has work sharing worked in germany industry by industry basis in an attempt to raise employment whether this work sharing works is theoretically ambiguous i exploit the cross industry variation in standard hours reductions to examine their impact on actual hours worked wages and employment analysis of industry level data suggests that work sharing may have reduced employment in the period 1984 1994 using individual data from the german socio economic panel i substantiate the union claim of full wage compensation the hourly wage rose enough to offset the decline in actual hours worked

identifying barriers toward a post growth economy a political economy view abstract in this paper we take a political economy perspective on barriers that inhibit a transition beyond the growth paradigm that is we frame transition barriers as looming conflicts of interest specifically we investigate potential transition barriers within three case studies first unemployment represents the most commonly cited reason why economic growth is considered indispensable second alternative indicators to gross domestic product gdp have not succeeded in replacing gdp as a standard metric of economic welfare third pension schemes rely on economic growth to offset demographic change in each of these three examples we identify actor interest constellations that foster the status quo of a growth economy we conclude that compensating some of those actors who would presumably be worse off in a post growth economy may be necessary though not sufficient for a transition

optimal fiscal feedback on debt in an economy with nominal rigidities we examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal we look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output and inflation using an objective function derived from utility we find the optimal level of fiscal feedback to be small there is a clear discontinuity in the behaviour of monetary policy and welfare either side of this optimal level as the extent of fiscal feedback increases optimal monetary policy becomes less active because fiscal feedback tends to deflate inflationary shocks however this fiscal stabilisation is less efficient than monetary policy and so welfare declines in contrast if fiscal feedback falls below some critical value either the model becomes indeterminate or optimal monetary policy becomes strongly passive and this passive monetary policy leads to a sharp deterioration in welfare

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

working time reduction and employment experiences in europe and economic policy recommendations the paper seeks to evaluate the evidence on the employment effects of the collective working time reductions in europe over the past 20 years while theoretical analyses produce contradictory assessments most empirical studies show positive employment effects but take insufficient account of the conditions under which the reductions in working time were implemented these conditions for the success of collective working time reductions include an active training policy designed to minimise skill shortages in the labour market the modernisation of work organisation wage increases in conjunction with productivity gains and a more equal income distribution

optimal fiscal policy rules in a monetary union this paper investigates the importance of fiscal policy in providing macroeconomic stabilization in a monetary union we use a microfounded new keynesian model of a monetary union which incorporates persistence in inflation and non ricardian consumers and derive optimal simple rules for fiscal authorities we find that fiscal policy can play an important role in reacting to inflation output and the terms of trade but that not much is lost if national fiscal policy is restricted to react on the one hand to national differences in inflation and on the other hand to either national differences in output or changes in the terms of trade however welfare is reduced if national fiscal policy responds only to output ignoring inflation

a new approach for identifying the parameters of a tax capitalization model abstract this study re estimates property tax capitalization rates with two empirical innovations first the underidentification problem inherent in all capitalization studies is resolved using estimates of rental values instead of estimates of the net user cost second the methodology along with the utilization of a unique data set mitigates biases resulting from potential correlations between property tax rates and unobservable amenities or public services the extent of tax capitalization estimated here is greater than estimates reported in many recent studies and is statistically indistinguishable from full capitalization the study also provides insights regarding the variability of the net user cost of housing

on measuring the effects of fiscal policy in recessions we do not have a good measure of the effects of fiscal policy in a recession because the methods that we use to estimate the effects of fiscal policy both those using the observed outcomes following different policies in aggregate data and those studying counterfactuals in fitted model economies almost entirely ignore the state of the economy and estimate the government multiplier which is presumably a weighted average of the one we care about the multiplier in a recession and one we care less about the multiplier in an expansion notable exceptions to this general claim sug gest this difference is potentially large our lack of knowledge stems significantly from the focus on linear dynamics vector autoregressions and linearized or close to linear dynamic stochastic general equilibrium dsge models our lack of knowledge also reflects a lack of data deep recessions are few and nonlinearities hard to measure the lack of statistical power in the estimation of nonlinear models using aggregate data can be addressed by exploiting estimates of partial equilibrium responses in disaggregated data microeconomic estimates of the partial equilibrium causal effects of a policy can discipline the causal channels inherent in any dsge model of the general equilibrium effects of policy microeconomic studies can also provide measures of the dependence of the effects of a policy on the states of different agents which is a key component of the dependence of the general equilibrium effects of fiscal policy on the state of the

using survey data to test standard propositions regarding exchange rate expectations survey data provide a measure of exchange rate expectations superior to the forward rate in that no risk premium interferes we estimate extrapolative adaptive and regressive models of expectations static or random walk expectations and bandwagon expectations are rejected current appreciation generates the expectation of future depreciation because variables other than the contemporaneous spot rate receive weight in comparing expectations to the process governing the spot rate we find statistically significant bias no variable is as ubiquitous in international financial theory and yet as elusive empirically as investors expectations regarding exchange rates in the past expectations have been modeled in an ad hoc way often by using the forward exchange rate there is however a serious problem with using the forward discount as the measure of the expected change in the exchange rate in that the two may not be equal the gap that may separate the forward discount and expected depreciation is generally interpreted as a risk premium most of the large empirical literature testing the unbiasedness of the forward exchange rate for example has found it necessary either arbitrarily to assume away the existence of the risk premium if the aim

systematic assessment error and intrajurisdiction property tax capitalization over the past twelve years considerable evidence has accumulated on the extent to which intercommunity differences in property tax burdens are capitalized into property values 17 21 8 7 25 recently linneman 14 has analyzed the validity of this evidence after taking into consideration alternative models of local government finance in the model that he believes best represents the spirit of the tax capitalization literature local government expenditures are financed wholly by property tax receipts he demonstrates that in this case a perfect correlation between taxes and public goods makes it econometrically impossible to estimate property value equations unless measurement errors and omitted variables are present he therefore asserts that existing results on the tax capitalization issue are of nebulous value

property taxation and the demand for housing an econometric analysis abstract there is disagreement among economists regarding the effect of a local increase in property taxation on the housing market in defining the price of housing services studies of the demand for housing have treated the property tax exclusively as an excise tax on housing consumption two recent theoretical developments suggest this is a misrepresentation of the tax one theory holds that the excise effects of property taxation may be shifted backward to the factors employed in the production of housing the other theory concludes that the property tax is not an excise but rather serves as an efficient price for local public services to investigate these hypotheses data from the annual housing survey were employed to estimate a housing demand model which included the net effective property tax rate among the set of independent variables in addition to revealing the property tax housing demand relationship the model provides more reliable estimates of income and price elasticities by eliminating specification errors found in previous studies results indicate that the property tax reduces the housing consumption of central city homeowners but does not distort the suburban housing market

working time regulation in a search economy with worker moral hazard abstract this paper analyzes the consequences of a working time reduction within an integrated shirking matching model under laissez faire workers and employers bargain over wages and working hours when unemployment is high the no shirking condition is binding and the number of working hours is lower than the level that would be negotiated in the absence of unobservable shirking in this case a work sharing policy increases aggregate employment at the opposite for low unemployment countries the no shirking condition does not bind and a working time regulation always worsens the labour market situation

animal spirits and fiscal policy abstract in this paper we study the effects of government spending with a behavioral macroeconomic model in which agents have limited cognitive capabilities and use simple heuristics to form their expectations however thanks to a learning mechanism agents can revise their forecasting rule according to its performance this feature produces endogenous and self fulfilling waves of optimistic and pessimistic beliefs animal spirits this framework allows us to show that the short run spending multiplier is state dependent the multiplier is stronger under either extreme optimism or pessimism and reduces in periods of tranquility furthermore the more the central bank focuses on output gap stabilization the smaller the multiplier we also show that periods of increasing public debt are characterized by intense pessimism while intense optimism occurs in periods of decreasing debt this allows us to show that governments face a trade off between the stabilization of the animal spirits and the stabilization of public debt then we show that the existence of this trade off has implications also for the stabilization of the output gap

fiscal and monetary rules for a currency union abstract this paper addresses the optimal joint conduct of fiscal and monetary policy in a two country model of a currency union with staggered price setting and distortionary taxes a tractable linear quadratic approximation permits a representation of the optimal policy plan in terms of targeting rules in the optimal equilibrium monetary policy should achieve aggregate price stability following a flexible inflation targeting rule fiscal policy should stabilize idiosyncratic shocks allowing for permanent variations of government debt but should abstain from creating inflationary expectations at the union level simple policy rules can approximate the optimal commitment benchmark through a mix of strict inflation targeting and flexible budget rules conversely the welfare costs of balanced budget rules are at least one order of magnitude higher than conventional estimates of the costs of business cycle fluctuactions

work sharing and overtime this paper deals with the employment effects of reduced working time when firms endogenous response of overtime is considered the analysis distinguishes between fixed and profit maximizing levels of output as well as between interior and corner solutions it is shown that under plausible assumptions a reduction in working time is quite likely to be counterproductive as an employment promoting measure i introduction a reduction in working time has been proposed as a method of increasing employment through work sharing such proposals however often seem to build on an oversimplified view of the world where little consideration is given to various possible repercussions most economists therefore seem rather sceptical towards such proposals for more or less critical discussions see e g hart sloane 1979 charpin 1984 brunstad holm 1984 calmfors 1985 hoel 1986 1987 hoel vale 1986 and dreze 1987 none of these papers however takes into account that actual working time will differ from normal working time to the extent that there is overtime work the aim of this paper is to analyse how endogenous responses of overtime may affect the outcome with respect to employment of reducing the normal working time although overtime work currently accounts for only a minor proportion of total working time around three per cent in sweden we believe this to be an important channel since a major reduction in working time will represent a nonmarginal change which is likely to produce significant changes in established practices our results add to the doubts that a reduction in working time increases employment there has been some recent work on the relationship between normal working time and overtime cf hart 1984 fitzroy hart 1985

using alsace moselle local laws to build a difference in differences estimation strategy of the employment effects of the 35 hour workweek regulation in france france s 1998 implementation of the 35 hour workweek has been one of the greatest regulatory shocks on labor markets few studies evaluate the impact of this regulation because of a lack of identification strategies for historical reasons due to the way alsace moselle was returned to france in 1918 the implementation of france s 35 hour workweek was less stringent in that region than in the rest of the country which is confirmed by double and triple differences yet it shows no significant difference in employment with the rest of france which casts doubt on the effectiveness of this regulation

anticipation learning and welfare the case of distortionary taxation we study the impact of anticipated fiscal policy changes in the ramsey economy when agents form expectations using adaptive learning we extend the existing framework by distortionary taxes as well as elastic labour supply which makes agents decisions non predetermined but more realistic we detect that the dynamic responses to anticipated tax changes under learning have oscillatory behaviour moreover we demonstrate that this behaviour can have important implications for the welfare consequences of fiscal reforms

fiscal consolidations and heterogeneous expectations abstract we analyze fiscal consolidations using a new keynesian model where agents have heterogeneous expectations and are uncertain about the composition of consolidations we look at spending based and tax based consolidations and analyze their effects separately we find that the effects of consolidations and the output multipliers are sensitive to heterogeneity in expectations before and after implementation of a specific fiscal plan depending on the beliefs about the type of consolidation prior to implementation we show that heterogeneity in expectations may lead to optimism in the economy improving thus the performance of a specific fiscal plan or can work towards the opposite direction leading to pessimism amplifying the contractionary effects of the consolidation in general we find that spending based consolidations last longer and lead to deeper recessions when agents are boundedly rational compared to the rational expectations benchmark while the opposite holds for tax based consolidations

anticipated fiscal policy and adaptive learning abstract the impact of anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations is considered agents are assumed to combine limited structural knowledge with a standard adaptive learning rule these issues are analyzed using two well known set ups an endowment economy and the ramsey model in our scenario there are important deviations from both rational expectations and purely adaptive learning the approach could be applied to other frameworks

optimal fiscal policy under learning abstract this paper characterizes optimal fiscal policy when agents learn about future taxation a benevolent and fully rational government chooses taxes on labor income and state contingent bonds to finance public spending considering that private agents form their expectations through a learning algorithm facing a trade off between distortionary taxes and distorted expectations the ramsey planner chooses the policy that minimizes the total cost of distortions the analysis produces two main results first the government will use fiscal variables to manipulate expectations reducing taxes and issuing debt at times of pessimism and doing the opposite at times of optimism this speeds up learning second the expectation dependent fiscal plan is also history dependent and it prescribes taxes that are not as smooth and more persistent than under rational expectations these findings are robust to alternative learning algorithms

booms and busts in economic activity a behavioral explanation booms and busts in economic activity are a regular occurrence they lead to a strong empirical regularity i e that output gaps and output growth are non normally distributed mainstream macroeconomic models explain this phenomenon by invoking exogenous shocks that are non normally distributed this is not a very satisfactory explanation as it shifts our ignorance one step further i propose an explanation based on a behavioral macroeconomic model in which agents are assumed to have limited cognitive abilities and thus develop different beliefs this model produces waves of optimism and pessimism in an endogenous way animal spirits and provides for a better endogenous explanation of the observed non normality in output movements i also analyze the implications for monetary policy

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

does ricardian equivalence hold when expectations are not rational this paper considers the ricardian equivalence proposition when expectations are not rational and are instead formed using adaptive learning rules we show that ricardian equivalence continues to hold provided suitable additional conditions on learning dynamics are satisfied however new cases of failure can also emerge under learning in particular for ricardian equivalence to obtain agents expectations must not depend on government s financial variables under deficit financing

optimal monetary and fiscal policy in a currency union we lay out a tractable model for the analysis of optimal monetary and fiscal policy in a currency union the monetary authority sets a common interest rate for the union whereas fiscal policy is implemented at the country level through the choice of government spending in the presence of country specific shocks and nominal rigidities the policy mix that is optimal from the viewpoint of the union as a whole requires that inflation be stabilized at the union level by the common central bank whereas fiscal policy has a country specific stabilization role one beyond the efficient provision of public goods

alternative value estimates of owner occupied housing evidence on sample selection bias and systematic errors abstract numerous econometric models have used various estimates of housing value as dependent variables the three most common measures in order of descending popularity have been homeowner estimates sales price and assessed value each of these measures has limitations the use of sales price can cause sample selection bias while owner and tax assessor estimates are subject to measurement error this study investigates the magnitude of the selection bias associated with sales price samples and whether the errors in owner and assessor estimates are systematically related to independent variables typically included in estimated equations our most important conclusion is that the use of owner estimates may cause bias in the estimated coefficients on many independent variables

the interactions between fiscal policy and monetary policy this paper studies the interactions of fiscal policy and monetary policy when they stabilize a single economy against shocks in a dynamic setting if both policy makers are benevolent then in our model the best outcome is achieved when monetary policy does nearly all of the stabilization if the monetary authorities are benevolent but the fiscal authority discounts the future or aims for an excessive level of output then a nash equilibrium will result in large welfare losses after an inflation shock there will be excessively tight monetary policy excessive fiscal expansion and a rapid accumulation of public debt however if in these circumstances there is a regime of fiscal leadership then the outcome will be very nearly as good as when both policy makers are benevolent

employment and distributional effects of restricting working time we study the employment and distributional effects of regulating reducing working time in a general equilibrium model with search matching frictions job creation entails fixed costs but existing jobs are subject to diminishing returns we characterize the equilibrium in the de regulated economy where firms and individual workers freely negotiate wages and hours then we consider the effects of a legislation restricting the maximum working time while we let wages respond endogenously employment effects are sensitive to the representation of preferences in our benchmark small reductions in working time starting from the laissez faire equilibrium solution always result in a small increase in the equilibrium employment while larger reductions reduce employment the regulation benefits workers both unemployed and employed even if wages decrease and even in cases where employment falls but reduces profits and output

it s a long way from norms to normality the 35 hour week in france the present overview on existing research addresses the double implication of working time standards as legal or contractual norms on the one hand and socially established normality on the oth

contesting time international comparisons of employee control of working time the authors hypothesize that three broad factors affect the degree of workers control over the timing and the total hours of their work the institutional and regulatory environment within the country labor market conditions and management and labor union strategies drawing from their interviews in 2000 with managers public sector policy makers and administrators and union leaders as well as from previous literature they illustrate how these factors actually affected working time and employee control over working time in the united states australia japan germany italy the netherlands and sweden their comparative analysis shows that in some countries employers and labor unions negotiated contracts that increased employee control over working time and provided employers with greater flexibility in others employee control over working time remained unevenly distributed across the occupational spectrum

the effects of overtime pay regulation on worker compensation proponents claim that a statutory overtime premium by raising the relative cost of overtime may encourage firms to substitute employment for overtime hours the author argues that there will be no real effects if firms reduce straight time wages so as to offer the same package of weekly compensation and hours of work that was acceptable initially empirical analysis suggests that wage differentials do arise to mitigate the purely demand driven effects predicted by previous models but these differentials are not large enough to neutralize overtime pay regulation completely copyright 1991 by american economic association

the nature and causes of unemployment in the federal republic of germany since the seventies an empirical investigation the leading economic problem of our time is the high and persistent level of unemployment as of early 1985 there are no signs that the severity of unemployment will weaken within the near future this paper discusses first some basic developments of labour supply and labour demand in the federal republic of germany frg the composition of the labour supply and the structure of the labour demand for persons and hours worked as well as the dynamics of the unemployment pool the next section reviews very briefly some empirical findings explaining the rise in the nairu where we make the distinction between the no shock and the actual nairu following suggestions put by the organizers of the conference we then elaborate on the employment function in the empirically oriented literature most employment functions use labour services i e total hours worked as the dependent variable thus assuming homogeneity of labour demand with respect to jobs and working hours in the german political arena however the distinction between persons employed and hours worked is particularly important first it figures in the employment aims of labour unions who request reductions in weekly working hours in order to induce higher manning second the distinction arises in the context of overtime work for it has been suggested that the reduction in overtime to standard working hours could create more than 1 million new jobs in germany we present some estimated labour demand functions which take into account these two dimensions of labour demand jobs and hours and which are used to elaborate on the direction and magnitude of the employment effects of reductions in wage costs and increases in overtime premia

hours of work and the fair labor standards act a study of retail and wholesale trade 1938 1950 when the fair labor standards act was first implemented a 5 reduction in the length of the standard workweek reduced by at least 18 the proportion of men and women working more than 40 hours per week this analysis based on monthly time series data from 1935 41 bls surveys and individual level data from the 1940 and 1950 censuses shows that the act s impact was larger in the south where the proportion of men and women working over 40 hours fell by 23 and 43 respectively than in the north because of much lower pre act wages in the south than in the north the minimum wage provisions of the act were much more binding in the south southern employers were less able than northern employers to adjust straight time wages in response to the act s overtime provisions

testing the effectiveness of the french work sharing reform a forecasting approach the macroeconomic impact of the french work sharing reform of 2000 a reduction of standard working hours in combination with wage subsidies is analysed using a vector error correction model vecm for several labour market variables as well as inflation and output out of sample forecasts for 2000 2001 are produced a comparison of these forecasts which serve as a benchmark simulation without structural shifts to the realized values with shifts suggests significant beneficial employment effects of the policy mix other shifts were absent and thus cannot explain the outcome output productivity hourly labour costs and inflation are only transitorily affected or not at all

working time regulation in france from 1996 to 2012 france which is often seen as an unusual country with a rigid 35 hour working week has experienced massive changes in its regulation of working time in recent decades including a progressive removal of 35 hour working week laws these changes have affected and continue to affect workplace organisation working conditions job creation productivity and wages the 35 hour working week policy represents a reduction in working time as well as a complex package that restructured french labour law and that opened up a great deal of space for social bargaining this paper provides a comprehensive analysis of the evolution of working time regulation and its political roots it discusses the studies evaluating the 35 hour working week and examines some of the basic consequences of reversing this policy since 2002 it also highlights unexplored lines of research on this topic

heterogeneity learning and information stickiness in inflation expectations in this paper we propose novel techniques for the empirical analysis of adaptive learning and sticky information in inflation expectations these methodologies are applied to the distribution of households inflation expectations collected by the university of michigan survey research center to account for the evolution of the cross section of inflation forecasts over time and measure the degree of heterogeneity in private agents forecasts we explore time series of percentiles from the empirical distribution our results show that heterogeneity is pervasive in the process of inflation expectation formation we identify three regions of the distribution that correspond to different underlying mechanisms of expectation formation a static or highly autoregressive region on the left hand side of the median a nearly rational region around the median and a fraction of forecasts on the right hand side of the median formed in accordance with adaptive learning and sticky information

work sharing during the great depression did the president s reemployment agreement promote reemployment the president s reemployment agreement pra of 1933 directed firms to reduce workweeks during the great depression so existing jobs could be spread into additional employment opportunities similar work sharing policies have recently been implemented across europe in hopes of reducing unemployment i find that ceteris paribus the work sharing aspects of the pra created nearly 2 5 million new employment opportunities in around four months however the programme also required firms to raise hourly wage rates offsetting close to half of these gains furthermore most of the remaining employment gains were wiped out after cartel oriented industry specific codes of fair competition supplanted the pra

property tax shifting under imperfect competition the hedonic price models are commonly used to empirically assess the degree to which property taxes are shifted from property owners to property renters the findings of these studies vary sporadically in terms of the degree of tax shifting the competitiveness of housing markets may significantly influence the degree of tax shifting in this article we allow a nonzero price cost markup in the hedonic price equation and examine the impact of market power on property tax shifting in our case study we examine the property specific characteristics occupancy record and local property tax associated with hundreds of managed rental properties in central new hampshire the results show that depending on the degree of market power exercised by a property management firm the anti competitive structure of the market may significantly contribute to property tax shifting from property owners to property renters