learning wage dynamics and firm specific human capital we introduce a dynamic and fully strategic model of wage determination in the presence of firm specific human capital in this model human capital is interpreted as information we show that equilibrium exists and is efficient and that it gives rise to a unique distribution of the social surplus we show further that the equilibrium wage is determined by three factors consideration of these factors allows us to determine when and how the market mechanism enables the worker to capture some of the returns to firm specific human capital we relate our findings to the ongoing empirical debate concerning the return to tenure

offset carbon emissions or pay a price premium for avoiding them a cross country analysis of motives for climate protection activities abstractthis article contributes to the economic literature on pure and impure public goods by considering two alternatives for contributing to the public good climate protection offsetting carbon emissions from conventional consumption or paying higher prices for climate friendly products we empirically examine a wide range of motives and their impact on individuals choice in favour of these two alternatives relying on data from representative international surveys our results indicate that environmental awareness warm glow motives and the desire to set a good example have the most robust effects on both climate protection activities in germany and the united states however some motives differ considerably between both alternatives and the two countries a green identity enhances the willingness to pay a price premium for climate friendly goods or services in germany while social norms seem to be of much higher relevance in the united states our results further suggest that the choice of climate

differences between continuous and discrete contingent value estimates in a split sample contingent valuation study of willingness to pay wtp for food safety improvements the dichotomous choice dc elicitation method consistently generated much larger estimates of wtp than did a continuous method little or none of these differences was due to bias introduced by the statistical techniques used with the dc data most or all of the difference was due to differences in respondent behavior in addition the continuous wtp responses showed a significant scope effect while the dc responses did not the observed difference in behavior may be attributable in part to yea saying by dc respondents

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

evaluating unemployment policies what do the underlying theories tell us the paper surveys unemployment policies for advanced market economies and evaluates them by examining the predictions of the underlying macroeconomic theories the basic idea is that for the most part different unemployment policy prescriptions rest on different macroeconomic theories and our confidence in the prescriptions should depend at least in part on theories ability to predict some salient stylized facts about unemployment behavior the paper considers four types of policies laissez faire demand management policies supply side policies and structural policies copyright 1995 by oxford university press

long run inflation and the distorting effects of sticky wages and technical change we show that the calvo price setting model is not necessarily inconsistent with evidence of a weak relation between positive trend inflation and price dispersion we identify the interaction between sticky wages and technical change as factors disrupting the allocative role of the wage system under positive trend inflation in turn this interaction generates inefficient wage dispersion as opposed to price dispersion which fuels inflation costs we conclude that it is too early to dismiss the new keynesian model as a useful vehicle to assess the costs of inflation

treating respondent uncertainty in contingent valuation a comparison of empirical treatments this research examines the impact of uncertainty on contingent valuation responses using 1 a survey of canadian landowners about willingness to accept compensation for converting cropland to forestry and 2 a survey of swedish residents about willingness to pay for forest conservation five approaches from the literature for incorporating respondent uncertainty are used and compared to the traditional random utility model with assumed certainty the results indicate that incorporating uncertainty has the potential to increase fit but could introduce additional variance while some methods for uncertainty can be an improvement over traditional approaches it is imperative to exercise caution when making systematic judgments about the effect of uncertainty on contingent valuation responses

yes in my backyard spatial differences in the valuation of forest services and local co benefits for carbon markets in mexico forests provide many and large benefits including cost efficient climate change mitigation however international carbon markets have not stimulated the demand for forestry offsets domestic market mechanisms are emerging in many countries and forests could be highly valued through these policies as most of the benefits produced by forests are enjoyed locally here a choice experiment explores drivers of valuation and willingness to pay for forest carbon services in voluntary markets in mexico by comparing the valuation of citizens from four regions to test geographical preference for projects n 645 findings from multinomial logit models show valuation of forest carbon services is transferable and citizens would pay more for offsets from projects closer to their homes proximate forests provide a range of co benefits to local users including environmental services and opportunities for recreation factors related to valuation include sense of responsibility previous knowledge of carbon emissions previous visits to the sites regional identification and the valuation of local environmental services e g improvements in local air quality knowledge of spatial heterogeneity in valuation of the use of forest services can help to design market based instruments by identifying highly valued areas for environmental services programs and carbon markets

matching workers and jobs cyclical fluctuations in match quality using national longitudinal survey of youth data on tenure and wages this article analyzes the extent to which the level of job mismatching varies over the business cycle and how it is dealt with by the labor market i find significant cyclical variation in job match quality and an internalization of the variation by the labor market through wages mismatching occurs more during recessions but is primarily captured in starting wages the evidence suggests the cyclical phenomenon is one of general mismatching rather than an increased number of stopgap jobs during recessions

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

unemployment as excess supply of labor implications for wage and price inflation abstract the introduction of both market clearing wages and nominal rigidities on wage setting can be used to rationalize unemployment as excess supply of labor in the new keynesian model as a result wage inflation dynamics are forward looking and depend negatively on the rate of unemployment moreover both price inflation and wage inflation evolve as indicated by equations equivalent to those obtained in erceg et al 2000 though with different slope coefficients in an equal volatility comparison the model with unemployment conveys less price stickiness and more wage stickiness

rules based monetary policy and the threat of indeterminacy when trend inflation is low abstract indeterminacy in new keynesian models with calvo contracts can occur even at low trend inflation levels of 2 or 3 the interaction of trend inflation with nominal wage rigidity and trend growth in output causes large distortions in the steady state and expands the indeterminacy region consequently even interest rate rules with strong inflation responses may not be sufficient to ensure determinacy a policy rule reacting to output growth but not to output gap significantly increases the prospect of determinacy although the threat of indeterminacy is less severe under taylor contracts significant departures from the original taylor principle are required for determinacy

mandatory versus voluntary payment for green electricity summary renewable energy sources have a critical role to play in contributing to the diversity sustainability and security of energy supplies the main objective of the paper is to gain an understanding of the support mechanism of renewable energy sources most preferred by households in the united kingdom this paper analyses households preferences and willingness to pay under a mandatory scheme where all households contribute compared to a voluntary scheme where only those who wish to pay to support renewables do so such as the green tariffs offered by electricity suppliers in the uk two self designed contingent valuation method cvm surveys are used to explore whether the type of payment option has an impact on households willingness to pay wtp for increasing share of renewable energy in electricity generation the paper also investigates whether the type of payment mode affects respondents self reported certainty of paying their stated valuations the results indicate that the likelihood of paying a positive amount for supporting renewable energy is higher under a mandatory scheme compared to a voluntary payment option in the uk respondents have a higher level of certainty in paying their stated wtp under a mandatory payment scheme

selection and monetary non neutrality in time dependent pricing models for a given frequency of price adjustment monetary non neutrality is smaller if older prices are disproportionately more likely to change selection for the age of prices provides a complete characterization of price setting frictions in time dependent models selection for older prices is weaker and non neutralities are larger if the hazard function of price adjustment is less strongly increasing selection is weaker if there is heterogeneity in price stickiness finally selection is weaker if durations of price spells are more variable in particular the taylor 1979 model exhibits maximal selection for older prices whereas the calvo 1983 model exhibits no selection

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

reconsidering the natural rate hypothesis in a new keynesian framework abstract this paper formulates a stylized new keynesian model in which each individual firm can select the frequency of its price adjustments the endogeneity of contract duration has a dramatic impact on the magnitude of the aggregate effects of steady state inflation with a plausible calibration of the magnitude of menu costs and other structural parameters this model predicts a relationship between steady state inflation and the frequency of price adjustment that is reasonably close to the empirical findings of cross country studies furthermore at moderate inflation rates steady state inflation generates relative price distortions that have a non trivial impact on aggregate output but this impact wanes and eventually disappears at much higher annual inflation rates because the frequency of price adjustment approaches that of the flexible price economy

a theory of wage and promotion dynamics inside firms we show that a framework that integrates job assignment human capital acquisition and learning captures several empirical findings concerning wage and promotion dynamics inside firms including the following first real wage decreases are not rare but demotions are second wage increases are serially correlated third promotions are associated with large wage increases fourth wage increases at promotion are small relative to the difference between average wages across levels of the job ladder fifth workers who receive large wage increases early in their stay at one level of the job ladder are promoted quickly to the next

latent thresholds analysis of choice data under value uncertainty in many non market valuation settings stakeholders will be uncertain as to their exact willingness to pay for a proposed environmental amenity it then makes sense for the analyst to treat this value as a random variable with distribution only known to the respondent in stated preference settings researchers have used elicitation formats with multiple bids and uncertain response options to learn about individual value distributions past efforts have focused on inference involving the expectation of individual densities this requires stringent and likely unrealistic assumptions regarding the shape or moments of individual value distributions we propose a latent thresholds estimator that focuses instead on the range i e minimum and maximum willingness to pay of individual respondents the estimator efficiently exploits correlation patterns in individual responses and does not require any restrictive assumptions on underlying values it also nests some of the existing approaches which are not statistically supported for our empirical application copyright 2012 oxford university press

alternative approaches for incorporating respondent uncertainty when estimating willingness to pay the case of the mexican spotted owl abstract this paper explores the sources and patterns of respondents uncertainty regarding their willingness to pay wtp and presents alternative approaches for incorporating this uncertainty into estimation of the logit model recently proposed approaches are compared to methods proposed in this paper which allows for incorporation of uncertainty regarding both yes and no responses these approaches are evaluated by comparing the goodness of fit and variability of mean wtp extreme recoding of uncertain yes responses as no responses reduces the logit goodness of fit and the precision of the wtp estimate incorporating the degree of uncertainty of yes responses results in the highest goodness of fit and the smallest variability of mean wtp among the various models addressing uncertainty a regression model is used to determine the significant determinants of respondent uncertainty

a comparison of alternative certainty calibration techniques in contingent valuation abstract a field test of two types of certainty calibration techniques in contingent valuation of public lands indicated that a 10 point certainty scale reduced wtp estimates by about half adjusting for uncertainty via a not sure option did not reduce wtp estimates but the variance increased there are several differences between these two ways of accounting for respondents uncertainty which may suggest why they provide different wtp value estimates and variances

on the welfare and cyclical implications of moderate trend inflation abstract the welfare and cyclical implications of moderate trend inflation are addressed in an augmented medium scale dsge model increasing trend inflation from 2 to 4 percent generates a consumption equivalent welfare loss of about 4 percent welfare costs of this magnitude are driven by staggered wage contracts trend growth extended borrowing a roundabout production structure and the interaction between trend inflation and shocks to the marginal efficiency of investment mei a sticky price model abstracting from these features generates much smaller losses moderate trend inflation also has important business cycle implications interacting much more strongly with mei shocks than with productivity or monetary shocks

endogenous price stickiness trend inflation and macroeconomic stability previous studies show that higher trend inflation is more likely to induce indeterminacy of equilibrium in sticky price models based on micro evidence that each period a fraction of prices is kept unchanged this paper demonstrates that when the degree of price stickiness is endogenously determined in a calvo model indeterminacy caused by higher trend inflation is less likely a key factor for determinacy is the long run inflation elasticity of output implied by the new keynesian phillips curve this elasticity declines substantially with higher trend inflation in the case of exogenously given price stickiness whereas in the case of endogenous price stickiness the decline in the elasticity is mitigated because higher trend inflation leads to a higher probability of price adjustment

optimal monetary policy under commitment with a zero bound on nominal interest rates we determine optimal monetary policy under commitment in a forwardlooking new keynesian model when nominal interest rates are bounded below by zero the lower bound represents an occasionally binding constraint that causes the model and optimal policy to be nonlinear a calibration to the u s economy suggests that policy should reduce nominal interest rates more aggressively than suggested by a model without lower bound rational agents anticipate the possibility of reaching the lower bound in the future and this amplifies the effects of adverse shocks well before the bound is reached while the empirical magnitude of u s mark up shocks seems too small to entail zero nominal interest rates shocks affecting the natural real interest rate plausibly lead to a binding lower bound under optimal policy however this occurs quite infrequently and does not imply positive average inflation rates in equilibrium interestingly the presence of binding real rate shocks alters the policy response to non binding markup shocks

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

wages and job mobility of young workers this paper presents a discrete time version of jovanovic s model of worker firm matching descriptive evidence is presented that supports the notion that unobserved worker firm heterogeneity is an important component in the intertemporal structure of wages for young workers a structural econometric model of wage dynamics under worker firm sorting is developed and estimated finally a formal test of the matching model is carried out and the matching structure on intertemporal covariances of wages is not rejected my results indicate the necessity of jointly considering processes of turnover and wage growth when analyzing the labor market experiences of young workers

interpreting panel data on job tenure tenure responses in the panel study of income dynamics psid and the national longitudinal surveys are often inconsistent with calendar time these inconsistencies pose special problems in the psid because job changes cannot be identified directly so researchers must infer them from error ridden tenure data we use alternative rules for partitioning psid data into jobs and then estimate several wage and mobility models to assess the sensitivity of parameter estimates to the partitioning method we also assess the importance of replacing raw tenure data with imputed measures that are internally consistent

does the law of one price hold in a high inflation environment a tale of two cities in turkey this study addresses the price convergence in two cities in turkey istanbul and ankara using annual data over the three quarters of the twentieth century 1922 1998 characterized by prevailing high inflation rates for most of the period in contrast to the rest of the literature addressing convergence in price levels with a typical result of extremely slow convergence rates at best we argue that convergence is much easier detected in growth rates rather than levels of prices we suggest using the bounds testing procedure of pesaran et al 2001 for this purpose we find a clear cut evidence on the existence of a common driving force behind inflation dynamics in istanbul and ankara a finding that is in contrast with the results typically reported in related literature

does productivity growth lower inflation in korea we investigate granger causality between productivity growth and inflation in korea using quarterly data for the period 1985q1 2002q4 our results indicate unidirectional granger causality from productivity growth to inflation in light of such causality we estimate the effect of productivity and other variables on productivity according to our regression results a 1 increase in labour and total factor productivity tfp reduces consumer price index cpi inflation by 0 07 0 08 and 0 37 0 44 respectively our results also suggest that the productivity inflation nexus became stronger in korea since the asian financial crisis and that this was largely due to structural reform and technological progress

has job stability declined yet new evidence for the 1990 s we update the evidence on changes in job stability through the mid 1990s using recently released current population survey data for 1995 that parallel earlier job tenure supplements in the aggregate job stability declined modestly in the first half of the 1990s moreover the relatively small aggregate changes mask rather sharp declines in stability for workers with more than a few years of tenure nonetheless the data available to this point do not support the conclusion that the downward shift in job stability for more tenured workers and the more modest decline in aggregate job stability reflect long term trends

inertial inflation indexation and price stickiness evidence from brazil abstract this paper evaluates the inertial inflation hypothesis for brazil the hypothesis posits that indexation created a feedback mechanism such that one time supply shocks were fully transmitted into permanent changes in inflation a theoretical model is used to show that this outcome is based on the assumption of perfect price flexibility however with price stickiness indexation does not produce inertial inflation the degree of inertia is then compared for two periods one without indexation 1945 1963 and one with indexation 1969 1985 finally vector autoregressive representations are estimated for the latter period allowing for price stickiness the empirical results do not support the hypothesis

how people respond to contingent valuation questions a verbal protocol analysis of willingness to pay for an environmental regulation abstract this paper investigates what a respondent is thinking when answering a willingness to pay question in a contingent valuation using a think aloud technique from psychology called verbal protocol analysis the willingness to pay responses we observed seem to be constructed from a variety of considerations including an obligation to pay a fair share of the cost of the solution and signaling concern for a larger set of environmental issues the finding that respondents seem to construct their values at the time they are asked rather than reporting a more well defined value is seen as consistent with over two decades of research on the psychology of decision making potential uses of verbal protocols in contingent valuation studies are also discussed

price adjustments in a general model of state dependent pricing we study the distribution of retail price adjustments under the assumption that firms are more likely to adjust their prices when doing so is more valuable our setup nests calvo 1983 at one extreme and a fixed menu cost model at the other all parameterizations are ranked by a measure of state dependence high state dependence implies counterfactually that there are no small price changes and that the variance of price changes falls sharply with trend inflation the parameterization that best fits microdata has low state dependence implying a phillips curve coefficient 60 as large as that of the calvo model but is nonetheless well behaved at high inflation rates

labor supply estimation biases from disregarding nonwage benefits labor supply models and research underpinned by labor supply decisions typically assume the agents choices are functions of wage and wage offers however there is evidence that these selections are not only wage driven but at least in part depend on non wage benefits encompassed in jobs and occupations in this paper i develop and estimate a stochastic dynamic model of occupational and job choice where non wage benefits are directly incorporated into the decision alongside wages a nested model within this is a wage model representing common practice in the literature where non wage benefits are disregarded i separately estimate the full model and the nested wage model in order to compare the implications of omitting non wage benefits three analyses are compared elasticities economy wide structural changes in occupations and inequality reduction intervention policies i find that while disregarding non wage benefits generally causes biases there are cases when the two models predict very similar outcomes and have close estimates such as in occupational specific elasticities and job transition elasticities however i demonstrate that these special cases are products of canceling biases and that the same estimates on subpopulations are biased these results suggest that in most cases ignoring non wage benefits will bias estimates by overestimating the importance of wage in the selection process and so any intervention or change in wages will be over emphasized and by disregarding changes in relative prices between wage and non wage benefits such as happens through changes in wage taxes or in non wage benefits these biases can be severe the results suggest that ignoring non wage benefits in labor supply decisions is appropriate only in the special case in which subpopulation biases negate each other which is atypical i would like to thank moshe buchinsky and maria casanova for their invaluable and continual help in this project as well as rosa matzkin arturo harker seth kerstein dan ben moshe peter bergman anonymous referees at review of economics and statistics and seminar participants at ucla rand syracuse university the bureau of labor statistics and the census bureau for numerous helpful comments and suggestions

monetary targets real exchange rates and macroeconomic stability abstract in this paper i develop a model to determine the optimal degree of flexibility in attaining monetary targets in an economy that is affected by shocks in the labor and financial markets i then simulate the model to assess the optimal degree of monetary policy flexibility in spain a country that has adopted monetary targets rigidly since 1978 i show that the model supports the policy choice of that country i also show that the monetary authorities should attribute more importance to real exchange rate movements in choosing their policies if the spanish economy becomes more open to international trade or if the labor market becomes more flexible

services inflation dynamics and persistence puzzle in brazil a time varying parameter approach this article analyses services inflation dynamics in brazil focusing on the services inflation persistence puzzle for monthly data from january 2004 to february 2016 we apply a time varying para

the return of the liquidity effect a study of the short run relation between money growth and interest rates in this article i use band pass filters to investigate the short run relationship between money growth and interest rates i find a negative correlation between short run movements in money growth and interest rates which i interpret as evidence that the liquidity effect dominates the anticipated inflation effect

price wage dynamics and inflation in socialist economies empirical models for hungary and poland this article analyzes the determinants of open inflation in transitional socialist economies with reference to recent experience in hungary and poland a simple inflation model is centered on the transmission process and on the short run dynamics of inflation further incorporating a number of features specific to socialist economies and working with quarterly data dynamic price and wage equations are estimated the estimated equations allow satisfactory exploration of the role and weight of foreign prices and domestic factors in propagating inflation foreign prices matter but developments on the cost side are critical in relating exogenous policy driven adjustments to the price level to increases in the rate of inflation the absence of conventional market based equilibrating mechanisms requires that nominal anchors particularly wage restraints feature prominently in any stabilization program adopted by reforming socialist economies copyright 1992 by oxford university press

the unemployment volatility puzzle is wage stickiness the answer i discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate i show that job creation in the model is influenced by wages in new matches i summarize microeconometric evidence and find that wages in new matches are volatile and consistent with the model s key predictions therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages i discuss a modification of the model based on fixed matching costs that can increase cyclical unemployment volatility and is consistent with wage flexibility in new matches

indexation and incomes policy a study of wage adjustment in unionized manufacturing data from nearly 200 collective bargaining units are used to study the frequency of wage change from 1957 to 1978 it is shown that incomes policies during the kennedy johnson and nixon administrations encouraged changes in the length of time between wage adjustments inflation often thought to be responsible for fluctuations in the coverage of indexing provisions is found to play virtually no role the conclusion is that government intervention in the wageprice process aroused fears that the government will intervene again in the future in the presence of this uncertainty the wage adjustment provisions of collective bargaining contracts were changed

why are wages cyclical in the 1970 s this article investigates cyclicality in real wages between 1969 and 1982 using panel study of income dynamics data there is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years however cyclicality in the movement of workers between heterogeneous labor market sectors affected aggregate wage cyclicality while sector location is important sector selectivity is not correlated with wages yet even within sectors cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels as well as in the coefficients associated with particular worker characteristics

trend inflation wage and price rigidities and productivity growth abstract what are the steady state implications of inflation in a general equilibrium model with real per capita output growth and staggered nominal price and wage contracts surprisingly a benchmark calibration implies an optimal inflation rate of 1 9 percent the analysis also shows that trend inflation has important effects on the economy when combined with nominal contracts and real output growth steady state output and welfare losses are quantitatively important even for low values of trend inflation further nominal wage contracting is found to be quantitatively more important than nominal price contracting in generating the results this conclusion does not arise from price dispersion per se but from an effect of nominal output growth on the optimal markup of monopolistically competitive labour suppliers finally accounting for productivity growth is found to be important for calculating the welfare costs of inflation indeed the presence of 2 percent productivity growth increases the welfare costs of inflation in the benchmark specification by a factor of four relative to the no growth case

discrete choice under preference uncertainty an improved structural model for contingent valuation abstract this paper is concerned with discrete choice contingent value estimation in the presence of response errors we attempt to extend the theoretical frameworks developed by hanemann 1984 amer j agric econom 66 332 341 and cameron 1988 j environ econom management 15 355 379 by introducing preference uncertainty with individual respondents we assume that respondents have incomplete knowledge about their true valuation of a nonmarket resource and thus may give wrong yes no answers on whether or not to pay a given bid amount for the resource a post decisional confidence measure for each observed yes no answer is elicited for characterizing the degree of preference uncertainty with the help of this confidence measure we develop an improved structural model for deriving value estimates data from a forest environment valuation survey are used for the empirical estimations

stated versus revealed knowledge determinants of offsetting co2 emissions from fuel consumption in vehicle use abstract this paper examines the role of prior knowledge in offsetting co2 emissions from fuel consumption in vehicle use the main result of our econometric analysis on the basis of unique representative data from drivers license holders in the usa and germany refers to the strong discrepancy between the stated and revealed knowledge of co2 offsetting the revealed knowledge measured by the correct estimation of the costs for this offsetting practice has a positive impact on the stated purchase of corresponding offsetting credits in both countries in contrast the effect of the stated knowledge of offsetting is not robust and in some cases even negative surprisingly it cannot even be confirmed that drivers license holders who claim that they are more than sufficiently informed estimate these costs more accurately

estimating the demand curve for sustainable use of pesticides from contingent valuation data abstract stated preference valuation techniques are often used to assess consumers willingness to pay for food items produced in farming systems that adopt a sustainable use of pesticides sup we propose an innovative valuation methodology in which dichotomous choice contingent valuation is used to estimate the demand curve price quantity relationship for such food items where price means price premium for the sup output quantity is the probability of choosing sup and the conventional food product is kept available in the market at the current market price this methodology can be used to evaluate market differentiation as a policy option to promote the sup the methodology is tested with data from a sample of urban consumers of fruits and vegetables in portugal the estimated demand curve is used to define the price level maximizing the total premium revenue for the sup sector as a whole this optimal level of the price premium is 77 55 or 163 of the value of the monthly basket of fruits and vegetables at current prices adopting the optimal price premium will decrease the number of consumers of sup food by 54 the reduction is even higher for low income consumers 80 leaving them more exposed to the risks of pesticide use

labor market frictions and optimal steady state inflation in central theories of monetary non neutrality the ramsey optimal steady state inflation rate varies between the negative of the real interest rate and zero this paper explores how the interaction of nominal wage and search and matching frictions affect the policy prescription we show that adding the combination of such frictions to the canonical monetary model can generate an optimal inflation rate that is significantly positive specifically for a standard u s calibration we find a ramsey optimal inflation rate of 1 16 percent per year

can defaults save the climate evidence from a field experiment on carbon offsetting programs individual preferences for environmental policies can be influenced by the frame in which choices and decisions are presented in this paper we present results of a field experiment on the contributions to carbon offsetting programs under two alternative treatments for the default option the opt in treatment asked subjects to pay for the policy proposal while the opt out treatment asked subjects if they wanted to be excluded from payment for the policy proposal the results show that the frame of the default option had a significant effect on the amount of money paid for the policy proposal subjects were more likely to accept the policy proposal if the default option was the opt out treatment the results have implications for the design of environmental policies

staggering the optimal monetary rule and persistence abstract the purpose of this paper is to show that persistence is not an attribute that derives from the characteristics of wage and price setting alone the structure of demand the monetary rule and the welfare loss function are also crucial determinants of the time series characteristics of the model

output persistence from monetary shocks with staggered prices or wages under a taylor rule we analytically examine output persistence from monetary shocks in a dsge model with staggered prices or wages under a taylor rule surprisingly while taylor style staggering never yields persistence calvo style staggering of wages does generate persistence under decreasing returns to labour c 2009 elsevier b v all rights reserved

offsetting versus mitigation activities to reduce hbox co _ 2 emissions a theoretical and empirical analysis for the u s and germany this paper studies the voluntary provision of public goods that is partially driven by a desire to offset for individual polluting activities we first extend existing theory and show that offsets allow a reduction in effective environmental pollution levels while not necessarily extending the consumption of a polluting good we further discuss the impact of an increased environmental preference on purchases of offsets and mitigation activities several theoretical results are then econometrically tested using a novel dataset on activities to reduce hbox co 2 emissions for the case of vehicle purchases in the u s and germany we show that environmental preference triggers the stated use of hbox co 2 offsetting and mitigation channels in both countries however we find strong country differences for the stated purchase of hbox co 2 offsets while such activities are mainly triggered by a high general awareness of the climate change problem in the u s the perception that road travel is responsible for hbox co 2 emissions to a large extent is more important for driver s license holders in germany

the optimal rate of inflation with trending relative prices relative price trends mean that monetary policy cannot stabilize the nominal prices of all consumption categories if prices are sticky monetary policy must then trade off distortions within different categories more weight should be placed on stabilizing prices for which adjustment entails greater distortions with exogenous price stickiness a simple model calibrated to u s data implies that slight deflation is optimal even absent money demand considerations if price stickiness is endogenous because of fixed costs of adjustment small inflation or small deflation can be optimal depending on whether demand conditions or price adjustment costs vary across sectors

optimal monetary policy optimal monetary policy maximizes the welfare of a representative agent given frictions in the economic environment constructing a model with two sets of frictions costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods we find optimal monetary policy is governed by two familiar principles first the average level of the nominal interest rate should be sufficiently low as suggested by milton friedman that there should be deflation on average yet the keynesian frictions imply that the optimal nominal interest rate is positive second as various shocks occur to the real and monetary sectors the price level should be largely stabilized as suggested by irving fisher albeit around a deflationary trend path since expected inflation is roughly constant through time the nominal interest rate must therefore vary with the fisherian determinants of the real interest rate although the monetary authority has substantial leverage over real activity in our model economy it chooses real allocations that closely resemble those which would occur if prices were flexible in our benchmark model there is some tendency for the monetary authority to smooth nominal and real interest rates

staggered price setting staggered wage setting and business cycle persistence abstract staggered price setting and staggered wage setting are commonly viewed as similar mechanisms in generating persistent real effects of monetary shocks in this paper we distinguish the two mechanisms in a dynamic stochastic general equilibrium framework we show that although the dynamic price setting and wage setting equations are alike a key parameter governing persistence is linked to the underlying preferences and technologies in different ways with reasonable parameter values the staggered price mechanism by itself is incapable of while the staggered wage mechanism plays an important role in generating persistence

the macroeconomics of trend inflation most macroeconomic models for monetary policy analysis are approximated around a zero inflation steady state but most central banks target an inflation rate of about 2 percent many economists have recently proposed even higher inflation targets to reduce the incidence of the zero lower bound constraint on monetary policy in this survey we show that the conduct of monetary policy should be analyzed by appropriately accounting for the positive trend inflation targeted by policymakers we first review empirical research on the evolution and dynamics of u s trend inflation and some proposed new measures to assess the volatility and persistence of trend based inflation gaps we then construct a generalized new keynesian model that accounts for a positive trend inflation in this model an increase in trend inflation is associated with a more volatile and unstable economy and tends to destabilize inflation expectations this analysis offers a note of caution regarding recent proposals to address the existing zero lower bound problem by raising the long run inflation target jel e12 e31 e32 e52 e58

tenure business cycle and the wage setting process abstract we analyze the interaction between job tenure and external labor market conditions in wage determination first we introduce a model that combines job matching with business cycle effects as the employment relationship progresses the worker appropriates a portion of the value of the match specific human capital she accumulates gradually becoming shielded from the cyclical variations in external labor market conditions the employment relationship is progressively internalized then we present empirical evidence supporting this prediction the elasticity of wages to the unemployment rate decreases with tenure this finding is robust to different specifications that allow for job heterogeneity and it contributes to the interpretation of recent evidence of changes in the effect of the business cycle on wages

optimal inflation rates with the trending relative price of investment abstract i study the effect of the trending relative price of investment on the optimal target rate of inflation in an estimated dynamic general equilibrium model of the u s economy the price of investment has a decreasing trend relative to that of consumption because of investment specific technological progress if the prices of investment goods are sticky a benevolent planner puts weight on stabilizing these prices which works to raise the optimal target rate of inflation in terms of the price of consumption the estimated model shows a high degree of price stickiness in an investment sector and the resulting optimal target rate of inflation is significantly positive this result is robust to an extended model in which the prices of some categories of investment goods are flexible

real wages and the business cycle the objectives of this review are threefold 1 to characterize the empirical literature on the cyclical behavior of real wages 2 to identify the sources of the differences in results across studies and 3 to enumerate key factors that determine the cyclicality of real wages given a host of measurement and methodological issues drawing firm conclusions is difficult but several generalizations can be made the estimated cyclicality of real wages depends crucially on the time period of analysis and the choice of whether to examine the production or the consumption wage composition effects play an important but complicated role as well

construct validity of dichotomous and polychotomous choice contingent valuation questions in this note we conduct construct validity tests for dichotomous choice dc and polychotomous choice pc contingent valuation questions contrary to previous results we find that dc and pc estimates of willingness to pay are theoretically valid convergent valid and similar in terms of statistical precision similar to previous results pc respondents are less sensitive to information than dc respondents we conclude that dc and pc valuation questions are construct valid for this study sequential pc valuation questions could be used in studies where obtaining information about the certainty or intensity of respondent preferences would be useful

surprise party estimating the consequences of unexpected presidential election results alesina s quarterly journal of economics 102 651 678 1987 influential model of presidential elections with ideologically motivated parties attributes higher growth and lower unemployment under democratic presidents to the surprise inflation a democratic victory entails in contrast to the published literature we test this hypothesis using calcula tions of presidential election surprises consistent with the assumption of rational economic actors we confront the econometric complications attending a time series approach tak ing into account economic growth dynamics we ultimately fail to confirm the hypothesis that the level of uncertainty associated with presidential election results has an effect on economic outcomes

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

state dependent pricing and business cycle asymmetries we present a tractable dynamic general equilibrium model of state dependent pricing and study the response of output and prices to monetary policy shocks we find important non linearities in these responses for empirically relevant shocks this generates substantially different predictions from time dependent pricing we also find a distinct asymmetry with state dependent pricing prices respond more to positive shocks than they do to negative shocks this is due to a strategic linkage between firms in the incentive for price adjustment our state dependent model can account for business cycle asymmetries in output of the magnitude found in empirical studies

respondent uncertainty in a contingent market for carbon offsets abstract the main objective of this paper is to provide additional empirical evidence of what explains respondent uncertainty in contingent valuation cv and how this in turn affects stated willingness to pay wtp air travelers asked to pay a carbon travel tax to offset carbon emissions from flying were asked how likely it is that they will actually pay if the tax is voluntary when changing the market compliance imperative from a mandatory carbon tax to a voluntary contribution a third of all air travelers consider it unlikely they will actually pay their stated wtp amount an ordered probit estimation approach is applied to identify the sources of respondent uncertainty besides the bid price respondent sense of responsibility and belief in the effectiveness of the voluntary carbon market are among the main reasons for the experienced uncertainty