infrastructure and aggregate agricultural productivity international evidence a relationship has long been recognized between a country s agricultural development and its investment in infrastructure capital such as transportation and communication facilities that is not directly related to the agricultural production process the relevant literature spans adam smith s proposition that the division of labour is limited by the extent of the market the work of von thtinen numerous studies by historians and economic historians and the work of economists such as schultz kuznets wharton owens and johnston and kilby to mention a few despite the apparently widespread recognition and acceptance that a relationship exists between agricultural development and infrastructural development few if any empirical studies test this as a hypothesis and provide estimates of the magnitude of such a relationship 2 the aim of this paper is to utilize 1965 aggregate agricultural production data and the concept of the aggregate production function to study the effects of transportation and communication infrastructure on aggregate agricultural productivity the aggregate data come from 47 less developed countries ldcs and 19 developed countries dcs the sample countries are listed in the appendix the use of intercountry comparisons for development studies dates to clark and the pioneering work of kuznets and it has been exploited econometrically by chenery 3 an important contribution to the study of international agricultural productivity was made by hayami and ruttan who showed that an aggregate agricultural production function that accounts for intercountry differences in resource endowments technical modern inputs and human capital can explain a large proportion of the variation in aggregate agricultural output across more and less developed agricultures 4 evenson and kislev modified hayami and ruttan s model by including a variable measuring each country s investment in agricultural research 5 essentially the same

exchange rates inflation and money supply in turkey abstract a radical reform package has been implemented in turkey in the post 1980 era involving simultaneously short run adjustment and transition to an outward oriented regime a major area where the programme has failed to register a significant success has been in the sphere of inflation high and volatile rates of inflation continue to be a characteristic feature of the turkish economy this paper seeks to explain the persistence of this phenomenon with reference to the interactions between exchange rate price level and money supply the study employs monthly data and the period under consideration is january 1981 to december 1987 distinguished by managed exchange rate flexibility results of a four variable vector autoregressive model are presented and analyzed these in turn provide the basis for a small scale model in which high powered money price level exports and the exchange rate are simultaneously explained judged in terms of its overall fit the model appears to be quite successful in accounting for the persistence phenomenon in the post 1980 period

inflation variability and the turkish economy the present paper investigates the effects of inflation variability on the level of economic activity in turkey during 1981 3 1989 12 by employing a seven variable vector autoregressive var model including the money supply interest rate real exchange rate price level a measure of inflation variability output and the trade balance the empirical findings indicate that while the output the money supply and the real exchange rate respond negatively to a shock to inflation variability the trade balance and the interest rate respond positively the responses are usually significant at the initial stages and they level off after six months

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

some macroeconomics for the 21st century this note describes a numerical simulation of a model of economic growth a simplified version of robert tamura s 1996 model of world income dynamics based on technology diffusion the model makes predictions for trends in average world income growth and about the evolution of the relative income distribution that accord well with observation the model is used to forecast the course of world income growth and income inequality over the century to come

the effect of distance and road quality on food collection marketing margins and traders wages evidence from the former zaire abstract food price variation is typical of the food economies of many low income countries the presence or absence of road infrastructure is perceived to be one of the main determinants of this variation this analysis shows that in the case of the former zaire food price dispersion is significant both across products and across regions it is demonstrated that transportation costs explain most of the differences in food prices between producer regions and that road quality is an important factor in the transportation costs however food prices decrease relatively faster than transportation costs increase and traders wages are higher on bad roads

world product and income international comparisons of real gross product the volume reports on the third phase of the united nations international comparison project icp the main results provide comparisons of real gross domestic product gdp per capita for thirty four countries in 1975 quantity and price comparisons are given also for personal consumption capital formation and public consumption and further subdivisions of final expenditures on gdp are estimated

do demographics prevent consumption aggregates from reflecting micro level preferences abstract most simulated micro founded macro models use solely consumer demand aggregates in order to estimate preference parameters of a representative consumer for use in policy evaluation focusing on dynamic models with time separable preferences we show that aggregation holds if and only if momentary utility functions fall in the identical shape harmonic absolute risk aversion ishara utility class identifying which parameters of ishara utility functions are allowed to vary over time given this theoretical result it should be easy to empirically reject the aggregation properties that the macroeconomic representative consumer identification approach requires it suffices to show that permanent incomes guaranteeing the same living standard across households of different size violate an affine relationship in order to test the validity of this affine equation we develop a vignette survey that produces appropriate data without demand estimation restrictions imposed by models surprisingly in six countries this equation is not rejected lending support to using consumer demand aggregates

hypothetical intertemporal consumption choices the paper extends and replicates part of the analysis by barsky juster kimball and shapiro 1997 which exploits hypothetical choices among different consumption streams to infer intertemporal substitution elasticities and rates of time preference we use a new and much larger dataset than barsky et al furthermore we estimate structural models of intertemporal choice while parameterizing the parameters of interest as a function of relevant individual characteristics we also consider lobehaviorallc extensions like habit formation models with habit formation appear to be superior to models with intertemporally additive preferences

fertility volatility and growth abstract empirically growth rates are negatively correlated with birth rates they are also correlated with production risk we argue that these stylized facts are related and arise jointly from the decision of how many children to have in a risky environment

households saving in china china in recent years the world s largest and fastest growing economy also has national saving rates that are among the highest in the world this article considers a variety of statistical issues that cloud the measurement of aggregate and household saving in china it also provides new empirical evidence on the importance of intertemporal considerations in explaining the variation in household saving across china s provinces given china s size and its high saving rates it is not surprising that in recent year s considerable theoretical and empirical effort has been devoted to understanding its saving behavior this research can be divided into two broad strands the first emphasizes the relevance for china of traditional equilibrium theories of saving ranging from simple keynesian consumption saving functions to variants of the life cycle and permanent income hypotheses the second argues that equilibrium theories of saving are unlikely to be relevant in an economy in transition from plan to market instead disequilibrium factors especially shortages and rationing in goods and credit markets explain china s saving experience more broadly china s saving rate remains unusually high relative to international experience even after controlling for some of the determinants of saving

transportation costs agricultural productivity and cross country income differences i document large difierences in domestic transport costs and transportation infrastructure across nations the richest countries have 5 times lower transport costs and 32 times more infrastructure per capita than the poorest countries of the world are these difierences a source of aggregate labor productivity difierences across nations using a three sector two region general equilibrium model i show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non agriculture taking as given the observed difierences in transportation costs and transportation infrastructure per capita i quantify the role of transportation for cross country income difierences the calibrated model produces an income disparity of 7 5 between the 5 rich and 5 poor countries this corresponds to an improvement of 50 relative to the disparity predicted by a two sector model of agriculture and non agriculture furthermore the efiects of advancements in transportation are non linear the elasticity of aggregate labor productivity with respect to transport labor productivity in the poorest nations is 6 times higher than in the richest ones the efiects of transport frictions are even more pronounced when restrictions to regional migration are introduced

transitional dynamics and the distribution of wealth in a neoclassical growth model abstract the evolution of the personal distribution of wealth in a standard neoclassical growth model is studied if the economy is growing toward the steady state and preferences are such that marginal utility from consumption is infinite finite at some all positive non negative consumption level s then the average saving propensity of agents is positively negatively related to their wealth if the economy is decaying toward the steady state these relationships are reversed if wealth and average saving propensity are positively negatively related the distribution of current period wealth lorenz dominates is lorenz dominated by next period s distribution of wealth

tough love and intergenerational altruism tough love and intergenerational altruism this article develops and studies a tough love model of intergenerational altruism we model tough love by modifying the barro becker standard altruism model in two ways first the child s discount factor is endogenously determined so lower childhood consumption leads to a higher discount factor later in life second the parent evaluates the child s lifetime utility with a constant high discount factor our model predicts that parental transfers will fall when the child s discount factor falls this is in contrast with the standard altruism model which predicts that parental transfers are independent of exogenous changes in the child s discount factor

the role of trade in structural transformation abstract low agriculture productivity is considered a key obstacle to economic development for many countries international trade in agricultural goods can help overcome this barrier and facilitate structural transformation because it allows countries to import part of their food needs this article quantifies the role of trade in this context through the examples of south korea during the last 50 years and great britain in the 19th century to do the analysis i calibrate and simulate a two sector neoclassical growth model to match the data and perform the policy experiments i find that agricultural imports played a crucial role in the early transformation of great britain while in south korea trade also had a positive impact on its structural transformation but it could have played a much larger role if the country had not introduced agricultural protection policies

the food problem and the evolution of international income levels in most poor countries large fractions of land labor and other productive resources are devoted to producing food for subsistence needs we show that a model incorporating the food problem can provide new and useful insights into the evolution of international income levels in particular we find that the food problem can explain why some countries started to realize increases in per capita output more than 250 years later in history than others we also show that the food problem has important implications for growth miracles and the speed at which a country converges to its balanced growth path

which sectors make poor countries so unproductive which sectors are most responsible for the low total factor productivities of developing countries to answer this question we develop a new framework for sectoral development accounting applying this framework to the penn world table we find that in equipment construction and food the sectoral tfp differences between developing countries and the united states are much larger than in the aggregate however in manufactured consumption the sectoral tfp differences are about equal to the aggregate tfp differences and in services they are much smaller we show that our level of disaggregation allows us to reconcile the results of existing studies of sectoral productivity differences which have focused on noncomparable two sector decompositions of the aggregate data we also show that our results help shed light on existing theories of aggregate tfp differences

cointegration aggregate consumption and the demand for imports a structural econometric this paper uses a two good version of hall s 1978 representative agent permanent income model to derive a structural import demand equation for nondurable consumer goods under the identification restriction that taste shocks are stationary the model is shown to imply that log imports log domestic goods and the log relative price of imports are co integrated the data decisively reject the null hypothesis that imports the relative price of imports and the consumption of home goods are not co integrated we employ the non linear least squares technique recently proposed by phillips and loretan 1990 to estimate the parameters of the import demand equation the long run price elasticity of import demand is estimated to be 0 95 the elasticity of import demand with respect to a permanent increase in real spending is estimated to be 2 20 these estimates fall within the range reported in studies by helkie and hooper 1986 cline 1989 and the many studies surveyed by goldstein and kahn 1985 the message of this paper is that at least for non durable consumer goods it is possible to interpret the traditional import demand equation as a co integrating regression and to interpret the price and expenditure elasticities estimated from such a trade equation as a co integrating vector estimates of the co integrating vector can be used to recover estimates of the utility parameters of the representative household the similarity between the ols and phillips loretan estimates of the parameters suggests that the simultaneous equation bias is not large this abstract was borrowed from another version of this item

are there cultural effects on saving some cross sectional evidence why are there such large differences in saving rates across countries conventional economic analyses have not been successful in explaining international saving differences so economists have sometimes suggested that national saving differences may be explained by cultural differences this paper tests the hypothesis that cultural factors influence saving by comparing saving patterns of immigrants to canada from different cultures using data from the canadian survey of family expenditures we find no evidence of cultural effects on saving

entry barriers competition and technology adoption i build a model of technology adoption to study the quantitative effect of entry barriers on total factor productivity tfp in my model incumbent firms choose technologies that are sufficiently productive to deter entry from a potential competitor i show that higher entry barriers help to deter entry and lead to the choice of less productive technologies a novelty of my work is that i use a direct measure of entry barriers i find that reducing entry barriers from their average level in the poorest 30 of countries to their u s level leads to a sizeable increase in aggregate tfp of 12 jel o11 o43

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

labor supply in the past present and future a balanced growth perspective the absence of a trend in hours worked in the postwar united states is an exception across countries and historically hours fall steadily by a little below 0 5 per year are steadily falling hou

asset smoothing consumption smoothing and the reproduction of inequality under risk and subsistence constraints abstract a growing literature asks whether low wealth agents can accumulate assets over time or whether they are trapped in poverty this paper develops a stochastic dynamic programming model with endogenous asset price risk to explore savings and portfolio decisions in a resource poor environment characterized by risk and subsistence constraints optimal portfolio strategies are found to bifurcate despite divisible assets and fully rational agents wealthier agents acquire a higher yielding portfolio and pursue conventional consumption smoothing poorer agents acquire a less remunerative portfolio and pursue asset smoothing rather than consumption smoothing asset based risk coping thus results in positive correlation between initial wealth and portfolio rate of return

the agricultural productivity gap in europe for fifteen european countries over the 1970 2004 period we establish that there is a large and persistent agricultural productivity gap the ratio of labor productivity in non agriculture to that in agriculture correcting for under reporting of selfemployment income in both agriculture and non agriculture significantly reduces the measured agricultural productivity gap for countries with information on years of school and experience at the sector level we also find substantially higher human capital in non agriculture than in agriculture our findings suggest that measured labor productivity differences between agriculture and non agriculture in european countries are not an indicator of resource misallocation but possibly an artifact of mismeasurement of value added and sectoral differences in human capital

explaining mass support for agricultural protectionism evidence from a survey experiment during the global recession why are citizens in advanced industrialized countries willing to accept high prices for agricultural products conventional wisdom suggests that agricul tural interests secure government protection because producers are concentrated and better politically organized than diffused consumers due to its focus on pro ducer capacity for collective action however the literature fails to account for the high levels of mass support for agricultural protectionism in advanced industrial ized nations this article presents new evidence from a survey experiment in japan conducted during the recent global recession december 2008 that accounts for this puzzle using randomly assigned visual stimuli the experiment activates respon dents identification with either producer or consumer interests and proceeds to ask attitudinal questions regarding food imports the results suggest that consumer priming has no reductive or additive effects on the respondents support for liberal izing food imports surprisingly producer priming increases respondents opposi tion to food import particularly among those who fear future job insecurity we further disentangle the puzzling finding that consumers think like producers on the issue of food import along two mechanisms sympathy for farmers and projec tion of their own job insecurity the results lend strong support to the projection hypothesis

structural change accounting with labor market distortions abstract this paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change in the u s india mexico and brazil between 1960 and 2005 i use census data to compute human capital by sector and infer labor market distortions as sectoral gaps in wage per unit of human capital i incorporate these distortions into a model of structural change and calibrate the model to reproduce the time paths of sectoral shares of labor and value added for each country counterfactuals reveal that 1 tfp growth in agriculture drives most of the decline in its share of labor 2 the role of labor market distortions is limited

the depressing effect of agricultural institutions on the prewar japanese economy why didn t the japanese miracle take place before world war ii the culprit we identify is a barrier that kept prewar agricultural employment constant using a standard neoclassical two sector growth model we show that the barrier induced sectoral distortion and an ensuring lack of capital accumulation account well for the depressed output level without the barrier japan s prewar gnp per worker would have been at least about a half of that of the united states not about a third as in the data the labor barrier existed because we argue the prewar patriarchy forced the son designated as heir to stay in agriculture

geography health and the pace of demo economic development abstract this paper investigates the impact of subsistence consumption and extrinsic and intrinsic causes of child mortality on fertility and child expenditure it offers a theory for why mankind multiplies at higher rates at geographically unfavorable tropical locations placed into a macroeconomic framework this behavior creates an indirect channel through which geography shapes economic performance it is explained why it are countries of low absolute latitude where we observe exceedingly slow if not stalled economic development and demographic transition

preference shocks from aggregation time series data evidence we investigate the impact of preference shocks on the aggregate dynamics of the u s economy in the context of a neoclassical growth model derived from aggregation the aggregation result we use is as follows if markets are complete and if agents have identical preferences of the addilog type then the heterogeneous agent economy where agents are subject to idiosyncratic productivity shocks behaves as if there was a representative consumer who faces shocks to preferences and technology we estimate the parameters in the aggregation based model from the aggregate time series data and compute the numerical solution we find that the preference shocks play an important role in the aggregate labor market fluctuations

wealth varying intertemporal elasticities of substitution evidence from panel and aggregate data abstract this paper constructs and estimates a model of consumer preferences in which the intertemporal elasticity of substitution ies of consumption expenditure rises with the level of wealth the purpose of this paper is to measure the effect that systematic variation in the ies of poor and rich consumers has on the ies of aggregate consumption expenditure we find economically significant differences in the ies of poor and rich consumers in indian panel data on the consumption of individual households we also find economically significant differences in the ies measured in aggregate time series data for the u s and india

international productivity patterns accounting for input quality infrastructure and research in this paper we present measures of land and labor productivity for a group of ninety eight developed and developing countries using an entirely new data set with annual observations spanning the past three decades the substantial cross country and intertemporal variation in productivity in our sample is linked to both natural and economic factors we extend previous work by dealing with multiple sources of systematic measurement error in conventional agricultural inputs the mix of conventional inputs indicators of quality of agricultural inputs and the amount of publicly provided infrastructure are all significant in explaining observed cross sectional differences in productivity patterns

productivity transport costs and subsistence agriculture abstract a defining feature of many poor economies is the large fraction of workers engaged in subsistence agriculture we develop a multi sector multi region model of a poor economy in which it is costly to transport goods across regions in order to study this outcome a key finding is that higher transport costs drive up the size of the agricultural workforce and the fraction in subsistence in a calibrated version of our model we show that the effect of transport productivity is quantitatively important in terms of both allocations and welfare

strikes are more common in countries with majoritarian electoral systems strikes are more common in those oecd countries where the legislature is elected in single member districts smd than in those where it is elected by proportional representation pr furthermore more working days are lost due to industrial conflict in countries with smd i suggest a politico economic explanation for these rarely noticed empirical regularities further empirical testing including controls drawn from previous strike research reveals that they hold up in a variety of econometric specifications

structural change in a multisector model of growth we study a multi sector model of growth with differences in tfp growth rates across sectors and derive sufficient conditions for the coexistence of structural change characterized by sectoral labour reallocation and constant aggregate growth path the conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists we present evidence from us two digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services we show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model

public education spending and private substitution in urban china abstract this paper documents robust evidence that increases in public spending on basic education are associated with significant reductions in household private tutoring spending in urban china this reduction comes primarily from the top and bottom income households suggesting multi dimensional demands for private tutoring it concentrates on households with an only boy and is larger for middle school than primary school children increases in public education spending are associated with significant reduction in school tuition which is homogeneous across households of different income levels changes in household spending on textbooks in response to more public education spending are modest but statistically insignificant

structural determinants of real exchange rates and national price levels some empirical evidence contrary to the long held notion of purchasing power parity ppp economists have found systematic evidence that the general level of prices across countries at a point in time varies dramatically irving b kravis alan w heston and robert summers 1982 for example report that some countries national price levels are no more than one third the u s price level extensions of this work show that such departures from ppp have persisted for decades recently efforts have been made to explain systematically these persistent or structural departures from ppp pioneering work by kravis and robert e lipsey 1983 1987 1988 has demonstrated that a positive correlation between the price level and real per capita gross domestic product is robust across numerous cross sectional specifications for instance using data from kravis et al 1982 table 6 12 87 percent of the variation in national price levels pl of 21 countries in 1975 is explained by per capita gdp y and a constant

savings and nutrition at low incomes while many development theorists assume saving propensities vary among different groups there has been limited theoretical justification for this view this paper analyzes two complementary theories stressing the effect on saving of physiological consequences of poor nutrition at low incomes one influence is on the probability of survival another is on workers productivity either effect means that the average propensity to save can rise with income issues considered include annuities exogenous changes in survival and efficiency implications for the efficiency wage theory of unemployment and distinctions between wage and nonwage income implications of nutritional effects for econometric specification of saving functions are stressed

roads to prosperity assessing the link between public capital and productivity does the positive correlation between infrastructure and productivity reflect causation if so in which direction the author finds that when growth in roads the largest component of infrastructure changes productivity growth changes disproportionately in u s industries with more vehicles that vehicle intensive industries benefit more from road building suggests that roads are productive at the margin however road investments do not appear unusually productive intuitively the interstate system was highly productive but a second one would not be road building thus explains much of the productivity slowdown through a one time unrepeatable productivity boost in the 1950s and 1960s

measuring and analysing the effects of short term volatility in real exchange rates this paper examines short term volatility in the real effective exchange rates of industrial countries and its impact on their imports it yields three conclusions first volatility has not diminished as markets have gained experience with floating exchange rates the trend appears to be in the opposite direction for some countries second exposure to short term volatility has differed among countries japan and sweden have experienced much more than most other industrial countries third volatility appears to depress the volume of international trade this third finding is consistent with results reported by cushman and by akhtar and hilton and challenges earlier findings by hooper and kohlhagen

rate of time preference intertemporal elasticity of substitution and level of wealth the rate of time preference rtp and the intertemporal elasticity of substitution ies are two important factors shaping intertemporal consumption decisions models in which the rtp and or the ies differ systematically between rich and poor households have different empirical and policy implications for economic development growth and the distribution of income and consumption from those of standard models in which these parameters are constant across households in this chapter we estimate a model in which both rtp and ies are allowed to differ across rich and poor households using household level panel data from india our empirical results are consistent with the view that the rtp is constant across poor and rich households but the ies is larger for the rich than it is for the poor

counterproductive counternarcotic strategies we model the economic incentives surrounding opium poppy cultivation in afghanistan specifically we examine the impact of eradication policies when opium is used as a means of obtaining credit and when the crops are cultivated in sharecropping arrangements the analysis suggests that when perfect credit markets are available an increased risk of eradication will lead to less land being allocated to opium poppy however when opium is used as a means of obtaining credit an eradication policy can rather increase land under poppy cultivation furthermore the unintended effects of eradication can be augmented in sharecropping arrangements

beyond balanced growth balanced growth models are commonly used in macroeconomics because they are consistent with the well known kaldor facts regarding economic growth these models however are inconsistent with one of the most striking regularities of the growth process the massive reallocation of labour from agriculture into manufacturing and services this paper presents a simple model consistent with both the kaldor facts and the dynamics of sectoral labour reallocation

differentiating mixed member electoral systems mixed member majoritarian and mixed member proportional systems and government expenditures the increasing use of mixed member electoral systems has led to an explosion of research attempting to specify their effects yet there has been no work on the economic policy effects of such systems even though this has been a significant subject of debate for scholars analyzing other electoral systems an analysis of mixed member system policy effects is problematic given the wide variation in institutional rules among different systems this article attempts to determine whether the institutional differences between mixed member majoritarian mmm and mixed member proportional mmp systems lead to differences in policy outputs the political economy literature finds that government expenditures are positively correlated with electoral system proportionality our statistical analysis of government expenditures in 17 mixed member systems between 1990 and 2000 shows that mmp systems which are more proportional than mmm systems are correlated with higher levels of government spending thus the mmm mmp

decreasing relative risk aversion risk sharing and the permanent income hypothesis this article develops a method for testing the risk sharing hypothesis rsh against various versions of the permanent income hypothesis pih while allowing for heterogeneity in risk preferences across households using 1 year and longer differences in household total nondurable consumption data from indian villages we find evidence that favors the rsh over the pih at the village level

real exchange rate volatility and the us bilateral trade a var approach this paper uses var models to investigate the impact of real exchange rate volatility on u s bilateral imports from the united kingdom france germany japan and canada the var systems include u s and foreign macro variables and are estimated separately for each country the major results suggest that the effect of volatility on imports is weak although permanent shocks to volatility do have a negative impact on this measure of trade and those effects are relatively more important over the flexible rate period copyright 1989 by mit press

engel s law and cointegration a time series counterpart of engel s law is that the expenditure share on food declines as the economy grows the main purpose of this paper is to test whether houthakker s addilog utility function can simultaneously explain this time series observation and cross sectional observations concerning engel s law ogaki and park s cointegration approach is used to estimate parameters of the utility function from time series data total expenditure elasticities implied by the estimated addilog utility function are compared with estimates of the elasticities from cross sectional data

changes in sectoral composition associated with economic growth in this paper the author uses dynamic general equilibrium methods to examine the interrelationship between sectoral composition and growth she shows that growth is affected by sectoral composition and vice versa the model is basically a solow model of sustained growth with multiple consumption goods and nonhomothetic preferences each consumption good is produced using different factor intensities the rate of exogenous technological change is different in each sector nonhomotheticity of preferences drives the result that sectoral composition affects growth rates copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

skill complementarity and the dual economy abstract i propose a new explanation for the large productivity gaps between agriculture and nonagriculture observed in developing countries namely that the elasticity of substitution between skilled and unskilled workers is higher in agriculture than in nonagriculture i estimate the elasticities in a cross country data set and use the results to simulate a simple two sector model in which heterogeneous elasticities of substitution affect relative sectoral productivity levels through the allocation of human capital calibrated to match data from the united states the model predicts sizable agricultural productivity gaps in countries where the share of highly educated workers in the labor force is low

the domestic politics of banking regulation this article seeks to ground financial regulatory choices in domestic politics based on evidence from twenty two industrialized countries we argue that electoral rules specifically the extent to which they are centrifugal or centripetal have a significant effect on whether the banks or their consumers pay for the security of the banking system moreover despite the homogenizing effects of global financial integration the political dynamics generated by these electoral rules continue to shape the nature and extent of prudential regulations that countries adopt in the place of banking cartels

money real interest rates and output a reinterpretation of postwar u s data this paper reexamines both monthly and quarterly u s postwar data to investigate if the observed comovements between money real interestrates prices and output are compatible with the money real interest output link suggested by existing monetary theories of output which include both keynesian and equilibrium models the major empirical findings are these 1 in both monthly and quarterly data we cannot reject the hypothesis that the ex ante real rate is exogenous or granger causally prior in the context of a four variable system which contains money prices nominal interest rates and industrial production 2 in quarterly data there is significantly more information con tained in either the levels of expected inflation or the innovationof this variable for predicting future output given current and lagged output than in any other variable examined money actualinflation nominal interest rates or ex ante real rates the effect of an inflation innovation on future output is unambiguously negative the first result casts strong doubt on the empirical importance of existing monetary theories of output which imply that money should have a causal role on the ex ante real rates the second result would appear incompatible with most demand driven models of output in light of these results we propose an alternative structural model which can account for the major dynamic interactions among the variables this model has two central features i output is unaffected by money supply and ii the money supply process is motivated by short run price stability this abstract was borrowed from another version of this item

the intertemporal elasticity of substitution an analysis based on japanese data this paper investigates whether the intertemporal elasticity of substitution ies for japan possesses similar properties to that found for the united states in the literature as the existing empirical findings are mixed there is no clear consensus this paper uses a model with both production and non separability between nondurables and durables in order to control for possible factors that cause a bias in the ies we present the empirical results demonstrating that the ies is quite similar between the two countries

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

electoral competition and agricultural support in oecd countries agricultural trade protectionism in developed countries remains a politically charged issue yet few studies have attempted to explain the political dynamics behind this important trade issue we consider agricultural subsidies as a type of distributive policy that targets the agricultural sector at the expense of consumers and taxpayers based on cox 1987 1990 and myerson 1993 we argue that electoral systems that encourage politicians to appeal to a narrow constituency tend to have a higher level of agricultural support we test this theoretical hypothesis using oecd agricultural support data disaggregated by commodity and country a cross classified multilevel model is employed to account for complex variation of agricultural support across countries commodities and time our empirical results show that electoral systems that encourage politicians to target narrow broad constituencies are associated with relatively high low levels of agricultural subsidies

aggregate economic activity and the variance of inflation another look abstract the time series of forecast errors and forecast variances estimated from engle s arch model are used to estimate the relationship between the volatility of inflation and key macroeconomic variables this is done using both a lucas supply framework and a granger causality framework the results of the latter in particular are strikingly different from previous work

majoritarian electoral systems and consumer power price level evidence from the oecd countries a straightforward extension of the standard stigler peltzman model of regulation coupled with a taagepera shugart analysis of electoral system effects suggests a that the greater seat vote elasticities of majoritarian electoral systems will tilt policy in favor of consumers while propor tional systems should strengthen producers and b that the pro con sumer bias of majoritarian systems should be manifested in systemati cally lower prices empirical tests controlling for the structural determi nants of national price levels estab lished in the earlier law of one price literature establish majoritarian elec toral systems as a significant and robust predictor lowering national price levels in the mean oecd coun

seat vote curves loyalty effects and the provincial distribution of canadian government spending federal government spending in the canadian provinces for 1962 2002 is examined with emphasis on the role of seat vote elasticities in majoritarian electoral systems fixed effects regressions establish that per capita federal spending in a province increases with political competition as measured by provincial seat vote elasticities and with loyalty to the federal government as measured by the degree of provincial support for the federal government however too much loyalty can be counter productive because very loyal provinces are uncompetitive with low seat vote elasticities

cultural constraints on innovation based growth to what extent does the cultural composition of a society impose a constraint on its long run growth potential we study this question in the context of an innovation based model of growth where cultural attitudes are endogenously transmitted from one generation to the next focusing on attitudes regarding patience we analyze the two way interaction between economic growth and the intergenerational transmission of patience exploiting this interaction we compare the long run growth performance of a culturally heterogeneous society where patience is initially underrepresented in the population with a culturally homogeneous society where all agents are perfectly patient our main result is that in the absence of any intrinsic preferences of patient parents to transmit their attitudes to their children the development paths of the two societies are bound to diverge with the culturally heterogeneous society experiencing lower growth rates yet if patient parents ceteris paribus prefer their children to be patient like them we show that the two societies can in the long run grow at the same rate jel d91 e24 o30 o40 z10

inflation and real growth some empirical results what is the relationship between the average rate of inflation and the variability of real economic growth recent studies by gordon 3 okun 7 logue and willett 6 klein 5 and jaffee and kleiman 4 have attempted to f1ll some of the gaps in our knowledge of inflation s effect on the economy these studies have generally demonstrated the positive empirical relationship between the rate of inflation and its variability or unpredictability such heightened uncertainty may produce greater variability of real growth which in turn undoubtedly increases welfare costs using annual data for twenty four countries we elnd a positive relationship between the mean inflation rate and the variability of real economic growth this finding strengthens the commonly held belief that inflation is undesirable on welfare grounds

taking credit redistribution and borrowing in an age of economic polarization several recent studies link rising income inequality in the united states to the global financial crisis arguing that us politicians did not respond to growing inequality with fiscal redistribution instead americans saved less and borrowed more to maintain relative consumption in the face of widening economic disparities this article proposes a theory in which fiscal redistribution dampens the willingness of citizens to borrow to fund current consumption a key implication is that pretax inequality will be more tightly linked with credit in less redistributive countries the long run partisan composition of government is in turn a key determinant of redistributive effort examining a panel of eighteen oecd democracies the authors find that countries with limited histories of left wing participation in government are significantly more likely see credit expansion as prefisc inequality grows compared to those in which the political left has been more influential

a time series analysis of real wages consumption and asset returns summary this paper re examines whether the time series properties of aggregate consumption real wages and asset returns can be explained by a neoclassical model previous empirical rejections of the model have suggested that the optimal labour contract model might be appropriate for understanding the time series properties of the real wage rate and consumption we show that an optimal contract model restricts the long run relation of the real wage rate and consumption we exploit this long run restriction cointegration restriction for estimating and testing the model using ogaki and park s 1989 cointegration approach this long run restriction involves a parameter that we call the long run intertemporal elasticity of substitution ies for non durable consumption but does not involve the ies for leisure this allows us to estimate the long run ies for non durable consumption from a cointegrating regression tests for the null of cointegration do not reject our model as a further analysis our estimates of the long run ies for non durable consumption are used to estimate the discount factor and a coefficient of time nonseparability using hansen s 1982 generalized method of moments we form a specification test for our model a la hausman 1978 from these two steps this specification test does not reject our model this paper re examines whether the time series properties of aggregate consumption real wages and asset returns are consistent with a simple neoclassical representative agent economy previous empirical explorations of this issue have rejected the neoclassical model in large part because the marginal rate of substitution between consumption and leisure does not equal the real wage as is implied by the the first order conditions of the model in this paper we argue that an optimal labour contracting model is more appropriate for understanding the time series behaviour of real wages and consumption we show that a version of the optimal contract model restricts the long run relation between real wages and consumption we exploit this longrun restriction ri cointegration restriction to estimate preference parameters and test the model first we employ the cointegration approach suggested by ogaki and park 1989 to estimate the long run intertemporal elasticity of substitution for non durable consumption from a cointegrating regression we test the model by testing for the cointegration restriction

decreasing relative risk aversion and tests of risk sharing the relative risk aversion rra coefficient of a household whose consumption is close to the subsistence level may be very high for example if consumption is exactly at the subsistence level the household may not be willing to bear any risk if this is the case then the rra coefficient must be a decreasing function of wealth for poor households therefore we should allow the possibility of decreasing rra drra in testing the full risk sharing hypothesis however existing tests in the empirical literature are derived using preferences that exhibit either increasing or constant rra even when they are applied to data containing low income households we therefore use a hyperbolic absolute risk aversion hara utility which implies increasing constant and decreasing rra as special cases to test full risk sharing hypothesis using the international food policy research institute ifpri and the international crops research institute of the semi arid tropics icrisat household level data sets we find evidence in support of the drra hypothesis along with evidence favoring full risk sharing hypothesis at the village level and evidence against the hypothesis at the inter village level when rra is restricted to be constant we replicate the previous results in the literature reject the full risk sharing hypothesis at both levels our tests however reject this restriction and favor drra in almost all cases these results suggest that it is important to allow for drra in testing the full risk sharing hypothesis when data containing low income households are investigated this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this this abstract was borrowed from another version of this item

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

electoral bias and policy choice theory and evidence this paper develops an approach to studying how bias in favor of one party due to the pattern of electoral districting affects policy choice we tie a commonly used measure of electoral bias to the theory of party competition and show how this affects party strategy in theory the usefulness of the approach is illustrated using data on local government in england the results suggest that reducing electoral bias leads parties to moderate their policies

do stockholders share risk more effectively than nonstockholders abstract this paper analyzes the extent of risk sharing among stockholders and nonstockholders to evaluate the empirical importance of market incompleteness it is essential to determine whether idiosyncratic shocks are important for the wealthy who have access to better insurance opportunities but also face different risks than the average household we study a model where each period households decide whether to participate in the stock market by paying a fixed cost due to this endogenous entry decision the testable implications of perfect risk sharing take the form of a sample selection model which we estimate using a semiparametric gmm estimator proposed by kyriazidou 2001 using data from psid we strongly reject perfect risk sharing among stockholders but perhaps surprisingly do not find evidence against it among nonstockholders this result appears to be robust to several extensions this finding suggests further focus on risk factors that primarily affect the wealthy such as entrepreneu

economic growth and environmental degradation when preferences are non homothetic we study the dynamics of pollution in an economic growth model with non homothetic preferences we characterize the forces that may drive the evolution of the income pollution relationship along the development process in particular we disentangle the standard accumulation mechanism which determines the intertemporal allocation of pollution from a mechanism based on the non homotheticity of preferences which leads the intratemporal allocation of expenditure between consumption and pollution abatement to depend on income as the economy develops and aggregate income grows up the fraction of income devoted to abatement increases if the income elasticity of abatement is larger than unity in this case the pollution may decrease with income even when the elasticity of pollution with respect to abatement is smaller than the elasticity of pollution with respect to emissions we numerically illustrate how this demand based mechanism determines the dynamic relationship between pollution and aggregate income

does electoral competition affect politicians trade policy preferences evidence from japan this study examines the effect of electoral competition on politicians trade policy preferences using candidate observations from the house of representatives in japan s 2012 general election the study clarifies the effects of constituency size and the electoral strength of constituencies on candidates political stances the empirical results provide evidence that politicians preferences for trade policy are sensitive to electoral pressure but their reactions differ depending on the characteristics of each constituency the results reveal that for a broad constituency with a large concentration of agricultural workers election candidates are more likely to support protectionism than their counterparts running in a narrow constituency for city district election candidates electoral strength measured by the vote margin significantly affects their trade policy preferences candidates in close elections are more likely to be protectionist than candidates elected by a substantial majority suggesting that electoral pressures deter politicians from supporting trade liberalization

short versus long coalitions electoral accountability and the size of the public sector this article examines the policy consequences of the number of parties in government we argue that parties externalize costs not borne by their support groups larger parties thus internalize more costs than small parties because they represent more groups this argument implies that the public sector should be larger the more parties there are in the government coalition we test this prediction using yearly time series cross sectional data from 1970 to 1998 in 17 european countries we find that increasing the number of parties in government increases the fraction of gdp accounted for by government spending by close to half a percentage point or more than one billion current dollars in the typical year we find little support for the alternative claim that the number of legislative parties affects the size of the public sector except via the number of parties in government

money growth volatility and the macroeconomy this study analyzes the effects of variability in money growth on the macroeconomy for the period 1961 1 1984 4 within the context of a vector autoregressive model that contains variables typically included in a small macro model variance decompositions and historical decompositions are used to assess the impact of money growth variability the variance decompositions suggest substantial effects of money growth variability on the long term interest rate output and the price level historical decompositions for 1979 4 1984 4 suggest substantial effects of money growth variability on the interest rate and output but smaller effects on the price level are found copyright 1988 by ohio state university press

who lobbies whom special interest politics under alternative electoral systems why do some interest groups lobby politicians and others lobby bureaucrats we theorize lobbying venue choices and intensityasafunctionofcontractenforceabilitywithpolicymakers politicians orbureaucrats wearguethatorganizational structures of interest groups in particular whether they are centralized or decentralized substantially affect their lobbying strategies because they are associated with different ability to monitor and enforce contracts with policy makers and punish them when they fail we further demonstrate that the effect of centralized versus decentralized structure on venue choices is conditional on the types of electoral system majoritarian semiproportional single nontransferable vote sntv or proportional representation systems we test this argument using longitudinal survey data on lobbying which span two decades and cover around 250 interest groups in various sectors and issue areas in japan the results lend strong support to our argument about contract enforceability under alternative electoral systems

why not africa growth and welfare effects of secure property rights this paper presents the long run equilibrium and developmentdynamics in the neoclassical growth model and a simple modelof endogenous growth when property rights are absent theresults are compared to the outcome in a corresponding modelwith secure property rights the main findings are that thereexists a considerable gain in level and growth of consumptionfrom establishing secure property rights that economicperformance without property rights worsens with an increasingnumber of competing social groups and that the existence orabsence of property rights explains conditional convergence

electoral institutions and the politics of coalitions why some democracies redistribute more than others standard political economy models of redistribution notably that of meltzer and richard 1981 fail to account for the remarkable variance in government redistribution across democracies we develop a general model of redistribution that explains why some democratic governments are more prone to redistribute than others we show that the electoral system plays a key role because it shapes the nature of political parties and the composition of governing coalitions hence redistribution our argument implies 1 that center left governments dominate under pr systems whereas center right governments dominate under majoritarian systems and 2 that pr systems redistribute more than majoritarian systems we test our argument on panel data for redistribution government partisanship and electoral system in advanced democracies w hy do some countries redistribute more than others most work on the politics of redistribution starts from the premise that democratic institutions empower those who stand to benefit from redistribution the basic logic is succinctly captured in the meltzer richard 1981 model where the voter with the median income is also the decisive voter with a typical right skewed distribution of income the median voter will push for redistributive spending up to the point where the benefit of such spending to the median voter is outweighed by the efficiency costs of distortionary taxation this argument implies that redistibution is much greater in democracies than in nondemocracies at least of the right authoritarian variety and that among the latter inegalitarian societies redistribute more than egalitarian ones there is some evidence to supportthefirstimplication althoughitisdisputed see ross 2005 but most of the variance in redistribution is probably within the same regime type according to datafromtheluxembourgincomestudy forexample the reduction in the poverty rate in united states as a result of taxation and transfers was 13 in 1994 whereas the comparable figure for sweden was 82 thepovertyrateisthepercentageofhouseholdsbelow 50 of the median income to explain this variance we have to look at political and economic differences

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt