the pricing effects of ambiguous private information when private information is observed by ambiguity averse investors asset prices may be informationally inefficient in rational expectations equilibrium this inefficiency implies lower asset prices as uninformed investors require a premium to hold assets and higher return volatility relative to informationally efficient benchmarks moreover asset returns are negatively skewed and may be leptokurtic inefficiency also leads to amplification in price of small changes in news relative to informationally efficient benchmarks public information affects the nature of unrevealed private information and the informational inefficiency of prices asset prices may be lower higher with good bad public information

sluggish intersectoral factor movements and alternative trade policies one of the basic assumptions of the standard two sector two factor general equilibrium model of production and trade is that factors are perfectly mobile between two sectors if a policy induced or policy independent change in a parameter of the model leads to an inequality in the price of a factor as between two sectors movement of the factor from the lower price sector to the higher price one will take place under the assumption of perfect mobility and that will eventually eliminate the intersectoral difference in factor prices at the new equilibrium this assumption of perfect mobility of factors has recently been a topic of further research in the two sector production and trade literature questions have been raised about the validity of this assumption see e g mussa 5 125 41 yu 7 387 93 casas 2 747 61 yu and parai 8 601 09 and parai and yu 6 842 52 in the context of labor it is argued that a policy induced increase in the wage rate in one sector does not necessarily lead to a movement of enough labor from the other sector so as to re establish the equality between sectoral wage rates even in the long run geographical or locational preferences of individuals for living in one area over another serious attachments of workers to one region due to strong family ties or high costs of moving from one place to another have usually been the reasons for the sluggish movement of labor from one sector to the other on the other hand the sluggishness in the mobility of physical capital is explained by the investors attitude towards uncertainty in other sectors and also the high cost of moving and adjusting to the need of the new industry given this imperfect mobility the net rental rates would not equalize between two sectors even in the long run mussa and casas separately modeled the imperfect labor mobility problem whereas grossman 3 1 17 modeled the case of imperfect capital mobility hill and mendez 4 19 25 however developed a general model incorporating the imperfect mobility of both capital and labor in the two sector general equilibrium model of production parai and yu have used the both factors are imperfectly mobile the purpose of the present paper is to extend the parai yu analysis further to investigate the implications of imperfect factor mobility in the analysis of standard gains from trade issues in the literature specifically we intend

erratum wealth information acquisition and portfolio choice a correction there is an error in my 2004 paper wealth information acquisition and portfolio choice this note shows how to correct it by adjusting the hypotheses of the model specifically it assumes that agents learn about the stock s mean payoff rather than about its realization all the conclusions of the paper remain valid there is a mistake in the derivation of agents unconditional expected utility in wealth information acquisition and portfolio choice review of financial studies 17 3 2004 pages 879 914 some formulas need to be corrected and some assumptions adjusted but all the conclusions of the paper remain valid in particular it remains the case that wealthier investors collect more information and that as a result they hold a larger fraction of their wealth in stocks even though their relative risk aversion is not lower the unconditional expected utility is approximated using a taylor series expansion in which higher order terms are dropped in fact these terms cannot be neglected under the payoff structure postulated in the paper as a result the demand for information cannot be evaluated for arbitrary preferences in this note we offer a solution to the issue which relies on a slight modification of the stock s payoff structure and supports all the conclusions of the paper 1 the problem the expression for the conditional expected utility ej u w2j fj stated on page 906 is correct however equation 12 obtained by taking its unconditional expectation is not to see why we rewrite ej u w2j fj as ej u w2j fj u w0j u w0j ej w fj 1 2 u w0j ej w 2 fj o z 1

efficiency wage models of unemployment one view h lorne carmichael persistent wage rigidity and involuntary unemployment appear to be recurrent problems in most economies what could be preventing the wage adjustment necessary to clear the labor market many recent papers claim to have found the answer in efficiency wage models this paper surveys this literature and attempts to evaluate its accomplishments it concludes that the efficiency wage models fail to explain wage rigidity or persistent involuntary unemployment persistent involuntary unemployment of workers is a recurrent problem in labor markets all over the world unemployed workers seem unable to find work even though they are willing to accept lower wages than those being paid employed workers with similar skills what could be preventing wages from adjusting to clear these markets many recent papers known collectively as the efficiency wage literature now claim to have the answer this paper will survey the efficiency wage literature and critically evaluate some of its accomplishments efficiency wage models have already been examined by yellen 1984 katz 1986 and stiglitz 1987 and have received generally favorable reviews this paper is more critical its overall conclusion is that efficiency wage models provide some useful insights into the workings of the labor market but they do not provide a satisfactory account of wage rigidity or involuntary unemployment there are at least five separate versions of the efficiency wage model they share a common structure however and this is outlined in the first section of the paper this section also attempts to relate efficiency wage models to other recent models of unemployment section ii examines and criticizes the different approaches in detail section iii evaluates the achievements of this approach and suggests some directions for future work i a general efficiency wage model efficiency wage models as the name suggests are first of all models of wages they generate unemployment by showing that firms will sometimes want to set wages at non market clearing levels it is useful to begin therefore by reviewing how wages and employment are determined in some related models in a perfectly competitive labor market the wage for each type of labor is adjusted constantly to maintain equality of supply and demand overall employment fluctuates in response to demand changes as workers move up and down their labor supply curves unemployment is voluntary in that anyone who is not working prefers that state to employment at the going wage for people of his skills as well the value of a worker s marginal product is equal to the marginal value of his leisure so there are no unexploited wage bargains between unemployed workers and firms this model is successful in predicting the long term response of wages to shifts in demand and supply but it is clear that in the short run its depiction of voluntary unemployment and flexible wages is unrealistic a natural way to generate more realism is to assume that wages are inflexible in the short run in this case a reduction in demand away from a long run equilibrium will lead to rationing of jobs by employers as they attempt to stay on their labor demand curves the unemployment here is involuntary in that the unemployed would prefer to be working at the going wage and is inefficient in that there are lost gains from trade between these workers and firms the weakness of this model is that it is silent about the mechanism that keeps wages rigid unemployed workers who offer to work for less than the fixed wage ought to find work the early implicit contract models of azariadis 1975 baily 1974 and gordon 1974 provide one explanation for wage rigidity these models introduced the idea that wages can do more than just clear the market for labor wages in an implicit contract model are used to shift the risk generated by uncertain output market conditions from risk averse workers to the risk neutral firm

distributional and efficiency impacts of increased us gasoline taxes we examine the impacts of increased us gasoline taxes in a model that links the markets for new used and scrapped vehicles and recognizes the consider able heterogeneity among households and cars household choice parameters derive from an estimation procedure that integrates individual choices for car ownership and miles traveled we find that each cent per gallon increase in the price of gasoline reduces the equilibrium gasoline consumption by about 0 2

exchange rate based inflation stabilization the initial real effects of credible plans abstract this paper studies the initial effects of exchange rate based stabilization programs within a dynamic general equilibrium model of a small open economy in which inflation acts as a tax on intermediate transactions and capital accumulation is subject to convex adjustment costs and gestation lags the model replicates the typical pattern of slow inflation convergence sustained real exchange rate appreciation trade balance deterioration and expansion in domestic spending followed by a deflationary slowdown without resorting to sticky prices imperfect credibility or adaptive expectations calibrated versions of the model are compared with the initial effects of the argentine convertibility plan of april 1991

automakers short run responses to changing gasoline prices abstract we provide empirical evidence that automobile manufacturers use cash incentives to offset how gasoline price fluctuations affect the expected fuel expenses of automobile buyers regressions based on a database of incentives over 2003 to 2006 suggest that on average manufacturers offset 40 of the change in relative fuel costs between vehicles due to gasoline price fluctuations the results highlight that carbon taxes and emissions trading programs likely would generate substantial substitution within vehicle classes and studies that ignore manufacturer discounting likely underestimate consumer demand for fuel economy the results also have implications for the optimal design of feebate programs

wages and employment in a segmented labor market this paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a competitive secondary sector either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and under reasonable specifications of key parameters to cause greater fluctuations of primary sector employment than secondary sector employment this pattern agrees with the stylized facts of the u s economy

what do we learn from the price of crude oil futures summary despite their widespread use as predictors of the spot price of oil oil futures prices tend to be less accurate in the mean squared prediction error sense than no change forecasts this result is driven by the variability of the futures price about the spot price as captured by the oil futures spread this variability can be explained by the marginal convenience yield of oil inventories using a two country multi period general equilibrium model of the spot and futures markets for crude oil we show that increased uncertainty about future oil supply shortfalls under plausible assumptions causes the spread to decline increased uncertainty also causes precautionary demand for oil to increase resulting in an immediate increase in the real spot price thus the negative of the oil futures spread may be viewed as an indicator of fluctuations in the price of crude oil driven by precautionary demand an empirical analysis of this indicator provides evidence of how shifts in the uncertainty about future oil supply shortfalls affect the real spot price of crude oil copyright 2010 john wiley sons ltd

terms of trade tariffs and labor market adjustment in developing countries a three goods model importables exportables and nontradables is used to analyze labor market adjustment to changes in the terms of trade and import tariffs for a small open economy first a three goods four factor model labor and capital specific to each sector is developed and used to investigate how an exogenously generated change in a country s terms of trade affects labor allocation and wages in the short run next a more traditional three goods two factor model is used to examine the effects in the long run the analysis is carried out under alternative assumptions regarding wage flexibility full flexibility economy wide real wage rigidity and sector specific real wage rigidity

gasoline prices and the used automobile market a rational expectations asset price approach this paper examines the impact of changes in gasoline price expectations on the market values of used automobiles an asset model of automobile valuation is used to relate year to year changes in market values to changes in the present discounted value of gasoline expenses econometric evidence from data covering the years 1972 through 1981 substantially confirms the hypothesis of the model that a gasoline price shock causes relative price changes across automobile types in proportion to the differences in their rates of fuel consumption

the intergenerational transmission of automobile brand preferences we document a strong correlation in the brand of automobile chosen by parents and their adult children using data from the panel study of income dynamics this correlation could represent transmission of brand preferences across generations or it could result from correlation in family characteristics that determine brand choice we present a variety of empirical specifications that lend support to the former interpretation and to a mechanism that relies at least in part on state dependence we then discuss implications of intergenerational brand preference transmission for automakers product line strategies and for the strategic pricing of vehicles to different age groups

do consumers recognize the value of fuel economy evidence from used car prices and gasoline price fluctuations abstract debate about the appropriate design of energy policy hinges critically on whether consumers might undervalue energy efficiency due to myopia or some other manifestation of limited rationality we contribute to this debate by measuring consumers willingness to pay for fuel economy using a novel identification strategy and high quality microdata from wholesale used car auctions we leverage differences in future fuel costs across otherwise identical vehicles that have different current mileage and therefore different remaining lifetimes by seeing how price differences across high and low mileage vehicles of different fuel economies change in response to shocks to the price of gasoline we estimate the relationship between vehicle prices and future fuel costs our data suggest that used automobile prices move one for one with changes in present discounted future fuel costs which implies that consumers fully value fuel economy

imperfect factor mobility a generalization and synthesis of two sector models of international trade the paper constructs and analyses a two sector model characterized by an endogenous factor price differential resulting from imperfect factor mobility it is shown that various models commonly used in international trade theory are special cases of our model the major conclusions include 1 a demonstration that commodity factor intensity rankings do not alone determine the relationship between endogenous and exogenous variables 2 an indication of the role played by the elasticity of intersectoral factor mobility in determining the effects of exogenous disturbances and 3 a proof that the allocational and distributional effects of factor price differentials must be dissociated from their welfare implications mobiliue imparfaite desfacteurs de production synthese et gmneralisation des modcles a deux secteurs dans la theorie du commerce international ce memoire pr6sente et analyse un modele a deux secteurs caracterise par un differentiel endogene dans le prix des facteurs de production entre secteurs suscite par la mobilit6 imparfaite des facteurs de production on montre que les divers modeles utilises traditionnellement dans la theorie du commerce international sont des cas particuliers du modele presente ici les conclusions principales sont i que l ordonnancement des coefficients d intensite des facteurs pour les differents biens ne suffit pas pour definir le rapport entre les variables exogenes et endogenes ii une indication du role joue par l elasticite de la mobilite des facteurs entre secteurs dans la definition de l impact des chocs exogenes et iii une preuve que les effets d allocation et de repartition des differentiels de prix des facteurs entre secteurs peuvent etre dissocies de leur impact au plan du bien etre

simpler is better predicting consumer vehicle purchases in the short run abstract when agencies such as the us environmental protection agency epa establish future greenhouse gas emissions standards for new vehicles forecasting future vehicle purchases due to changes in fuel economy and prices provides insight into regulatory impacts we compare predictions from a nested logit model independently developed for us epa to a simple model where past market share predicts future market share using data from model years 2008 2010 and 2016 the simple model outperforms the nested logit model for all goodness of prediction measures for both prediction years including changes in vehicle price and fuel economy increases bias in forecasted market shares this bias suggests price increases are correlated with unobserved increases in vehicle quality changes in preferences or brand specific changes in market size but not cost pass through for 2010 past shares predict better than a nested logit model despite a major shock the economic disruption caused by the great recession observed share changes during this turbulent period may offer upper bounds for policy changes in other contexts the largest observed change in market share across the two horizons is 6 6 for manufacturers in 2016 and 3 4 for an individual vehicle in 2010

fiscal adjustment and labor market dynamics in an open economy this paper studies the labor market effects of fiscal adjustment in a two sector three good intertemporal framework key features of the model are an informal sector minimum wages unionized labor in the formal economy imperfect labor mobility and public production of intermediate inputs bluxuryq and wait unemployment prevail in equilibrium it is shown that if unions care sufficiently about employment and if the degree of openness is high an increase in the price of government services may reduce unemployment in the steady state a similar result would hold in an efficiency wage setting if the bdisciplinary effectq of unemployment is sufficiently strong d 2004 published by elsevier b v

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

pass through in a concentrated industry empirical evidence and regulatory implications we estimate pass through with thirty years of data from a concentrated industry the empirical model accounts for oligopoly interactions yet facilitates estimation with aggregate price data robust statistical evidence supports that industry wide cost changes are more than completely transmitted downstream and that this industry pass through is largely unaected by competitive conditions the industry in question portland cement is a major focus of environmental and antitrust regulators we use our pass through estimates to i evaluate the welfare consequences of marketbased co2 regulation ii predict the magnitude and location of price eects due to a merger under review by antitrust authorities and iii corroborate the simulation based analysis of the epa regarding its impending regulation of local pollutants

the effects of the corporate average fuel efficiency standards in the us this paper examines the effects of the corporate average fuel economy standards cafe on automobile sales prices and fuel consumption first a discrete choice model of automobile demand and a continuous model of vehicle utilization are estimated using micro data from the consumer expenditure survey for 1984 1990 next the demand side model is combined with a model of oligopoly and product differentiation on the supply side with these elements in place the effects of the cafe regulation are assessed through simulations and compared to the effects of alternative policy instruments such as an increase in gasoline tax

factor mobility and the general equilibrium model of production abstract the two sector production model is generalized to accommodate any degree of mobility in the two factors the model provides a convenient framework for exploring the manner in which factor mobilities interact with factor intensities in resolving a number of basic issues in neoclassical trade theory particular emphasis is placed on determining the importance of absolute mobility when the two factors are equally mobile and of the size of the mobility differential when factor intensities are equal across sectors

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

macroeconomic adjustment with segmented labor markets this paper analyzes the macroeconomic effects of fiscal and labor market policies in a developing economy with an informal sector and a heterogeneous work force a permanent reduction in government spending on nontraded goods leads in the long run to a deprecia tion of the real exchange rate a fall in the market clearing wage for unskilled labor an increase in output of traded goods and a lower stock of net foreign assets a permanent reduction in the minimum wage improves competitiveness and expands the formal sector the effect of changes in unemployment benefits are also analyzed q 1999 elsevier science

theoretical foundations for sticky wages abstract the paper compares three different types of theoretical explanation of sticky wages they are implicit contracts efficiency wage models and insider outsider models it then reconsiders keynes rationale for sticky wages which focuses on relative wage issues finally the paper considers possible directions for future research

sensitivity of price elasticity of demand to aggregation unobserved heterogeneity price trends and price endogeneity evidence from u s data abstract price elasticity estimates of residential electricity demand vary widely across the energy economics and policy literature in this paper we seek to explain these findings using three nationwide datasets from the u s the american housing survey forms eia 861 and the residential energy consumption survey we examine the role of the sample period level of aggregation use of panel data use of instrumental variables and inclusion of housing characteristics and capital stock our findings suggest that price elasticities have remained relatively constant over time upon splitting our panel datasets into annual cross sections we do observe a negative relationship between price elasticities and the average price whether prices are rising or falling appears to have little effect on our estimates we also find that aggregating our data can result in both higher and lower price elasticity estimates depending on the dataset used and that controlling for unit level fixed effects with panel data generally results in more inelastic demand functions addressing the endogeneity of price and or measurement error in price with instrumental variables has a small but noticeable effect on the price elasticities finally controlling for housing characteristics and capital stock produces a lower price elasticity

differential information and dynamic behavior of stock trading volume this article develops a multiperiod rational expectations model of stock trading in which investors have differential information concerning the underlying value of the stock investors trade competitively in the stock market based on their private information and the information revealed by the market clearing prices as well as other public news we examine how trading volume is related to the information flow in the market and how investors trading reveals their private information article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

wealth information acquisition and portfolio choice i solve with an approximation a grossman stiglitz economy under general preferences thus allowing for wealth effects because information generates increasing returns decreasing absolute risk aversion in conjunction with the availability of costly information is sufficient to explain why wealthier households invest a larger fraction of their wealth in risky assets one no longer needs to resort to decreasing relative risk aversion an empirically questionable assumption furthermore i show how to distinguish empirically between these two explanations finally i find that the availability of costly information exacerbates wealth inequalities copyright 2004 oxford university press

an efficiency wage model with explicit monitoring abstract this paper develops an efficiency wage model of involuntary unemployment in a small open economy which uses two factors to produce three goods one of which is non traded monitoring aimed at reducing shirking by workers in all industries the analysis shows how a tariff on imports may lower employment but paradoxically raise social welfare at the same time as the paper also demonstrates the optimal policy combination includes not only taxes on capital and monitoring as well as a subsidy on employment but also despite the small country assumption a tax on consumption

environmental protectionism the case of cafe abstract in 2011 the us changed its automobile fuel economy standards from a uniform fleet wide average miles per gallon target to one that varies with car sizes smaller cars now must meet stricter standards while the motive for any policy change can be disputed the consequence of this change looks like environmental protectionism because the favored larger cars are disproportionately assembled in the us the change imposes costs on imported cars equivalent to a tariff of 50 to 200 per vehicle

investigating income effects in scanner data do gasoline prices affect grocery purchases there is much discussion in the popular press about how consumers adjust their purchase decisions for items from lattes and restaurant meals to which type of meat to purchase for dinner during times of rising fuel prices 1 while analysts ascribe declines in retail sector profits when fuel prices rise to changes in demand elasticity most empirical analysis of consumer choice for such daily items abstracts from inter temporal income effects instead fuel prices are used in demand estimation as exogenous shifters of production costs and therefore valid instruments for identifying demand parameters though introspection and popular press suggest that sharp changes in fuel costs may shift price sensitivity in nonfuel purchases through an income effect little empirical work has been done to estimate or quantify this effect 2

effect of gasoline prices on car fuel efficiency evidence from lebanon abstract this paper explores how gasoline prices affect the sales of new and used cars in lebanon using a rich dataset on monthly imported cars from 2000 to 2016 a vector autoregressive analysis is used to model different consumer choices between fuel efficient cars midsize cars and fuel inefficient cars we report the first empirical evidence on this question from the middle east and north africa mena region using individual automobile data we use within sample and out of sample tests to examine whether gasoline prices influence the sale of fuel efficient cars our results show evidence against the hypothesis that rising gasoline prices shift consumers demand toward the most fuel efficient cars

efficiency wages disinflation and labor mobility abstract the paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of disinflation policies in an open economy facing imperfect capital markets wages are flexible in the nontradables sector and based on efficiency factors in the tradables sector with perfect labor mobility a permanent reduction in the devaluation rate leads in the long run to a real appreciation a lower ratio of output of tradables to nontradables an increase in real wages measured in terms of tradables and a fall in the product wage in the nontradables sector under imperfect labor mobility unemployment temporarily rises

intertemporal substitution and new car purchases this article presents a dynamic demand model for motor vehicles this approach accounts for the change in the mix of consumers over the model year and measures consumers substitution patterns across products and time i find intertemporal substitution is significant consumers are more likely to change the timing of their purchase in reaction to a price increase rather than buy another vehicle in the same period further i find automakers use of large cash back rebates at the end of the model year although boosting overall sales induces large numbers of consumers to delay their purchases and so pay lower prices

efficiency wages in a ricardian model of international trade abstract this paper examines the implications of efficiency wages for international trade in a simple extension of the ricardian model in which labour performs two different tasks in production and where workers are imperfectly monitored in the performance of one of the tasks as a result of the factor market distortion the one factor economy may behave like a heckscher ohlin model an important result is that transfers of income have efficiency reducing effects and hence the standard aggregate analysis of trade policy may be inappropriate