exchange rate pass through in u s manufacturing industries this paper studies exchange rate pass through in u s manufacturing industries and its cross sectional variation through an adapted dixit stiglitz model of product differentiation the paper predicts that pass through is positively related to the degree of product differentiation and inversely related to the elasticity of marginal cost with respect to output empirical estimates of the pass through elasticities show that pass through is incomplete and varies across industries the degree of pass through is found to be positively correlated to different proxies for product differentiation and negatively to a proxy for the elasticity of marginal cost

monetary and fiscal policies in an open economy the central theme of this paper is that international linkages between national economies influence in fundamentally important ways the effectiveness and proper conduct of national macroeconomic policies specifically our purpose is to summarize the implications for the conduct of macroeconomic policies in open economies of both the traditional approach to open economy macroeconomics as developed largely by james meade robert mundell and j marcus fleming and of more recent developments our discussion is organized around three key linkages between national economies through commodity trade through capital mobility and through exchange of national monies these linkages have important implications concerning the effects of macroeconomic policies in open economies that differ from the effects of such policies in closed economies recent developments in the theory of macroeconomic policy have established conditions for the effectiveness of policies in influencing output and employment which emphasize the distinction between anticipated and unanticipated policy actions the importance of incomplete information and the consequences of contracts that fix nominal wages and prices over finite intervals in this paper we shall not analyze how these conditions are modified in an open economy however since our concern is with macro economic policy a principal objective of which is to influence output and employment we shall assume that requisite conditions for such influence are satisfied this abstract was borrowed from another version of this item

an adverse selection model of optimal unemployment insurance abstract we ask whether offering a menu of unemployment insurance contracts is welfare improving in a heterogeneous population we adopt a repeated moral hazard framework as in shavell and weiss 1979 supplemented by unobserved heterogeneity about agents job opportunities our main theoretical contribution is a quasi recursive formulation of our adverse selection problem including a geometric characterization of the state space our main economic result is that optimal contracts for bad searchers tend to be upward sloping due to an adverse selection effect this is in contrast to the well known optimal decreasing time profile of benefits in pure moral hazard environments that continue to be optimal for good searchers in our model

the impact of unemployment insurance on job search evidence from google search data job search is a key choice variable in theories of labor markets but is difficult to measure directly we develop a job search activity index based on google search data the google job search index gjsi we validate the gjsi with both survey and web based measures of job search unlike those measures the gjsi is high frequency geographically precise and available in real time we demonstrate the gjsi s utility by using it to study the effects of unemployment insurance policy changes between 2008 and 2014 we find no evidence of an economically meaningful effect of these changes on aggregate search

job search and the effect of urban structure on unemployment and married female participation rates a model of urban job search is presented concentrating on the skill level of the seeker the implications for the effect of urban structure on intra urban unemployment and married female participation rate differentials are examined it is found using census data for greater london that urban structure represented by the intra urban distribution of jobs per worker as derived from the job search model has the predicted effects on unemployment and participation rates after allowing for other determinants of these rates the paper concludes with some implications for urban manpower policy

equity based natural resource allocation for infrastructure development evidence from large hydropower dams in africa and asia abstract large hydropower infrastructure development is a key energy priority in low and middle income countries as a means to increase energy access and promote national development nevertheless hydropower dams can also negatively impact people s livelihoods by reducing access to local natural resources such as land water and food this paper analyses equity based resource allocation from an ecological economics perspective by looking at local resource use competition between different uses food energy livelihoods and users villagers urban settlers local government and dam builders in selected case studies in asia and africa it also illustrates from a political ecology approach divergences between national priorities of energy production and growth and local development needs

separating the reporting effects from the injury rate effects of workers compensation insurance a hedonic simulation this paper presents a numerical simulation based on data from the early 1970s to investigate the economic links between labor market outcomes and the workers compensation insurance system the results suggest that in most cases any of three changes in the system more generous benefits more accurate categorization of insurance claims or more complete experience rating of premiums will slightly reduce the actual number of work related injuries but will dramatically increase the number of insurance claims filed the authors conclude that changes in self reported injuries can produce significant misimpressions of the safety incentives created by the workers compensation insurance system

substitution between unemployment insurance and workers compensation abstract this paper extends the literature on post injury duration of absence from work by developing a model that incorporates substitution between unemployment insurance benefits and workers compensation a theoretical analysis is presented in which the worker maximizes expected utility over four possible states of nature the model is tested empirically using pooled cross section and time series data at the two digit industry level the main findings support the predictions of the model an increase in workers compensation benefits increases the average duration of accidents with an elasticity of 0 9 1 4 while an increase in unemployment insurance payments reduces the average duration of accidents with an elasticity of 0 5 0 7

the case of risk premia for risky jobs revisited abstract the empirical evidence concerning the existence of risk premia for risky jobs is contradictory some results support the existence of these premia while others do not this note provides a theoretical justification for these contradictory results in a fairly general model where firms and workers can effect the probability of a workplace accident

deductible contracts against fraudulent claims evidence from automobile insurance insurance fraud is now recognized as a significant resource allocation problem in many markets the object of this study is to verify how straight deductible contracts may affect the equilibrium level of falsification in automobile insurance this type of contract is observed in many markets even if it is not optimal under costly state falsification a higher deductible may create incentives to fraud or cheat particularly when the insured anticipates that the claim has a small probability of being audited to verify this proposition we estimate a loss equation for which one of the determinants is the amount of the deductible using a data set of claims filed for damages following an automobile accident with twenty insurance companies in quebec in 1992 because we have access only to reported losses a higher deductible also implies a lower probability of reporting small losses to isolate the fraud effect related to the presence of a deductible in the contract we jointly estimate a loss equation and a

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

the effects of exchange rate volatility on commodity trade between the united states and mexico author affiliation mohsen bahmani oskooee department of economics p o box 413 bolton hall 822 university of wisconsin milwaukee milwaukee wi 53201 usa bahmani uwm edu corresponding authorscott w hegerty department of economics p o box 413 university of wisconsin milwaukee milwaukee wi 53201 usa hegertys beloit edu acknowledgment we would like to thank our anonymous referees for their valuable comments any error however is ours 1 introductionwith the breakdown of the bretton woods system in 1973 real exchange rates began to fluctuate greatly as volatility increased exporters and importers could no longer be as certain of the real prices of their goods this increased risk would affect their expected profits and thus influence their decision to trade exchange rate uncertainty has been shown to have affected trade flows between countries and across sectors but it has had both positive and negative effects in different studies increased volatility has had important implications in assessing the costs and benefits of various exchange rate regimes as well as of exchange rate controls in this study we assess the effect of this volatility on trade between the united states and mexico based on the exports and imports of 102 industries from 1962 to 2004 and we find that it plays a role only for a small number of individual industries 1intuitively one might surmise that uncertainty toward the real price of traded goods may reduce trade flows as risk averse buyers and sellers face possible losses due to exchange rate fluctuations and thus choose not to partake in risky dealings on the other hand it has been hypothesized that exchange rate risk can actually increase trade flows as importers and exporters opt to increase the volume of trade to attain a certain income making up for a decrease in the per unit value of a good by increasing the number of units bought or sold the bulk of the literature points to the former conclusion as reviewed by mckenzie 1999 and more recently by bahmani oskooee and hegerty 2007 the trading relationship between mexico and the united states is an important one more than 70 of mexico s exports go to the united states likewise mexico is still the second largest market for u s exports after canada mexico has taken advantage of its relatively inexpensive labor to attract u s manufacturing firms and expand its exports mexico imports automobile parts from the united states for example and then exports completed automobiles assembly line factories known as maquiladoras have attracted much attention but with the growth of china and competition from its even less expensive labor this sector has actually declined in addition the united states is mexico s main trading partner for agricultural products thus the two countries share important trade flows across a wide variety of sectors table 1 shows a breakdown of mexico s top 15 export and import industries in order of largest to smallest dollar value or trade share of the 102 industries that we analyze in our study the rankings are given for the year 1980 in order to capture the preliberalization trade structure and for the year 2004 to capture flows in the years after mexico joined the general agreement on tarifs and trade gatt and the north american free trade agreement nafta 2table 1 top 15 industries by dollar value of trade table omitted see article image the most striking observation in table 1 is that the same manufacturing industries occupy top spots for both exports and imports road motor vehicles exports of which have grown in importance since 1980 were also the top mexican import in both 1980 and 2004 likewise such manufacturing industry categories as telecommunications apparatus other electrical machinery machinery and appliances non electrical and office machines make up a large part of both export and import flows

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

optimal dynamic reinsurance policies under a generalized denneberg s absolute deviation principle abstract this paper studies the optimal dynamic reinsurance policy for an insurance company whose surplus is modeled by the diffusion approximation of the classical cramer lundberg model we assume the reinsurance premium is calculated according to a proposed mean cvar premium principle which generalizes denneberg s absolute deviation principle and expected value principle moreover we require that both ceded loss and retention functions are non decreasing to rule out moral hazard under the objective of minimizing the ruin probability we obtain the optimal reinsurance policy explicitly and we denote the resulting treaty as the dual excess of loss reinsurance this form of the optimal treaty is new to the literature and lends support to the fact that reinsurance contracts in practice often involve layers it also demonstrates that reinsurance treaties such as the proportional and the standard excess of loss which are typically found to be optimal in the dynamic reinsurance model need not be optimal when we consider a more general optimization model we also consider other generalizations including i allowing the insurer to manage its business through both reinsurance and investment and ii n piecewise mean cvar premium principle in the former case we not only show that the dual excess of loss reinsurance policy remains optimal but also demonstrate that investing in stock can further enhance insurer s financial stability with lower ruin probability for the latter case we establish that the optimal reinsurance treaty can have at most n layers which is also more consistent with practice

ruthless prepayment evidence from multifamily mortgages abstract estimates of a prepayment function for multifamily mortgages are reported in this paper these are among the first attempts to estimate such a function most previous work along these lines focuses on single family mortgages a further distinguishing aspect of the paper is its attempt to incorporate the impact of unobservable factors on the mortgage refinancing decision a variant of the maximum likelihood procedure first developed by meyer ph d thesis mit 1987 is employed the results indicate an overall positive duration dependence for the conditional prepayment rate the estimated response of prepayments to a change in the market rate of interest is significant with the expected sign it is also larger once the effect of unobserved heterogeneity is taken into account nonetheless the magnitude of the response is substantially less than that predicted by the ruthless option pricing model

exchange rate pass through in turkish export and import prices this article examines exchange rate pass through into prices of internationally traded goods in the case of a small emerging open market economy such as turkey in this study we provide empirical evidence on complete pass through in export prices in turkey using aggregate data on the manufacturing sector our data do not however support complete pass through in import prices in turkey this contradicts with the findings of the existent literature which typically concludes that the degree of pass through in import prices is higher than the one of export prices this can be interpreted as a result of competition between import and import substituting industries where importers fall short of competing successfully with import substituting sectors although turkish importers can be responsive to exchange rate changes to a certain degree in the short run in the long run they seem to lose their market power perhaps as a result of swift competition a complete exchange rate pass through to export prices in t

california s 2004 workers compensation reform costs claims and contingent workers the large excess fraction of difficult to diagnose injuries that occur on a monday was originally thought to reflect employees use of workers compensation to cover weekend injuries evidence has

insurance fraud and optimal claims settlement strategies abstract we examine the optimal claims settlement strategy for a liability insurer when claimants can permanently misrepresent their losses by engaging in costly claims falsification in this environment claims auditing is not a possible deterrent to fraud and the settlement strategy consists of an indemnification profile that relates the insurance payment to the claimed amount of loss the optimal indemnification profile is shown to involve systematic underpayment of claims at the margin as a means to deter loss exaggeration with the extent of underpayment limited by expected litigation costs and potential bad faith claims the key testable implication of the theory is that the extent of underpayment should be greater for classes of claims for which loss exaggeration is easier empirical analysis of insurance settlements for bodily injury liability in automobile accidents confirms this prediction this suggests that liability insurers optimally choose claims payment strategies to lessen a claimant s i

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

modelling export prices and quantities in a small open economy volvement by u s manufacturing industry oxfjord economic papers 32 mar 1980 102 122 lindenberg eric b and stephen a ross tobin s q ratio and industrial organization journal of business 54 jan 1981 1 32 marvel howard p foreign trade and domestic competition economic inquiry 18 jan 1980 103 122 thomadakis stavros b a value based test of profitability and market structure this review 59 may 1977 179 185

a structural model for developing countries manufactured exports a dynamic structural econometric model is developed to analyze movements in manufactured exports and to capture lags in the adjustment to equilibrium the model is estimated with pooled cross section time series data for a representative sample of fifteen developing countries grouped according to their export market power the results suggest that prices domestic productive capacity and external economic activity are critical determinants of manufactured exports from developing countries the structural parameter estimates are used to infer the effects of changes in destination country income distinguishing between the short run and long run export volume and export revenue effects the results indicate that domestic economic policies that promote investment and capacity in export oriented activities are likely to play a key role in increasing foreign exchange earnings in developing countries even if growth in external demand is slow

separating moral hazard from adverse selection and learning in automobile insurance longitudinal evidence from france the identification of information problems in different markets is a challenging issue in the economic literature this paper performs tests of residual asymmetric information in the french automobile insurance market for the 1995 1997 period this market is characterized by the presence of a regulated experiencerating scheme bonus malus contract choices are strongly associated with the bonus malus of policyholders we have access to longitudinal survey data with dynamic information both on claims and accidents we propose a causality test to distinguish pathways through which a positive correlation arises between contract choice and accidents we find evidence of moral hazard among a sub group of policyholders with significant driving experience 5 15 years we distinguish this moral hazard estimate from adverse selection and learning policyholders with less experience have a combination of learning and moral hazard whereas no residual information problem is found for policyholders with more than 15 years of experience

infrastructure and inequality abstract we develop a model in which public capital is both an engine of growth and a determinant of the distributions of wealth income and welfare government investment increases wealth inequality over time regardless of its financing the time path of income inequality is however highly sensitive to financing policies and is often characterized by sharp intertemporal tradeoffs with income inequality declining in the short run but increasing in the long run public investment generates a positive correlation between growth and income inequality along the transition path but their short run and long run relationship depends critically on i how externalities impinge on allocation decisions ii financing policies and iii the time period of consideration finally these policies also generate sharp trade offs between average welfare and its distribution with government investment improving average welfare but also increasing its dispersion our results are obtained numerically but extensive sensitivity analysis confirms their robustness across key parameter values

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

does unemployment compensation affect unemployment duration abstract we use a flexible hazard rate model with unrestricted spell duration and calendar timeeffects to analyse a dataset including all norwegian unemployment spells during the1990 s the dataset provides a unique access to conditionally independent variation inunemployment compensation we find that a marginal increase in compensation re duces the escape rate from unemployment significantly irrespective of business cycleconditions and spell duration the escape rate rises sharply in the months just prior tobenefit exhaustion while men are more responsive than women with respect to mar ginal changes in compensation women are most responsive with respect to benefitexhaustion keywords unemployment spells business cycles unemployment compensation non parametric duration analysis jel classification c41 j64 the ragnar frisch centre for economic research oslo we wish to thank the re search council of norway for financial support and christian brinck harald goldstein costas meghir espen moen steinar strom rolf aaberge and three anonomyous referees for helpful comments cor respondence to knut roed the ragnar frisch centre for economic research gaustadalleen 21 0349oslo norway e mail knut roed frisch uio no

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

income tax evasion an intersectoral analysis abstract this paper develops an intersectoral model of income tax evasion with general equilibrium effects key elements of the model are imperfectly substitutable outputs from the compliant and evading sectors and workers with heterogeneous evasion costs the model allows for biased public expenditures a wide range of behavioural responses and both legitimate and criminal activities evading tax as well as tax avoidance activities qualitative and quantitative assessments are undertaken for the effects of tax rate changes on evasion activity relative output prices and real tax revenues this approach offers useful findings for taxation policy and is amenable to further analytical extensions

workers compensation and moral hazard in tunisia abstractmoral hazard is a problem of asymmetric information that plays a central role in numerous contractual relationships and may lead to suboptimal resource allocation both ex ante and ex post moral hazard problems in workers compensation wc have been extensively analysed in developed countries the main objective of this paper is to test the presence of ex post moral hazard in the tunisian context to our knowledge this is the first analysis on this topic in a developing country tunisia it is particularly important to study moral hazard problems in developing countries since the negative impacts of such problems could be exacerbated in the developing world dionne and st michel 1991 have developed a methodology for testing for the presence of ex post moral hazard in the context of a more generous wc regime in quebec the tunisian institutional context that we study is similar to that prevailing in quebec that is in 1995 there was a significant increase in the generosity of the wc regime

the supply and demand for imports and exports in a simultaneous model previous studies on the behaviour of aggregate exports and imports have tended to ignore the simultaneous relationship between quantity and price this paper investigates the price responsiveness of export and import demand and supply in eight african countries the results indicate that export demand price elasticities are smaller when the sample is african the import supply and demand elasticities were found to be generally large the marshall lerner condition of balance of payment stability is found to be easily satisfied a positively sloped function of export supply is found to exist for a majority of countries in the sample the average time lag of export supply is found to be about a year the disequilibrium model is found to be more appropriate for import demand import supply and export supply

allocation distribution and scale towards an economics that is efficient just and sustainable abstract the practical policy of issuing tradeable permits for depletion and pollution requires for its implementation the clear separation of the three basic economic goals of efficient allocation equitable distribution and sustainable scale economic theory needs to catch up with policy in recognizing that scale issues cannot be reduced to either allocation or distribution

exchange rates and import prices for a small open economy the case of ireland as a further contribution to the growing international literature on exchange rate pass through pt this study assesses the extent of pt for irish import prices over the period 1963 to 1995 it fills two important gaps in the literature by making due allowance for the time series properties of the data and by concentrating on the case of a small open economy in order to assess the extent of pt a mark up model for aggregate import unit values is employed it is argued that the usual single equation mark up estimation technique leads to seriously biased and inefficient estimates of the degree of pt as it ignores the strong simultaneity of import prices and domestic competing prices this study makes use of the johansen technique to allow for such simultaneity and uncovers two long run equilibrium relationships among the data for import unit values and domestic competing prices and confirms the existence of very close to full pt for both previous results in the literature demonstrating substantially

microeconomic implications of exchange rate variations this paper investigates the effect of exchange rate variations on the equilibrium of an industry in which domestic firms are competing with foreign suppliers the paper is designed as an expository survey it discusses the perfectly competitive industry exchange rate pass through under imperfect competition entry exit and hysteresis with fixed costs and exchange rate uncertainty copyright 1990 by oxford university press

disability earnings income and consumption using longitudinal data for the period 1968 2005 for a sample of male household heads we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes including earnings income and consumption we have seven main findings first disability rates are high we divide the disabled along two dimensions based on the persistence and severity of their work limiting condition we estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years and a 19 percent chance that he has begun a chronic and severe disability second the economic consequences of disability are frequently profound ten years after disability onset a person with a chronic and severe disability on average experiences a 68 percent decline in earnings a 32 percent decline in after tax income a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption third the various economic consequences differ sharply across disability groups the outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled fourth our findings show the partial and incomplete roles that individual savings family support and social insurance play in reducing the consumption drop that follows disability only about half of this most disabled group reports receiving social security disability insurance or supplemental security income fifth we find a noticeable fall in earnings and income prior to the onset of a reported disability consumption also falls somewhat suggesting that future disability is partially but incompletely predictable in the short run sixth time use and detailed consumption data further indicate that disability is associated with a decline in well being seventh the quantities we have estimated combined with elasticities from the literature allow us to examine the optimality of current compensation for the disabled we find that the current compensation for our most disabled group appears to be lower than is optimal

hardball and the soft touch the economics of optimal insurance contracts with costly state verification and endogenous monitoring costs abstract we examine an environment of costly state verification in which insureds possess private information about the magnitude of an insurable loss insurers can verify the actual loss suffered only by incurring a positive resource cost and insureds may verification and may lead to more generous settlements optimal insurance contracts are shown to mitigate the incentives to evade by a combination of incentives which include the overpayment of easily monitored losses and undercompensation for claims exhibiting higher verification costs

the timing of monetary and price changes and the international transmission of inflation this paper presents a theoretical and empirical investigation into timing relationships between variables within and across industrialized countries the main empirical results of our analysis are 1 domestic monetary expansion appears to lead inflation in the sense that money granger causes prices without feedback contradicting an implication of the monetary approach to the balance of payments 2 hardly any significant timing relationship exists between domestic and foreign rates of inflation during the fixed exchange rate period providing no evidence for a generalized law of one price 3 some sterilization of official reserve inflows was successfully performed by the non reserve central banks except for canada 4 u s interest rates granger cause foreign rates providing evidence of some international transmission via asset markets

calculating the real return on a sovereign wealth fund we present a new methodology for calculating the real return on sovereign wealth funds swf that share the investment objective of maximizing international purchasing power in terms of goods and services specifically we modify the traditional approach for deflating the nominal return along three dimensions the aggregator formula the measure of international prices and the weighting scheme we argue that a geometric average of price levels is an appropriate aggregator formula for capturing the deflationary effects of imports increasingly originating from low cost countries and that import prices paid by the swf owner and weights reflecting the owner s import pattern are consistent with the investment objective our proposed approach using the norwegian government pension fund global as an illustration raises the estimated average annual real rate of return over the sample period of 1998 2012 from 3 1 to 4 9

the short run dynamics of prices and the balance of payments the purpose of this study is to analyze theoretically and empirically the short run behavior of prices and the balance of payments in a small open economy with a fixed exchange rate following the presentation of the theoretical framework the experience of mexico during 1950 73 is analyzed the model is based on what is known as the monetary approach to the balance of payments this approach as is frequently presented deals with long run equilibrium situations when all relative prices are fixed this long run equilibrium view was applied to test empirically the theory for several countries 2 using the assumption that there are no serious barriers to the international movement of capital and that all goods are traded 3 these assumptions imply that goods and capital markets are perfectly arbitraged and therefore that price levels and interest rates in all the countries always move together

exchange rate pass through in a small open economy the anglo irish case bilateral import unit values are constructed to investigate the extent and speed of exchange rate and production cost pass through into the unit values of irish imports total and sectoral from the uk using menon s 1996 mark up model the approach used to measure exchange rate pass through is based on cointegration and error correction modelling and the period of analysis is from 1979 to 1995 full pass through from the bilateral irish pound sterling exchange rate and from uk producer costs could not be rejected for total and sectoral import unit values for the sample period 1979q1 1995q4 this implies no role for domestic competing prices in explaining the long run relationship determining unit values of irish imports from the uk the results indicate that for aggregate and sectoral unit values of irish imports from the uk pass through is incomplete in the short run

moral hazard insurance claims and repeated insurance contracts the paper develops a simple model of repeated automobile insurance contracts providing a framework for analyzing changes in aggregate insurance data in periods of changes that affect driver incentives experience rating of premiums gives drivers an incentive to exert effort to avoid accidents ex ante moral hazard and an incentive to hide accidents ex post moral hazard the empirical analysis using data from the competitive insurance markets in ontario and alberta over a period of major legislative changes in ontario suggests that much of the recent decline in accidents in ontario was due to an increased incentive to hide accidents jel classification d 12 d82 hasard moral reclamations d assurance et contrats d assurance renouveles le texte developpe un modele simple de contrats d assurance automobile renouveles fournissant un cadre d analyse des donnees d assurance agregees dans des periodes de changement qui affectent les incitations des chauffeurs un regime de primes cotees selon l experience donne aux chauffeurs une incitation a faire des efforts pour eviter les accidents hasard moral ex ante et une incitation a cacher qu il y a eu accident hasard moral ex post l analyse empirique utilisant les donnees recueillies dans les marches d assurance con currentiels de l ontario et de l alberta pour une periode au cours de laquelle il y a eu des changements legislatifs majeurs en ontario suggere qu une bonne partie du declin des accidents enregistre en ontario a ete attribuable a une incitation accrue a cacher les accidents

work incentive effects of taxing unemployment benefits before 1979 unemployment insurance ui benefits were not treated as taxable income in the united states several economists criticized this policy on the ground that not taxing ui benefits while taxing earned income allegedly encourages unemployed persons to conduct longer than socially optimal job searches since 1979 however ui benefits received by persons in higher income families have been subject to income tax this paper investigates whether the introduction of benefit taxation has had the predicted effect of reducing unemployment duration the study uses data on a sample of persons that filed for ui in 1978 or 1979 to examine whether high income claimants collected benefits for shorter periods after the tax change than they did before benefits became taxable as part of the empirical analysis the paper develops a generalization of the weibull distribution and applies a limited dependentvariable technique for this distribution similar to the tobit technique for the normal distribution despite some variation in the results from different model specifications the analysis presents persuasive evidence of a tax effect on unemployment duration the 1979 policy change is estimated to have reduced average compensated unemployment duration among the sampled high income claimants by about one week

a regional analysis of labour force participation rates across the member states of the european union elhorst j p 1996 a regional analysis of labour force participation rates across the member states of the european union reg studies 30 455 465 this study investigates the causes of variation in labour force participation rates in a regional europe two participation rate equations are estimated one for men and one for women using annual data derived from eurostat 1983 1989 the explanatory variables are based on previous studies on the subject of the neoclassical formulation of the individual s labour supply function extended by the situation in which an individual who wishes to work cannot find a job and becomes involuntarily unemployed the consistency of the parameter estimates to different estimation models is investigated it turns out that heterogeneity between the member states of the eu is so important that it is almost impossible to find an overall regression equation for the whole eu elhorst j p 1996 une analyse regionale des taux d activite dans les pays membres de l union europ

adverse selection in insurance markets policyholder evidence from the u k annuity market in this paper we investigate the importance of adverse selection in insurance markets we use a unique data set consisting of all annuity policies sold by a large u k insurance company since the early 1980s to analyze mortality differences among individuals who purchased different types of policies we find systematic relationships between ex post mortality and annuity policy characteristics such as whether the annuity will make payments to the estate in the event of an untimely death and whether the payments from the annuity rise over time these mortality patterns are consistent with the presence of asymmetric information in the annuity market we find no evidence of substantive mortality differences however across annuities of different size even though models of insurance market equilibrium with asymmetric information would predict such differences we also find that the pricing of various features of annuity contracts is consistent with the self selection patterns we find in mortality rates our results therefore suggest that selection may occur across many specific features of insurance contracts and that the absence of selection on one contract dimension does not preclude its presence on others this highlights the importance of considering the detailed features of insurance contracts when testing theoretical models of asymmetric information

the welfare state as provider of accident insurance in the workplace efficiency and distribution in equilibrium the welfare state provides universal insurance for workers against accidents in the workplace in equilibrium this insurance does not generate adverse safety incentives to firms noninternalized insurance makes workers sort themselves nonoptimally to firms and choose higher individual effort levels to prevent accidents as compared to insurance schemes that are internalized in the market welfare state insurance may therefore generate higher safety levels than perfect experience rating not lower an optimal income taxation scheme in the welfare state implies progressive taxation the optimal tax level increases with the extent of the welfare state copyright 1995 by royal economic society

the degree and determinants of exchange rate pass through market structure non tariff barriers and multinational corporations this study investigates the exchange rate pass through for australian imports of manufactures pass through elasticities are estimated for total manufactures and forty product categories by applying an econometric procedure which avoids the pitfalls in previous studies to a carefully assembled data set the determinants of pass through are analyzed by relating the pass through elasticities to variables representing foreign control nontariff barriers product characteristics and market structure the author finds that pass through is incomplete for most products with significant variation across products unlike previous studies he finds that most of the variation in pass through is explained by the presence of multinational corporations and nontariff barriers copyright 1996 by royal economic society

incentive effects of workers compensation insurance abstract this paper uses micro level data from the current population survey to estimate the determinants of participation in state workers compensation programs in the united states the principal finding is that higher workers compensation benefits are associated with greater participation in the workers compensation program after accounting for a variety of covariates in addition the waiting period is found to have a substantial negative effect on program participation finally time series estimates based on the cross sectional model show that the growth in workers compensation claims in the 1970s corresponds reasonably well with the growth in real benefits in this time period

unemployment insurance and the duration of workplace accidents the social cost of workplace accidents is large in a typical year in the united states from one third to one half as many working days are lost to work injuries as are lost to unemployment see krueger 1988 recently economists have paid more attention to the economic issues involved in occupational safety and health osh in particular they have investigated the different effects of government intervention in this area for example it has been found that in general safety regulations and their enforcement had little impact on the incidence of workplace accidents there also seems to be a consensus that an increase in the generosity of workers compensation wc benefits is associated with an increase in both the frequency and the duration of wc claims for workplace accidents in this connection some researchers have raised a potentially important issue the possibility of substitution between wc and unemployment insurance ui in most countries wc is more generous than ui in terms of wage replacement and there may therefore be an incentive for workers about to be laid off to try to benefit from wc instead of ul2 workers suffering from a workplace accident may also be tempted to take action in order to obtain a longer period of recovery compensated by wc these two types of moral hazard are likely to be particularly important when injuries are hard todiagnose e g low back injuries and in industries where the level of unemployment is such that many workers may expect to be unemployed and to receive ui benefits after their recovery the construction industry in canada may be considered such an industry since climate constraints mean that many workers are unemployed during winter time fortin and lanoie 1992 were the first authors to investigate these issues in particular from quebec aggregate data at the industry level they found

the international transmission of inflation to a small open economy under fixed exchange rates and highly interest sensitive capital flows an empirical analysis abstract this paper deals with the international transmission of inflation to a small open economy soe under fixed exchange rates and facing very interest sensitive capital flows it focuses particular attention on a channel of transmission which has been hitherto largely ignored namely portfolio capital flows arising from the monetary policy actions of the soe s reserve currency country rcc the bulk of the existing literature on this topic regards portfolio capital flows and money in general as having no causative role but simply passively mirroring transmission through commodity markets the model obtains strong support for ireland from 1972 to 1979 during which the ir was maintained in a strict one for one parity with the stg

workers compensation moral hazard and the composition of workplace injuries this paper provides evidence that workers compensation insurance wc affects not only the occurrence but also the composition of reported injuries in our theoretical approach wc is the source of two interrelated moral hazard problems underprovision of accident preventing efforts by the insured worker ex ante moral hazard and false reporting of injuries ex post moral hazard our model predicts that under certain assumptions the impact of wc benefits is stronger on the probability of reporting a difficult to diagnose injury than on the probability of reporting an injury that is easy to diagnose panel data on 9 800 workers in the quebec construction industry over each month of the period 1977 86 combining administrative data from the quebec construction board with data from the quebec workers compensation board are used for the estimates the parameters of the model are estimated using a threealternative logit kernel hybrid multinomial probit mnp framework with individual random effects our results confirm our theoretical pre

the spatial variation in unemployment and labour force participation rates of male and female workers lillydahl j h and singell l d 1985 the spatial variation in unemployment and labour force participation rates of male and female workers reg studies 19 459 469 this paper investigates the spatial patterns of male and female unemployment and labour force participation rates the theoretical underpinnings for differences in work and residential choices for males and females are reviewed census tract data from five metropolitan areas in the united states are examined we find that no significant pattern exists for overall labour market activity however when male and female unemployment and participation rates are analysed separately significant and dissimilar spatial patterns exist for each hence returns from relocating industry improving transportation investing in human capital or providing job information need to be evaluated in sex specific terms

money debt and prices in the united kingdom this paper is concerned with testing the asset theory of the price level using quarterly uk data over the period 1968 1979 expressed in its most general form the asset theory states that the aggregate price level p is related to real variables such as the level of economic activity y financial wealth and the composition of wealth in terms of financial assets such as money m government bonds b etc this theory has a long tradition and has been revived and developed by blinder and solow 1973 among many others for the present we limit our attention to only two financial assets namely money and government bonds although in principle this set could be enlarged this preoccupation reflects the attention paid to money and bonds in the literature and the requirement that financial assets should be of the outside variety which precludes bank lending corporate liabilities etc hence our general specification of the price level is

are devaluations contractionary in mena countries currency depreciation reduces aggregate supply by raising cost of imported inputs and increases aggregate demand by increasing its net export component depending on the relative strength of the two effects depreciation could be expansionary or contractionary we employ the bounds testing approach to cointegration and error correction modelling to evaluate the effects of exchange rate depreciation on output growth both in the short and in the long run across a sample of mena countries exchange rate fluctuations are found to be important to fluctuations in real output growth in the short run anticipated exchange rate depreciation may induce long run expansionary or contractionary effects on output supply consistent with theory s predictions the expansionary effect of unanticipated depreciation is only transitory on output growth nonetheless unanticipated depreciation is found to have a contractionary effect on output growth in the long run via an increase in the cost of imported inputs

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

testing the exogeneity specification underlying the monetary approach to the balance of payments d espite the acute interest in the monetary approach to the balance of payments mbop over the past several years both as an explanation of the worldwide inflationary epidemic of the late 1960s and early 70s johnson 1972b and as a simple and manageable theoretical basis for policy recommendations by groups like the imf rhomberg and heller 1977 no general consensus has been reached as to the validity of the monetary model one reason for this is that the task of interpreting the results of the plethora of empirical tests of the monetary approach has been complicated by the controversy over the accuracy of the exogeneity assumptions underlying the mbop that are implicit in those studies these include the exogeneity with respect to reserve flows of the determinants of the demand for nominal money balances the domestic price level interest rate and level of real income as well as the domestic credit component of a country s money supply exogeneity makes the task of interpretation difficult for if the mbop assumptions regarding exogeneity are incorrect then to borrow geweke s 1978 p 163 words and to add studies in the mbop literature to which they would apply the otherwise identifying restrictions imposed on structural equations may not be sufficient to identify those equations argy and kouri 1974 genberg 1976 estimation procedures will be inconsistent e g bean 1976 zecher 1976 and the model cannot adequately portray the dynamics of the system it seeks to describe this last problem transcends any issue of estimation although it is not unrelated for it implies that the theoretical specification of the mbop is incorrect to begin with thus invalidating the putative reduced forms of the mbop that have come to represent the approach and form the basis for the policy recommendations alluded to earlier historically exogeneity was simply assumed as something not amenable to testing recently however geweke 1978 has demonstrated that the specification of exogeneity is a hypothesis with testable implications the purpose of this paper is to test formally the exogeneity hypothesis underlying empirical tests of the mbop specifically and the theoretical specification of the model in general using geweke s methods it is found that the hypothesis that the variables mentioned above are in fact exogenous can be rejected for each and every country in the sample this finding casts some doubt on the theoretical validity of the mbop and even more doubt on the accuracy of much of the empirical evidence garnered in its support the plan of the paper is as follows in section ii a mbop model is briefly presented and its exogeneity restrictions are highlighted in section iii the formal test of exogeneity is discussed and then in section iv the results of the tests using data from australia france germany norway and sweden are presented section v contains some conclusions

exchange rate pass through abstract the resilience of trade balances of the major industrialized economies to changes in their exchange rates has evoked interest in the exchange rate pass through relationship so far there has not been a comprehensive survey of this literature the paper aims to fill this gap in two ways first it pieces together the theoretical literature on exchange rate pass through second it provides a critical survey of the empirical literature on exchange rate pass through emphasis is placed on the data and methodology employed in previous work this is done in order to guide future work in this growing area of research

exchange rates and import prices for a small open economy the exchange rate pass through for a small open economy in the case of australian manufactured imports in estimated by applying an econometrics procedure which avoids the pit falls in previous studies to a carefully assembled data set for the first time in the literature estimate of pass through based on the johansen 1988 maximum likelihood ml procedure are provided it is found that incomplete pass through has important implications for policy and the macroeconomy

exchange controls and interest rate determination with traded and non traded assets the irish united kingdom experience abstract this paper is an empirical study of the effectiveness of exchange controls in recent irish experience vis a vis the united kingdom specifically we examine the effects of domestic money market conditions on an array of irish interest rates following the imposition of the controls and the relative importance of covered british interest rates during the process of financial disintegration induced by these controls using time varying parameter estimation we find that the central bank gained only partial and temporary control over interest rates through domestic monetary channels for most assets and liabilities interest parity conditions were restored within six months after a policy change

countercyclical policy and the speed of recovery after recessions we consider the effect of some policies intended to shorten recessions and accelerate recoveries our innovation is to analyze the duration of the recoveries of various u s states which gives us a cross section of both state and national level policies because we study multiple recessions for the same state and multiple states for the same recession we can control for differences in the economic conditions preceding recessions and the causes of the recessions when evaluating various policies we find that expansionary monetary policy at the national level helps to stimulate the exit of individual states from recession we find that exogenous measures of decreases in taxes or targeted increases in federal spending reduce recovery times for state recessions we also find ambient economic conditions can extend expected recovery times other states in the same region suffering from recession around the same time the length of the preceding recession and increases in oil prices

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

economic effects of workers compensation in the united states private insurance and the administration of compensation claims using a sample of workers compensation claims from new york this article investigates 1 the probability that the claimant and insurer will negotiate a settlement rather than adjudicate the claim 2 the size of the settlement if settlement occurs 3 the size of the award if the claim is adjudicated and 4 factors determining the extent of the insurers claim adjustment efforts the findings show that insurer adjustment activities increase settlement probability and that a 24 25 discount rate is required to equate lump sum settlements with the benefit stream paid by an adjudicated award

an empirical analysis of the commute to work patterns of males and females in two earner households the purpose of this paper is to empirically investigate the proposition that residential decisions are made with reference to the male head of household s job location disadvantaging females in the labor market a sample of approximately 50 000 adults in two earner households in urban areas distributed across the united states is selected from public use microdata from the 1980 census and used to estimate a simultaneous model to explain commute to work behavior of men and women the model is estimated separately for households that did and did not change residences in the past year the impacts of the new residences on the commute times of both male and female workers holding other variables constant are compared we conclude that residential selection does favor males relative to females although there is evidence that this advantage is eliminated as the ratio of female to male earnings in the same household narrows

energy demand economic growth and energy efficiency the bakun dam induced sustainable energy policy revisited abstract in embarking on a dynamic course of economic development and industrial modernism malaysia sees the need to increase its electricity generation capacity through the development of a mega dam project the bakun dam although hydroelectricity generation offers one of the benign options in accommodating the increasing energy consumption per capita in malaysia it is argued that the construction of bakun s dam which involves a complete and irreversible destruction of 69 640 ha of old forest ecosystem remains a difficult and uncertain endeavour it is further argued that apart from mega dam technology there are also other means to orchestrate a sustainable energy system in malaysia these include the implementation of demand and supply initiatives such as the deployment of energy saving technology or influencing behavioral change towards a sustainable energy consumption pattern

pricing to market behaviour and exchange rate pass through in japanese exports this paper examines the relationship between exchange rate changes and japanese export pricing behavior employing a methodology which permits the separate measurement of pricing to market behavior and the cost impact of exchange rate changes the results suggest that incomplete pass through of exchange rate changes is a pervasive phenomenon but rejects the widely held view that japanese export firms have relied more heavily on pricing to market strategies during the period of yen appreciation in order to maintain market shares there is also evidence that estimates which capture only pricing to market behavior may over emphasise the degree of pass through to the extent that cost of production is sensitive to exchange rate changes copyright 1994 by royal economic society

workers compensation and moral hazard two types of moral hazard have been determined the first type is related to self prevention activities affecting probabilities of accidents the second type relates to the agent s activities whenever the accident occurs the authors objective consists of presenting an empirical measure of the significance of this second type of moral hazard in the workers compensation market the main challenge in isolating moral hazard consists of dividing into two parts the total variation in recovery time with respect to changes in insurance coverage 1 the variation of consumption corresponding to a given level of information and 2 the variation of consumption due to greater asymmetrical information the methodology used in this study separates these two variations copyright 1991 by mit press

auditing claims in the insurance market with fraud the credibility issue abstract this paper characterizes the equilibrium of an insurance market where opportunist policyholders may file fraudulent claims we assume that insurance policies are traded in a competitive market where insurers cannot distinguish honest policyholders from opportunists the insurer policyholder relationship is modelled as an incomplete information game in which the insurer decides to audit or not the market equilibrium depends on whether insurers can credibly commit or not to their audit strategies we show that a no commitment equilibrium results in a welfare loss for honest individuals which may even be so large that the insurance market completely shuts down we also show that transferring monitoring costs to a budget balanced common agency would mitigate the commitment problem

unemployment insurance meets the classical labor supply model abstract through making average income dependent on the breakdown of non employment into frequency and duration the classical labor supply model with unemployment insurance has important implications for labor force participation the duration of employment and unemployment and modes of worker behavior that are by and large consistent with empirical knowledge

competition for land a sociometabolic perspective abstract possible negative effects of increased competition for land include pressures on biodiversity rising food prices and ghg emissions however neoclassical economists often highlight positive aspects of competition e g increased efficiency and innovation competition for land occurs when several agents demand the same good or service produced from a limited area it implies that when one agent acquires scarce resources from land less resource is available for competing agents the resource competed for is often not land but rather its function for biomass production which may be supplanted by other inputs that raise yields increased competition may stimulate efficiency but negative environmental effects are likely in the absence of appropriate regulations competition between affluent countries with poor people in subsistence economies likely results in adverse social and development outcomes if not mitigated through effective policies the socioecological metabolism approach is a framework to analyze land related limits and functions in particular with respect to production and consumption of biomass and carbon sequestration it can generate databases that consistently link land used with biomass flows which are useful in understanding interlinkages between different products and services and thereby help to analyze systemic feedbacks in the global land system

workers compensation rate regulation how price controls increase costs abstract in the 1980s regulation constrained workers compensation insurance premiums in the face of rapid growth in loss costs we develop and test the hypothesis that rate suppression exacerbates loss growth leading to higher losses and premiums the empirical analysis using rating class data for eight states for the period 1985 91 confirms that rate suppression measured by lagged residual market share of payroll increased loss growth the cost increasing effects are greater in the residual market than in the voluntary market but premiums increased more rapidly in the voluntary market the resulting pattern of cross subsidies between and within classes is consistent with a simple model of political influence with subsidies to high risks and small firms at the expense of low risks and insurer equity

environmental sustainability as the first principle of distributive justice towards an ecological communitarian normative foundation for ecological economics abstract the ecological economic concern with environmental sustainability embodies the normative orientations of the field this concern is foremost a matter of distributive justice the definition of which determines the relevance of the appropriate scale and efficient allocation criteria yet it would appear that the discipline lacks a shared internally consistent set of ethical premises by which this concern might be legitimized various authors have embraced a rawlsian conception of liberal justice as the appropriate banner for ecological economics in place of the consequentialist libertarian foundations of neoclassical economics including environmental economics it is argued here that this is insufficient in so far as it is premised on a vision of a discrete self sufficient economic actor instead it is posited that an ecological economic ethic must proceed from an understanding of the economic actor as community member a recognition implicit in recent ecological economic contributions focused on discourse ethics and deliberative democracy an ecological communitarian conception of distributive justice which views the well being of the individual as inseparable from the integrity of its implicate mutually constituting human and non human natural communities is advanced as the appropriate basis for the ecological economic world view in this light the thermodynamic foundations of ecological economics are seen to provide the necessary departure point for normative decision making oriented towards ensuring sustainability in economic organization

the wealth of the unemployed many studies have investigated the adequacy of unemployment insurance ui benefits as a form of income replacement but few have looked at other resources with which the unemployed can finance their unemployment spells this paper focuses on one form of resources own wealth holdings the author finds that the median worker s financial assets can cover roughly two thirds of the income loss from an unemployment spell wealth holdings vary tremendously however and almost one third of workers are unable to replace even 10 of their income loss moreover predicted wealth holdings decline precipitously with realized unemployment durations both absolutely and especially relative to actual income loss this finding together with the finding that individuals who are eligible for more generous ui draw down their wealth more slowly than do others during unemployment spells suggests that ui benefit adequacy could be increased if the benefits were targeted to those with longer unemployment spells

is honesty the best policy curtailing insurance fraud through optimal incentive contracts an incentive contracting approach is used to characterize optimal contracts when insured individuals possess private information about their losses and are able to misrepresent permanently their loss magnitudes by engaging in the falsification of claims we demonstrate that efficient agreements necessarily induce some falsification but that the extent of such claims inflation is mitigated partially by an indemnification schedule that overcompensates small losses while overpaying larger ones the differential costs of generating insurance claims through falsification provide an avenue by which the heterogencous insureds can credibly signal their underlying losses and are exploited in an optimal contract to implement loss contingent insurance payments

modelling nie exports aggregation quantitative restrictions and choice of econometric methodology the current debate regarding the robustness of estimates of export demand and supply elasticities for nies is examined by modelling manufactured exports from korea the results suggest that normalisation of the export demand function for price rather than quantity is an important issue in estimating export demand functions of small countries and that estimates of export demand elasticities at high levels of aggregation are subject to potentially powerful biases when the aggregate consists of categories which are subject to quantitative restrictions if proper modelling procedures are followed it is likely that the small country assumption will find far more empirical support than it has hitherto

rate regulation safety incentives and loss growth in workers compensation insurance we analyze the relationship between insurance rate regulation inflationary cost surges and incentives for loss control using state level data on workers compensation insurance for 24 states during 1984 90 regulators often responded to rapid loss growth during this period by denying rate increases or approving increases that were less than initially requested by insurers we test whether rate suppression increased loss growth by distorting incentives for loss control our regressions indicate a positive and statistically reliable relationship between loss growth and lagged measures of regulatory price constraints suggesting that rate regulation increased the frequency and or severity of employee injuries copyright 2000 by university of chicago press