business cycle analysis with a markov switching model this article explores the hamilton markov switching model through an analysis of the business cycles of eight developed market economies forecasting and specification tests suggest only marginal improvements over linear autoregressive models yet filtered and smoothed conditional probabilities indicate turning points in business cycles that closely correlate with turning points from traditional methods tests regarding the asymmetry of business cycles reject the null of symmetry for most countries

evidence of nonlinearity in daily stock returns this article applies a newly developed statistical technique to time series of daily rates of return of 15 common stocks the technique involves estimating the bispectrum of the observed time series the bispectrum is defined as the double fourier transform of the third order cumulant function if the process generating rates of return is linear with independent innovations then the skewness of the bispectrum will be constant the article describes a test that can detect nonconstant skewness in the bispectrum hence if the test rejects constant skewness a nonlinear process is implied as a consequence the test can distinguish between white noise and purely random noise the results suggest that daily stock returns are generated by a nonlinear process

the effect of unions on the structure of wages a longitudinal analysis this paper studies the effects of unions on the structure of wages using an estimation technique that explicitly accounts for misclassification errors in reported union status and potential correlations between union status and unobserved productivity the econometric model is estimated separately for five skill groups using a large panel data set formed from the u s current population survey the results suggest that unions raise wages more for workers with lower levels of observed skills in addition the patterns of selection bias differ by skill group among workers with lower levels of observed skill unionized workers are positively selected whereas union workers are negatively selected from among those with higher levels of observed skill despite a large and sophisticated literature there is still substantial disagreement over the extent to which differences in the structure of wages between union and nonunion workers represent an effect of trade unions rather than a consequence of the nonrandom selection of unionized workers over the past decade several alternative approaches have been developed to control for unobserved heterogeneity between union and nonunion workers 2 one method that has been successfully applied in other areas of applied microeconometrics is the use of longitudinal data to measure the wage gains or losses of workers who change union status unfortunately longitudinal estimators are highly sensitive to measurement error even a small fraction of misclassified union status changes can lead to significant biases if the true rate of mobility between union and nonunion jobs is low this sensitivity led lewis 1986 to essentially dismiss the longitudinal evidence in his landmark survey of union wage effects in this paper i present some new evidence on the union wage effect based on a longitudinal estimator that explicitly accounts for misclassification errors in reported union status the estimator uses external information on union status misclassification rates along with the reduced form coefficients from a multi variate regression of wages on the observed sequence of union status indicators to isolate the causal effect of unions from any selection biases introduced by a correlation between union status and the permanent component of unobserved wage heterogeneity recognizing that unions may raise wages more or less for

optimal execution with regime switching market resilience abstract in this paper we study the optimal placement of market orders in a limit order book lob market when the market resilience rate which is the rate at which market replenishes itself after each trade is stochastic more specifically we establish a tractable extension to the optimal execution model in obizhaeva and wang 2013 by modelling the dynamics of the resilience rate to be driven by a markov chain when the lob replenishes itself stochastically through time the optimal execution strategy becomes state dependent and is driven linearly by the current remaining position and the current temporary price impact with their linear dependence based on the expectation of the dynamics of future resilience rate a trader would optimally place more aggressive respectively conservative market orders when the limit order book switches from a low to a high resilience state respectively from a high to a low resilience state our cost saving analysis indicates that the incremental execution costs can be substantial when the agent ignores the stochastic dynamics of the market resilience rate by adopting the state independent strategies

union effects on wage dispersion in canadian industry abstract this paper analyzes the effects that unions have on the dispersion of wages in canada the empirical results indicate that unions have a significant effect in reducing wage dispersion the standard deviation in hourly wages is smaller for unionized workers than it is for non unionized workers this result holds not only for the more general case but also for narrowly defined demographic industrial and occupational categories finally regression estimates indicate that the coefficients on the wage determining variables are smaller in the unionized sector

was the recent downturn in us real gdp predictable this article uses a small set of variables real gdp the inflation rate and the short term interest rate and a rich set of models atheoretical time series and theoretical structural linear and nonlinear as well as classical and bayesian models to consider whether we could have predicted the recent downturn of the us real gdp comparing the performance of the models to the benchmark random walk model by root mean square errors the two structural theoretical models especially the nonlinear model perform well on average across all forecast horizons in our ex post out of sample forecasts although at specific forecast horizons certain nonlinear atheoretical models perform the best the nonlinear theoretical model also dominates in our ex ante out of sample forecast of the great recession suggesting that developing forward looking microfounded nonlinear dynamic stochastic general equilibrium models of the economy may prove crucial in forecasting turning points

energy savings in nigeria is there a way of escape from energy inefficiency abstract this study estimates the transition probabilities for different energy use states in nigeria using the markov switching regression technique according to the results both energy efficient and energy inefficient states are less persistent but comparatively the energy inefficient state is more persistent thus in nigeria it is much difficult to escape from the energy inefficient state than the energy efficient state several reasons may explain this phenomenon and they include inefficient regulatory system poor institutional structure high corruption proliferation of second hand goods undeveloped markets high incidence of poverty and inefficient pricing in the energy sector pricing policies should be combined with institutional improvement and infrastructural development if nigeria wants to achieve a sustainable energy efficient state in the long term

long memory in stock market trading volume this article examines consistent estimation of the long memory parameters of stock market trading volume and volatility the analysis is carried out in the frequency domain by tapering the data instead of detrending them the main theoretical contribution of the article is to prove a central limit theorem for a multivariate two step estimator of the memory parameters of a nonstationary vector process using robust semiparametric procedures the long memory properties of trading volume for the 30 stocks in the dow jones industrial average index are analyzed two empirical results are found first there is strong evidence that stock market trading volume exhibits long memory second although it is found that volatility and volume exhibit the same degree of long memory for most of the stocks there is no evidence that both processes share the same long memory component

so what orders do informed traders use we present a simple glosten milgrom type equilibrium model to analyze the decision of informed traders on whether to use limit or market orders we show that even after incorporating an order s price impact not only may informed traders prefer to use limit orders but the probability that they submit limit orders can be so high that limit orders convey more information than market orders we further show that the horizon of the private information is critical for this decision and is positively related to the use of limit orders our empirical analysis using torq suggests that informed traders do prefer limit orders to market orders and that limit orders are indeed more informative our model is in contrast to the literature that assumes that informed traders use market orders only and the literature that examines the limit order versus the market order decision of uninformed traders

what do the leading indicators lead the authors find that the composite leading index cli is useful for forecasting gross national product gnp both in sample and in an out of sample real time exercise they propose a nonlinear specification in which cyclical shifts of the cli precede those in gnp however the authors find that better forecasts are provided by a simple linear relation between current gnp growth and the growth rate of the cli during the previous quarter along with an error correction term corresponding to the previous quarter s logarithmic difference between the level of the cli and the level of gnp copyright 1996 by university of chicago press

a two country model of stochastic output with changes in regime abstract this paper evaluates the transmission of business cycles between countries and presents evidence that world wide shocks dominate any transmission of business cycles i examine industrial production and look at the relationships of the united states with canada germany and the united kingdom in the process i present a specialized markov switching time series model and evaluate it relative to other more familiar stochastic models i show that for the data sets considered markov switching models have much better goodness of fit but larger forecast variance relative to arma or var models

optimal residual based tests for fractional cointegration and exchange rate dynamics a lagrange multiplier test of the null hypothesis of cointegration in fractionally cointegrated models is proposed the test statistic uses fully modified residuals to cancel the endogeneity and serial correlation biases and standard asymptotic properties apply under the null and under local alternatives with iid gaussian errors the asymptotic gaussian power envelope of all unbiased tests is achieved by the one sided two sided test the finite sample properties are illustrated by a monte carlo study in an application to the dynamics among exchange rates for seven major currencies against the u s dollar mixed evidence of the existence of a cointegrating relation is found

does agricultural extension pay a case study for a new crop lupins in western australia abstract compared to studies evaluating the benefits from agricultural research there are relatively few empirical studies of the net economic benefits of agricultural extension and even fewer that consider both public and private sector extension effort in this study we examine regional differences in the adoption of lupins in western australia wa in order to estimate the net economic benefits of public and private sector extension impacts of extension and other variables on adoption were analysed for 40 shires using multivariate regression analysis the results suggest that both public and private extension activities influenced farmer uptake of lupins particularly by bringing forward the start time of the diffusion curve economic benefits of extension based on the statistical analysis were combined with costs of extension estimated from public sector records and surveys of private sector extension agents and used to estimate the net present value of extension investments by the public and private sectors in the study area

housework fixed effects and wages of married workers although the primacy of household responsibilities in determining gender differences in labor market outcomes is universally recognized there has been little investigation of the direct effect of housework on wages using data from the panel study of income dynamics cross sectional wage regressions reveal a substantial negative relation between wages and housework for wives which persists in specifications controlling for individual fixed effects the evidence for husbands is inconclusive married women s housework time is on average three times that of married men s the addition of housework time to the wage equations increases the explained component of the gender wage gap from 27 30 percent to 38 percent

the behavior of the exchange rate in the genetic algorithm and experimental economies this paper studies the behavior of the exchange rate in the kareken wallace overlapping generations economy with two currencies in which decision rules are updated using the genetic algorithm the analysis shows that a stationary monetary equilibrium of the kareken wallace model is not stable under the genetic algorithm dynamics the fluctuations in the genetic algorithm exchange rate are driven by fluctuations in the portfolio fractions which change over time in response to the inequality between the rates of return on two currencies further both the genetic algorithm simulations and the experiments with human subjects were characterized by continuing fluctuations of the exchange rate with first period consumption values close to a stationary value

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

bayes estimates of markov trends in possibly cointegrated series stylized facts show that average growth rates of u s per capita consumption and income differ in recession and expansion periods because a linear combination of such series does not have to be a constant mean process standard cointegration analysis between the variables to examine the permanent income hypothesis may not be valid to model the changing growth rates in both series we introduce a multivariate markov trend model that accounts for different growth rates in consumption and income during expansions and recessions and across variables within both regimes the deviations from the multivariate markov trend are modeled by a vector autoregression var model bayes estimates of this model are obtained using markov chain monte carlo methods the empirical results suggest the existence of a cointegration relation between u s per capita disposable income and consumption after correction for a multivariate markov trend this result is also obtained when per capita investment is added to the var

rules of thumb versus dynamic programming this paper studies decision making with rules of thumb in the context of dynamic decision problems and compares it to dynamic programming a rule is a fixed mapping from a subset of states into actions rules are compared by averaging over past experiences this can lead to favoring rules which are only applicable in good states correcting this good state bias requires solving the dynamic program we provide a generalframework and characterize the asymptotic properties we apply it to provide a candidate explanation for the sensitivity of consumption to transitory income jel eoo c63 c61 e21

the high frequency trade off between speed and sophistication abstract central to the ability of a high frequency trader to make money is speed in order to be first to trading opportunities firms invest in the fastest hardware and the shortest connections between their machines and the markets yet this is not enough algorithms must be short no more than a few instructions as a result there is a trade off in the design of optimal high frequency trading strategies being the fastest necessitates being less sophisticated to understand the effect of this tension a computational model is presented that captures latency both of code execution and information transmission trading algorithms are modelled through genetic programming with longer programmes allowing more sophisticated decisions at the cost of slower execution times it is shown that depending on the market composition short fast strategies and slower more sophisticated strategies may both be viable and exploit different trading opportunities the relative profits of these different approaches vary however slow traders benefit and social welfare increase in the presence of hfts a suite of regulations are tested to manage the risks associated with high frequency trading the majority are found to be ineffective though constraining the ratio of orders to trades may be promising

learning information processing and order submission in limit order markets by introducing a genetic algorithm learning with a classifier system into a limit order market this paper provides a unified framework of microstructure and agent based models of limit order markets that allows traders to determine their order submission endogenously according to market conditions it examines how traders process and learn from market information and how the learning affects limit order markets it is found that measured by the average usage of different group of market information trading rules under the learning become stationary in the long run also informed traders pay more attention to the last transaction sign while uninformed traders pay more attention to technical rules learning of uninformed traders improves market information efficiency but not necessarily when informed traders learn opposite to the learning of informed traders learning makes uninformed traders submit less aggressive limit orders and more market orders furthermore private values can have significant impact in the short run but not in the long run one implication is that the probability of informed trading pin is positively related to the volatility and the bid ask spread

role of education and extension in the adoption of technology a study of upland rice and soybean farmers in central west brazil strauss j barbosa m teixeira s thomas d and junior r g 1991 role of education and extension in the adoption of technology a study of upland rice and soybean farmers in central west brazil agric econ 5 341 359 this paper explores reduced form determinants of the adoption of certain technologies by upland rice and soybean farmers in the center west region of brazil we merge community level data on the availability and quality of publicly provided infrastructure principally extension to the farm level data containing information on farmer human capital as well as land quantity and quality by using community level measures of availability and quality of extension we avoid problems of endogeneity of farm level measures of extension use we find positive impacts of farmer education on the diffusion process in accordance with other studies we also isolate effects of the quality in regional extension investment as measured by the average experience of technical extension staff these results indicate that investments in human capital of extension workers does have a payoff in terms of farmer adoption of improved cultivation practices

is the business cycle characterized by deterministic chaos abstract tests are conducted on u s macroeconomic data for the presence of low dimensional deterministic chaos where deterministic chaos is defined as in grandmont s 1985 walras bowley lecture or in brock 1986 the idea is to test for evidence of endogenous instability causing the business cycle low order autoregressions are hard to reject with our methods evidence of chaos is weak but our tests may be too weak to detect it evidence of nonlinearity is present in employment 1950 i to 1983 iv unemployment 1949 i to 1982 iv monthly post war industrial production and pig iron production 1877 1937

an econometric model of serial correlation and illiquidity in hedge fund returns the returns to hedge funds and other alternative investments are often highly serially correlated in sharp contrast to the returns of more traditional investment vehicles such as long only equity portfolios and mutual funds in this paper we explore several sources of such serial correlation and show that the most likely explanation is illiquidity exposure i e investments in securities that are not actively traded and for which market prices are not always readily available for portfolios of illiquid securities reported returns will tend to be smoother than true economic returns which will understate volatility and increase risk adjusted performance measures such as the sharpe ratio we propose an econometric model of illiquidity exposure and develop estimators for the smoothing prole as well as a smoothing adjusted sharpe ratio for a sample of 908 hedge funds drawn from the tass database we show that our estimated smoothing coecien ts vary considerably across hedge fund style categories and may be a useful proxy for quantifying illiquidity exposure

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

volatility dependence and contagion in emerging equity markets abstract in this paper we use weekly stock market data for a group of latin american countries to analyze the behavior of volatility through time we are particularly interested in understanding whether periods of high volatility are correlated across countries the analysis uses both on univariate and bivariate switching volatility models our results do not rely on the correlation coefficients but on the co dependence of volatility regimes the results indicate that high volatility episodes are in general short lived lasting from 2 to 12 weeks we find strong evidence of volatility co movements across countries especially among the mercosur countries

the impact of heterogeneous trading rules on the limit order book and order flows in this paper we develop a model of an order driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules agents are assumed to have three components to the expectation of future asset returns namely fundamentalist chartist and noise trader furthermore agents differ in the characteristics describing these components such as time horizon risk aversion and the weights given to the various components the model developed here extends a great deal of earlier literature in that the order submissions of agents are determined by utility maximisation rather than the mechanical unit order size that is commonly assumed in this way the order flow is better related to the ongoing evolution of the market for the given market structure we analyze the impact of the three components of the trading strategies on the statistical properties of prices and order flows and observe that it is the chartist strategy that is mainly responsible of the fat tails and clustering in the artificial price data generated by the model the paper provides further evidence that large price changes are likely to be generated by the presence of large gaps in the book

long memory and persistence in aggregate output abstract we examine persistence in u s aggregate output by estimating fractionally integrated arima models these models provide better low frequency approximations to the wold representation than previous stochastic specifications and earlier results on the importance of a permanent component emerge as special cases we find evidence of long memory which induces persistence though this long memory need not be associated with a unit root our point estimates indicate that macroeconomic shocks while persistent are distinctly less persistent than many earlier studies suggest however confidence intervals associated with the long run response are quite wide

trends in the male female wage gap the 1980s compared with the 1970s 1 introduction an interesting pattern emerges when contrasting men s and women s wage growth in the 1970s and 1980s from 1979 to 1989 female wages grew 1 7 per annum faster than male wages this wage growth in the 1980s resulted in a 17 narrowing of the gender wage gap on the other hand from 1969 to 1979 female wages grew at a rate only 0 39 per year faster than male wages resulting in very little narrowing of the gender wage gap blau 1998 as noted by smith and ward 1989 these contrasting trends puzzled many because it is well known that female work behavior shot up more dramatically in the 1970s than in the 1980s if female wage growth is related to increasing labor force activity one would have expected the male female wage gap to narrow more in the 1970s than in the 1980s the purpose of this paper is to identify some of the reasons why the male female wage gap narrowed more quickly in the 1980s than in the 1970s despite a deceleration of the growth in female labor force activity in the 1980s what appears to be the case is that predominantly younger and less experienced females entered the labor force in the 1970s the entry of women with relatively little human capital brought down the growth in women s average human capital o neill 1985 so that despite the upsurge of women s labor force participation in the 1970s women s average human capital relative to men s increased more slowly in the 1970s than in the 1980s this relatively slower growth in women s human capital appears to have played itself out in the 1980s both because the number of women joining the labor force slowed and because women s labor force attachment as measured by the proportion of potential work years actually worked increased blau 1998 with these trends average female human capital increased in the 1980s resulting in greater overall wage gains because of the stark differences between the 1970s and 1980s this paper concentrates on distinguishing the factors that contribute to men s and women s wage growth in the two decades despite the substantial literature on the male female wage gap the interdecade difference in the trend has not been adequately examined in what follows this paper uses the panel study of income dynamics psid to illustrate the effects of the demographic changes alluded to above 1 first it presents wage trends for the 1970s and 1980s second it provides direct measures of changes in human capital growth within each decade third to illustrate the importance of these demographic trends especially how new young labor market entrants bring down wages it shows that the higher relative female wage growth in the 1980s is reduced and the relatively slower female wage growth in the 1970s is enhanced when one controls for individual human capital characteristics these effects are illustrated first by including actual experience type variables in a regression whose coefficients measure wage growth and second by eliminating new entrants from 1970s and 1980s regression analysis the paper shows that with these controls increases in female average growth in both the 1970s and 1980s were more comparable than previously thought 2 recent literature on trends in the male female wage gap this is not the first paper to recognize the trend in male female wage convergence o neill 1985 blau and beller 1988 smith and ward 1989 goldin 1990 katz and murphy 1992 wellington 1993 o neill and polachek 1993 blau and kahn 1997 and blau 1998 all note that women s wages have risen relative to men smith and ward 1989 find that female relative wages rose between 1920 and 1980 when adjusting for worker skills goldin 1990 piecing together various data sources finds a similar long term narrowing according to her the ratio of female to male earnings in the economy as a whole rose from 0 46 to 0 56 during the period 1890 to 1930 but was virtually stable from 1950 to around 1980 p

on measuring synchronization of bulls and bears the case of east asia abstract this paper implements estimation and testing procedures for comovements of stock market cycles or phases in asia we extend the harding and pagan harding d pagan a p 2006 synchronization of cycles journal of econometrics 132 1 59 79 test for strong multivariate nonsynchronization smns between business cycles to a test that allows for an imperfect degree of multivariate synchronization between stock market cycles moreover we propose a test for endogenously determining structural change in the bivariate and multivariate synchronization indices upon applying the technique to five asian stock markets we find a significant increase in the cross country comovements of asian bullish and bearish periods in 1997 a power study of the stability test suggests that the detected increase in comovement is more of a sudden nature i e contagion or asian flu instead of gradual i e financial integration it is furthermore argued that stock market cycles and their propensity toward increased synchronization contain useful information for both investors policy makers and financial regulators

money as a medium of exchange in an economy with artificially intelligent agents abstract we study the exchange economies of kiyotaki and wright 1989 in which agents must use a commodity or fiat money as a medium of exchange if trade is to occur our agents are artificially intelligent and are modeled as using classifier systems to make decisions in the assignment of credit within the classifier systems we introduce some innovations designed to study sequential decision problems in a multi agent environment for most economies that we have simulated trading and consumption patterns converge to a stationary nash equilibrium even if agents start with random rules in economies with multiple equilibria the only equilibrium that emerges in our simulations is the one in which goods with low storage costs play the role of medium of exchange i e the fundamental equilibrium of kiyotaki and wright

the relation between implied and realized volatility abstract previous research finds the volatility implied by s p 100 index option prices to be a biased and inefficient forecast of future volatility and to contain little or no incremental information beyond that in past realized volatility in contrast we find that implied volatility outperforms past volatility in forecasting future volatility and even subsumes the information content of past volatility in some of our specifications our results differ from previous studies because we use longer time series and nonoverlapping data a regime shift around the october 1987 crash explains why implied volatility is more biased in previous work

trends and cycles in macroeconomic time series two structural time series models for annual observations are constructed in terms of trend cycle and irregular components the models are then estimated via the kalman filter using data on five u s macroeconomic time series the results provide some interesting insights into the dynamic structure of the series particularly with respect to cyclical behavior at the same time they illustrate the development of a model selection strategy for structural time series models

public benefits private benefits and policy mechanism choice for land use change for environmental benefits the choice of policy mechanisms for encouraging environmentally beneficial land use change should depend on the relative levels of private or internal net benefits and public or external net benefits a map of recommended policy mechanisms is developed depending on the relative levels of these variables positive incentives negative incentives and extension need to be targeted carefully to appropriate projects where private net benefits are closer to zero and or public net benefits are more extremely positive or negative technology development is suggested where private net costs outweigh public net benefits no action is recommended for many potential projects

are output fluctuations transitory according to the conventional view of the business cycle fluctuations in output represent temporary deviations from trend the purpose of this paper is to question this conventional view if fluctuations in output are dominated by temporary deviations from the natural rate of output then an unexpected change in output today should not substantially change one s forecast of output in say five or ten years our examination of quarterly postwar united states data leads us to be skeptical about this implication the data suggest that an unexpected change in real gnp of 1 percent should change one s forecast by over 1 percent over a long horizon

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

a fractional cointegration analysis of purchasing power parity a generalized notion of cointegration called fractional cointegration is introduced to examine the long run purchasing power parity ppp hypothesis by allowing deviations from equilibrium to follow a fractionally integrated process the fractional cointegration analysis can capture a wider range of mean reversion behavior than standard cointegration analyses this gain is flexibility in modeling subtle mean reverting dynamics is found to be important for a proper evaluation of long run ppp empirical results based on historical data for the 1914 1989 period show that ppp reversion exists and can be characterized by a fractionally integrated process in three out of five countries studied the results support ppp as a long run phenomenon though significant short run deviations from ppp can exist

stock market cycles financial liberalization and volatility in this paper we analyze the cycles of the stock markets in four latin american and two asian countries and we compare their characteristics we divide our sample in two subperiods in order to account for differences induced by the financial liberalization processes of the early 1990s we find that cycles in emerging countries tend to have shorter duration and larger amplitude and volatility than in developed countries however after financial liberalization latin american stock markets have behaved more similarly to stock markets in developed countries whereas asian countries have become more dissimilar concordance of cycles across markets has increased significantly over time especially for latin american countries after liberalization

collective bargaining and union membership effects on the wages of male youths the objective of this paper is to demonstrate that the nonunion wage differential consists of two effects the first represents the differential between the wage of a nonunion worker in a collective bargaining unit and the wage paid to a comparable worker not covered by a bargaining agreement this effect arises from the monopoly power of organized labor the second is the wage differential between union and nonunion workers in collective bargaining units this latter effect is attributed to economic benefits that unionism brings to its members empirical evidence is presented in support of both effects

bargaining effect and membership effect in public sector unions the vast majority of the literature on public sector unionism focuses on union wage effects and the extent of unionization in this paper we investigate some additional aspects of public sector unionism that have been discussed recently with respect to the private sector the first is an analysis of the wage effects attributable to the legal status of the worker union specifically we investigate the difference between an individual s membership in a union and an individual s employment in a collective bargaining unit second we examine the return to human capital and seniority in unionized versus non unionized public sector employment the two issues under scrutiny here are not unrelated for each measures in its own way the ability of the union to deliver benefits to and elicit the support of its membership in other words both are issues of union security for the most part the literature on union wage effects makes no distinction between union membership and collective bargaining coverage as an exception christensen and maki use a cross section of three digit industries to investigate both an industry coverage variable and an industry membership variable 3 they conclude that membership in the union is the key status in the collective bargaining process in two other papers jones 15 and blakemore hunt and kiker 1 use panel data that allow the worker s union status to be identified according to union membership and collective bargaining coverage both find that nonunion workers employed in a collective bargaining unit receive a wage premium over workers who are not covered and that union members receive an extra bonus

a model of carbon price interactions with macroeconomic and energy dynamics abstract this paper develops a model of carbon pricing by considering two fundamental drivers of european union allowances economic activity and energy prices on the one hand economic activity is proxied by aggregated industrial production in the eu 27 as it provides the best performance in a preliminary forecasting exercise vs other indicators on the other hand brent natural gas and coal prices are selected as being the main carbon price drivers as highlighted by previous literature the interactions between the macroeconomic and energy spheres are captured in a markov switching var model with two states that is able to reproduce the boom bust business cycle hamilton 1989 first industrial production is found to impact positively negatively the carbon market during periods of economic expansion recession thereby confirming the existence of a link between the macroeconomy and the price of carbon second the brent price is confirmed to be the leader in price formation among energy markets bachmeier and griffin 2006 as it impacts other variables through the structure of the markov switching model taken together these results uncover new interactions between the recently created eu emissions market and the pre existing macroeconomic energy environment

long swings in exchange rates are they really in the data several authors have reported evidence of long swings in u s dollar exchange rates by rejecting the random walk in favor of a markov regime switching model we show that this evidence is not robust to an extension of the sample period one should however not conclude that long swings are thus absent because the tests may have insufficient power a possible reason for this is the low data frequency because existing tests are based on quarterly data and we find that the power can be increased substantially by raising the data frequency indeed weekly data reject the random walk so we conclude that long swings are in the data this conclusion is supported by significant superiority of regime switching over random walk out of sample forecasts of the direction of change

classification error models and labor market dynamics measurement error is often a severe problem in longitudinal data such as labor market flows two correction methods have been used for labor market flows but the methods tend to adjust the data in opposite directions one method shows a rigid labor market with long unemployment spells whereas the other shows the opposite because the methods appear theoretically similar one might interpret the differing results as an indictment of both procedures this article documents and explains the differences between the two methods more important it argues that the differences result from the reliance of one method on assumptions that are theoretically implausible and rejected by the data

policy mechanism choice for environmental management by non commercial lifestyle rural landholders abstract for some environmental assets in rural areas the landholders who are having the biggest impact are people with small holdings and an emphasis on lifestyle rather than commercial gains from their land this paper aims to better understand the motivations and likely responses to policy for lifestyle landholders in australia in order to assess which policy mechanisms if any are likely to be most efficiently used to influence their land management through face to face interviews we find that lifestyle landholders have important differences from commercial farmers including much smaller properties a stronger interest in environmental outcomes a lack of land management skills and a lack of time for land management activities from the perspective of environmental policy programs engaging with lifestyle landholders is likely to involve higher transaction costs and there are likely to be higher learning and transition costs per unit area a framework for selection of policy tools is modified to take account of these findings it is concluded that the prospects for worthwhile public investments in land use changes by lifestyle landholders are lower than for commercial landholders

the hamilton model with a general autoregressive component estimation and comparison with other models of economic time series abstract this paper generalizes the hamilton model to the important case in which the autoregressive component need not contain a unit root using u s quarterly real gnp data the model is estimated and the results are compared to those of hamilton some monte carlo evidence for the model is presented and its in sample forecasting performance is discussed and compared to the original hamilton model the arima model and the deterministic time trend model

the transition between energy efficient and energy inefficient states in cameroon i use a two state energy efficient inefficient markov switching dynamic model to study energy efficiency in cameroon in a novel manner employing yearly data covering 1971 to 2012 i find that th

informed traders and limit order markets abstract we consider a dynamic limit order market in which traders optimally choose whether to acquire information about the asset and the type of order to submit we numerically solve for the equilibrium and demonstrate that the market is a volatility multiplier prices are more volatile than the fundamental value of the asset this effect increases when the fundamental value has high volatility and with asymmetric information across traders changes in the microstructure noise are negatively correlated with changes in the estimated fundamental value implying that asset betas estimated from high frequency data will be incorrect

potential benefits of agricultural research and extension in peru the benefits of agricultural research and extension are examined in an ex ante consumer producer surplus framework for five commodities in peru the effects of demand shifts over time and government pricing policies on research and extension benefits are considered data for the analysis include the results of research and extension questionnaires administered at seven sites in peru the projected rates of return to research and extension indicate substantial returns to public investments

farmer to farmer transfer of new crop varieties an empirical analysis on small farms in uganda farmer to farmer transfer or dissemination of technologies is a neglected area of research even though successful diffusion of many researcher and farmer developed technologies is highly dependent upon farmers private initiatives this is particularly true in many developing countries where formal market mechanisms used in dissemination are often ineffective successful dissemination of new technologies to marginal farmers require greater knowledge and use of indigenous dissemination methods the determinants of farmer to farmer transfer of new bean varieties experimented with by small scale farmers in uganda are investigated farmers were experimenting with new varieties received through earlier on farm trials and were transferring small quantities of grain to other farmers for experimental purposes on farm trials may thus be an effective but limited method for diffusing new varieties factors directly associated with the transfer decision were farm size and variables identifying a willingness to experiment with new varieties the production risk reducing strategies of intercropping and sowing of a larger number of non climbing bean varieties were negatively associated with the probability to transfer grain the quantity of grain available to transfer was not associated with the transfer decision farmers were not transferring grain of the five varieties at different rates even though significant differences in yield were found

measuring business cycle time the business cycle analysis of arthur f burns and wesley c mitchell and the national bureau of economic research presumed that aggregate economic variables evolve on a time scale defined by business cycle turning points rather than by months or quarters do macroeconomic variables appear to evolve on an economic rather than a calendar time scale evidence presented here suggests that they do however the estimated economic time scales are only weakly related to business cycle time scales providing evidence against the view underlying traditional business cycle analysis copyright 1987 by university of chicago press

the causal link between energy and output growth evidence from markov switching granger causality abstract in this paper we empirically investigate the causal link between energy consumption and economic growth employing a markov switching granger causality analysis we carry out our investigation using annual u s real gdp total final energy consumption and total primary energy consumption data which cover the period between 1968 and 2010 we find that there are significant changes in the causal relation between energy consumption and economic growth over the sample period under investigation our results show that total final energy consumption and total primary energy consumption have significant predictive content for real economic activity in the u s economy furthermore the causality running from energy consumption to output growth seems to be strongly apparent particularly during the periods of economic downturn and energy crisis we also document that output growth has predictive power in explaining total energy consumption furthermore the power of output growth in predicting total energy consumption is found to diminish after the mid of 1980s

inferring the private information content of trades a regime switching approach this paper presents an empirical model for inferring the private information content of trades at the transaction level the trade indicator model of glosten and harris 1988 is extended to a two state regime switching setting and the model is estimated using tick by tick data from the new york stock exchange nyse the specialist is found to react in accordance with the proposed model bid ask quotes set after the execution of a trade reflect the conjectured information content of that particular trade based on the estimated model four empirical results emerge a the suggested regime switching model fit data well b the reverse j shaped pattern of intra daily quoted spreads is shown to agree with the clustering of costs incurred by the specialist through trading with better informed agents c on average 9 of all trades are found to reveal private information to the specialist d results regarding the trading volume of informed traders support the stealth trading hypothesis suggested by barclay and warner 1993 copyright 2003 john wiley sons ltd

classification error in dynamic discrete choice models implications for female labor supply behavior two key issues in the literature on female labor supply are i whether persistence in employment status is due to unobserved heterogeneity or state dependence and ii whether fertility is exogenous to labor supply until recently the consensus was that unobserved heterogeneity is very important and fertility is endogenous hyslop 1999 challenged this using a dynamic panel probit model of female labor supply including heterogeneity and state dependence he found that adding autoregressive errors led to a substantial diminution in the importance of heterogeneity this in turn meant he could not reject that fertility is exogenous here we extend hyslop 1999 to allow classification error in employment status using an estimation procedure developed by keane and wolpin 2001 and keane and sauer 2005 we find that a fairly small amount of classification error is enough to overturn hyslop s conclusions leading to overwhelming rejection of the hypothesis of exogenous fertility

markov switching and stochastic volatility diffusion models of short term interest rates this article empirically compares the markov switching and stochastic volatility diffusion models of the short rate the evidence supports the markov switching diffusion model estimates of the elasticity of volatility parameter for single regime models unanimously indicate an explosive volatility process whereas the markov switching models estimates are reasonable itis found that either markov switching or stochastic volatility but not both is needed to adequately fit the data a robust conclusion is that volatility depends on the level of the short rate finally the markov switching model is the best for forecasting a technical contribution of this article is a presentation of quasi maximum likelihood estimation techniques for the markov switching stochastic volatility model

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

optimal prediction of cyclical downturns abstract in the conventional way of visualizing economic time series the prediction problem does not dichotomize into predicting turning points and predicting conditional means yet the prediction of turning points has always been considered a separate issue in business cycle literature the paper first discusses these issues and then describes a model where the prediction of turning points does separate from the prediction of conditional means using the model an optimal way of predicting turning points is derived and applied to u s data the paper uses time series methodology and the theory of optimal stopping times

a nonparametric investigation of duration dependence in the american business cycle does the termination probability of a business expansion or contraction increase with age this question may be formally addressed by analyzing the nature of duration dependence in aggregate economic activity our null hypothesis is that there is no duration dependence which we test via intentionally nonparametric procedures we also argue that common notion of business cycle periodicity can be usefully interpreted in terms of whole cycle duration dependence we find some evidence for duration dependence in whole cycles and in prewar expansions but little evidence elsewhere

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

an information diffusion based model of oil futures price abstract inspired by the increasing evidence of financialization speculation in commodity pricing this paper constitutes a first attempt to build an information diffusion based asset pricing framework for the oil futures market with gradual information dissemination slowly decaying uncertainty about the asset s future fundamentals generates persistent conditional volatility and a drift in asset return volatility based proxies for information flows are proposed to examine empirically the asset pricing implications the results confirm a significant intertemporal relationship between return on the price of oil futures information diffusion and volatility components an important implication of our study is that the slow diffusion of information generates predictability in price dynamics a forecasting model is then constructed and tested in relation to our theory it is found that the lagged series of the pricing factors possess significant predicting power for returns

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

analyzing business cycle asymmetries in a multi level factor model abstract we study the business cycle in the us over 1959 2011 using a large dimensional multi level factor model we find notable asymmetries over the business cycle but the bulk of common dynamics is stable over time the comovement among variables is larger in recessions compared to expansions the recession factor is highly correlated with monetary and financial variables whereas expansion and symmetric factors are mainly related to real activity variables

understanding the gender pay gap what s competition got to do with it a number of researchers have argued that men and women have different attitudes toward and behavioral responses to competition that is women are more likely to opt out of jobs in which performance pay is the norm and to under perform in some competitive situations laboratory experiments suggest that these gender differences are rather large to check these hypotheses and findings against differences in the field the authors use performance pay as an indicator of competition in the workplace and compare the gender gap not only in incidence of performance pay but also in earnings and work effort under these contracts they find that although women are less likely than men to work under performance pay contracts the gender gap is small furthermore the effect of performance pay on earnings is modest and does not differ markedly by gender consequently the authors argue the ability of these competition hypotheses to explain the gender pay gap seems very limited