tenure security and land related investment evidence from ethiopia the authors use a large data set from ethiopia that differentiates tenure security and transferability to explore determinants of different types of land related investment and its possible impact on productivity while they find some support for endogeneity of investment in trees this is not the case for terraces transfer rights are unambiguously investment enhancing the large productivity effect of terracing implies that even where households undertake investments to increase their tenure security this may not be socially efficient in ethiopia government action to increase tenure security and transferability of land rights can significantly enhance rural investment and productivity

measuring positive externalities from unobservable victim precaution an empirical analysis of lojack lojack is a hidden radio transmitter device used for retrieving stolen vehicles because there is no external indication that lojack has been installed it does not directly affect the likelihood that a protected car will be stolen there may however be positive externalities due to general deterrence we find that the availability of lojack is associated with a sharp fall in auto theft rates of other crime do not change appreciably at least historically the marginal social benefit of an additional unit of lojack has been fifteen times greater than the marginal social cost in high crime areas those who install lojack however obtain less than 10 percent of the total social benefits leading to underprovision by the market

a simple model of sectoral adjustment despite the significance of limited labour mobility across sectors few attempts have been made to produce dynamic models of sectoral adjustment which are consistent with perfect foresight and yet flexible enough to allow for a variety of dynamic experiments this paper proposes a simple perfect foresight model of two sector economies in which aggregate sectoral movement of labour takes place through the process of demographic change the model is tractable enough that one can easily examine the effects of intertemporally complicated relative price shocks both exogenous and endogenous under a variety of assumptions on technology

the impact of fomc statements on the volatility of asset prices this article examines the impact of federal open market committee fomc statements on asset prices statements are found to have a much more pronounced impact on the volatility of asset prices than interest rate surprises they influence primarily stock returns intermediate and long term yields whereas short term rates are driven both by statements and by interest rate surprises we also find that the regime shift of may 1999 has improved the effectiveness of monetary policy as reflected in an overall reduction in market volatility during the most recent regime in addition markets are equally well prepared for the upcoming rate decision in both regimes but the process of adjustment depends on whether a statement was issued in the old regime or not when a statement is issued price adjustments are very similar across both periods whereas if no statement is issued then the rate of adjustment towards the new value is more gradual and occurs throughout the entire intermeeting period

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

skill distribution and comparative advantage a comparison of china and india summary this paper empirically examines the different comparative advantages of china and india in relation to their different skill distribution patterns by utilizing industry export data on china and india from 1983 to 2000 we find that a country with a greater dispersion of skills i e india especially in the earlier years has higher exports in industries with shorter production chains while a country with a more equal dispersion of skills i e china especially in the later years has higher exports in industries with longer production chains the causal relationship is fairly robust and skill sorting mechanism seems to work behind

insecure property and technological backwardness we consider the incentive to adopt superior technologies when private property is insecure the welfare costs of insecure property can be substantially greater than those commonly associated with diversion and with the disincentive effect induced by imperfect appropriation of returns when private property is sufficiently insecure anticipation of conflict over economic distribution gives rise to technological backwardness even though 1 superior technologies are readily available at zero cost and 2 the ex post diversion of resources might be small

unobservable skill dispersion and comparative advantage abstract this paper investigates a theoretical mechanism linking comparative advantage to the distribution of skills in the working population we develop a tractable multi country multi industry model of trade with unobservable skills in the labour market and show that comparative advantage derives from i cross industry differences in the substitutability of workers skills and ii cross country differences in the dispersion of skills we establish the conditions under which higher skill dispersion leads to specialization in industries characterized by higher skill substitutability across tasks the main results are robust when the model is extended to allow for partial observability of skills finally we use distributions of literacy scores from the international adult literacy survey to approximate cross country productivity differences due to skill dispersion and we carry out a quantitative assessment of the impact of skill dispersion on the pattern of trade

u s monetary policy surprises identification with shifts and rotations in the term structure we develop a model to extract measures of monetary policy surprises from the maturity structure of the yield curve the model endogenously allows for the fact that the yield curve may either shift or rotate in response to monetary policy shocks a latent factor model approach with identification through heteroskedasticity harnesses the term structure to extract monetary policy shocks the approach offers informational advantages over event studies results from the u s term structure from 1994 strongly support the hypothesis that differing term structure responses are reactions to different types of monetary policy shock rather than differing reactions to the same policy shock

the confidence effects of fiscal consolidations we explore how fiscal consolidations affect private sector confidence a possible channel for the transmission of fiscal policy that has received particular attention recently as a result of governments embarking on austerity trajectories in the aftermath of the crisis panel regressions based on the annual action based datasets of devries et al 2011 and alesina et al 2014a show that consolidations and in particular their unanticipated components affect confidence negatively to obtain a more accurate picture of how consolidations affect confidence we construct a monthly dataset of consolidation announcements so that we can investigate the confidence effects in real time using an event study the results suggest that consumer confidence falls around announcements of consolidation measures an effect likely driven by revenue based measures moreover these effects are highly relevant for european countries with weak institutional arrangements as measured by the tightness of fiscal rules or budgetary transparency the effects on producer confidence are generally similar but weaker than for consumer confidence long term interest rates as a measure of confidence in the sovereign tend to fall around spending based consolidation announcements we have no evidence that the confidence effects of consolidation announcements are worse in slumps than in booms generally strengthening institutional arrangements may help in mitigating adverse confidence effects of consolidations

property rights and the political organization of agriculture we propose a general equilibrium model where the economic organization of agriculture and the political equilibrium determining the security of property rights are jointly determined in particular because the form of organization may affect the probability and distribution of benefits from future property challenges it may be shaped in anticipation of this impact property rights security may then be secured at the expense of economic efficiency the model provides a framework for understanding why in some contexts land is redistributed primarily via land sales and tenancy markets but via politics and conflict in others we test some implications of the theory using a five decade panel dataset that traces changes in the extent of tenancy and tenancy reform across 15 indian states

renewable resources and the gains from trade the brander taylor small open economy model of trade in a renewable resource and other goods is modified to allow for diminishing returns in the other goods sector it is shown that opening up for trade may result in steady state gains from trade even when there is open access to the resource and the country does not specialize fully in resource extraction it is also shown that transition to optimal management with price taking behaviour may result in a welfare loss resources renouvelables et gains en provenance du commerce international l auteur modifie le modele brander taylor de commerce international d une ressource renouvelable et d autres biens dans le cas d une petite economie ouverte afin de tenir compte des rendements decroissants dans le secteur des autres biens on montre que i ouverture au commerce international peut entrainer des gains en provenance de l echange international en regime permanent et ce meme quand l acces a la ressource est ouvert et que le pays ne se specialise pas dans l extraction de la ressource on montre que dans la periode de transition vers un management optimal quand il y a ajustement aux prix de marche il peut y avoir perte de bien etre

managing partially protected resources under uncertainty it is common wisdom that open access leads to the inefficient use of resources and private ownership of resources improves efficiency however the impact of enclosure and efficient management of some resource pools on other open access resource pools is poorly recognized the problem is common to many congestion prone facilities including roads parks fisheries antibiotics grazing lands and wilderness areas in this paper we analyze the optimality of price and quantity instruments in regulating resource use when there is uncertainty about congestion costs price instruments are found to be preferable to quantity instruments and strictly so when demand is less than perfectly elastic we also explore the effect of market power by resource owners on the relative efficiency of the two instruments

the missing link the ricardian approach to the factor endowments theory of trade this paper views all interpersonal trade as ricardian while all international trade reflects each country s factor endowment the model provides the logical link betwe en heckscher ohlin and ricardo the strength of the model is that it allows simpler and more robust theorems about trade welfare and fac tor payments factor price equalization holds universally and stolper samuelson is not tied to the number of goods or factors a key resul t is that the old mill theorem that the small country gains all from trade is incorrect trade patterns with three factors and two goods a re completely characterized copyright 1988 by american economic association

on the origins of comparative advantage this paper proposes a simple theory of international trade with en dogenous technological dierences across countries the core of our analysis lies in the determinants of the division of labor we consider a world economy comprising two large countries with a continuum of goods and one factor of production labor each good is characterized by its complexity de ned as the number of tasks that must be per formed to produce one unit there are increasing returns to scale in the performance of each task which creates gains from specialization and uncertainty in the enforcement of each contract which create transac tion costs the trade obetween these two forces pins down the size of productive teams across sectors in each country under free trade the country where teams are larger specializes in the more complex goods in our model it is the country where the product of institutional qual ity and human per worker capital is larger hence better institutions and more educated workers are complementary sources of comparative advantage in the more complex industries

property rights renewable resources and economic development this paper analyzes the role of endogenous property rights in the development of an open resource based economy i incorporate renewable resources and endogenous decisions on property rights into a convex growth model with the formal and informal sectors i find that along the transition path to steady state property rights enforcement is not constant but improves with time as well as involves intermediate property rights specification between open access and perfect property rights international trade and labor market are driving these endogenous changes property rights improve with favorable terms of trade when the economy exports resource services and stronger property rights help maintain the resource stock by deterring illegal harvest this pushes labor away from the informal harvest sector toward greater participation in the formal sector of the economy in turn more labor participation in the formal sector along with capital formation increase the country s output and consumption overall with an open economy and well functioning institutions renewable resources have a positive impact on economic growth

money fame and the allocation of talent brain drain and the institution of science abstract the earning structure in science is flatter than in the private sector which could cause a brain drain toward the latter this paper studies the allocation of talent between both sectors when agents value money and fame assuming that the intrinsic performance is a less noisy signal of talent in science than in the private sector we show that a good institution of science mitigates the brain drain and that introducing extra monetary incentives through the market might induce excessive diversion from pure to applied research we finally show the optimality of a relatively flat earning structure in science

sorting it out international trade with heterogeneous workers each worker brings a bundle of skills to the workplace for example quantitative and communication skills since employers must take this bundle as a package deal they choose workers with just the right mix of skills we show that international differences in the distribution of worker skill bundles for example japan s abundance of workers with a modest mix of both quantitative and teamwork skills have important implications for international trade industrial structure and domestic income distribution formally we model two dimensional worker heterogeneity and show that the second moments of the distribution of skills are critical as in the roy model

illegal landings an aggregate catch self reporting mechanism to solve the problem of illegal landings this article proposes a new tax mechanism based on the regulator s own aggregate catch estimates and ex ante self reports of planned catch by fishermen we show that the mechanism avoids illegal landings while ensuring nearly optimal exploitation and generating nearly correct entry and exit incentives finally we simulate the mechanism for the danish cod fishery in kattegat to obtain a rough indicator of the size of the tax it turns out that the average tax payment as a percentage of profit is surprisingly low

futures prices as risk adjusted forecasts of monetary policy many researchers have used federal funds futures rates as measures of financial markets expectations of future monetary policy however to the extent that federal funds futures reflect risk premia these measures require some adjustment in this paper we document that excess returns on federal funds futures have been positive on average and strongly countercyclical in particular excess returns are surprisingly well predicted by macroeconomic indicators such as employment growth and financial business cycle indicators such as treasury yield spreads and corporate bond spreads excess returns on eurodollar futures display similar patterns we document that simply ignoring these risk premia significantly biases forecasts of the future path of monetary policy we also show that risk premia matter for some futures based measures of monetary policy shocks used in the literature

network security and contagion abstract we develop a theoretical model of security investments in a network of interconnected agents network connections introduce the possibility of cascading failures due to an exogenous or endogenous attack depending on the profile of security investments by the agents we provide a tractable decomposition of individual payoffs into an own effect and an externality which also enables us to characterize individual investment incentives recursively by considering the network with one agent removed at a time using this decomposition we provide characterization of equilibrium and socially optimal investment levels as a function of the structure of the network highlighting the role of a new set of network centrality measures in shaping the levels of equilibrium and optimal investments when the attack location is endogenized by assuming that the attacker chooses a probability distribution over the location of the attack in order to maximize damage similar forces still operate but now because greater investment by an agent shifts the attack to other parts of the network the equilibrium may involve too much investment relative to the social optimum

homework in development economics household production and the wealth of nations we introduce home production into the neoclassical growth model and examine its consequences for development economics in particular we study the extent to which one can account for international income differences with differences in policies that distort capital accumulation in models with home production such policies not only reduce capital accumulation but also change the mix of market and nonmarket activity hence these models can generate larger differences in output than standard models for a given policy differential we also show how the welfare implications change when we incorporate home production

communication by central bank committee members different strategies same effectiveness the paper assesses the communication strategies of the federal reserve the bank of england and the european central bank and their effectiveness we find that the effectiveness of communication is not independent from the decision making process the paper shows that the federal reserve has been pursuing a highly individualistic communication strategy amid a collegial approach to decision making while the bank of england is using a collegial communication strategy and highly individualistic decision making the european central bank ecb has chosen a collegial approach both in its communication and in its decision making assessing these strategies we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the federal reserve and the ecb this suggests that there may not be a single best approach to designing a central bank communication strategy

institutions and moral hazard in open economies i investigate the interaction between international trade and national institutional development in an environment characterized by heterogeneous individuals choosing their education levels to maximize their utilities and institutions alleviating moral hazard by allowing managers to better observe and verify the productive efforts of workers liberalized trade allows institutions to serve as independent sources of comparative advantage in this setting i examine the effect of trade liberalization on the distribution of income in institutionally developed and underdeveloped nations trade affects income via a direct effect on prices and an indirect effect on the incentives to invest in education

measuring the effects of federal reserve forward guidance and asset purchases on financial markets i extend the methods of gurkaynak sack and swanson 2005 to separately identify the effects of federal reserve forward guidance and large scale asset purchases lsaps during the 2009 15 u s zero lower bound zlb period i find that both forward guidance and lsaps had substantial and highly statistically significant effects on medium term treasury yields stock prices and exchange rates comparable in magnitude to the effects of the federal funds rate before the zlb forward guidance was more effective than lsaps at moving short term treasury yields while lsaps were more effective than forward guidance and the federal funds rate at moving longer term treasury yields corporate bond yields and interest rate uncertainty however the effects of forward guidance were not very persistent with a half life of 1 4 months the effects of lsaps seem to be more persistent i conclude that overall in terms of these criteria lsaps were a more effective policy tool than forward guidance during the zlb period

gated communities and the economic geography of crime abstract this paper analyzes gated communities in a geographic model of crime there are four major results first gating always diverts crime to other communities but has an overall deterrent effect on crime as long as it does not impact legitimate employment opportunities second gating expenditures may be strategic substitutes or strategic complements the latter possibility may help explain why gated communities appear to spread like a contagion third the nash equilibrium level of gating expenditures is inefficiently large fourth gating may actually increase the overall level of crime if it either affects employment opportunities or it influences the selection among multiple equilibrium crime rates

unemployment and the efficiency wage hypothesis there has been much recent discussion of the reasons why prices in certain markets and in particular in labour markets may not adjust to eliminate excess supply the absence of speedy adjustment of prices is an essential feature of the recent models of disequilibrium macroeconomics but for the most part no explanation for this absence is provided from within those models one explanation that has been around in the literature for some time and has been receiving increasing attention recently is the efficiency wage hypothesis initially applied to developing economies see leibenstein i957 it has more recently been adapted to developed economies by weiss i 980 and used in the context of a keynesian macroeconomic model by hart i 980 similar concepts have been applied to the credit market by stiglitz and weiss i98i the purpose of the present paper is to explore further the conditions under which the notion of an efficiency wage is applicable and can provide an explanation of involuntary unemployment the essential feature of the efficiency wage hypothesis is that the productivity of a firm s employees increases as their wage is increased at least over an economically relevant part of its range if the wage paid by the firm is denoted by w the number of employees by l and the productivity of each employee by p w where p w o then the effective labour force of the firm e can be represented by

the origins of inequality insiders outsiders elites and commoners hereditary economic inequality is unknown among mobile foragers but hereditary class distinctions between elites and commoners exist in some sedentary foraging societies with agriculture such stratification tends to become more pronounced we develop a model to explain the associations among productivity population property rights and inequality using malthusian dynamics we show that regional productivity growth leads to enclosure of the best sites first creating inequality between insiders and outsiders hereditary elite and commoner classes subsequently arise at the best sites food consumption becomes more unequal and commoners become poorer these predictions are consistent with a wide range of archaeological evidence

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

monetary policy and asset prices a markov switching dsge approach summary this paper estimates a markov switching dynamic stochastic general equilibrium model by incorporating stock prices in monetary policy rules in order to identify the federal reserve s stance toward them based on the data from 1984 q1 to 2009 q2 i find that historical evidence of the policy reaction toward stock prices is weak except for the stock market bubble of the 1990s a counterfactual exercise shows that the rapid growth in stock prices during that period would have been significantly higher if monetary policy had been independent of the stock market however unconditional macroeconomic volatility increases with the degree of policy responsiveness toward stock prices copyright 2017 john wiley sons ltd

information from financial markets and var measures of monetary policy exogenous measures of monetary policy shocks directly derived from nancial market information are used in close us and open us germany economy var models to evaluate the robustness of the dynamic e ect of monetary policy obtained from traditional identi ed var the empirical analysis con rms the main features of the monetary policy transmission mechanism in us and germany explicitly addressing the issue of simultaneity between the german policy interest rate and the us dollar dmark exchange rate 1999 elsevier science b v all rights reserved jel classixcation e44 e52 f41

the optimal export tax for a primary commodity in a vertical market the conventional formula for the optimal export tax derived from a partial equilibrium model that ignores importers welfare is extended to include the deadweight loss to the domestic economy associated with the tax applying the extended formula to the tax russia imposes on its exports of logs results suggest ignoring the marketing channel causes the optimal export tax for a primary commodity to be understated the degree of understatement increases as the supply of logs and processing marketing inputs become less price elastic and as buyer and seller power in the downstream lumber industry increases for plausible values of model parameters however the degree of understatement is modest less than 19

identifying vars based on high frequency futures data abstract using the prices of federal funds futures contracts we measure the impact of the surprise component of federal reserve policy decisions on the expected future trajectory of interest rates we show how this information can be used to identify the effects of a monetary policy shock in a standard var this alternative approach to identification is quite different and we argue more plausible than the conventional identifying restrictions we find that a usual recursive identification of the model is rejected as is any identification that insists on a monetary policy shock having an exactly zero effect on prices contemporaneously we nevertheless agree with the conclusion of much of the var literature that only a small fraction of the variance of output can be attributed to monetary policy shocks

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

trade tragedy and the commons we develop a theory of resource management where the degree to which coun tries escape the tragedy of the commons and hence the de facto property rights regime is endogenously determined three forces determine success or failure in resource management the regulator s enforcement power the extent of har vesting capacity and the ability of the resource to generate competitive returns without being extinguished the model can explain heterogeneity across coun tries and resources in the effectiveness of resource management and it predicts that changes in prices population and technology can cause transitions to better or worse management regimes jel p14 q21 q22 q23 q32 many of the world s major renewable resource stocks are in a state of decline this is true for capture fisheries for forests in developing countries and for many measures of the biosphere s health other renewable resources including many species of wildlife marine mammals and coral reefs are also under threat while poverty and government corruption are surely respon sible for some of this record particular emphasis is often placed on the potentially damaging role played by international trade this emphasis is not surprising given that natural resource products are a key export for much of the developing world and property rights over renewable resources are both difficult to define and poorly enforced but property rights are not an immutable country characteristic such as weather mineral deposits or topography they are instead market institutions developed to facilitate transactions and protect scarce resources consequently changes in prices technology and other effects of market integration may alter the de facto property rights regime and lead to impacts quite dif ferent from those predicted by existing analyses the purpose of this paper is to examine renew able resource use within a framework where the enforcement of property rights and hence the efficacy of resource management is endogenously determined we develop a theory where an existing government regulates the use of a renewable resource by a set of agents who have a right to harvest the resource could be a fishery forest stock aquifer etc and we assume it is local and therefore contained within one country the govern ment sets rules limiting harvests but agents may cheat on these allocations and risk punishment property rights are endogenous in this framework because the government must account for agents incentive to cheat as a result the effective protection for the resource or what we refer to as the de facto property rights regime may be far from perfect even though property rights would be perfectly enforced if there was no monitoring problem

triple win for trade in renewable resource goods by use of export taxes abstract we challenge the free trade paradigm in particular for developing countries exporting natural resource goods by demonstrating positive economic and environmental effects of an export tax for renewable resource goods the two sector general equilibrium model designed has an open access renewable resource industry and a manufacturing industry the economic environmental and social effects of using an export tax on goods from the open access renewable resource industry are analysed it is demonstrated that the gross domestic product the steady state resource stock and the domestic consumption of both products increase with the resource export tax compared to free trade with no trade taxes

renewable resource economists and policy what differences have we made abstract this paper surveys developments in fisheries economics and fisheries policy over the past half century early work clarified the nature of the economic issues associated with open access laying the groundwork for changes in policies after coastal nations expanded their jurisdictions in 1976 perhaps the most important point made by economists is that property rights matter and that open access conditions create economic as well as biological problems the policy process has begun to create property rights systems although many of the world s fisheries still operate under mixed systems of regulations and open access incentives

the fed and the stock market an identification based on intraday futures data this article develops a new identification procedure to estimate the contemporaneous relation between monetary policy and the stock market within a vector autoregression var framework the approach combines high frequency data from the futures market with the var methodology to circumvent exclusion restrictions and achieve identification our analysis casts doubt on var models imposing a recursive structure between innovations in policy rates and stock returns we find that a tightening in policy rates has a negative impact on stock prices and that the federal reserve fed has responded significantly to movements in the stock market estimates are robust to various model specifications

recovering probability distributions from option prices this article derives underlying asset risk neutral probability distributions of european options on the s p 500 index nonparametric methods are used to choose probabilities that minimize an objective function subject to requiring that the probabilities are consistent with observed option and underlying asset prices alternative optimization specifications produce approximately the same implied distributions a new and fast optimization technique for estimating probability distributions based on maximizing the smoothness of the resulting distribution is proposed since the crash the risk neutral probability of a three four standard deviation decline in the index about 36 percent 46 percent over a year is about 10 100 times more likely than under the assumption of lognormality recently the increasing popularity of derivatives and some highly publicized failures to control risk have led to increased efforts to find reasonable methods to measure the sensitivity of large institutional derivatives portfolios to extreme events merely because such events are rare is not sufficient to ignore them since on the few occasions when they do occur significant amounts of money can change hands potentially wiping out profits accumulated over long prior periods a key assumption behind methods of estimation is the joint probability distribution of constituent underlying asset returns this has long been a concern of financial economists since probability assumptions are critical to much of their research during the last quarter century heretofore probability distributions of stock market returns have typically been estimated from historical time series unfortunately common hypotheses may not capture the probability of extreme events and the events of interest are rare or may not be present in the historical record even though they are clearly possible

price formation and liquidity in the u s treasury market the response to public information the arrival of public information in the u s treasury market sets off a two stage adjustment process for prices trading volume and bid ask spreads in a brief first stage the release of a major macroeconomic announcement induces a sharp and nearly instantaneous price change with a reduction in trading volume demonstrating that price reactions to public information do not require trading the spread widens dramatically at announcement evidently driven by inventory control concerns in a prolonged second stage trading volume surges price volatility persists and spreads remain moderately wide as investors trade to reconcile residual differences in their private views how do financial markets form prices and provide liquidity when information arrives efforts to address this issue have led to an extensive microstructure literature on equity markets and to a lesser extent on the foreign exchange fx market relatively little work has focused on the u s treasury market however in spite of its importance in its own right and the advantages it offers as an alternative testing ground for microstructure hypotheses

the creation of effective property rights traditionally general equilibrium models have taken effective property rights to be given and have been concerned only with analyzing the allocation of resources among productive uses and the distribution of the resulting product but this formulation of the economic problem is incomplete because it neglects that the appropriative activities by which people create the effective property rights that inform allocation and distribution are themselves an alternative use of scare resources this paper develops two canonical general equilibrium models of resource allocation and income distribution that allow for the allocation of time and effort to the creation of effective property rights to valuable resources in one model the valuable resources are initially in common pool in the other models the analysis reveals how the amount of time and effort that agents allocate to the creation of effective property rights on the technology of production and on the scale of the economy the paper also analyses the security of initial claims to valuable resources and speculates about why initial claims are perfectly secure

optimal and open access harvesting of multi use species in a second best world expansion of human populations and activities has caused increased conflicts between wildlife and humans as a result the distinction between resource and pest species has become blurry we propose an economically based classification of species based on a multi use bioeconomic model the classification of the steady state population of a species is shown to depend on both species density and economic factors we extend earlier work on multi use resource pest species by applying the theoretical model to a developing country context where property rights to wildlife are imperfectly enforced so that second best trade measures are often applied by the international community to promote conservation upon calibrating the model using data for the african elephant we derive three further results first when comparing the optimal stock of a multi use species to the open access stock we find that the ranking in terms of abundance is ambiguous second and consistent with existing literature on resource management in a second best world our case study supports the idea that trade bans have ambiguous effectson wildlife abundance third due to a bifurcation effect characterizing the multi use model s solution strategic and temporary subsidizing by the north may enable them to free ride on conservation efforts of the south henceforth

goods or resource contests in this paper we analyze the optimal mix between appropriative and defensive activities for goods goods contest and appropriative and defensive activities for resources resource contest we show that goods contests are qualitatively different from resource contests it turns out that for plausible cases the resource contest is dominated by the goods contest in the sense that investments are only positive in the latter

pre announcement effects news effects and volatility monetary policy and the stock market abstract i examine pre announcement and news effects on the stock market in the context of public disclosure of monetary policy decisions the results suggest that the stock market tends to be relatively quiet conditional volatility is abnormally low on days preceding regularly scheduled policy announcements although this calming effect is routinely reported in anecdotal press accounts it is statistically significant only over the past four to five years a result that i attribute to changes in the federal reserve s disclosure practices in early 1994 the paper also looks at how the actual interest rate decisions of policy makers affect stock market volatility the element of surprise in such decisions tends to boost stock market volatility significantly in the short run and positive surprises higher than expected values of the target federal funds rate tend to have a larger effect on volatility than negative surprises the implications of the results for broader issues in the finance and economics literatures are also discussed

events that shook the market tick data on the standard and poor s 500 stock index s p 500 futures contract and newswire searches are used to match events to large 1 to 5 minute stock price changes sixty nine events that led to large stock price changes are identified between 1982 and 1999 53 of which are directly or indirectly related to monetary policy many large stock price changes have no events associated with them

how markets process information news releases and volatility we examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets we find these announcements are responsible for most of the observed time of day and day of the week volatility patterns in these markets while the bulk of the price adjustment to a major announcement occurs within the first minute volatility remains substantially higher than normal for roughly fifteen minutes and slightly elevated for several hours nonetheless these subsequent price adjustments are basically independent of the first minute s return we identify those announcements with the greatest impact on these markets we examine the impact on interest rate and foreign exchange markets of scheduled macroeconomic news releases such as the employment report the consumer price index cpi and the producer price index ppi many market participants believe that such announcements have a major impact on financial markets indeed a small industry devoted to predicting the figures to be released in upcoming releases has evolved in recent years with the exception of the weekly money supply figures however the impact of such announcements on financial markets has received scant attention 1 this is doubly surprising given the considerable research interest in market volatility since these news releases are a potential source of much of this volatility consider for instance figure 1 as shown there prices in interest rate and foreign exchange futures markets are much more volatile between 8 30 and 8 35 a m eastern time et than during any other five minute trading period including

adverse selection in labor markets and international trade this analysis considers trade between countries with labor market distortions due to adverse selection comparative advantage is caused either by a better mix of high and low productivity workers or by the absence of adverse selection in one country in either case free trade may lead to a loss for the inferior country a trading equilibrium is pareto better than an equilibrium in a fully integrated economy with perfect factor mobility if both countries face adverse selection otherwise the trading equilibrium is pareto inferior subsidies for production of the imported good may improve the social utility of the inferior country copyright 1995 by the editors of the scandinavian journal of economics

endogenous enclosure in north south trade we show that the second best case against the optimality of free trade remains valid in the face of a well targeted but costly policy response trade between a north where property rights can be enforced at relatively low cost and an otherwise identical south yields trade patterns and welfare results nearly identical to those previously shown to arise if north and south differ exogenously in the extent of control over resources both nations respond optimally to world prices and the opening of trade leads to the development of property rights in the south nonetheless for a set of world prices bounded by the south s autarky price the south is better off under autarky and is made worse off by each increase in its export price on montre que l optimum de second ordre par rapport a l optimalite du libre echange reste valide quand on fait face a une strategie de reponse bien ciblee mais couteuse le commerce entre un nord ou les droits de propriete sont polices a un cout relativement bas et un sud identique sauf pour ce qui est de ce facteur engendre des patterns de commerce et de bien etre a peu pres identiques aux resultats obtenus si nord et sud different de maniere exogene dans le controle qu ils ont sur les ressources les deux pays repondent optimalement aux prix mondiaux et l ouverture du commerce entraine le developpement de droits de propriete dans le sud toutefois pour un ensemble de prix mondiaux bornes par les prix d autarcie du sud le sud s en tire mieux en autarcie et voit sa situation s empirer a proportion que son prix a l exportation s accroit

the social efficiency of private decisions to enforce property rights costs must be incurred if an owner is to enforce private property rights effectively we show that in a perfectly competitive economy private decisions to enforce rights may result in either more or less enforcement than is socially efficient cases of multiple stable equilibria occur and an equilibrium may be locally but not globally efficient resources may not be employed in their socially most valuable uses and enforcement may be accompanied by inefficient investment in resource productivity

should asean 5 monetary policy makers act pre emptively against stock market bubbles stock market rises and asset price inflation in asean economies have raised the question of whether monetary authorities in these economies should act pre emptively against these rising trends to prevent impending financial crises using structural vector error correction models svecms which incorporate mixed data characteristics we examine the effects and interactions between monetary policy and stock market shocks for singapore malaysia thailand indonesia and the philippines the results suggest that monetary policy focused on the stock market detracts from price stability objectives in particular because containing a stock market bubble may inadvertently depress output and inflation

optimal protection of property rights in a general equilibrium model of growth we incorporate weak property rights into an otherwise standard general equilibrium model of growth and second best optimal policy in this setup the state plays two of its key roles it protects property rights and provides public services the government chooses policy the income tax rate as well as the allocation of collected tax revenues between law enforcement and public services to maximize the growth rate of the economy the focus of our analysis is on how weak property rights generate multiple decentralized competitive equilibria the different properties of these equilibria and the implications of second best optimal policies

imperfect factor mobility and the distribution of income abstract when labor is imperfectly mobile between industries workers may have a special interest in commercial policies that increase the price of the output of the industry in which they are employed this proposition is investigated in a two good model in which the degree of labor mobility is measured by the elasticity of a convex input transformation curve the existence of such a transformation curve is justified by a model in which individual workers have differing relative and absolute efficiencies in different industries the results are extended to the case of many industries

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

the fed and interest rates a high frequency identification we measure monetary policy shocks as changes in the fed funds target rate that surprise bond markets in daily data these shock series avoid the omitted variable time varying parameter and orthogonalization problem of monthly vars and do not impose the expectations hypothesis we find surprisingly large and persistent responses of bond yields to these shocks 10 year rates rise as much as 8 10 of a percent to a one percent target shock the usual view that monetary policy only temporarily raises long term rates and influences inflation would lead one to predict a negative long rate response this abstract was borrowed from another version of this item

trade liberalisation resource sustainability and welfare the case of east baltic cod abstract recent research has warned that liberalising trade in capture fish products originating from inefficiently managed fisheries might cause over exploitation reduced fish stocks and thereby a reduced steady state of welfare this paper qualifies the warning in a case study of the east baltic cod market by developing an age structured bio economic supply model combined with basic theory of trade between two countries welfare effects of trade liberalisation are identified taking fishing quotas input limitations mesh size regulations and shared ownership of stocks into account it is shown that although liberalising trade in products supplied by such a fishery might cause steady state welfare reductions in the supplier countries these welfare reductions are small compared to the welfare gains from a hypothetical change to optimal management hence the introduction of better fisheries management is much more important than trying to meet potential negative consequences of trade liberalisation since even small improvements in fisheries management may offset the negative effects of trade liberalisation

a sorted tale of globalization white collar jobs and the rise of service offshoring abstract we study how the rise of unaffiliated trade in services with china and india has impacted u s labour markets the topic has two understudied aspects it deals with service trade most studies deal with manufacturing trade and it examines the historical first of u s workers competing with educated but low wage foreign workers our empirical agenda is made complicated by the endogeneity of service imports and the endogenous sorting of workers across occupations to develop an estimation framework that deals with these we imbed a partial equilibrium model of trade in tasks within a general equilibrium model of occupational choice the model highlights the need to estimate labour market outcomes using changes in the outcomes of individual workers and in particular to distinguish workers who switch up from those who switch down switching down means switching to an occupation that pays less on average than the current occupation we apply these insights to matched cps data for 1996 2007 the cumulative 10 year impact of rising service imports from china and india has been as follows 1 downward occupational switching increased by 7 percentage points from 21 to 28 and upward occupational switching increased by 6 percentage points from 17 to 23 2 transitions to unemployment were imprecisely measured to have increased by half a percentage point potentially raising the white collar unemployment rate from 3 0 to 3 5 3 the earnings average across all white collar workers fell by a small 1 however for the sub population of workers who switched down or became unemployed earnings fell by 15 and 47 respectively 4 service exports had partially offsetting effects on switching and unemployment

trade and divergence in education systems this article presents a theory on the endogenous choice of education policy and the two way causal relationship between trade and education systems a country s education system determines its talent distribution and comparative advantage the possibility of trade by raising the returns to the sector of comparative advantage in turn induces countries to further differentiate their education systems and reinforces the initial pattern of comparative advantage specifically the nash equilibrium choice of education systems by two countries interacting strategically are necessarily more divergent than their autarky choices and yet less than what is socially optimal for the world

measuring the reaction of monetary policy to the stock market movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy however little is known about the magnitude of the federal reserve s reaction to the stock market in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate this paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market we find a significant policy response with a 5 percent rise fall in the s p 500 index increasing the likelihood of a 25 basis point tightening easing by about a half

market based measures of monetary policy expectations a number of recent articles have used different financial market instruments to measure near term expectations of the federal funds rate and the high frequency changes in these instruments around federal open market committee announcements to measure monetary policy shocks this article evaluates the empirical success of a variety of financial market instruments in predicting the future path of monetary policy all of the instruments we consider provide forecasts that are clearly superior to those of standard time series models at all of the horizons considered among financial market instruments we find that federal funds futures dominate all the other securities in forecasting monetary policy at horizons out to six months for longer horizons the predictive power of many of the instruments we consider is very similar in addition we present evidence that monetary policy shocks computed using the current month federal funds futures contract are influenced by changes in the timing of policy actions tha

swords or plowshares a theory of the security of claims to property this paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities the model emphasizes the distinction between offensive weapons which are the instruments of predation and fortifications which provide defense against predation the analysis of this model shows how the equilibrium security of claims to property is determined the analysis focuses on the possibility of a nonaggressive equilibrium in which no resources are allocated to offensive weapons and claims to property are fully secure we also analyze the complex relation between economic welfare and the security of claims to property we find for example that a relatively poor agent could be better off in an equilibrium with less secure claims to property

restricted coasean bargaining we investigate the efficiency of coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes when property rights are costly to defend appropriate we find bargaining restrictions may be pareto superior to unconstrainedvoluntary exchange under cost uncertainty over the harmful activity we show an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions for an all pay auction we find conditions where precluding bargaining is always ex ante preferable to unrestricted bargaining for cases where the restrictions are contested we show conditions for the continuing existence of welfare improvements

a model of the origins of basic property rights this paper studies the origins of one of the most basic of property rights namely the right of an individual or an organization to the fruits of its labour my objective is to address the questions of why when and how this property right can emerge and be made secure i develop a model of the strategic interaction between two players in the state of nature which is an environment characterized by the absence of any laws and institutions including property rights and the state my analysis explores in particular the roles of the players fightin g and productive skills on the emergence and security or otherwise of this property right

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

tourism welfare and de industrialization in a small open economy this paper investigates the effects of an expansion of tourism on welfare output and factor prices in the host country using a general equilibrium international trade model in the absence of taxes foreign ownership and distortions an increase in foreign visitors will increase welfare only if the price of nontradables increases factor mobility and foreign ownership tend to reduce the gains from tourism while commodity taxes tend to increase them conditions under which an increase in tourism can lead to deindustrialization are also discussed copyright 1991 by the london school of economics and political science

the welfare cost of lawlessness evidence from somali piracy in spite of general agreement that establishing the rule of law is central to properly functioning economies little is known about the cost of law and order breakdowns this paper studies a specific context of this by estimating the effect of somali piracy attacks on shipping costs using data on shipping contracts in the dry bulk market to estimate the effect of piracy we look at shipping routes whose shortest path exposes them to piracy and find that the increase in attacks in 2008 led to around an 8 to 12 increase in costs from this we calculate the welfare loss imposed by piracy we estimate that generating around 120 usd million of revenue for somali pirates led to a welfare loss in excess of 630 usd million making piracy an expensive way of making transfers

on the origins of property rights conflict and production in the state of nature i analyse the emergence of property rights in a model of conflict and production in the absence of institutions of enforcement the population of agents evolves dynamically through conflicts for possession of factor goods among pairs of randomly matched agents conflicts are incomplete information wars of attrition with an agent s type consisting of his or her independently drawn valuation of the prize and cost of competing for it i prove equilibrium existence and show that in the steady state of the game the population sorts into two stable groups resource haves and have nots in accordance with a known function of their primitive types

the distribution of talent and the pattern and consequences of international trade i study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities when an individual s contribution to firm output can be measured accurately in some activities but not in others the most able workers select occupations in which their pay most closely reflects their own performance in a world economy with two otherwise similar countries that have different distributions of talent the country with the more heterogeneous labor force exports the good that is produced by the most talented individuals in this country trade exacerbates the polarization of the labor force and often worsens the distribution of income

after the big bang obstacles to the emergence of the rule of law in post communist societies when russia launched mass privatization it was widely believed that it would create a powerful constituency for the rule of law that didn t happen we present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the pareto efficient rule of the game the reason is that uncertainty about the legal regime can lead to asset stripping and stripping can give agents an interest in prolonging the absence of the rule of law this abstract was borrowed from another version of this item

a model of institutional formation within a rent seeking environment abstract this paper presents a game theoretic model in which some fraction of output is appropriated from entrepreneurs entrepreneurs are able to form a league to prevent this appropriation but this might not be individually rational because of either the free rider problem or coordination failure the model also shows that poorer countries are less able to form this league and so might not be able to develop institutions establishing property rights

new ways to assess and enhance land registry sustainability evidence from rwanda summary rwanda has recently implemented a nation wide program of first time land regularization ltr that many believe set new standards for the region we use administrative data combined with household survey and program rollout information to explore sustainability of the infrastructure created in this process including the impact of public efforts to increase registration of subsequent transactions we find that the program provided significant benefits in terms of gender equality and credit access while opening up new opportunities in terms of land taxation or land use planning but that high level of rural informality may undermine these in the medium to long term while public efforts to decentralize service provision helped to significantly reduce informality additional efforts are likely to be needed to ensure sustainability of the registry we discuss how rwanda can further move in this direction and draw out implications for other countries considering first time adjudication and registration of property rights

peasants against private property rights a review of the literature land is the main if not the only asset for a majority of people in developing countries the definition and allocation of rights over land are thus naturally essential aspects of individuals daily lives as well as critical determinants of social and economic development the privatization of land rights has long been seen as a necessary process enhancing both efficiency and equity however privatized land rights have not always emerged endogenously while exogenously driven programs of land privatization have not always been successful nor popular this has raised questions about the expected benefits of land rights privatization this paper aims at summarizing the main arguments and studies both theoretical and empirical on this issue with a specific focus on the factors that can make privatization inefficient or detrimental for the most concerned individuals

the intraday impact of company responses to exchange queries abstract this study investigates australia s unique continuous disclosure regime using intraday data on the australian securities exchange asx over the period january 2010 april 2012 we examine abnormal returns and trading volumes that accrue to shareholders immediately after an announcement responding to a trading induced query the use of intraday data permits us to examine the direct impact of these events and the length of time the market takes to incorporate this information with a higher degree of precision than the research currently on offer the study is framed within an event study methodology with a number of robustness measures a matched sample approach analysis of cross sectional determinants the removal of penny stocks and procedures to account for sample selection bias we find significant share price reversals following a query announcement with a reversal of 3 3 by the end of the widest event interval our study also provides evidence that the market takes up to 60 min to impound this information overall we provide support for the efficacy of the query framework administered by the asx

monotone matching in perfect and imperfect worlds we study frictionless matching in large economies with and without market imperfections providing sufficient conditions for monotone matching that are weaker than those previously known necessary conditions which depend on a key analytical object we call the surplus function are also offered changes in the surplus yield valuable information about the comparative statics of matching patterns across environments we apply our framework to some examples adapted from the literature accounting for and extending several comparative static and welfare results we also explore the dependence of the matching pattern on the type distribution

moneylenders and bankers price increasing subsidies in a monopolistically competitive market abstract in many areas of the world a significant part of the cost of obtaining a good or service is the cost of enforcing the contracts entailed in its provision we present models of markets with endogenous enforcement costs motivated by studies of rural credit markets we show that subsidies may have perverse effects under monopolistic competition increasing prices or inducing exit higher prices interest rates result from the loss of scale economies or from negative externalities among suppliers the models are consistent with the puzzling evidence that infusions of government subsidized formal credit have not improved the terms offered by moneylenders

village political economy land tenure insecurity and the rural to urban migration decision evidence from china this paper investigates the impact of land tenure insecurity on the migration decisions of china s rural residents a simple model first frames the relationship among these variables and the probability that a reallocation of land will occur in the following year after first demonstrating that a village leader s support for administrative land reallocation carries with it the risk of losing a future election the paper exploits election timing and village heterogeneity in lineage group composition and demographic change to identify the effect of land security in response to an expected land reallocation in the following year the probability that a rural resident migrates out of the county declines by 2 8 percentage points which accounts for 17 5 percent of the annual share of village residents aged 16 to 50 who worked as migrants during the period this finding underscores the potential importance of secure property rights for facilitating labor market integration and the movement of labor out of agriculture

welfare implications of water scarcity higher prices of desalination in this paper we evaluate the welfare implications of shortages in renewable resources and investigate the effects of cross subsidization on these shortages we set up a stochastic dynamic programming model in which a benevolent supplier allocates the resource for multiple user groups subject to revenue and resource constraints the supplier also has access to an external source that can be utilized at a certain cost the solution to the model gives the optimal sectoral prices and demand for the external source we find out that saving budget surplus during periods of scarcity allows the planner to charge prices below average costs when the resource is abundant using data from turkey we simulate our dynamic model to quantify the implications of cross subsidization on water use across user groups

a ricardian model of the tragedy of the commons abstract this paper revisits the tragedy of the commons when agents have different capabilities in both production and encroachment activities and can allocate their time between them under fairly general assumptions on production and encroachment technologies an individual s expected income is convex with respect to his actions so that individuals specialize consequently in equilibrium the economy is divided into at most two homogenous groups encroachers and producers the partition obeys a relative advantage criterion several equilibria may exist the tragedy of the commons equilibrium without production always does the pareto optimal allocation of activities may not be an equilibrium we show that minute changes in property right enforcement may lead to drastic improvements for society we argue that in convex games such as this paper s role choice game bounded rationality is a natural assumption and the concept of local nash equilibrium is the natural analytical tool to handle it