the pareto domination of irrational expectations over rational expectations abstract a simple overlapping generations economy with one consumer in every generation and with one consumption good in every period is considered it is shown that a sequence of temporary equilibria generated by an irrational inelastic expectation function always generates an allocation which pareto dominates the corresponding allocation generated by the rational expectation function furthermore it is shown that in spite of systematic prediction errors such an allocation is also efficient

rationing and optimality in overlapping generations models the theory of overlapping generations models provides examples of economies where the first welfare theorem of static finite economies fails to hold since the discovery of this result several authors have examined the relationship between competitive equilibria and pareto optimal allocations although they have systematically ignored alternatives to the competitive mechanism as the only allocation rule to our knowledge the question of whether a different allocation mechanism may perform better than the competitive one has not been posed one alternative to the competitive allocation rule is provided by the theory of equilibria with rationing which has been developed extensively for static finite economies such models have been under constant criticism because they provide no or very little explanation as to why prices are fixed at non walrasian levels although binding quantity constraints imply a clear signal as to how prices should adjust therefore if the model of quantity rationing can be placed in a full dynamic framework where prices adjust from one period to the next the criticism of assumed and unexplained price rigidity could be overcome by adopting the approach of the law of supply and demand i e demand rationing implies price increases and supply rationing implies price decreases a well defined class of price adjustment rules may be obtained which provides a first step toward a theory of price dynamics under nonmarket clearing conditions optimality properties of rationing equilibria in static finite economies have been studied by several authors balasko 1979 1982 bohm and muller 1977 and dreze and muller 1982 examined the question of different rationing equilibria for the same set of prices whereas bohm 1984

the labor market status of immigrants effects of the unemployment rate at arrival and duration of residence combining current population survey samples from november 1979 april 1983 june 1986 and june 1988 all of which included data on country of birth and year of immigration the authors examine pat

equilibria and efficiency in the fixprice setting abstract the aim of this paper is to study efficiency under fixed price constraints and to define an equilibrium concept that extends to some degree the standard welfare analysis of general equilibrium theory this paper contains a description of the fixprice setting a study of the set of relatively pareto efficient allocations a definition of coupon equilibria the proof of their existence and an investigation into the structure of the set of coupon equilibria and of the set of economies admitting efficient coupon equilibria

immigrant participation in the welfare system this paper presents a systematic analysis of immigrant participation in the us welfare system using the 1970 and 1980 us censuses in contrast to the previous studies the researchers focused on changes in welfare use across immigrant cohorts over time for a single immigrant cohort as it assimilates to the us furthermore it develops a theoretical model of the migration decision that explicitly incorporates the income insurance aspect of the us welfare system the analysis revealed that recent immigrant cohorts use the welfare system more intensively than earlier immigrant waves also the immigrant welfare participation was greater the longer an immigrant household had resided in the us and those characteristics of the immigrants country of origin were important determinants of welfare participation in addition the theoretical model of the migration decision which explicitly incorporated the presence of a welfare system in the destination country and this model could account for some of the ways in which source country characteristics were found to affect immigrant welfare participation

the dynamics of migration in the presence of chains abstract the experience of several host countries shows that small initial inflows of migrants have a perpetuating effect on further migration from the same country of origin this paper studies the interplay of factors that determine the transitional dynamics of migration flows in the presence of social relationships between migrants we fully specify and formally solve a stochastic two country model of chain migration with one sending and one receiving country in which initial immigration patterns matter for future immigration patterns numerical calculations illustrate the crucial role of the wage elasticity of labor demand in counteracting the potential explosiveness of chain migration

the demise of the public interest model of the federal reserve system the political economy of american monetary policy cambridge university press cambridge 19901 edited by thomas mayer is a collection of one previously published and eighteen unpublished works that seeks to review consolidate and extend the growing literature on a positive theory of the federal reserve system a major theme of the collection is that the traditional public interest view of the fed has little to offer as a guide to understanding the behavior of federal reserve officials at the same time the collection offers a word of caution to practitioners of the positive theory who use a naive public choice approach according to this subplot a narrow self interest approach to the fed is not much better than the traditional alternative a general theory of the federal reserve system requires the right blend of the best elements from the staid public interest view and the renegade public choice view as a review of the current state of the literature this collection of works has much to offer the book is at its best in posing questions that force not only the public interest proponent but also the naive public choice theorist to rethink their positions the book is less useful i think as a road map to future research in contrast to this book s premise the problem i see with the naive public choice approach is not that it has been too radical but that it has not been radical enough the renegade assumption that fed decisionmakers are self interested utility maximizers is misleading only when used within the context of a misspecified model of the macroeconomy i argue in this review essay that the next discrete step in the evolution of a positive theory of central banking is to supplement the self interest assumption with

immigrant earnings age at immigration matters a correlation between age at immigration and earnings is observed in canadian census data the evidence supports three underlying sources of the effect first work expe rience in the source country yields virtually no return in the host country second the return to education varies with age at immigration and finally an acculturation effect is observed for immigrants who are visible minorities or whose mother tongue is not english further it is found that educational attainment and relatedly earnings vary systematically across age at immigration with those arriving around age 15 to 18 obtaining fewer years of education

congressional influence on u s monetary policy abstract congressional influence is generally discounted or ignored in political models of federal reserve behavior here i show that changes in the leadership of the senate banking committee are significantly correlated with monetary base growth more liberal committee leaders are associated with significantly higher base growth other factors held constant the result is shown to hold across several econometric specifications and different definitions of the congressional preference variable

immigrants economic assimilation evidence from longitudinal earnings records we examine immigrants earnings trajectories and measure the extent and speed with which they are able to reduce the earnings gap with natives using a dataset that links respondents of the survey

the impact of host country schooling on earnings a study of male immigrants in the united states immigrants in the united states who acquire u s schooling earn higher wages than other immigrants using data from the u s censuses and the national longitudinal survey of youth we show that this wage advantage results from both greater educational attainment and higher returns to education the higher returns are not the consequence of ability bias or greater english proficiency of those who acquire u s schooling returns to years of non u s education are higher for immigrants who complete their schooling in the united states consistent with the view that u s schooling upgrades or certifies education received in the source country for those without u s schooling returns are higher for immigrants from highly developed countries and countries for which english is an official language

the immigrant and native born wage distributions evidence from united states censuses recent studies document a large widening of the immigrant native born mean wage gap since about 1970 a trend that some observers ascribe to post 1965 changes in u s immigration policy these studies are limited however by their exclusive focus on men which ignores important gender differences in the wage gap and by the inadequacy of the mean wage for characterizing the gap when as in recent decades the wage distribution dramatically changes this study of recent immigrants examines changes across the entire wage distribution for both genders the authors find evidence based partly on gender differences that minimum wages strongly influenced the gap a counterfactual analysis also indicates that if recent immigrants in 1970 had faced the 1990 wage structure their wage distribution would have closely resembled that of recent immigrants in 1990 these and other results suggest that the increasing wage gap is linked to changes in the wage structure

the effect of changes in the u s wage structure on recent immigrants earnings abstract since recent immigrants tend to earn less than natives their relative earnings have been adversely affected by an increase in the return to labor market skills over the past three decades using longitudinal social security records matched to cross sections of the sipp and cps i estimate the return to skills rose by 41 between 1980 and 1997 this reduced the relative earnings of immigrants who arrived in the 1980s and early 1990s by 10 to 15 percentage points examining solely the earnings of recent immigrants may lead to an overly pessimistic picture of their actual labor market skills

assimilation changes in cohort quality and the earnings of immigrants this paper reexamines the empirical basis for two facts that seem to be found in most cross section studies of immigrant earnings 1 the earnings of immigrants grow rapidly as they assimilate into the united states and 2 this rapid growth leads to many immigrants overtaking the earnings of the natives within 10 15 years after immigration using the 1970 and 1980 u s censuses this paper studies the earnings growth experienced by specific immigrant cohorts during the period 1970 80 it is found that within cohort growth is significantly smaller than the growth predicted by cross section regressions for most immigrant groups this differential is consistent with the hypothesis that there has been a secular decline in the quality of immigrants admitted to the united states

the legacy of immigration labour market performance and education in the second generation previous research finds that the children of immigrants or the second generation earn at least as much as other native born but that there are persistent ethnic differences in the intergenerational transmission of education and wages we explain why these results are not incompatible and extend the empirical evidence in several directions using the canadian survey of labour and income dynamics first we estimate a model of wages earnings and hours worked using modern econometric techniques to corroborate earlier us results of complete integration by the second generation in the labour market we find that ethnic differences in labour market performance are significant but that these difference do not alter conclusions about the relative performance of the second generation second we find a source of superior labour market performance for the second generation in higher educational attainment which constitutes an important legacy of immigration that should not be ignored third we find that the de

the labor market skills of recent male immigrants evidence from the current population survey using data from special supplements to the current population survey cps the authors track the education and hourly earnings of recent male immigrants to the united states in terms of these measures of labor market skills the cps data suggest that immigrants who came in the late 1980s were more skilled than those who arrived earlier in the decade this pattern represents a break from the steady decline in immigrant skill levels observed in 1940 80 census data despite the encouraging trend over the 1980s however the average skills of recent immigrants remain low by historical standards

self selection and the earnings of immigrants this paper analyzes the way in which the earnings of the immigrant population may be expected to differ from the earnings of the native population because of the endogeneity of the decision to migrate the empirical study shows that differences in the u s earnings of immigrants with the same measured skills but from different home countries are attributable to variations in political and economic conditions in the countries of origin at the time of migration excerpt

you can t take it with you immigrant assimilation and the portability of human capital the national origin of an individual s human capital is a crucial determinant of its value education and labor market experience acquired abroad are significantly less valued than human capital obtained domestically this difference can fully explain the earnings disadvantage of immigrants relative to comparable natives in israel variation in the return to foreign schooling across origin countries may reflect differences in its quality and compatibility with the host labor market the return to foreign experience is generally insignificant acquiring additional education following immigration appears to confer a compound benefit by raising the return to education acquired abroad

monetary policy signaling from the administration to the federal reserve this chapter employs the index of monetary policy signaling from the administration to the federal reserve safer that was developed in chapter two the safer index is a simple weekly sum of articles that appeared in the wall street journal in which administration officials expressed a desire for easier 1 or tighter 1 monetary policy a key assumption is that systematically over time the financial media capture the essence of communication that is going on between the executive branch and federal reserve officials 1 the signaling index is employed in ordinary least squares regressions for the period from january 1964 to november 1991 cumulative values of the safer index over a three week period as an explanatory variable are found to have a statistically significant effect on the average federal funds rate during the third week as the dependent variable further evidence suggests that the safer index is granger causal with respect to the federal funds rate after classifying the signals by sources within the administration oval office council of economic advisers treasury and other and unidentified sources it is shown that for the overall 1964 1991 period signals from the treasury department and from other and unidentified sources have a statistically significant effect on the federal funds rate while signals from the oval office and the council do not when the data are segmented according to who was the chairman of the federal reserve board at the time ordinary least squares results indicate that the federal reserve did not systematically respond to executive branch signaling in a statistically significant way when william mcchesney martin g william miller and alan greenspan were chairmen but did respond statistically significantly to administration signaling during portions of the periods during which arthur burns and paul volcker were chairmen

congressional influence on u s monetary policy a reconsideration of the evidence abstract one of the few works that finds strong evidence of congressional influence on u s monetary policy is grier 1991 which finds a direct relationship between the liberalism of the senate oversight committee leadership and monetary base growth we extend this analysis by considering a longer sample period and by considering the preferences of house oversight committee leaders in addition to senators grier s evidence is not robust to these extensions where we do find correlation between congressional preferences and monetary base growth increased liberalism of congressional oversight committees is associated with lower monetary base growth

the earnings of mexican immigrants in the united states abstract this paper documents the trends in the earnings of mexican immigrants during the 1970 1990 period the empirical evidence indicates that there has been a decline in the relative wage of successive mexican immigrant waves in the past three decades and that little wage convergence occurs between the typical mexican immigrant and the typical native worker the data also suggest that the increasing importance of mexican immigration is partly responsible for the deterioration in relative skills observed in the aggregate immigrant population but that there has also been a decline in relative skills even among non mexican immigrants

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

immigrant worker assimilation is it a labor market phenomenon the work in this paper contributes to the debate on the economic assimilation of immigrant workers in the u s labor market a model of simultaneous occupational choice and earnings is estimated for foreign born hispanic men foreign born east asian men and for native white men to test the general hypotheses of assimilation an important distinction is made between those who migrated as adults and those who migrated as children the results suggest that the appearance of assimilation may be the outcome of pre labor market experiences of individuals who migrate as children along with changes in u s immigration law that have relaxed skill criteria for entering immigrants

the earnings of immigrant men in canada job tenure cohort and macroeconomic conditions using eleven cross sectional surveys spanning 1981 92 the authors compare the earnings of immigrant and native born men in canada apparently recent immigrant cohorts have suffered no decline in earnings job tenure is found to be a strongly significant determinant of earnings previous estimates of immigrant earnings differentials which have not incorporated job tenure information may partly reflect differences in tenure between immigrants and the native born when the sample is restricted to pairs of surveys that are close to the census survey years the estimates of cohort effects are sensitive to the choice of survey years one possible explanation for that sensitivity is suggested by the finding that macroeconomic conditions are a statistically significant determinant of the rate of assimilation of recent immigrants

productivity of highly skilled immigrants economists in the postwar period larry d singell jr prior work finds declining immigrant quality in the postwar period that is linked to source country and skill composition changes associated with the 1965 immigration act this paper uses a unique panel of foreign and native born american economic association members to show that the highly skilled experienced a similar shift away from european migrants toward those from asia however the findings do not indicate that this change in source country composition has been accompanied by a decline in quality rather the most recent cohorts of foreign born economists appear to be more productive than their native counterparts jel j61 i introduction this article is the first systematic analysis of the attributes and abilities of foreign born u s economists since a descriptive study of the brain drain by grubel and scott 1967 it also provides some of the first formal evidence for the largely theoretical proposition in earlier work by bhagwati and rodriquez 1975 that the united states draws the best skilled workers from abroad however recent immigration literature has not focused on the brain drain but has generated considerable debate concerning whether the 1965 immigration and nationality act has reduced the skill quality of u s immigrants in particular descriptive evidence in borjas 1987 and greenwood 1983 respectively indicates that the 1965 law shifted the composition of u s immigrants toward non european nations and increased the number of low skilled migrants to the united states our article extends this work by examining whether there has been a post 1965 change in the source country mix of ph d economists and whether such chan ges impact the productivity of the foreign born in comparison to their native counterparts most empirical studies of immigrant productivity have focused on earnings early cross sectional studies of immigrant earnings including chiswick 1978a concluded that the age earnings profile of immigrants is steeper than that of comparable native born workers and though initially lower crosses the native profile 10 to 15 years after immigration these results are consistent with the widely held belief that the immigration process self selects the highly motivated and industrious from their respective source countries thus immigrants although they initially enter the united states with relatively low levels of human capital eventually become more productive than their native counterparts more recent work by borjas 1985 1987 has contested these conclusions arguing that it is not possible to separately identify assimilation and cohort effects using a single cross sectional data set in particular the positive correlation between earnings and years since migration in cross sectional data may be due to immigrant assimilation or a cohort effect that arises from the declining skill quality of more recent immigrant groups borjas combines multiple cross sectional data sets to separately identify assimilation and cohort effects and finds evidence indicating that earlier cohorts of immigrants do relatively better than both natives and more recent immigrant cohorts suggesting a decline in immigrant quality although chiswick 1986 challenges the contention of declining immigrant quality and funkhouser and trejo 1995 find evidence that immigrant quality may have increased during the 1980s borjas 1995 contends that the empirical evidence consistently shows that immigrant quality has declined for most of the postwar period however the decline in immigrant quality has not necessarily been found within specific groups of immigrants in particular greenwood and mcdowell 1986 find that the change in skill quality is related to the shift in the source country composition of immigrants away from european nations toward those from asia and latin american after the 1965 immigration act thus explanations for the relatively poor performance of recent immigrants including those in lalonde and topel 1991 1992 and borjas 1992 focus on the post 1965 changes in the incentives to migrate to the united states that have increased the number of low skilled non european immigrants

local unemployment and the relative wages of immigrants evidence from the current population surveys abstract we provide evidence on wage profiles of immigrants using current population survey data from 1979 to 2003 taking into account that changes in labor market conditions impact natives and immigrants differently high rates of immigrant wage assimilation in general and relatively high wages of immigrant cohorts that arrived during the 1990s in particular can to a large extent be explained by a negative trend in unemployment in the data relating immigrant and native period effects to local labor market unemployment we find that wage assimilation among lesser educated immigrants is negligible for high school and college educated male immigrants rates of wage assimilation during early years in the united states are procyclical suggesting that rising unemployment slows accumulation of u s specific human capital