the endogeneity of displacement

fiscal policy and private investment expenditure a study of australia and the united states the effect of government spending on private sector s investment and profitability is examined within the context of an open economy macro model the empirical results of the study indicate that the private investment expenditure in australia and the united states is crowed out by government investment and government consumption respectively these results are in conflict with the hypothesis of fiscal neutrality in addition the empirical results of corporate profitability provide no support for the complementary relationship between public and private investment expenditure

social security and retirement an international comparison this article concerns the following items 1 decline in labour force participation 2 social security benefit accrual and the implicit tax on work 3 the importance of the early retirement age 4 the implicit tax on work and labour force participation etc

output effects of government purchases the theoretical analysis focuses on the distinction between temporary and permanent movements in government purchases under plausible conditions the temporary case involves an output response that is positive less than one to one with the change in government purchases and larger than that generated by an equal sized but permanent shift in purchase the equilibrium real rate of return rise in the temporary case but changes little in the permanent one defense purchases are divided empirically into permanent and temporary components by considering the role of temporary wars no temporary shifts in nondefense purchases were isolated empirical results verify an expansionary output effect for temporary purchases that exceeds that of permanent purchases the results for some other expectational hypotheses are found to be generally supportive of the theory

should generational accounts replace public budgets and deficits the author assesses the concept of generational accounts and the specific accounts constructed by alan auerbach jagadeesh gokhale and laurence kotlikoff 1991 although these accounts support the assertion of present orientation in fiscal policy they rest on numerous assumptions based on judgments that are open to question these involve the treatment of the public budget constraint the benefits from public exhaustive expenditures economic and population projections the discount rate and fiscal incidence alternative and equally reasonable assumptions could yield radically different conclusions the author concludes that the auerbach gokhale and kotlikoff accounts should not replace the annual public budget as they argue

implications of population ageing for economic growth the share of the population aged 60 and over is projected to increase in nearly every country in the world during the period 2005 50 population ageing will tend to lower both labour force participation and savings rates thereby raising concerns about a future slowing of economic growth our calculations suggest that oecd countries are likely to see modest but not catastrophic declines in the rate of economic growth however behavioural responses including greater female labour force participation and policy reforms including an increase in the legal age of retirement can mitigate the economic consequences of an older population in most non oecd countries declining fertility rates will cause labour force to population ratios to rise as the shrinking share of young people will more than offset the skewing of adults towards the older ages these factors suggest that

the political limits to nongovernmental organizations in jordan abstract nongovermental organizations ngos are frequently touted as important actors in democratization yet despite the proliferation of ngos since the advent of political liberalization and democratization in jordan they remain circumscribed by the realities of continued state power because the political transition was informed by a desire to perpetuate regime survival in the midst of economic crisis ngos continue to experience political limits to their activities the regime primarily relies upon three strategies to control the ngo community a administrative repression and oversight b civil society infiltration through royal nongovernmental organizations and other government ngos and c centralization through the general union of voluntary societies

social security and economic integration this letter analyzes the impact of economic integration on capital accumulation and capital flows when countries differ in their social security systems funding and early retirement both foster capital accumulation relative to pay as you go pensions with flexible retirement when economies integrate both imply capital outflow possibly resulting in utility losses

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

economic evaluation of nutrition policy abstract the good news from prevention research is that it appears possible to dramatically improve health in the us by changing identified risk factors the goal of this paper is to discuss how to evaluate the economic consequences of improvements in nutrition and exercise related health cost benefit analysis and the related tools of cost effectiveness analysis and cost utility analysis are proposed as preferred methods the decision rule is simply if the sum of the potential gains to all those affected by a policy intervention exceed the sum of costs there is a potential gain in societal welfare by this standard preventive interventions can be worthwhile even when they do not reduce lifetime medical expenditures or increase lifetime earnings that is even when the intervention is not a free lunch the distinction between the internal costs for an individual patient versus the external costs an individual s illness imposes on others is an important conceptual issue practical issues include determining whether a poor health habit causes the costs and other results being attributed to it and the completeness of the analysis in principle the analysis should examine all of the effects and resource costs of the intervention including changes in morbidity mortality the quality of life allocations of patient time and caregiving by others as well as traditional health sector costs and changes in productivity improvements in nutrition and exercise related health may also have important implications for public sector finances of programs including medicare and social security

government versus private ownership of public goods there has been a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services in recent years with an increasing trend toward contracting out to the private sector and public private partnerships this paper analyzes how ownership matters in public good provision we show that if contracts are incomplete then the ownership of a public good should lie with a party that values the beneets generated by it relatively more this is true regardless of whether this party is also the key investor or other aspects of the technology

macroeconomic consequences of population aging in the united states overview of a national academy report author s lee ronald d abstract the us population will age rapidly for several decades and then more slowly with less aging than most rich nations health of the elderly has greatly improved but disability stagnated after 2000 retirement age reversed its decline in the mid 1990s and health status leaves ample room for increased elder labor supply many older people have inadequate retirement savings and face additional risks including uncertainty about both public and private pensions and health insurance population aging may cause a small decline in rates of return the main problem is the impact of population aging on public programs for the elderly

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

reduction in the long term unemployment of the elderly a success story from finland in finland the elderly unemployed are allowed to collect unemployment benefits up to the age of 60 when they can retire via a particular unemployment pension in 1997 the eligibility age of persons benefiting from this scheme was raised from 53 to 55 we consider changes in the risk of unemployment unemployment durations and the exit states before and after the reform in the duration analysis a flexible treatment design is adopted by allowing for quantile treatment effects we apply three different non and semiparametric methods which all produce robust and coherent results since the reform the group aged 53 54 has had a lower risk of unemployment shorter unemployment durations and higher exit rates to employment and it is no longer distinguishable from the group aged 50 52 we estimate the amount of unemployment benefits saved due to the reform

gradual retirement financial incentives and labour supply of older workers evidence from a stated preference analysis abstract using data from a stated preferences experiment in the netherlands we find that replacing full time pension schemes with schemes that offer gradual retirement opportunities induce workers to retire one year later on average total lifetime labour supply however decreases by 3 4 months because the positive effect of delayed retirement on labour supply is cancelled out by a reduction in working hours in the years before full retirement the impact of gradual retirement schemes is however heterogeneous across groups of workers workers in bad health who gain access to gradual retirement postpone their retirement by 1 7 months more than workers in good health this suggests that introduction of gradual retirement alleviates to a certain extent the health related burden that employees in poor health may experience in carrying out their work nevertheless introduction of gradual retirement reduces the total labour supply of both groups of workers financial incentives either in terms of changing pension income or the price of leisure also affect expected retirement age but the impact of these financial incentives does not differ with the possibility of gradual retirement finally we find that gradual retirement is not a preferred option among workers as the large majority prefers full retirement

macroeconomic effects of budget deficits further international evidence abstract this paper investigates the effects of budget deficits on money growth inflation investment and real output growth using annual data from a sample of 32 countries the findings can be summarized as follows i deficits are generally not monetized and therefore they do not produce inflation via monetary expansions ii deficits are not inflationary even through their alleged aggregate demand effects iii deficits are negatively correlated with the rate of growth of real output but this may just reflect their countercyclical nature and iv increased deficits do appear to retard investment usually after one or two years jel e63 h62

sources of output fluctuations in the united states during the inter war and post war years abstract this paper attempts to decompose the sources of fluctuations in industry output into 1 an aggregate national shock 2 industry group specific shocks and 3 idiosyncratic factors the empirical methodology is the engle watson dynamic mimic model the work is motivated as an attempt to compare empirically aggregate single factor theories of the cycle with real business cycle theories emphasizing technology shocks disaggregate data from the inter war and post war periods are examined conclusions on the relative importance of the various shocks seem to be dependent on the period being considered the single index theory of the cycle seems more appropriate for the inter war period

inflation and government deficits there is a pronounced positive correlation of inflation andgovernment deficits in the united states since world war ii the purpose of this paper is to test the three leading explanationsof this correlation these three explanations are a a deficitincreases prices through a wealth effect b a deficit results inthe federal reserve purchasing debt thus increasing the moneysupply and prices and c expected inflation increases the deficit which is the change in the nominal value of bonds no supportis found for either of the first two hypotheses the results indi cate that expected government deficits have no significance forfuture inflation since world war ii the united states has experienced large federal government deficits and a sustained peacetime inflation three differentconnections between the deficits and inflation are prominent in theliterature the most direct connection between government deficits and inflationis that by increasing the real value of outstanding bonds and perceived netwealth a deficit can raise total spending and the price level this connec tion is also the most long standing and is suggested by metzler 1951 andpatinkin 1965 for example monetarists generally and buchanan and wagner 1977 in particularhave emphasized a different link between deficits and inflation they sug gest that the federal reserve purchases government bonds when the trea sury sells bonds thus increasing high powered money the money supply and the price level the federal reserve might behave this way for exam ple because it is attempting to hold down interest rates on governmentsecurities when deficits occur recently barro 1978 1979 has put forward a hypothesis that deficitsare a result of inflation rather than inflation being a result of deficits thegovernment deficit is the change in the nominal value of outstanding gov ernment bonds if the anticipated inflation rate increases then the nomi nal value of bonds must increase i e the government will run a deficit tokeep the same anticipated real amount of bonds all three of these possible connections between government deficitsand inflation are consistent with the observed positive correlation of defi cits and inflation the implications however are strikingly different con

social security and cross country differences in hours a general equilibrium analysis abstract i develop a general equilibrium life cycle model with an intensive and extensive margin of labor supply and endogenous human capital accumulation i use the model to assess the effects of changes to various features of social security on labor supply outcomes of particular interest are changes to the scale of the program and to the relevant eligibility rules i find that the cross country differences in social security programs account for at least 79 of the differences in employment rates of people aged 55 64 and 17 31 of the differences in aggregate hours worked between the us and continental europe

did vietnam veterans get sicker in the 1990s the complicated effects of military service on self reported health abstract the veterans disability compensation vdc program which provides a monthly stipend to disabled veterans is the third largest american disability insurance program since the late 1990s vdc growth has been driven primarily by an increase in claims from vietnam veterans raising concerns about costs as well as health we use the draft lottery to study the long term effects of vietnam era military service on health and work in the 2000 census we find no evidence that military service affected overall employment rates or overall work limiting disability rates that is health conditions that make work difficult at the same time military service sharply increased federal transfer income especially for lower skilled white men among whom there was also a large negative impact on employment and a marked increase in disability rates the differential impact of vietnam era service on low skilled men cannot be explained by more combat or war theatre exposure for the least educated because high school graduates were at least as likely to be exposed to combat or war theatre as the less educated this leaves the relative attractiveness of vdc for less skilled men and the work disincentives embedded in the vdc system as a likely explanation for our findings

interest rates and expected future budget deficits in the united states several recent empirical studies have found no evidence of a positive association between interest rates and current and past budget deficits one possible explanation for this finding is that interest rates are related much more to the expectation of future budget deficits than to current and past budget deficits in this paper i investigate whether this explanation is valid finding no evidence that it is section ii briefly formulates and discusses the hypothesis under consideration stating some of its implications section iii presents the results of regressing the commercial paper rate moody s aaa bond rate and the ex post real commercial paper rate on current and past government spending budget deficits and real money supplies the regressions have been fitted to the entire sample of monthly data spanning the period between june 1908 and march 1984 and to 11

government spending interest rates prices and budget deficits in the united kingdom 1701 1918 abstract the british data from the early 1700s through wwi provide an unmatched opportunity for studying temporary changes in government purchases temporary increases which appeared mainly as wartime spending raised long term interest rates but significantly increased the growth rates of money and prices only during suspensions of the gold standard 1797 1821 and 1914 1918 temporary changes in military spending accounted for the bulk of budget deficits over the sample of more than 200 years i found only two major non war deficits one associated with compensation payments to slaveowners in 1835 1936 and the other with a dispute over the income tax in 1909 1910 interest rates did not react much to these exogenous deficits

college education and the midcentury gi bills the midcentury gi bills were the largest direct scholarship program for higher education in american history i use a comparison group created by the sharp cutoff date of the korean war gi bill to evaluate the effects of the korean war gi bill on postsecondary educational attainment and access to college by the disadvantaged i then bound the likely effects of the world war ii gi bill based on elasticities estimated for the korean war gi bill and new estimates using older veterans as a comparison group for younger ones i find that the combination of the korean war and wwii gi bills probably increased total postsecondary attainment among all men born between 1921 and 1933 by about 15 to 20 percent with smaller effects for surrounding cohorts the impacts of both programs on college attainment were apparently concentrated among veterans from families in the upper half of the distribution of socioeconomic status

unemployment vacancies and the long term unemployed this paper is concerned with two related features of the labor market the ratio of long term to total unemployment r and the relat ionship between unemployment and vacancies the u v curve a model is developed to explain r in terms of the average probability that an unemployed person will find a job within a particular time period when the authors add the empirically confirmed hypothesis that this exit probability is lower for the long term than it is for the short term unemployed the n the model is consistent with the observed pattern of unemployment copyright 1988 by royal economic society

government debt government spending and private sector behavior a current period tax reduction financed by issuing government debt shifts the timing of tax collection from the current period to the future if the future taxes implied by government debt are not fully perceived and discounted by the private sector there will be a net wealth effect that increases private sector consumption thus reducing capital accumulation and growth if on the other hand the implied future taxes are perceived and discounted by the private sector the current period tax reduction will be used to increase private saving to pay for the future taxes and government debt will be absorbed without any real effects on the economy the effects of government spending financed by current period taxation also depend upon private sector perceptions 2 if the benefits of government spending are ignored private sector consumption will decrease in accordance with the reduction in permanent disposable income to the extent that government spending is on consumption type goods that are perceived as substitutes for privately provided consumption goods there will be a relatively greater reduction in private sector consumption to the extent that government spending is on investment type goods yielding future goods and services that are perceived as substitutes for future privately provided consumption goods there will be a relatively smaller reduction in private sector consumption the standard approach to modeling private sector consumption saving behavior involves a rather asymmetric set of assumptions as to how the private sector perceives the various elements of government fiscal policy 3 current period taxes are assumed to be fully perceived but current period government spending is implicitly assumed to be completely ignored by the private sector in considering permanent personal disposable income the private sector is assumed to be forward looking in its assessment of income and taxation the stock of government debt is nevertheless included as part of the stock of private wealth the implicit assumption associate professor of economics graduate school of business university of chicago 1101 east 58th street chicago il 60637 i thank eugene fama levis kochin michael mussa paul evans and an anonymous referee for helpful comments i am particularly grateful to daniel benjamin for contributing many hours of discussion and laura lahaye who was a research assistant and valuable adviser on earlier drafts the theoretical debate on the burden of the debt has been long standing gerald o driscoll 1977 documents ricardo s nineteenth century position robert barro 1974 reopened the debate by introducing the fundamental issue of intergenerational transfers also discussed in merton miller and charles upton 1974 the empirical side of the debate was initiated by levis kochin s 1974 attempt to test for the effects of deficits on consumption and by martin feldstein s 1974 attempt to test for the effects of social security wealth on consumption other empirical contributions include jess yawitz and laurence meyer 1976 myself 1978 and j earnest tanner 1978 1979 with respect to the effects of government deficits and debt and barro 1978 michael darby 1979 and dean leimer and selig lesnoy 1982 with respect to social security wealth see also interesting recent papers by john seater 1982 who generates detailed tests of the effects of deficits and debt on consumption charles plosser 1982 who explores the effects of government spending and debt shocks on interest rates and feldstein 1982 who attempts tests similar to some in this paper see fn 29 2martin bailey s 1962 1971 development of the effects of government spending on private consumption and aggregate economic activity is the seminal contribution paul david and john scadding 1974 extend bailey s ideas and provide some supporting empirical evidence more recently willem buiter 1977 and myself 1978 developed models based on bailey s earlier work barro 1981 has an interesting paper on related issues see also david aschauer 1982 3the standard approach incorporates fiscal policy through the concept of personal disposable income and by including the stock of government debt as part of personal wealth see for example the empirical specification of albert ando and franco modigliani 1963 which has been the basis of most empirical consumption studies since and feldstein 1974 for one of the more influential papers based on the ando modigliani specification

can government purchases stimulate the economy this essay briefly reviews the state of knowledge about the government spending multiplier drawing on theoretical work aggregate empirical estimates from the united states as well as cross locality estimates i assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate a temporary deficit financed increase in government purchases i conclude that the multiplier for this type of spending is probably between 0 8 and 1 5 jel e23 e62 h50

a note on deficit implicit debt and interest rates this short note revisits the long standing issue of the relationship between government borrowings and interest rates using vector autoregression var models in particular we consider the dynamic impacts of both official deficit and implicit debt on the interest rates two measures of unfunded social security obligations implicit debt are examined the recently developed generalized forecast error variance decompositions which are invariant to the ordering of variables in vars are adopted we find that temporary shocks to the official deficit do not cause real interest rate changes in the short term but do cause moderate changes in the long term they have significant impact on nominal interest rates in both short and long horizons the implicit debt also appears to have some moderate influence on real interest rates at long horizons

quantifying the laffer curve on the continued activity tax in a dynastic framework it is argued that the tax on continued activity should be removed by implementing actuarially fair schemes however these schemes cannot fund the expected social security ss deficit this article proposes to give individuals a fraction of the actuarially fair incentives in the case of postponed retirement ss faces a trade off between giving enough incentives to make individuals delay retirement and giving little increase in pensions in order to help finance its expected deficit this trade off is captured by a laffer curve finally when the ss system aims to maximize welfare the optimal tax on postponed retirement is still strictly positive erratum vol 49 issue 4 1539

collateral damage trade disruption and the economic impact of war abstract conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity especially international trade we study the effects of war on bilateral trade with available data extending back to 1870 using the gravity model we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals controlling for other determinants of trade as well as the possible effects of reverse causality we find large and persistent impacts of wars on trade national income and global economic welfare we also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured direct costs of war such as lost human capital as illustrated by case studies of world wars i and ii

is a military really a luxury good an international panel study of ldcs this paper introduces country specific fixed effects into a theoretical and empirical model of military expenditure contrary to the existing literature the model indicates that the share of military expenditure decreases with a country s income

fiscal policy and interest rates in europe the appetite for fiscal discipline has been steadily declining among most industrial countries in the past fiscal profligacy would have been punished by markets with higher interest rates and in some cases also exchange rate depreciation however in post emu europe exchange rate markets no longer discipline the fiscal behaviour of national governments perhaps more crucially even the interest rate punishment to fiscal indiscipline is highly uncertain with academic opinions being quite divided on this issue this paper takes a close look at the link between fiscal policy and interest rates in the european context the key finding is that an expansionary fiscal policy in one emu member will have an effect both on its spreads and on the overall level of interest rates for the currency union as a whole with the second effect however being quantitatively much more significant this suggests that there are indeed substantial spillovers through the interest rate channel among fiscal policies of member countries to limit countries incentive to run expansionary fiscal policies a set of rules like those embedded in the stability and growth pact is then needed some weak evidence is also found that after emu interest rate spillovers seem to be more significant for high debt countries with unsustainable fiscal policies reflecting perhaps market concerns about a possible sovereign bail out or the impact of financial distress there may be a case then for imposing tighter rules on high debt countries riccardo faini

macroeconomic implications of early retirement in the public sector the case of brazil abstract in brazil generous public sector pensions have induced civil servants to retire on average at age 55 in this paper we assess the efficiency gains from eliminating such policy induced early retirement in a two sector overlapping generations economy we find the adverse effects of that policy are significant specifically the generosity of public sector pensions which induces civil servants to retire 5 years prematurely at age 55 rather than at age 60 is often associated with decreases in steady state output gdp of almost 3 and welfare losses in the private sector of more than 3 of consumption

redistribution of individual pension wealth to survivor pensions evidence from a stated preferences analysis abstract pension schemes in the netherlands allow workers to redistribute their own pension wealth to increase the survivor pension of their partner however due to lacking communication and knowledge of survivor pensions among workers and also due to the lack of transparent products and choice architecture redistribution remains limited this paper uses a stated preferences experiment that is explicitly designed for workers with a partner in the age group of 55 to 65 years to elicit their pension redistribution preferences we find that on average the preferred pension wealth redistribution amounts to 50 35 of all individuals have such a preference 33 of all individuals would prefer less redistribution and 32 percent prefers to redistribute more pension income to the partner upon one s death we further show that total family income during working life does not affect the redistribution to survivor pensions however the distribution of the contribution to total family income before retirement across partners as well as the survival likelihood of the partner and the number of years the partner is expected to survive have a significant causal impact on the preferred pension redistribution decision the preference for redistribution to survivor pensions also depends significantly on personal characteristics preferences and social attitude males have a significantly stronger preference for redistribution compared to females moreover forward looking more risk averse and more altruistic individuals have a stronger preference to redistribute part of their pension wealth to a survivor pension finally in particular when employees have the perception that their partner is more forward looking they are willing to invest more in a survivor pension

the value of life and the rise in health spending over the past half century americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result debate on health policy often focuses on limiting the growth of health spending we investigate an issue central to this debate is the growth of health spending a rational response to changing economic conditions notably the growth of income per person we develop a model based on standard economic assumptions and argue that this is indeed the case standard preferences of the kind used widely in economics to study consumption asset pricing and labor supply imply that health spending is a superior good with an income elasticity well above one as people get richer and consumption rises the marginal utility of consumption falls rapidly spending on health to extend life allows individuals to purchase additional periods of utility the marginal utility of life extension does not decline as a result the optimal composition of total spending shifts toward health and the health share grows along with income in projections based on the quantitative analysis of our model the optimal health share of spending seems likely to exceed 30 percent by the middle of the century

job search requirements for unemployed at the end of working life effects on unemployment dynamics and self employment probabilities this paper investigates the extent to which job search requirements in unemployment insurance u i increase the probability of self employment as a retirement route for causal identification we apply a difference in differences approach using a dutch 2004 policy reform that introduced job search requirements in u i for persons aged 57 5 and older unemployment dynamics and self employment probabilities are studied using a dynamic multinomial logit model with unobserved heterogeneity the results suggest that job search requirements stimulated people to exit unemployment and discouraged older workers to enter unemployment the probability of self employment as an exit route to retirement increased relative to u i but not relative to paid employment

fiscal policy and the term structure abstract this paper investigates the empirical association between deficits in interest rates it extends the results in plosser 1982 to include the more recent experience the association between a measure of ex ante real rates and deficits is also considered the results largely corroborate the previous results first little or no association between real or nominal interest rates and deficits is found second output and to a lesser extent military spending are found to have a significant association with interest rates

deadweight losses and the saving response to a deficit deadweight losses and the saving response to a deficit several recent empirical studies have challenged the conventional wisdom that deficits cause a higher interest rate many economists are however critical of the seemingly implied theoretical justification that every individual fully recognizes the size of the deficit and the extent to which it increases future tax liabilities this paper demosntrates that far weaker information assumptions are needed to obtain an aggregate savings response equal to the deficit a reallocation of deadweight losses causes ricardians to save more than their share of the deficit to keep consumption unaffected allowing for a substantial fractrion of keynesians who save less than their share 1 introduction the saving behavior in the ricardian equivalence theorem is often criticized for relying on perfect foresight e g buchanan 1976 and evans 1985 85 even david ricardo himself rejected what is nowadays termed the ricardian equivalence theorem on grounds that people are not sufficiently aware of future tax liabilities see o driscoll 1977 this paper demonstrates that the saving response obtained by the ricardian equivalence theorem saving oing up by the deficit with a constant interest rate can be obtained with weaker rationality assumptions when deadweight losses associated with nonlump sum taxation are accounted for deadweight losses have been overlooked in the deficit debate possibly because the deadweight loss estimates in the public finance literature were rather small up until a few years ago the first mention of deadweight losses we have found is the brief theoretical discussion of transactions costs in collecting taxes and issuing debt in barro 1974 1109 deficits and welfare is an issue currently debated but the question posed is usually the reverse of the one asked here while we analyze how welfare losses affect the macro consequences of a deficit recent studies have focused on whether deficits increase or decrease welfare for instance both chan 1983 and barsky et al 1986 have studied whether deficits are desirable or not though analyzing how uncertainty of present and future after tax income are affected 1 futher a recent article by hansson and stuart 1987 estimated the losses from labor and capital taxes in a current and a future time period to evaluate the welfare consequences of a reallocation of taxes over time the theoretical argument made in this paper might be viewed as an obvious elaboration of the ricardian equivalence theorem nevertheless given current parameter estimates of deadweight losses the argument turns out to be very important quantitatively a simple illustration will demonstrate that far from everyone perhaps less than half of the population needs to have rational foresight about the deficit in order for a deficit to generate a one to one response in saving ii the behavior of ricardian individuals the effect of taxes altering efficiency and deadweight losses in each of the two time periods the standard ricardian equivalence theorem is arrived at assuming lump sum taxation with no deadweight losses accompanying taxation according to the theorem a deficit has the equivalent effect of current taxation because people anticipate the future tax liability incurred with the deficit these ricardian individuals have no reason to alter their labor supply the production techniques or their consumption pattern all that a deficit therefore results in is an increase in savings that is exactly equal to the deficit how would the analysis change if nonlump sum taxations is allowed for and associated with deadweight losses one shoudl have to analyze which particular tax is cut today and which is raised tomorow when the deficit is generated and how both affect the desired levels of labor suplly consumption etc today and in the future

government borrowing and tax adjusted real and nominal interest rates the purpose of this paper is to test for the effect of federal government budget deficits on one year tax adjusted nominal and real interest rates in an is lm as model the results suggest that the specification of the dependent variable is a crucial issue in the debate over the linkage between deficits and interest rates the evidence shows a positive and significant effect of various measures of the federal government deficit and debt on the real tax adjusted treasury bill rate in both the levels and the first differenced equations but not on the nominal tax adjusted rate the positive and significant deficit debt coefficients are also confirmed when the first differenced equation is estimated by instrumental variables and when the equation is estimated over various time periods thus there is robust evidence of a positive linkage between federal government borrowing and the tax adjusted real but not nominal interest rates

democratic governance and sectoral policy reform tracing linkages and exploring synergies abstract effective democratic governance influences how societies and economies progress and prosper for many people in developing and post socialist countries the action and impact of democratic governance happens through sectoral reforms efforts to improve democratic governance can have strong impacts on sectoral reforms how these are implemented who participates in them at various stages and what outcomes are achieved conversely sectoral policy reforms and program interventions can serve to promote and enhance democratic governance this article discusses these linkages and provides selected examples of the synergies among them it raises the political dimension of democratic governance and offers several suggestions regarding where when and how donor agencies can intervene both to promote democratic governance and to advance sectoral policy reforms

do changes in demographic characteristics explain declining male employment rates examination of the australian case using a propensity score re weighting decomposition approach using australian data spanning the period from 1981 to 2001 we apply a propensity score re weighting decomposition approach to investigate the extent to which the large decline in the male employment population rate over this period can be attributed to changes in socio demographic characteristics we find that changes in observed characteristics account for little of the aggregate decline however changes in characteristics are found to be important for population sub groups in particular changes in partner status and partner employment status have acted to decrease employment rates of younger males but increase employment rates of older males a further finding is that holding observed characteristics constant there has been a very large decline in the employment rate of 55 64 year olds with bachelor degree qualifications in the course of applying the decomposition method we illustrate that validity of inferences depends on appropriate specification of the reweighting function

u s war costs two parts temporary one part permanent military spending fatalities and the destruction of capital all of which are immediately felt and are often large are the most overt costs of war they are also relatively short lived but the costs of war borne by combatants and their caretakers which includes families communities and the modern welfare state tend instead to be lifelong in this paper i show that a significant component of the budgetary costs associated with u s wars is long lived one third to one half of the total present value of historical war costs are benefits distributed over the remaining life spans of veterans and their dependents even thirty years after the end of hostilities typically half of all benefits remain to be paid estimates of the costs of injuries and deaths suggest that the private burden of war borne by survivors namely the uncompensated costs of service related injuries are also large and long lived

do the french pension reforms increase re employment of older unemployed workers abstractthe sustainability of social security financing has pushed authorities to reform their policy to increase the labour market participation of older workers while most of the studies have fo

the politics of government ngo relations in africa abstract non governmental organizations ngos deservedly or not have gained a reputation as the leading practitioners of rural development in africa african governments have responded ambiguously to the presence of these new agencies on the one hand valuing the economic resources ngos can raise but resisting the political pluralization implied by popular development action this article describes the growth of ngos in africa and proposes a framework for analyzing the dynamics of government ngo relations by means of examples drawn from kenya and zimbabwe among other african countries the article illustrates the strategies used by governments to exercise control and by ngos to assert autonomy an argument is made that politics rather than economics best explain the contribution of ngos to development as well as the attitude of governments toward the burgeoning voluntary sector

time to burn calories the impact of retirement on physical activity among mature americans abstract physical activity is crucial for maintaining and improving health especially at advanced ages while retirement increases the amount of time available for physical activity there is only limited evidence regarding the causal effect of retirement on recommended levels of physical activity addressing this gap in the literature we use data from the u s health and retirement study to estimate the causal impact of retirement on meeting the federal government s 2008 physical activity guidelines for americans using official early and normal retirement ages as instruments for retirement our causal iv analyses suggest significant positive effects of retirement on meeting the guidelines these effects are robust with regard to the treatment of unobserved individual specific heterogeneity the measurement of guideline compliance the definition of retirement and respondents health insurance status we also show that the effects of retirement on physical activity are larger for persons with higher levels of education and wealth

population ageing and labour markets in the face of rapid population ageing the long run fall in effective retirement ages in most oecd countries needs to be reversed there are some positive signs that this is beginning to happen but early exit from the labour force i e well before official old age pension ages still remains a very common phenomenon in oecd countries in this paper we first compare recent trends in the labour situation of older workers across oecd countries this is followed by a discussion of supply side and demand side factors that have been driving these trends in particular new evidence is presented on incentives to retire that are embedded in pension systems we conclude that recent reforms in most countries in this area are working in the direction of encouraging later retirement although in a few countries there are still substantial incentives to stop working early we then examine to what extent there are barriers on the demand side which may also be discouraging work at an older age such as age discrimination seniority rules in wage setting low training participation and employment protection rules we conclude that countries have also begun to tackle these barriers as well nevertheless while considerable pension reform has undoubtedly strengthened incentives to continue working at an older age further action is still required on the demand side to ensure that those older workers who wish to work longer can do so copyright 2010 oxford university press

fiscal policy and the mehra prescott puzzle on the welfare implications of budget deficits when real interest rates are low historically average real returns on u s government debt have been far below the rate of economic growth allowing the u s government to roll over its debt at a rather low cost at the same time the rate of return on capital has generally been above the growth rate suggesting that the u s economy is dynamically efficient the paper shows that the welfare implications of budget deficits in this scenario depend critically on why interest rates have been so low if the government can offer low returns on its debt because of some unique ability to create default free claims persistent primary budget deficits may be unproblematic but if low interest rates are due to high risk aversion policies that exploit the low cost of government debt to run frequent budget deficits will impose significant risks on future taxpayers in essence safe government debt is safe for the debt holders but it is very risky for the taxpayers who are implicitly taking a short position in the safe security

government financing decisions and asset returns abstract this paper presents an empirical investigation of the relation between government financing decisions and asset returns in particular the focus is on whether a substitution of debt financing for tax financing of a given level of expenditures is associated with an increase in interest rates the paper brings a different perspective to empirical investigations of government fiscal policies by examining the response of asset prices in an efficient capital market to such policies rather than focusing on aggregate consumption behavior the results are consistent with the idea that asset prices are unrelated to how the government finances its expenditures the results however also indicate that the capital market is not indifferent with respect to the level of government expenditures as higher interest rates are associated with increases in government purchases

a test of steady state government debt neutrality a test of steady state government debt neutrality this paper investigates whether in the steady state the real interest rate is an increasing function of both the government debt and government spending using data from the period between january 1981 and march 1986 the paper finds no evidence of such a relationship these data afford an especially powerful test because the ratio of federal debt to trend output which had fallen from 93 to 33 percent between january 1948 and december 1980 reversed course after the enactment of the economic recovery tax act reaching 47 percent in march 1986 i introduction in conventional macroeconomic analysis government debt is not neutral because households view it as contributing to their net wealth as a result the larger the government debt is the wealthier households feel and the more they consume more consumption in turn spells less investment over time and thus a lower steady state capital stock as a result output is ultimately lower and the real interest rate higher in principle however households need not view government debt as net wealth 1 if households accurately foresee the future taxes that will service the government debt if they face perfect capital markets if taxes do not distort their decisions and if they internalize future generations then they treat the future taxes servicing the government debt as an exact offset consequently government debt is neutral since it does not make households feel wealthier and hence affects nothing 2 nevertheless because most macroeconomists doubt that households accurately foresee future servicing taxes have access to perfect capital markets and internalize future generations they do not model government debt as neutral like perfect competition however government debt neutrality may be a good approximation in many applications even if the assumptions underlying it are unrealistic therefore empirical analysis rather than introspection should determine how one models government debt this paper provides such an empirical analysis the empirical analysis focuses on the steady state relationship between government debt and the real interest rate 3 in the steady state a larger government debt leads to a smaller capital stock and hence a higher marginal product of capital if households view government debt as net wealth consequently the real interest rate is also higher if instead government debt is neutral nothing should happen to the real interest rate u s data from the period between january 1981 and march 1986 have been used here to investigate whether a larger government debt leads to a higher real interest rate in the steady state and hence whether government debt is neutral these data afford an especially powerful test because the ratio of federal debt to trend output which had fallen from 94 to 33 percent between january 1948 and december 1980 reversed course after the enactment of the economic recovery tax act reaching 47 percent by march 1986 moreover this upward trend is likely to continue well beyond 1986 such an enormous increase in federal debt should have raised by steady state real interest rate appreciably if households view government debt as net wealth to any important extent in the absence of evidence that the steady state real interest rate did rise government debt is judged to be neutral in the steady state section ii formulates the model which is estimated in sections iii and iv section v summarizes the paper and then briefly reviews an extensive literature consistent with government debt neutrality ii formulation of the econometric model the appendix demonstrates that if households view government debt as net wealth the real interest rate should be an increasing function of both the government debt and government spending in the steady state see also evans 1988 for this analysis

women s participation in local organizations conditions and constraints abstract civic organizations have a capacity to contribute to economic growth and an equitable distribution of welfare by reducing information asymmetries and transaction costs while donors increasingly recognize that group based projects are a means to advocate organizational capacities of target groups it is not clear whether group based organizations always increase efficiency and equity this article analyses the determinants of participation in local development groups ldgs using data from two projects funded by undp in kashmir and gtz in chad a major result of the empirical analysis is the identification of a middle class effect of participation the exclusion of the majority of the poor can be explained by high opportunity costs to join the group especially for income earning women in addition it can be shown that an existing social network is a pre condition for participation finally the assumption has been confirmed that bargaining power of the members is important for their decision to participate in groups