by force of demand explaining international comovements abstract this paper explores the possibility that economic fluctuations may be largely demand driven it is shown that the stylized open economy business cycle regularities documented by feldstein and horioka 1980 the economic journal 90 june 314 329 and backus et al 1992 journal of political economy 100 4 745 775 can be explained by demand shocks alone even in a standard general equilibrium model frictions such as market incompleteness increasing returns to scale and sticky prices do not appear to be the preconditions for resolving these long standing puzzles

linear adjustment costs and seasonal labor demand evidence from retail trade firms standard models of dynamic labor demand rely on the presence of adjustment costs to explain the observed smoothness in employment patterns although the costs are often difficult to quantify the experience rating feature of the u s unemployment insurance ui system provides a measurable linear cost of adjustment using a unique data set with administrative data on over 8000 firms i estimate the effect of a ui induced linear adjustment cost on seasonal labor demand in retail trade i find strong support for the large role of adjustment costs in reducing the employment response of firms to seasonal fluctuations in demand

patents as a measure of technology shocks and the aggregate u s labor market i introduction one of the dominant approaches to macroeconomic research in the past several decades has been the island paradigm of friedman 1968 and phelps 1970 in this framework economic agents operate under incomplete information regarding relative and absolute prices when making economic decisions this paradigm is used in the rational expectations literature see mccallum 1980 and the references therein in a market clearing framework to study among other things the effects of fiscal and monetary policies in aggregate economic systems this market clearing model is sufficiently popular that it is rare to find a textbook treatment of macroeconomics that omits this new classical model of the aggregate economy one component of this aggregate economic model is a labor market where nominal wages are flexible 1 this approach to the labor market was developed by lucas and rapping 1969 in their model it is assumed that labor suppliers operate under incomplete information about the aggregate price level thereby raising the possibility that output produced in the economy will vary with the level of price expectations 2 despite its central role in explaining economic fluctuations in a popular model of the economy there is surprisingly little evidence available in previous research testing the implications of this model of the labor market one objective of the present study is to provide some empirical evidence on this market clearing model of the labor market in carrying out such a test it will be necessary to provide an explanation for the nonstationary nature of labor market series such as real wages and employment one possible explanation for this apparent nonstationarity would be the technology shocks frequently used in the real business cycle literature e g long and plosser 1983 where it has often been assumed that these shocks are i 1 unobservable stochastic processes thus these shocks to the production function may be used as a way of explaining why macroeconomic time series are also i 1 a similar mechanism involves the possibly nonstochastic scalar preceding the aggregate production function in the economic growth literature this magnitude called the solow residual measures the growth in aggregate output that cannot be explained by the growth of quality adjusted factor inputs in production this residual is sometimes thought to be measured by the stock of knowledge used by economic agents barro and sala i martin 1995 p 351 increases in the stock of knowledge enable the aggregate economy to produce more goods and or new goods from quality adjusted resource levels when knowledge increases if the stock of knowledge is nonstationary then so too would be output and other magnitudes in an aggregate economy 4 thus the nonstationary nature of aggregate data can be explained by a nonstationary element of the aggregate production function whether stochastic or deterministic however that variable is interpreted if the sources of the apparent nonstationarity in macroeconomic data are assumed to be unobservable i 1 stochastic processes an implication of this fact is that the inability to measure technology shocks renders it impossible to test the implications of economic models that would arise if these shocks could be measured for example if technology shocks are i 1 then optimizing behavior by households and firms will result in cointegrating relationships between technology shocks and choice variables set by the public if it were possible to measure shocks to the production function one could test for these long run cointegrating relationships and the parameters of these cointegrating vectors could be estimated 5 in addition it is desirable to explicitly incorporate technical change into economic models if it could indeed be measured because doing so may result in more reliable estimates of structural parameters of economic interest and it may permit improved tests of economic hypotheses

cost effective compensation to avoid carbon emissions from forest loss an approach to consider price quantity effects and risk aversion abstract analyses were carried out on financial compensation to avoid loss of tropical forests and related carbon c emissions when marginal financial yield declined for land use options with extended areas and when a risk averting perspective modeled according to financial theory around the capital asset pricing model is assumed the approach in this study was to consider natural forest forest plantation pasture and cropland simultaneously to investigate how an optimized land use distribution may reduce the amount of compensation necessary to avoid c emissions from forest loss the financial compensations derived were as high as us 176 per hectare per year when comparing natural forests only with the most profitable alternative croplands however compensation decreased to us 124 for risk neutral decision makers who would strive for optimized land use allocation and to only us 47 per hectare per year for risk avoiders who would look to maximize the reward to variability ratio sensitivity analyses indicated that the compensation under risk aversion increased much less than under risk ignoring when increased productivity of agricultural land use or growing demand for agricultural products was simulated it was concluded that considering appropriate diversification strategies and the well documented human behavior to avoid risks is an important step in developing cost effective compensation policies

cyclical and causal relations between real wages and employment in the eu this paper analyses and compares the joint behaviour of real wages and employment over the business cycle in the european union eu economies using both annual and quarterly data since 1960 further investigation of the cointegrating properties and the existence of causal effects in the real wage employment relation is undertaken by employing appropriate var models the evidence suggests weak procyclical or acyclic behaviour of real wages relative to cyclical employment in the quarterly data and stronger procyclicality in the annual data thus confirming the dunlop tarshis result for the majority of the eu economies with a few exceptions no cointegrating relations were detected while the granger causality tests suggest either weak or lack of unidirectional causality finally the sensitivity analysis showed that the filtering method has not much influence on the results but the choice of deflator may overturn them in certain cases

secondary forests as temporary carbon sinks the economic impact of accounting methods on reforestation projects in the tropics abstract tropical forestry is often not competitive with agricultural land uses such as pasture for cattle ranching additional revenues from carbon sequestration generated by the clean development mechanism cdm of the kyoto protocol can change this situation in three different zones of north western ecuador minimum compensation payments for carbon sequestration were determined which would make reforestation a feasible land use alternative based on our findings that these minimum prices depend on the net benefit of the respective land use alternatives and on the accounting regimes for cdm sink projects we applied the accounting rules for temporary and long term certified emission reductions cer to two reforestation projects forest plantation and natural regrowth of secondary forest a comparison of these alternatives showed that secondary forest is an attractive alternative under both accounting regimes because of its low establishment costs and relative early timber revenues after identifying the zone most suitable for carbon sink projects we calculated net benefits of land use changes in the event that certain prices for emission reductions were actually paid we found that secondary forest becomes economically attractive if the price of permanent credits is above 4 5 tco 2 whereas forest plantations require permanent cer prices of 7 0 tco 2 in both cases the results are within the price margins forecasted by various institutions for the first commitment period of the kyoto protocol the presented methodology is meant to support the decision making process on the supply side of a future cer market opportunity costs of land use changes have to be analyzed carefully before deciding in favor of long binding forestry projects assigning temporary credits to naturally regrown secondary forests could although excluded from cdm during the first commitment period combine the advantages of a flexible accounting regime with the positive economic and ecological effects of this competitive land use

endogenous money or sticky prices comment on monetary non neutrality and inflation dynamics abstract we show that the highly persistent inflation dynamics and its lead lag relationship with output can be explained by a standard flexible price rbc model augmented with endogenous monetary policy endogenous monetary policy acting upon the illusion that prices are sticky and money is effective can create price movements that appear to indicate price stickiness although there is none in the economy

timber harvesting versus forest reserves producer prices for open use areas in german beech forests fagus sylvatica l abstract a strong demand for nature conservation can be ascertained in germany several nature conservation groups argue that in order to provide nature conservation in considerable parts of the forest area forestry should sacrifice timber harvesting for example the abandoning of harvesting altogether is supposed to enhance and protect the species richness this fact and the very low profitability of forestry in germany motivated the writing of this paper the paper explains a methodology for deriving producer prices involved in forest reserves where harvest benefits are sacrificed totally such methodology can be useful to form a basis for private contracts between forest owners and nature conservationists who demand forest reserves the results of this methodology can also be integrated in financial programs for species and habitat conservation in a basic theoretical consideration it is demonstrated that a stand by stand evaluation approach may only serve as an initial step in deriving compensation prices for forest reserves due to the stochastic character of forest management a nonlinear programming approach nlp was adopted to find an optimal operational plan for a hypothetical beech fagus sylvatica l forest in both the constraints and the objective function the nonlinearity is considered by integrating stochastic components additionally only virtual homogenous forest reserves are considered firstly a basic nlp solution for the hypothetical forest with the objective maximise the net present value npv of timber harvests adjusted to risk was obtained when considering several constraints subject to stochastic variation of net revenues and timber harvests without considering forest reserves secondly other solutions allowing for forest reserves were computed the decrease of the objective function when forest reserves were increased in periodic increments seemed well suited to mirror the opportunity costs of forest reserves the results showed that a stand by stand approach gave much greater compensation prices than the nlp approach the reason for this lay in the consideration of a nonlinear objective function as well as the nonlinear constraints in the case of nlp the first 42 ha forest reserve was priced at 11 494 euro ha or 483 euro ha year expressed in infinite yearly compensation the yearly compensation price for the last forest reserve had an increase up to 607 euro ha year a stand by stand approach however resulted with compensation prices from minimally 609 up to maximally 709 euro ha year various interest rates 3 2 and 5 2 caused different compensation price curves the slope of the curves increased when the interest rate decreased the limits of the approach the problem of deriving a demand for forest reserves and the opportunities for applying the presented approach to state forests are discussed

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

new evidence on labor supply employment versus hours elasticities by sex and marital status using the tri annual micro panel data of the survey of income and program participation we estimate fixed effects labor supply models separating the extensive and intensive margins the employment elasticity is 0 6 for single men versus 1 1 for married men the employment elasticity is 2 4 for single women versus 1 8 for married women the compensated hours worked elasticity is 0 4 for employed single and married men and 0 7 for employed single and married women the implied aggregate employment elasticity of 1 5 and hours per employee elasticity of 0 5 indicate employment fluctuations account for three fourths of wage induced variation in labor hours

global potential for carbon sequestration geographical distribution country risk and policy implications abstract we have provided a framework for identifying least cost sites for afforestation and reforestation and deriving carbon sequestration cost curves at a global level in a scenario of limited information special attention is given to country risk in developing countries and the sensitivity to spatial datasets our model results suggest that within 20 years and considering a carbon price of us 50 tc tree planting activities could offset 1 year of global carbon emissions in the energy sector however if we account for country risk considerations associated with political economic and financial risks carbon sequestration is reduced by approximately 60 with respect to the geography of supply illustrated by grid scale maps we find that most least cost sites are located in regions of developing countries such as the sub sahara southeast brazil and southeast asia

the cyclical behavior of prices and quantities the case of the automobile market abstract this paper aims at understanding the joint behavior of prices and quantities in a particular market it examines whether we can find decision problems for suppliers and buyers together with a market structure which are consistent with observed price and quantity series because of the homogeneity of the product and the quality of the data we study the automobile market we conclude that the behavior of prices is inconsistent with simple market structures prices appear to be too sticky we then consider potential explanations none appears completely satisfactory in particular costs of changing prices do not explain the joint behavior of prices and quantities

consumption leisure choice with habit formation abstract in an intertemporal consumption leisure choice model with wage uncertainty and habit forming consumption we have shown that consumption and leisure do move in opposite directions consistent with the observed pro cyclicy of aggregate hours worked

demand shocks and economic fluctuations this paper studies conditions under which demand side shocks can generate realistic business cycles in rbc models although highly persistent demand shocks are necessary for generating procyclical investment variable capacity utilization and habit formation can reduce the required degree of persistence

by force of demand explaining cyclical fluctuations of international trade and government spending abstract this paper explores the role of demand shocks as an alternative to productivity shocks in driving both domestic and international business cycles within the international real business cycle irbc framework in addition to those well documented domestic business cycle fluctuations e g the volatility and cyclicality of output consumption investment labor hours and labor productivity and international business cycle properties e g the countercyclical net export and the comovement puzzle this paper focuses on two additional stylized facts in the industrialized countries the procyclical trade openness the gdp fraction of trade volume and the countercyclical government size the gdp fraction of government spending using a parsimonious dynamic stochastic general equilibrium model we show that the model s predictions under productivity shocks are not consistent with these facts instead a demand shock driven model replicates the above facts while matching other domestic and international business cycle properties an estimated version of the model confirms the quantitatively important impacts of demand shocks

a business cycle model with variable capacity utilization and demand disturbances abstract we develop a dynamic general equilibrium model with demand preference shocks estimated using hall s j labour economics 15 1997 223 residual that replicates u s business cycles well at least compared to the real business cycle models the key factor is cyclical capital utilization which is based on imperfect competition slow adjustments in capital stock and fixed requirement of labor input we also demonstrate theoretically that a representative agent economy with preference shocks could be viewed as the reduced form of a heterogeneous agents economy with incomplete markets specifically a heterogeneous agents economy with incomplete markets is aggregated into a representative agent economy with preference shocks this result would provide a microeconomic foundation for preference shock models it is also shown that a shock to marginal utility of consumption and a shock to marginal disutility of labor have different effects

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

macroeconomic fluctuations and the allocation of time what are the fundamental driving forces of macroeconomic fluctuations in particular why do people spend more time working in booms and less in recessions these are basic questions of macroeconomics recent thinking has emphasized technology shifts preference shifts and changes in government purchases as likely driving forces it is useful to distinguish atemporal and intertemporal effects of the driving forces under standard assumptions the technology shift has no effect through atemporal channels because income and substitution effects exactly offset a straightforward decomposition of movements of employment attributes most of them to the atemporal effects of preference shifts

labor and investment frictions in a real business cycle model abstract this paper develops a prototype real business cycle model in which labor and investment frictions may compete directly with technology shocks in accounting for fluctuations in the postwar us economy using ireland s 2004a a method for taking models to the data journal of economic dynamics and control 28 1205 1226 methodology we establish that both types of friction are quantitatively important technology shocks still explain a substantial fraction of the fluctuations in aggregate output as the baseline real business cycle model predicts formal hypothesis tests suggest that changes in the recurrence of shocks frictions and structural parameters all play a role in accounting for the shift in the time series properties of the data between the periods before and after 1980

the elasticity of substitution between time and market goods evidence from the great recession the elasticity of substitution between time and market goods we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products increased coupon usage and shopping at discount stores we estimate that the returns to these shopping activities declined during the recession and therefore this behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on non market work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions institutional subscribers to the nber working paper series and residents of developing countries may download this paper without additional charge at www nber org

consumption heterogeneity employment dynamics and macroeconomic co movement abstract real business cycle models rely on total factor productivity tfp shocks to explain the observed co movement among consumption investment and hours however an emerging body of evidence identifies investment shocks as important drivers of business cycles this paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption across employed and non employed can generate co movement in response non tfp shocks estimation reveals fluctuations in the marginal efficiency of investment that explain the bulk of business cycle variance in consumption investment and hours a corollary of the model s empirical success is the labor wedge that is not important at business cycle frequencies

tobin s imperfect asset substitution in optimizing general equilibrium in this paper we present a dynamic optimizing model that allows explicitly for imperfect substitutability between different financial assets this is specified in a manner which captures tobin s 1969 view that an expansion of one asset s supply affects both the yield on that asset and the spread or risk premium between returns on that asset and alternative assets our estimates of this model on u s data confirm that some of the observed deviations of long term rates from the expectations theory of the term structure can be traced to movements in the relative stocks of financial assets the richer aggregate demand and asset specifications imply that there exists an additional channel of monetary policy our results suggest that central bank operations exercise a modest influence on the relative prices of alternative financial securities and so exert an extra effect on long term yields and aggregate demand separate from their effect on the expected path of short term rates

conservation payments under risk a stochastic dominance approach conservation payments can be used to preserve forest and agroforest systems to explain landowners land use decisions and determine appropriate conservation payments it is necessary to focus on revenue risk marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates an empirical application to shaded coffee protection in the biologically important choco region of west ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk neutral assumptions further the extant distribution of land has strong impacts on the required payments

saving tropical forests as a global warming countermeasure an issue that divides the environmental movement abstract saving tropical forests as a global warming countermeasure has become one of the environmental movement s most divisive issues divisions are just as sharp as the better known ones between government positions while the debate is often couched in scientific terms and with appeals to high universal principles the positions of the different partisans to the debate are better understood in terms of hidden agendas conscious or not in the case of european governments which oppose inclusion of forests in the kyoto protocol s clean development mechanism the exclusion of forests would lead to improvement of industrial competitiveness as compared to the us in the case of brazil opposition to including avoided deforestation fits with conspiracy theories regarding internationalization of the amazon for european and european dominated non governmental organizations ngos opposition to forests is best explained as an opportunistic blow at us consumption culture which is reviled for reasons largely unrelated to climate change from the point of view of brazilian ngos concerned with maintaining amazonian forest these alternative agendas are side issues that attractive as they might be do not merit throwing away a major opportunity for obtaining monetary flows for forest maintenance more carbon can be maintained in the forests than the amount of carbon credit granted in this way even if the carbon in the forests is temporary at some point a net benefit exists for the climate from having the forest project instead of a smaller reduction in fossil fuel emissions proposals for ton year accounting and for temporary credits effectively deal with issues such as carbon permanence to make the climatic benefits of avoided deforestation real allowing both a gain for climate and the maintenance of biodiversity and other values through carbon mitigation activities the importance of tropical deforestation in global greenhouse gas emissions means that agreement will eventually have to be reached on how to account for the benefits of avoided deforestation and incorporate them into mitigation activities this will continue to be the case regardless of the course of negotiations in the coming months in the wake of the march 2001 announcement by us president george w bush of his desire to renege on us commitments under the protocol

critical factors for transforming creativity into sustainability abstract although creativity and sustainability have received considerable attention in the literature there is limited research considering both particularly in relation to co existing organizational factors which facilitate the transformation of creativity into sustainable products this paper explores this gap through an analysis of six case studies of commercial organizations presenting both successful and unsuccessful implementation of sustainable products services across types of firms and industries the research framework focuses on three general facets 1 leadership 2 boundaries where different aspects of internal and external firm s activities enable a diversity of opinions and stakeholder engagement and 3 economic alignment instrumentality in which the goal of wealth creation is present and supported by a firm s capabilities the main finding of the paper is that appropriate leadership along with effective boundary spanning and clear profit orientation are simultaneously necessary conditions for successful transformation of creative business ideas into successful sustainable products services by business organizations this implies a steep discounting of success prospects if any of the above factors is lacking the work contributes to the development of general theoretical frameworks and approaches for achieving organizational success based on co creating social and economic value at the same time

valuing nature lessons learned and future research directions this paper critically reviews the literature on environmental valuation of ecosystem services across the range of global biomes the main objective of this review is to assess the policy relevance of the information encompassed by the wide range of valuation studies that have been undertaken so far published and other studies now cover most ecosystems with aquatic and marine contexts attracting the least attention there is also a predominance of single function valuation studies studies valuing multiple functions and uses and studies which seek to capture the before and after states as environmental changes take place are rare by and large it is the latter types of analyses that are most important as aids to more rational decision taking in ecosystem conservation versus development situations involving different stakeholders local national and global aggregate global scale estimates of ecosystems value are problematic given the fact that only marginal values are consistent with conventional decision aiding tools such as economic cost benefit analysis in general valuation data provide prima facie support for the hypothesis that net ecosystem service value diminishes with biodiversity and ecosystem loss balmford et al 2002 science 297 p 950 future research effort should include complementary research on multiple ecosystem services that seeks to capture the temporal disturbance profile and its causal factors the explicit recognition of multiple interdependent ecosystem services and values poses both conceptual and empirical research challenges it would serve to transform the practice of research in this sub field via the a priori assumption of multiple and inter dependent use instead of independent single use this line of reasoning can then be extended to the institutional arrangements that determine which values are captured new institutional processes and arrangements are probably required in order to best realise benefit streams from multiple ecosystem use and non use provision across a range of different stakeholders

a simple nonadditive preference structure for models of household behavior over time intertemporal separability is an almost universal assumption in empirical work on household behavior but a good deal of recent work on consumption and labor supply suggests that it may not be tenable the traditional weakening of this assumption is to allow for habit formation i propose an alternative structure for intertemporal preferences that nests intertemporal additivity in a simple way and yields closed form solutions for demand functions this structure includes the neoclassical durables model as a special case i derive a demand system that nests the almost ideal system as its time separable counterpart this model is estimated on u k aggregate time series data for seven goods time separability is decisively rejected moreover i find that ignoring temporal dependencies leads to considerable bias in the estimates of elasticities of the seven goods durables display the strongest nonseparable effect the estimated reactions are consistent with the neoclassical durables model

can long run restrictions identify technology shocks gali s innovative approach of imposing long run restrictions on a vector autoregression var to identify the effects of a technology shock has become widely utilized in this paper we investigate its reliability through monte carlo simulations using calibrated business cycle models overall gali s methodology appears to be fruitful the impulse responses derived from the artificial data generally have the same sign and qualitative pattern as the true responses and the approach can be informative in discriminating between alternative models however our results reveal some important quantitative shortcomings including considerable estimation uncertainty about the impact of technology shocks on macroeconomic variables more generally the conditions under which the methodology performs well appear considerably more restrictive than implied by the key identifying assumption this underscores the importance of using economic models to guide in the implementation of the approach in interpreting the results and in assessing its limitations jel c32 e32 o33

overcoming barriers to innovation and diffusion of cleaner technologies some features of a sustainable innovation policy regime despite a deepening understanding of systems and processes by which the innovation and diffusion of cleaner technologies occurs relatively little attention has been given to the development of policy processes that reflect this deeper understanding a set of guiding principles for improving sustainable innovation policy processes has been formulated and disseminated by the authors and colleagues in research drawing on theoretical and empirical analysis including a case study of low carbon energy innovation in the uk and interactions with policy makers and other stakeholders through a series of workshops this paper elaborates on two of the guiding principles 1 stimulating the development of a sustainable innovation policy regime bringing together innovation and environmental policy regimes 2 applying systems thinking engaging with the complexity and systemic interactions of innovation systems and policy making processes to promote a transition to sustainability

crop biodiversity risk management and the implications of agricultural assistance this paper presents a theoretical and empirical analysis of the impact of financial assistance to farms on crop biodiversity in an uncertain setting the findings reveal that risk aversion is an important driving force for crop biodiversity conservation risk averse farmers can hedge against the uncertainty they face by allocating land to different crop species however policies intended to stabilize revenues by supporting particular species may alter this link by delinking crop biodiversity from the management of revenues risk

the total economic value of amazonian deforestation 1978 1993 national income accounting has been criticized because of its failure to encompass the notion of sustainability several studies address this problem through green income accounting i e by adjusting conventionally measured gdp for reduction in a given country s stock of natural resources these studies generally base value on the unit net price of the resource other studies go beyond net price emphasizing a natural resource s total economic value tev that is its non marketable as well as its marketable values this paper combines the green income accounting and tev approaches and applies the new framework to brazil in order to assess the foregone economic benefits resulting from amazonian deforestation the results lend support to calls for greater policy emphasis on conservation of unique and irreplaceable ecosystems 2000 elsevier science b v all rights reserved

use and misuse of the net present value in environmental studies abstract environmental studies regularly use the net present value npv to value benefits and costs of projects however the npv disregards whether the stream of net benefits is steady or volatile and ignores the distribution of net benefits among different groups of people here we test alternatives to npv building on two example cases 1 we use discounted utility du to evaluate land use projects and calculate opportunity costs for avoided deforestation 2 we simulate decision making on tropical deforestation whereby we use multiple decision criteria to consider the distribution of net benefits between two groups farmers and conservationists results show considerable differences in the ranking of projects between du and npv when projects are not marginal compared to du npv regularly overestimates the value of forest plantations moreover npv tends to overstate the opportunity costs of avoiding deforestation in terms of saved carbon emissions not accounting for the distribution of net benefits when optimizing land use allocation leads to sub optimal simulated deforestation scenarios we therefore suggest that future studies should either also use du to value economic consequences of projects or that they use the npv as only one among several socio economic and ecological decision criteria

sticky wages and sectoral labor comovement abstract a defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity standard models cannot account for this phenomenon this paper develops and estimates a two sector dynamic general equilibrium model that can account for this key regularity my model incorporates three shocks to the economy monetary policy shocks neutral technology shocks and embodied technology shocks in the capital producing sector the estimated model is able to account for the response of the u s economy to all three shocks using this model i argue that the key friction underlying sectoral comovement is rigidity in nominal wages

stochastic economic assessment of afforestation on marginal land in irrigated farming system we analysed the economic viability of afforestation on marginal irrigated croplands in irrigated drylands of uzbekistan the revenues derived from a combination of diversified agricultural production carbon sequestration nitrogen fixation and avoided irrigation water use were analysed considering uncertainty associated with on farm activities such as crop production and short rotation forestry at the per hectare scale variability in land use revenues would necessitate substantial increases in carbon prices for afforestation to be as profitable as crop cultivation on marginal lands assuming an abundant irrigation water supply in contrast at the farm scale the analysis results revealed that afforestation can be attractive financially even without carbon payments due to farm production constraints variable land use returns and the benefits of land use diversification increased carbon prices would promote carbon sequestration by motivating farmers to plant high biomass producing tree species but would have an ecosystem service trade off by reducing the appeal of nitrogen fixing species that are essential for nitrogen self sufficiency of afforestation efforts given the modest irrigation needs of afforestation efforts compared to the cultivation of annual crops tree plantations could become a primary income source for farms during periods of drought irrigation water saved from replacing crops with trees on marginal farmland would enhance the cultivation of commercial crops on productive lands thus increasing farm income

how important is the intensive margin of labor adjustment discussion of aggregate hours worked in oecd countries new measurement and implications for business cycles by lee ohanian and andrea raffo using new quarterly data for hours worked in oecd countries ohanian and raffo 2011 argue that in many oecd countries particularly in europe hours per worker are quantitatively important as an intensive margin of labor adjustment possibly because labor market frictions are higher than in the us i argue that this conclusion is not supported by the data using the same data on hours worked i ond evidence that labor market frictions are higher in europe than in the us like ohanian and raffo but also that these frictions seem to asect the intensive margin at least as much as the extensive margin of labor adjustment

identifying the source of dynamics in disaggregated import data this paper uses kennan s 1988 model to separately identify supply side and demand side dynamics in us import data dynamics arise from both autocorrelated shocks to supply and demand side fundamentals and from lagged adjustment to these shocks the model consists of a pair of partial adjustment models in which consumers and producers each attempt to follow a stochastic target level of imports subject to a quadratic adjustment cost the model is applied to quarterly data on us imports of seven narrowly defined commodities autos beer cameras wine cigars tea and soap two main results emerge first adjustment costs are important on both sides of the market second supply side adjustment costs are larger than demand side adjustment costs 1998 john wiley sons ltd

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

an econometric analysis of fluctuations in aggregate labor supply and demand the paper contains a simple equilibrium model of the labor market the supply function allows for intertemporal substitution in response to real wage fluctuations and the demand function allows for adjustment costs on employment the supply and demand functions both solve quadratic partial adjustment problems driven by rational expectations about future real wages the market equilibrium also solves a partial adjustment problem driven by rational expectations about future preference and technology shocks two related issues are emphasized the identification of dynamic labor supply and demand functions and the theoretical interpretation of serial correlation in employment and real wages when the supply and demand shocks are assumed to be ar 1 processes which are not causally related the model delivers a simple structure for the equilibrium process for employment and real wages which is a restricted var 2 this simple structure facilitates the interpretation of summary statistics on the time series properties of observed employment and real wage series the supply and demand functions can both be locally identified using only employment and real wage data an illustrative application is presented using u s manufacturing data for the period 1948 1971

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

on the adjustment matrix in error correction models abstract this paper explores the determinants of the adjustment matrix in error correction models within two intertemporal models of the firm in a production smoothing model of inventories it is shown that the adjustment matrix contains the speed of adjustment of inventories as conjectured in previous work but this parameter matrix also contains the parameters from the autoregressive polynomials associated with the stochastic unobservable shocks in the model two empirical examples are provided suggesting that these unobservable shocks cannot be assumed to be serially uncorrelated in a flexible wage model of a labor market the impact upon the adjustment matrix of normalizing the cointegrating matrix is studied in contrast to one state variable problems normalization of the cointegrating matrix is arbitrary on economic and statistical grounds in this model and it is shown that even with serially uncorrelated shocks estimating the elements of the adjustment matrix may not provide an estimate of the speed of adjustment under some normalizations of the cointegrating matrix the implication of the analysis is that without guidance from an economic model about the interpretation of elements of the adjustment matrix under alternative normalizations of the cointegrating matrix or when unobservable shocks are serially correlated economic interpretation of estimates of the adjustment matrix will be hazardous

consumer search price dispersion and international relative price fluctuations this article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price lop and relative price fluctuations search frictions lead firms to price discriminate across markets based on the opportunity cost of search which depends on the local wage with productivity and taste shocks estimated from the data deviations from the lop are as volatile and persistent as in the data fluctuations in relative wages real exchange rates and the terms of trade are also consistent with the data

managing increasing environmental risks through agrobiodiversity and agrienvironmental policies abstract agro biodiversity can provide natural insurance to risk averse farmers by reducing the variance of crop yield and to society at large by reducing the uncertainty in the provision of public good ecosystem services such as e g co2 storage we analyze the choice of agro biodiversity by risk averse farmers who have access to financial insurance and study the implications for agri environmental policy design when on farm agro biodiversity generates a positive risk externality while increasing environmental risk leads private farmers to increase their level of on farm agro biodiversity the level of agro biodiversity in the laissez faire equilibrium remains inefficiently low we show how either one of two agri environmental policy instruments can cure this risk related market failure an ex ante pigouvian subsidy on on farm agro biodiversity and an ex post compensation payment for the actual provision of public environmental benefits in the absence of regulation welfare may increase rather than decrease with increasing environmental risk if the agroecosystems is characterized by a high natural insurance function low costs and large external benefits of agro biodiversity

heterogeneity and long run changes in aggregate hours and the labor wedge abstract from 1961 to 2007 u s aggregate hours worked increased and the labor wedge measured as the discrepancy between a representative household s marginal rate of substitution and the marginal product of labor declined substantially the labor wedge is negatively related to hours and is often attributed to labor income taxes however u s labor income taxes increased since 1961 we examine a model with gender and marital status heterogeneity which accounts for the trends in the u s hours and the labor wedge apart from taxes the model s labor wedge reflects non distortionary cross sectional differences in households hours worked and productivity we provide evidence that household heterogeneity is important for long run changes in labor wedges and hours in other oecd economies

rationally inattentive macroeconomic wedges abstract this paper argues that the solution to a dynamic optimization problem of consumption and labor under finite information processing capacity can simultaneously explain the intertemporal and intratemporal labor wedges it presents a partial equilibrium model where a representative risk adverse consumer chooses information about wealth with limited attention the paper compares ex post realizations of models with finite and infinite capacity the model produces macroeconomic wedges and measures of elasticity consistent with the literature these findings suggest that aconsumption labor model with information processing constraints can explain the difference between predicted and observed consumption and employment behavior

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

time series representations of economic variables and alternative models of the labour market accepting the hypothesis that the time series facts of the aggregate labour market may be summarized by the linear autoregressive and moving average representations of wages prices unemployment and interest rates implies that a useful theory ought to lead to predictions about these representations following this approach this paper first catalogues many of the time series facts about the aggregate labour market and then compares them against alternative models of the labour market based on the intertemporal substitution and staggered contract hypotheses

sustainable innovations in the corporate sector the empirical evidence from ibex 35 firms abstract sustainable innovation practices those which simultaneously contribute to environmental social and economic value creation have drawn increased attention from academics industry leaders and policy makers around the globe there is a general agreement that innovation is a very important part of the puzzle in achieving long term sustainability thus a critical question to be answered is what factors actually differentiate and appear to contribute to sustainable innovations si at the firm level this paper addresses the question by examining empirical evidence from the ibex 35 companies from the years 2010 2015 our results obtained from multivariate regression model indicate that the intensity of a firm s si activity is strongly and statistically significantly associated with the sector in which a given firm operates with a rising level of environmental footprint acting as a stimulant for innovation additionally firms characterized by higher net profit margins and returns on equity were also much more likely to introduce sis the findings also suggest that factors like size and age of a given company as well as level of competition in a sector in which it operates are not significant predictors for the implementation of sustainable innovations overall this study contributes to our understanding of the main characteristics of companies active in the area of si

what do residuals from first order conditions reveal about dge models the first order condition foc associated with labour in many dynamic general equilibrium models involves only current period variables residuals constructed from this foc are inconsistent with aggregate us data in that they are very large and highly persistent the persistence suggests that models which introduce dynamic terms in the labour foc may be more consistent with the data three such models one with learning by doing one with habit formation and one with labour adjustment costs confirm that they can reduce the persistence in the residuals making the models more consistent with the joint dynamics of consumption output and hours

has fiscal policy helped stabilize the postwar u s economy abstract in this paper i consider whether postwar fiscal policy has helped stabilize the u s economy i do this by adding to the stochastic growth model fiscal policy feedback rules estimated from postwar data these rules allow fiscal policies to respond to current and lagged output and labor hours i use the estimated policy rules to see if postwar fiscal policy reduces output volatility and or lengthens expansions and shortens recessions i find that fiscal policy in general provides little stability on either count i also find that the endogenous feedback links by themselves can provide some stabilization

reducing emissions from deforestation and degradation in cameroon assessing costs and benefits a new momentum is underway to account for emissions from avoided deforestation and degradation at the united nations framework convention on climate change unfccc this paper assesses the feasibility of one of the reducing emissions from deforestation and degradation redd mechanisms currently discussed namely that of compensated reduction in the case of cameroon here we assess the differential revenues that a farmer could get from 1 ha of land out of two alternative land uses shifting cultivation the traditional land use pattern in southern cameroon or carbon credits as compensation for the conservation of primary forest it is found that a break even price of 2 85 t of carbon dioxide equivalent would level shifting cultivation with compensated reduction this result suggests that at current carbon prices and independently form variations in the discount rate it could already be more profitable to preserve the primary forest rather than to log it in order to grow crops 2008 elsevier b v all rights reserved

instrumental variables procedures for estimating linear rational expectations models abstract this paper illustrates how to use instrumental variables procedures to estimate the parameters of a linear rational expectations model these procedures are appropriate when disturbances are serially correlated and the instrumental variables are not exogenous we compare our procedures to some alternative estimators that estimate free parameters from restrictions implied by the euler equations the procedures are applicable to a variety of linear rational expectations models several examples of which we cite

learning by doing and aggregate fluctuations abstract an unresolved issue in business cycle theory is the endogenous propagation of shocks yielding allocations that exhibit the persistence displayed in the data this paper explores the quantitative implications of one propagation mechanism learning by doing whose parameters are estimated using sectoral and plant level observations in the u s which are then integrated into a stochastic growth model with technology shocks we conclude that learning by doing can be a powerful mechanism for generating endogenous persistence moreover learning by doing implies that the employment decision of the representative agent is dynamic which allows a re interpretation of taste shocks or cyclical labor utilization as endogenous labor supply shifts

income diversification poverty traps and policy shocks in cote d ivoire and kenya abstract this paper presents evidence on the effects of two different sorts of policy shocks on observed income diversification patterns in rural africa in cote d ivoire households with poor endowments were less able to respond to attractive emerging on farm and non farm opportunities due to entry barriers to superior livelihood strategies the benefits of exchange rate reform accrued disproportionately to households that were richer prior to devaluation by contrast food for work transfers to households in kenya significantly reduced liquidity constraints enabling project participants to pursue more lucrative livelihood strategies in non farm activities and higher return agricultural production patterns jointly these two shocks underscore the importance of liquidity market access and skill constraints to skilled non farm income sources to dynamic poverty traps in rural africa

can intangible capital explain cyclical movements in the labor wedge intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses we demonstrate that intangible capital can have a substantial impact on business cycle dynamics especially if the intangible is complementary with production capacity we focus on customer capital the capital embodied in the relationships a firm has with its customers introducing customer capital into a standard real business cycle model generates a volatile and countercyclical labor wedge due to a mismeasured marginal product of labor we also provide new evidence on cyclical variation in selling effort to discipline the exercise

a time series analysis of real wages consumption and asset returns summary this paper re examines whether the time series properties of aggregate consumption real wages and asset returns can be explained by a neoclassical model previous empirical rejections of the model have suggested that the optimal labour contract model might be appropriate for understanding the time series properties of the real wage rate and consumption we show that an optimal contract model restricts the long run relation of the real wage rate and consumption we exploit this long run restriction cointegration restriction for estimating and testing the model using ogaki and park s 1989 cointegration approach this long run restriction involves a parameter that we call the long run intertemporal elasticity of substitution ies for non durable consumption but does not involve the ies for leisure this allows us to estimate the long run ies for non durable consumption from a cointegrating regression tests for the null of cointegration do not reject our model as a further analysis our estimates of the long run ies for non durable consumption are used to estimate the discount factor and a coefficient of time nonseparability using hansen s 1982 generalized method of moments we form a specification test for our model a la hausman 1978 from these two steps this specification test does not reject our model this paper re examines whether the time series properties of aggregate consumption real wages and asset returns are consistent with a simple neoclassical representative agent economy previous empirical explorations of this issue have rejected the neoclassical model in large part because the marginal rate of substitution between consumption and leisure does not equal the real wage as is implied by the the first order conditions of the model in this paper we argue that an optimal labour contracting model is more appropriate for understanding the time series behaviour of real wages and consumption we show that a version of the optimal contract model restricts the long run relation between real wages and consumption we exploit this longrun restriction ri cointegration restriction to estimate preference parameters and test the model first we employ the cointegration approach suggested by ogaki and park 1989 to estimate the long run intertemporal elasticity of substitution for non durable consumption from a cointegrating regression we test the model by testing for the cointegration restriction

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

home production labor wedges and international business cycles non separabilities due to home production break the link between market consumption and its marginal utility and help explain several stylized facts of the open economy in an estimated two country model with complete asset markets in which home production generates a labor wedge that mimics its empirical counterpart output is more correlated than consumption across countries labor inputs and labor wedges are positively correlated across countries and relative market consumption is negatively related to the real exchange rate evidence from time use surveys corroborates some of the predictions of the model

do we really care about biodiversity this paper addresses from an economic perspective the issue of global biodiversity conservation it challenges the perception that the world really cares a great deal about biodiversity and is prepared to pay the full cost of maintaining this stock of natural capital despite the existence of a plethora of international agreements there still seems to be a global deficit of care surrounding efforts to combat challenges such as those posed by global warming and biodiversity conservation more light can be thrown on the degree of care by measuring both the actual expenditures and the stated willingness to pay for biodiversity conservation however actual expenditures are much lower than willingness to pay estimates recorded in the published literature using the criteria that the right amount of conservation effort is one where the marginal economic benefits from conservation just equal the marginal costs of conservation the paper explores the biodiversity conservation conundrum and concluded that on the available evidence the world does not care too much about this natural capital stock and bequests to future generations

identification of technology shocks in structural vars the usefulness of svars for developing empirically plausible models is actually subject to controversies in macroeconomics we propose a two step svars based procedure which consistently estimates the effect of permanent technology shocks on aggregate variables simulation experiments from a standard business cycle model and a sticky prices model show that our approach outperforms standard svars the two step procedure when applied to actual data predicts a significant short run decrease of hours after a technology improvement followed by a hump shaped positive response additionally the rate of inflation and the nominal interest rate displays a significant decrease after this shock

in search of a stylised fact do real wages exhibit a consistent pattern of cyclical variability the paper surveys the studies on the cyclical behaviour of real wages published from the twenties onwards the traditional simple neoclassical model of the labour market suggests that real wages tend to move countercyclically however from a theoretical viewpoint there are few reasons to expect this behaviour once the simple model is extended to account for imperfect competition uncertainty lagged responses or contracting between firms and workers empirical studies give different answers to the problem the contributions reviewed in the paper are arranged roughly in a chronological order the interwar period the postwar pre econometric studies the econometric work using aggregate data the evidence produced on the basis of longitudinal data the analyses of the shock responsiveness of real wages and finally the most recent papers attempting a reconciliation of the somewhat conflicting evidence derived from aggregate and panel data

an investigation of the determinants of manufacturing employment in the united kingdom in this paper we present and estimate an adjustment cost model of industry employment which takes explicit account of both expectations and aggregation over different labour types the resulting model is subject to a large number of tests and is a highly robust representation of the data finally forecasts are produced for manufacturing employment up to 1990

was the new deal contractionary can government policies that increase the monopoly power of firms and the militancy of unions increase output this paper shows that the answer is yes under certain emergency conditions these emergency conditions zero interest rates and deflation were satisfied during the great depression in the united states the new deal which facilitated monopolies and union militancy was therefore expansionary in the model presented this conclusion is contrary to a large previous literature the main reason for this divergence is that this paper incorporates rigid prices and the zero bound on the short term interest rate jel e23 e32 e52 e62 j51 n12 n42