learning wage dynamics and firm specific human capital we introduce a dynamic and fully strategic model of wage determination in the presence of firm specific human capital in this model human capital is interpreted as information we show that equilibrium exists and is efficient and that it gives rise to a unique distribution of the social surplus we show further that the equilibrium wage is determined by three factors consideration of these factors allows us to determine when and how the market mechanism enables the worker to capture some of the returns to firm specific human capital we relate our findings to the ongoing empirical debate concerning the return to tenure

learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

careers in ongoing hierarchies the probability that an unskilled worker can be successfully trained or screened to be a manager depends on the effort of the firm with positive hiring costs a firm prefers to train screen its own managers however the optimal size of the firm for productive efficiency may conflict with efficient managerial husbandry how a firm copes with the above constraint generates stochastic layoffs lateral mobility promotions diverse earnings profiles fast track jobs and up or out rules copyright 1994 by american economic association

the global financial crisis explaining cross country differences in the output impact abstract what explains differences in the crisis impact across developing countries and emerging markets using cross country regressions to assess the factors driving the growth performance in 2009 compared to pre crisis forecasts for that year we find that a small set of variables explain a large share of the variation in the growth impact countries with more leveraged domestic financial systems stronger credit growth and more short term debt tended to suffer a larger effect on economic activity although the relative importance of these factors differs across country groups for emerging markets this financial channel trumps the trade channel for a broader set of developing countries however the trade channel seems to have mattered with more open countries affected more strongly and those exporting food commodities being less hard hit exchange rate flexibility helped in buffering the impact of the shock particularly for emerging markets there is also some evidence that countries with a stronger fiscal position prior to the crisis were impacted less severely we find little evidence for the importance of other policy variables

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

consequences of bank distress during the great depression the consequences of bank distress for the economy during the depression remain an area of unresolved controversy since john m keynes 1931 and irving fisher 1933 macroeconomists have argued that bank distress magnified the extent of the economic decline during the depression as the intermediaries controlling money and credit banks were in a special position to transmit their distress to other sectors but the mechanism through which banking distress mattered for the economy has been hotly contested milton friedman and anna j schwartz 1963 saw the contraction in the money multiplier driven in their view by panicked depositors withdrawals of deposits as the primary mechanism through which banking distress affected the real economy they described the mechanism transmitting banking distress to the real sector as operating at the national level through changes in the aggregate supply of money and interest rates bank distress reduced the money supply available to the public either through the closure of banks and the consequent freezing of bank deposits or the withdrawals of deposits by depositors that feared bank failure ben s bernanke 1983 building on fisher 1933 emphasized the transmission of monetary shocks via their effects on the balance sheets of borrowers and on the supply of credit by banks borrowers balance sheets were worsened by debt deflation as the result of fixed dollar debt obligations borrowers net worth and cash flow declined with the rising value of debt service costs relative to income borrowers with positive net present value projects but weak balance sheets had less internally generated retained earnings to invest and could not qualify for credit furthermore bernanke argued that the contraction of the money supply produced contraction of nominal income and prices relative to fixed debt service which weakened borrowers balance sheets and in turn weakened banks not only did firms financial distress reduce the number of qualified borrowers the contraction in banks net worth forced a reduction in the supply of bank loans to qualified borrowers many firms and individuals relied on banks for credit and as those banks suffered losses of capital due to asset value declines and contractions in deposits as depositors reacted to bank weakness by withdrawing their funds even borrowers with viable projects and strong balance sheets experienced a decrease in the effective supply of loanable funds bernanke termed the combined weakening of borrowers balance sheets and the contraction in bank credit supply a rise in the cost of credit intermediation the scarcity of perfect substitutes for the positive net present value investments of firms with weak balance sheets and for the credit supplied by existing banks implies that the weakening of firms and banks balance sheets the disappearance of banks and the contraction in surviving banks lending made it more difficult for the economy to channel funds to their best use thus what began as a contraction in aggregate demand became a contraction in aggregate supply which magnified adverse economic shocks and prolonged and deepened the depression the financial distress of firms and banks and the decline in bank lending were not only symptoms of the depression but means for magnifying the shocks that caused the depression bernanke s statistical evidence in support of this story is derived from time series analysis at the national level in calomiris graduate school of business 601 uris hall columbia university 3022 broadway new york ny 10027 and national bureau of economic research e mail cc374 columbia edu mason department of finance drexel university 3141 chestnut street philadelphia pa 19104 e mail joe mason drexel edu we thank valerie ramey david wheelock charles himmelberg steve zeldes gary gorton two referees and seminar participants at columbia university wharton northwestern university and the 2001 economic history association meetings for helpful comments on an earlier draft we gratefully acknowledge support from the national science foundation the university of illinois and the federal reserve bank of st louis

why does the economy fall to pieces after a financial crisis the worst fi nancial crisis in the history of the united states and many other he worst fi nancial crisis in the history of the united states and many other countries started in 1929 the great depression followed the second worst countries started in 1929 the great depression followed the second worst struck in the fall of 2008 and the great recession followed commentators struck in the fall of 2008 and the great recession followed commentators have dwelt endlessly on the causes of these and other deep fi nancial collapses have dwelt endlessly on the causes of these and other deep fi nancial collapses less conspicuous has been the macroeconomists concern about why output and less conspicuous has been the macroeconomists concern about why output and employment collapse after a fi nancial crisis and remain at low levels for several or employment collapse after a fi nancial crisis and remain at low levels for several or many years after the crisis this article pursues modern answers to that question it many years after the crisis this article pursues modern answers to that question it focuses on events in the united states since 2008 focuses on events in the united states since 2008 existing macroeconomic models account successfully for the immediate effects existing macroeconomic models account successfully for the immediate effects of a fi nancial crisis on output and employment i will lay out a simple macro model of a fi nancial crisis on output and employment i will lay out a simple macro model that captures the most important features of modern models and show that realistic that captures the most important features of modern models and show that realistic increases in fi nancial frictions that occurred in the crisis of late 2008 will generate increases in fi nancial frictions that occurred in the crisis of late 2008 will generate declines in real gdp and employment of the magnitude that occurred but this declines in real gdp and employment of the magnitude that occurred but this model cannot explain why gdp and employment failed to recover once the fi nancial model cannot explain why gdp and employment failed to recover once the fi nancial crisis subsided the model implies a recovery as soon as fi nancial frictions return to crisis subsided the model implies a recovery as soon as fi nancial frictions return to normal at the end of the article i will mention the ideas that are in play to explain normal at the end of the article i will mention the ideas that are in play to explain the persistent adverse effects of temporary crises but these ideas have not made their the persistent adverse effects of temporary crises but these ideas have not made their way into the mainstream model way into the mainstream model this article cites only a few of the many important contributions to the mainthis article cites only a few of the many important contributions to the mainstream model my paper hall 2009 contains many citations and the forthcoming stream model my paper hall 2009 contains many citations and the forthcoming new volume of the new volume of the handbook of monetary economics discusses the literature fully discusses the literature fully

experimentation and job choice in this article we examine optimal job choices when jobs differ in the rate at which they reveal information about workers skills we then analyze how the optimal level of experimentation changes over a worker s career and characterize job transitions and wage growth over the life cycle using the dictionary of occupational titles merged with the national longitudinal survey of youth 1979 we then construct an index of how much information different occupations reveal about workers skills and document patterns of occupational choice and wage growth that are consistent with a trade off between information and wages

the real consequences of financial stress abstract we introduce a dynamic banking macro model which abstains from conventional mean reversion assumptions and in which similar to brunnermeier and sannikov 2010 adverse asset price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector to assess such phenomena empirically we employ a multi regime vector autoregression mrvar approach rather than conventional linear vector autoregressions we conduct bivariate empirical analyses using country specific financial stress indices and industrial production for the u s the uk and the four large euro area countries our mrvar based impulse response studies demonstrate that compared to a linear specification response profiles are dependent on the current state of the economy as well as the sign and size of shocks previous multi regime based studies focusing solely on the regime dependence of responses conclude that during a high stress period stress increasing shocks have more dramatic consequences for economic activity than during low stress conducting size dependent response analysis we find that this holds only for small shocks and reverses when shocks become sufficiently large to induce immediate regime switches our findings also suggest that in states of high financial stress large negative shocks to financial stress have sizeable positive effects on real activity and support the idea of unconventional monetary policy measures in cases of extreme financial stress

a real options approach to bankruptcy costs evidence from failed commercial banks during the 1990s literature identifies three main aspects of liquidation costs firm size asset specificity and industry concentration this paper unifies the theory behind these aspects of bankruptcy costs by treating them as components of a broader option valuation problem faced by the liquidating trustee testing the hypothesized asset price relationships on fdic failed bank liquidation data yields the appropriate results furthermore it appears that liquidation time alone can be used as an effective second order proxy for asset value growth where market value estimates are unavailable

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

regional growth and finance in europe is there a quality effect of bank efficiency abstract in this study we test whether regional growth in 11 european countries depends on financial development and suggest the use of cost and profit efficiency estimates as quality measures of financial institutions contrary to the usual quantitative proxies of financial development the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds an improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does more credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects

financial factors in the great depression eginning with irving fisher 1933 and john maynard keynes 1931 b 1963 macroeconomists have argued that financial markets were important sources and propagators of decline during the great depression turning points during the depression often coincided with or were preceded by dramatic events in financial markets stock market collapse waves of bankruptcy and bank failure and contractions in the money stock but the mechanism through which financial factors contributed to the depression has been a source of controversy as has been the relative importance of financial factors in explaining the origins and persistence of the depression this essay reviews the literature on the role of financial factors in the depression and draws some lessons that have more general relevance for the study of the depression and for macroeconomics i argue that much of the recent progress that has been made in understanding some of the most important and puzzling aspects of financial real links in the depression followed a paradigm shift in economics a central neglected theoretical piece of the story for financial factors was the allocative effects of imperfections in capital markets which can imply links between disruptions in financial markets and subsequent economic activity also the increasing emphasis on learning and path dependence in economics has helped to explain why financial shocks during the 1930s were so severe and why policy makers failed to prevent the depression

learning about variable demand in the long run this paper studies the problem of a monopoly who is uncertain about the demand it faces and learns about it over time through its pricing experience the demand curve facing the monopoly is not constant it changes over time in a markovian fashion we characterize the monopoly s optimal policy and inquire how it differs from an informed monopoly s policy it turns out that even when the rate at which the demand varies is negligible the stationary probability with which the monopoly s policy deviates from its informed counterpart is nonnegligible as long as the discount factor is below 1

another look at the radner stiglitz nonconcavity in the value of information abstract this paper revisits the well known result of r radner and j stiglitz 1984 in bayesian models of economic theory elsevier amsterdam which shows that under certain conditions the value of information exhibits increasing marginal returns over some range their result assumes that both the number of states and the number of signal realizations are finite assumptions which preclude most analyses of optimal information acquisition we provide sufficient conditions that yield this nonconcavity in the value of information in a general framework the role that these conditions play is clarified and illustrated with several examples we also discuss the robustness of the nonconcavity result and the difficulties involved in getting the value of information to be globally concave journal of economic literature classification number d83

evaluating theories of bank runs with heterogeneity restrictions this paper empirically tests theories of bank runs we use a structural panel var to extract runs from deposit market data identification exploits cross sectional heterogeneity in deposit insurance we identify bank runs as adverse deposit market supply shocks hitting uninsured banks harder compared to insured conditional on a run we study the behavior of uninsured banks with bad and good fundamentals we find that both experience runs but deposit outflows at the former are more severe panic effects which affect all uninsured deposits alike irrespective of fundamentals dominate in the aggregate insured banks partially absorb the outflow of uninsured deposits

reciprocal deposits and incremental bank risk even after controlling for other observable factors reciprocal deposits are associated with higher bank risk as measured by the probability of failure and the z score these results are consistent with the moral hazard hypothesis and reject the risk substitution hypothesis

surviving the great recession the influence of income inequality in us urban counties abstractsurviving the great recession the influence of income inequality in us urban counties regional studies while there has been extensive research on the role of income inequality in economic growth there has been less investigation as to the role of income inequality on economic resilience this paper addresses the relationship between income inequality and resilience by evaluating the vulnerability of urban counties in the united states entering recession between 2006 and 2010 and tests whether income inequality contributes to their probability of recession survival a cox proportional hazards model is used to determine factors contributing toward urban counties resilience to the external shock of the great recession the research is focused on the relationship between the level of income inequality in a county and its recession risk it is found that areas with increased income inequality entered recession earlier

a theory of wage and promotion dynamics inside firms we show that a framework that integrates job assignment human capital acquisition and learning captures several empirical findings concerning wage and promotion dynamics inside firms including the following first real wage decreases are not rare but demotions are second wage increases are serially correlated third promotions are associated with large wage increases fourth wage increases at promotion are small relative to the difference between average wages across levels of the job ladder fifth workers who receive large wage increases early in their stay at one level of the job ladder are promoted quickly to the next

bank branches expansion efficiency and local economic growth abstractthis study investigates the effects of branch network expansion and geographical strategies on the cost efficiency of italian cooperative banks between 2006 and 2013 results indicate that except for banks with a more diversified product offering expansion has a negative impact on efficiency which is exacerbated by increased distance between the headquarters and branches any positive effect due to a larger bank size is neutralized by the branch expansion efficient local banks and a larger credit availability boost the local economy while a bank structural change by a branch expansion generates a negative effect in terms of local economic development

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

the spectre of deflation a review of empirical evidence what explains the widespread fear of deflation this article reviews the history of thought economic history and empirical evidence on deflation with a view to answering this question it also outlines informally the main effects of deflation in applied monetary models the main finding is that for both historical and contemporary deflations there are many open empirical questions that could be answered using the tools economists use to study inflation and monetary policy more generally qu est ce qui explique la peur tres repandue de la deflation ce memoire fait un tour d horizon de l histoire de la pensee economique de l histoire economique et des resultats empiriques quant aux effets de la deflation en vue de repondre a cette question on fait aussi echo informellement aux effets principaux de la deflation dans les modeles monetaires appliques ce qui ressort principalement de ce travail est que tant pour les deflations dans l histoire que dans le monde contemporain il y a bien des questions empiriques encore irresolues auxquelles on pourrait donner une reponse en utilisant l outillage mental que les economistes utilisent pour etudier l inflation et la politique monetaire plus generalement sp c tre n thing that is thought to be seen but has no material existence haunting presentiment of ruin war madness etc

bank credit risk grain production and the indian economy we generate measures of banking risk across indian states and examine the relationship between banking risk and economic production in india we find that banking risk co moves with total grain pro

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

initial labor market conditions and long term outcomes for economists each year graduate students entering the academic job market worry that they will suffer due to uncontrollable macroeconomic risk given the importance of general human capital and the relative ease of publicly observing productivity in academia one might expect that long term labor market outcomes for students graduating in unfavorable climates will resemble long term outcomes for those graduating in favorable climates in this paper i analyze the relationship between macroeconomic conditions at graduation initial job placement and long term outcomes for ph d economists from seven programs using macroeconomic conditions as an instrument for initial placement i show that a quality and type of initial job have a causal effect on long term job characteristics i also show that better initial placement increases research productivity which helps to limit the set of economic models that can explain the effect of initial placement on long term jobs

the relation between sovereign credit rating revisions and economic growth abstract a country s economic growth exhibits a significant response to sovereign rating changes a one notch upgrade downgrade causes an increase decline of about 0 6 0 3 in re rated countries five year average annual growth rates the results hold after accounting for other determinants of economic growth and potential endogeneity problems and are robust to the use of quarterly data changes in country rating affect economic growth via the interest rate and capital flow channels narrower sovereign bond yield spreads and increased capital inflows are associated with upgrades which stimulate re rated countries economic performance and the converse holds for downgrades

bank run psychology abstract banks are inherently susceptible to panics and bank runs due to the problem of maturity mismatch resulting in both a stable equilibrium in which the bank survives and an unstable equilibrium in which a bank run occurs understanding equilibrium selection in this setting is extremely important for safeguarding financial stability in this paper one new potential factor that determines whether a bank runs gets triggered or not is experimentally studied namely the psychological state of the depositor prior to participating in an experimental bank run game subjects are either induced with fear sadness or happiness using an autobiographical emotion induction task the findings suggest that the presence of background fear significantly increases the likelihood of withdrawal and a subsequent bank run in addition women are shown to be significantly more likely to withdraw then men but only in the fear induction treatment

the great depression versus the great recession in the u s how fiscal monetary and financial polices compare abstract this study reviews the financial distress that triggered and amplified the financial crises of the great depression and great recession and compares macroeconomic and financial policy responses shadow banking funded the build up of the financial excesses that preceded both the quicker and forceful response of monetary and fiscal policy during the great recession and stronger action to restore market functionality mitigated the downturn and aided recovery nevertheless actions to address the mortgage debt overhang were slower post depression reforms focused on preventing deposit runs and post great recession reforms on preventing runs on bank debt and shadow banks while boosting capital buffers

the impact of formal finance on the rural economy of india india has systematically pursued a supply led approach to increasing agricultural credit its objectives have been to replace moneylenders to relieve farmers of indebtedness and to achieve higher levels of agricultural credit investment and output india s success in replacing moneylenders has been outstanding between 1951 and 1971 their share of rural credit appears to have dropped from more than 80 percent to 36 percent it may have dropped to as low as 16 percent by 1981 but that estimate is disputed still institutional credit is far from reaching all farmers only about a quarter of cultivators borrow and no more than 2 percent take out long term loans most small farmers have little access to credit and long term credit goes mostly to large farmers overall farm debt has probably not increased sharply in real terms as formal credit has primarily substituted for credit from other sources moreover with the rapid growth of commercial banks in the 1970s the system mobilized more deposits than it lent in rural areas in 1981 of course enhanced deposit services are a useful service of the rural population but one must ask what has been the impact of heavy rural credit and better financial services on agricultural investment production and rural incomes the authors econometric results suggest that the rapid expansion of commercial banks in rural areas has had a substantially positive effect on rural nonfarm employment and output the availability of better banking facilities appears to have overcome one of the obstacles to locating nonfarm activities in rural areas expanded rural finance has had less of an effect on output and employment in agriculture than in the nonfarm sector the effect on crop output has not been great despite the fact that credit to agricluture has greatly increased the use of fertilizer and private investment in machines and livestock there has been more impact on inputs than on output so the additional capital investment has been more important in substituting for agriclutural labor than in increasing crop output but overall rural credit and expansion of the rural financial system have had a positive effect on rural wages creating nonfarm jobs has apparently added more to total employment than the substitution of capital for labor has subtracted it in agriculture so wages have risen even for agricultural workers albeit modestly the supply led approach to agricultural credit that has been pursued for three decades has clearly benefited current borrowers and farm households formerly indebted to moneylenders it has also spurred fertilizer use and investment in agriculture it has been less successful in generating viable institutions and has failed to generate agricultural employment the policy s costs to india s government have been high as portfolio losses associated with poor repayment ultimately have to be borne by the government or one of its institutions under optimistic assumptions the benefits of the agricultural income are at best no more than 13 percent higher than the cost to the government of the extra agricultural credit if assumptions about the cost of supplying the credit and about repayment rates are less optimistic the social costs and the costs to the government of providing the credit would have exceeded the benefits in agricultural income the expansion of commercial banks to rural areas paid off in nonfarm growth employment and rural wages the question is could these benefits have been achieved without imposing agricultural credit targets on the commercial banks and credit cooperatives or did the commercial banks expand only because they were forced to lend to agriculture the authors could not answer these questions with the data at hand

learning your comparative advantages we introduce an equilibrium labor market model where workers gradually learn about their unobserved production abilities while engaged in a productive activity occupation workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes because workers are learning about themselves their output informs them not only about their productivity in their current occupation but about their likely productivity in other occupations as well as workers acquire more information they self select into the occupations in which they expect to perform best and their wages increase returns to experience here capture improved job selection by workers as they sort through occupations and learn

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

bank valuation and accounting discretion during a financial crisis this paper shows that banks overstate the value of distressed assets and their regulatory capital during the us mortgage crisis real estate related assets are overvalued in banks balance sheets especially those of bigger banks compared to the market value of these assets banks with large exposure to mortgage backed securities also provision less for bad loans furthermore distressed banks use discretion over the classification of mortgage backed securities to inflate their books our results indicate that banks balance sheets offer a distorted view of the financial health of the banks and provide suggestive evidence of regulatory forbearance and noncompliance with accounting rules

ex ante returns and occupational choice using data from duke university undergraduates we make three main contributions to the literature first we show that data on earnings beliefs and probabilities of choosing particular occupations

an assessment of tarp assistance to financial institutions six years after the passage of the 2008 troubled asset relief program commonly known as tarp it remains hard to measure the total social costs and benefits of the assistance to banks provided under tarp programs tarp was not a single approach to assisting weak banks but rather a variety of changing solutions to a set of evolving problems tarp s passage was associated with significant improvements in financial markets and the health of financial intermediaries as well as an increase in the supply of lending by recipients however a full evaluation must also take into account other factors including the risks borne by taxpayers in the course of the bailouts moral hazard costs that could result in more risk taking in the future and social costs related to perceived unfairness our evaluation is organized in five parts 1 what did policymakers do 2 what are the proper objectives of interventions like tarp assistance to financial institutions 3 did tarp succeed in those economic objectives 4 were tarp funds allocated purely on an economic basis or did political favoritism play a role 5 would alternative policies either alongside or instead of tarp and alternative design features of tarp have worked better

banking risk and macroeconomic fluctuations abstract this paper develops a model of banking frictions and banking risk as a sort of systemic risk changes in banking risk lead to fluctuations in aggregate economic activity we decompose the macroeconomic effect of a banking risk shock into a pure default effect and a risk aversion effect when risk sharing among investors is imperfect when the shock generates a bank risk spread similar to the peak value during the global financial crisis the overall effect is a decline in employment by 4 66 the default effect leads to a 3 40 employment decline by a within model measure and a 3 51 decline by a between model measure the remaining is attributed to the risk aversion effect a practical implication of our analysis is that by developing financial safety net and improving risk sharing among investors the society can mitigate the adverse macroeconomic effects of banking risk shocks to some extent but cannot eliminate all of them

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

learning and life cycle patterns of occupational transitions individuals experience frequent occupational switches during their lifetime and initial worker characteristics are predictive of future patterns of occupational switching we construct a quantitative model of occupational choices with worker learning and occupation specific productivity shocks to match life cycle patterns of occupational transitions and quantify the value of occupational mobility and learning for the average 18 year old worker the value of being able to switch occupations is about 67 months of the maximum wage he or she could earn in the model and the value of a worker learning his or her type is about 32 months of this maximum wage

the effect of bank failures on economic activity evidence from u s states in the early 20th century this paper provides evidence documenting the existence of a bank failure channel the magnifying effect of bank failures on economic distress using state level quarterly time series from 1900q1 to 1929q4 we estimate a vector autoregression model of bank failures for each state the forecast error variance decompositions are used to construct a categorical measure of the bank failure channel we examine the influence of regulatory variables economic conditions and banking conditions on the degree to which bank failures propagate distress state sponsored deposit insurance and minimum capital requirements are important for explaining the likelihood of having a bank failure channel

optimal experimentation in a changing environment this paper studies optimal experimentation by a monopolist who faces an unknown demand curve subject to random changes and who maximizes profits over an infinite horizon in continuous time we show that there are two qualitatively very different regimes determined by the discount rate and the intensities of demand curve switching and the dependence of the optimal policy on these parameters is discontinuous one regime is characterized by extreme experimentation and good tracking of the prevailing demand curve the other by moderate experimentation and poor tracking moreover in the latter regime the agent eventually becomes trapped into taking actions in a strict subset of the feasible set

financial innovations in banking impact on regional growth carbo valverde s lopez del paso r and rodriguez fernandez f 2007 financial innovations in banking impact on regional growth regional studies 41 311 326 this paper contributes to the literature on the relationship between finance and growth by analysing the relationships between financial intermediation and economic growth within the regions of one country rather than with different countries the focus on regions is relevant since regional information is more homogeneous the legal and institutional factors are similar and the relevant financial market is more accurately defined the study also incorporates the effects of a set of banking innovations the analysis is undertaken for the spanish regions the results show that product and service delivery innovations contribute positively to regional gross domestic product investment and gross savings growth carbo valverde s lopez del paso r et rodriguez fernandez f 2007 les innovations financieres dans le secteur bancaire l impact sur l

interbank liquidity crunch and the firm credit crunch evidence from the 2007 2009 crisis we study the credit supply effects of the unexpected freeze of the european interbank market using exhaustive portuguese loan level data we find that banks that rely more on interbank borrowing before the crisis decrease their credit supply more during the crisis the credit supply reduction is stronger for firms that are smaller with weaker banking relationships small firms cannot compensate the credit crunch with other sources of debt furthermore the impact of illiquidity on the credit crunch is stronger for less solvent banks finally we find no overall positive effects of central bank liquidity but instead higher hoarding of liquidity

human capital specificity evidence from the dictionary of occupational titles and displaced worker surveys 1984 2000 measures of four basic skills constructed from the dictionary of occupational titles are used to examine the source of human capital specificity the measures are used to characterize the skill portfolio of each job and to construct distance measures between jobs wage losses in the displaced worker surveys are shown to be more closely associated with switching skill portfolios than switching industry or occupation code per se these switches represent large decreases in the skill portfolio in the postdisplacement job the recent evidence for industry specific capital is reexamined the results suggest a difference between fluid and crystallized skills

promotion turnover and compensation in the executive labor market this paper develops a generalized roy model with human capital accumulation moral hazard and career concerns we identify and estimate the model with a large panel that matches data on publicly listed firms to information on their executives the structural estimates obtained are used to decompose the firm size pay gap we find that although total compensation and incentive pay increase with firm size certainty equivalent pay decreases with firm size in larger firms and for more highly ranked executives weaker signal quality about effort results in higher risk premiums this risk premium accounts for roughly 80 percent of the firm size gap in total compensation larger firms are also willing to pay more than smaller ones to attract executives finally the estimated coefficients on human capital accumulation from formal education and experience gained from different firms are individually significant but their collective effect on firm size pay differentials nets out

two sides of the same coin u s residual inequality and the gender gap abstract we show that the narrowing gender gap and the growth in earnings inequality are consistent with a simple model in which skills are heterogeneous and the growth in skill prices has been particularly strong for skills with which women are well endowed empirical analysis of dot cps and nlsy79 data finds evidence to support this model a large increase in the prices of cognitive and people skills skills with which women are well endowed and a decline in the price of motor skills account for up to 40 percent of the rising inequality and 20 percent of the narrowing gender gap

are banks really special new evidence from the fdic induced failure of healthy banks the fdic used cross guarantees in order to close 38 subsidiaries of first republicbank corporation in 1988 and 18 subsidiaries of first city bankcorporation in 1992 when lead banks from each of these texas based bank holding companies were declared insolvent i use this plausibly exogenous failure of otherwise healthy subsidiary banks as a natural experiment in order to study the impact of bank failure on local area real economic activity the resolution of these institutions was associated with a significant decline in failed bank lending that led to a permanent reduction in real county income of about 3 percent jel codes e5 g18 g33 keywords bank failures cross guarantee uniqueness of banks

credit crunch caused by bank failures and self selection behavior in lending markets this study investigates how bank failures affect the real economy from the lenders perspective using experimental settings of unique bank failures in japan this paper identifies the credit crunch effect by bank failures the main findings are the following first bank failures decrease the investments of the client firms by approximately 30 second the high investment growth level firms deal with unhealthy banks these choices generate a self selection bias of 30 80 third there is no evidence that bank failure shock is related to the firms accessibility to other financial sources

public debt and growth heterogeneity and non linearity we study the long run relationship between public debt and growth in a large panel of countries our analysis builds on theoretical arguments and data considerations in modelling the debt growth relationship as heterogeneous across countries we investigate the debt growth nexus adopting linear and non linear specifications employing novel methods and diagnostics from the time series literature adapted for use in the panel we find some support for a negative relationship between public debt and long run growth across countries but no evidence for a similar let alone common debt threshold within countries

contagion and bank failures during the great depression the june 1932 chicago banking panic the authors examine the social costs of asymmetric information induced bank panics in an environment without government deposit insurance their case study is the chicago bank panic of june 1932 the authors compare the ex ante characteristics of panic failures and panic survivors despite temporary confusion about bank asset quality on the part of depositors during the panic which was associated with widespread depositor runs and bank stock price declines the panic did not produce significant social costs in terms of failures among solvent banks copyright 1997 by american economic association

enriching a theory of wage and promotion dynamics inside firms in previous work we showed that a model that integrates job assignment human capital acquisition and learning can explain several empirical findings concerning wage and promotion dynamics inside firms in this article we extend that model in two ways first we incorporate schooling and derive further testable implications that we then compare with the available empirical evidence second and more important we show that introducing task specific human capital allows us to produce cohort effects we further argue that task specific human capital is a realistic concept and may have many important implications we also discuss limitations of our extended approach

entrepreneurship over the life cycle where are the young entrepreneurs most individuals do not start a business and if they do they start well into their 30s to explain these stylized facts i estimate a dynamic roy model with experience accumulation risk aversion and imperfect information about ability using the panel study of income dynamics information frictions and income risk reduce entrepreneurship by up to 40 and 35 respectively entry costs and information frictions explain most of the delayed entry results from counterfactual policies targeting delayed entry suggest that entrepreneurship education can yield higher returns than subsidies fostering young entrepreneurship yields higher returns than fostering old entrepreneurship

large firms and within firm occupational reallocation abstract this paper considers the equilibrium interaction between within firm and across firm reallocation in the presence of labor market frictions while a sizable literature has investigated frictional labor markets it has ignored within firm mobility nonetheless every year a sizable fraction of workers switch occupations without changing firms employees in large firms can sample from a larger selection and across firm mobility is replaced by within firm mobility bringing together within and across firm reallocation along with labor market frictions naturally accounts for the observed differences in worker flows and wages across firms of different sizes

interbank contagion at work evidence from a natural experiment this article tests financial contagion due to interbank linkages for identification we exploit an idiosyncratic sudden shock caused by a large bank failure in conjunction with detailed data on interbank exposures first we find robust evidence that higher interbank exposure to the failed bank leads to large deposit withdrawals second the magnitude of contagion is higher for banks with weaker fundamentals third interbank linkages among surviving banks further propagate the shock finally we find results suggesting that there are real economic effects these results suggest that interbank linkages act as an important channel of contagion and hold important policy implications jel g01 g21 g28 e58 since the onset of the financial turmoil increased uncertainty reflected particularly in counterparty risk has led banks to hoard liquidity this has resulted in a significant decline of trading in the interbank money markets jean claude trichet president of the european central bank december 2008

monetary policy and bank lending in developing countries loan applications rates and real effects abstract recent studies of monetary policy in developing countries document a weak bank lending channel based on aggregate data in this paper we bring new evidence using uganda s supervisory credit register with microdata on loan applications volumes and rates coupled with unanticipated variation in monetary policy we show that a monetary contraction reduces bank credit supply increasing loan application rejections and tightening loan volume and rates especially for banks with more leverage and sovereign debt exposure there are associated spillovers on inflation and economic activity including construction permits and trade and even social unrest

bank asset liquidation and the propagation of the u s great depression we hypothesize that financial disintermediation during and after the great depression arose from the slow liquidation of failed bank deposits empirical results from incorporating the stock of failed national bank deposits for the period 1921 40 in vector autoregression var models suggest that the stock of deposits in closed banks undergoing liquidation is as important as money stock in terms of explaining output changes over forecast horizons from one to three years hence we infer that the dynamic effects of banking sector shocks were cumulative and pervasive during and after the depression