how to beat the random walk an empirical model of real exchange rates abstract an econometric model is developed for all possible bilateral real exchange rates between the united states the united kingdom germany and japan for the period february 1977 to june 1987 we extend the standard dornbusch frankel type of models using an error correction approach with an observable macro economic determinant of the long run real exchange rate for the econometric analysis we develop an efficient estimator by pooling the data for all currencies contrary to previous empirical tests on the long run behaviour of real exchange rates we find a notable and significant mean reversion component

capital utilization economies of scale and technical change in the growth of total factor productivity an explanation of south korean manufacturing growth abstract this paper presents a method of interpreting the growth of total factor productivity directly linking the productivity growth to key parameters of a specific cost function it shows that the productivity index can be decomposed into effects due to a technical change b non constant returns to scale and c change in capital utilization the decomposition framework was applied to data on south korean manufacturing during the 1961 1980 period in south korean manufacturing the total factor productivity was found to have grown at 3 per annum scale economies contributed about 38 of the growth of tfp the technical change 45 and the change in the capital utilization rate 17 the results of this study support of the view that for growing less developed economies the growth in capital utilization rate is a source of growth in total productivity that is too significant to be ignored

changing inequality in markets for workplace amenities among u s industries where earnings rose relatively from 1979 1995 injury rates declined relatively obversely during the 1960s narrowing interindustry wage differentials were associated with an increase in the relative risk of injury in high wage industries evidence from the nlsy suggests similar results among full time workers between 1988 and 1996 between 1973 and 1991 the disamenity of evening night work was increasingly borne by low wage male workers changing earnings inequality has understated changing inequality in the returns to work assuming skill neutral changes in the cost of reducing these disamenities estimates of the implied income elasticities of demand for amenities are well above unity

equilibrium real exchange rates closed form theoretical solutions and some empirical evidence abstract this paper generates closed form theoretical solutions for the relationships among the real exchange rate relative per capita consumption and relative wealth in a stochastic dynamic general equilibrium model of two countries representative consumers the solutions offer insight into the robust cross sectional relationship between relative per capita gdps and relative national price levels established in kravis and lipsey 1983 1987 1988 in a manner consistent with equilibrium exchange rate theories and the productivity differentials model of balassa 1964 and samuelson 1964 application of panel data from summers and heston 1988 to the model s structural equations yields economically plausible estimates of the elasticity of intertemporal substitution the relative importance of nondashtradables in consumption and the rate of time preference in several oecd countries relative to that in the united states

solving exchange rate puzzles with neither sticky prices nor trade costs we present a simple framework in which both the exchange rates disconnect and forward bias puzzles are simultaneously resolved the flexible price two country monetary model is extended to include a consumption externality with habit persistence habit persistence is modeled using campbell cochrane preferences with deep habits along the lines of the work of ravn schmitt grohe and uribe by deep habits we mean habits defined over goods rather than countries the model is simulated using the artificial economy methodology it offers a neo classical explanation of the meese rogoff puzzle and mimics the failure of fundamentals to explain nominal exchange rates in a linear setting finally the model naturally generates the negative slope in the standard forward market regression

exchange rate uncertainty and international portfolio flows a multivariate garch in mean approach abstract this paper examines the impact of exchange rate uncertainty on different components of net portfolio flows namely net equity and net bond flows as well as their dynamic linkages specifically a bivariate var garch bekk in mean model is estimated using bilateral monthly data for the us vis a vis australia canada the euro area japan sweden and the uk over the period 1988 01 2011 12 the results indicate that the effect of exchange rate uncertainty on net equity flows is negative in the euro area the uk and sweden and positive in australia the impact on net bond flows is also negative in all countries except canada where it is positive under the assumption of risk aversion the findings suggest that exchange rate uncertainty induces a home bias and causes investors to reduce their financial activities to maximise returns and minimise exposure to uncertainty this effect being stronger in the uk the euro area and sweden compared to canada australia and japan overall the results indicate that exchange rate or credit controls on these flows can be used as a policy tool in countries with strong uncertainty effects to pursue economic and financial stability

industrialisation catching up and economic growth a comparative study across the world s capitalist economies various hypotheses are examined seeking to explain inter country convergence at the upper end but divergence at the lower end of the world income rankings a model of disequilibrium growth with sector specific technological progress and spillover is developed and then estimated on two samples of capitalist economies 1960 85 it is found that the degree of disequilibrium between agriculture and industry is greatest in the least developed economies but their rate of labor transfer has been slow technological spillover has stimulated productivity growth in less developed agricultural sectors but not in the industrial sectors of the least developed economies copyright 1991 by royal economic society

the response of exchange rates to permanent and transitory shocks under floating exchange rates abstract using the joint behavior of inflation and real exchange rates we develop an empirical model to uncover the sources of the fluctuations in the real dollar exchange rates of four major industrial countries under the current float this model allows us to construct two time series for each country pair one representing the permanent component of each real exchange rate and the other the purely transitory component over the period as a whole transitory shocks played a relatively small but statistically significant role real dollar exchange rates therefore did not simply evolve in response to permanent shocks instead there are instances in which temporary shocks made a substantial contribution we conclude that the random walk model though an approximate statistical description of real exchange rate behavior is a poor guide to model structure jel f31

comparative productivity of korean manufacturing 1967 1987 this paper compares productivity levels in south korean manufacturing with those in the usa for 13 manufacturing branches the comparison is based on specific industry of origin purchasing power parities value added per hour worked in korean manufacturing rose from only 4 5 percent of the us level in 1967 to more than 18 percent in 1987 total factor productivity rose from only 9 percent in 1967 to 26 percent of the us level in 1987 at a more detailed level especially the leather metals and machinery industries have reached high productivity levels some of which approach levels in european manufacturing the considerable labour productivity gap between korea and the united states can partly be explained by capital intensity structural effects size effects and levels of education

exchange rate regimes and national price levels this paper explores the role of exchange rate regimes in explaining deviations from the classic theory of purchasing power parity examining a broad panel of countries i find that developing countries with fixed exchange rate regimes have national price levels that are 20 percent higher than those with flexible regimes for industrial countries the relation between regimes and price levels is qualitatively similar but weaker i investigate several explanations for this pattern and find that exchange rate overshooting in floats inflation inertia in pegs and expansionary policies can explain only 5 percentage points of the observed differences i also show that even though the observed pattern could be the outcome of a class of open economy models pioneered by obstfeld and rogoff the data provides limited empirical support for the predictions of this model

the pervasive effects of family on entrepreneurship toward a family embeddedness perspective families and businesses have often been treated as naturally separate institutions whereas we argue that they are inextricably intertwined long term changes in family composition and in the roles and relations of family members have produced families in north america that are growing smaller and losing many of their previous role relationships such transformations in the institution of the family have implications for the emergence of new business opportunities opportunity recognition business start up decisions and the resource mobilization process we suggest that entrepreneurship scholars would benefit from a family embeddedness perspective on new venture creation d 2003 elsevier science inc all rights reserved

explaining the relative decline of agriculture a supply side analysis for indonesia the relative decline of agriculture in growing economies is a central feature of economic development and a major influence on agricultural policies the literature on the causes of this decline has focused on the relative price effects arising from demand factors especially engel s law rather than on supply side influences such as changes in relative factor endowments and differential rates of technical change this article develops a simple structural model of the transformation of the indonesian economy applying an error correction mechanism to capture the dynamics resulting from disequilibria and the costs of adjustment the decline in agriculture s share of gross domestic product is found to be caused much less by the relative price effects typically emphasized in the literature than by capital accumulation and rapid technical change in agriculture

quality over quantity reexamining the link between entrepreneurship and job creation although much has been written about the quantity of jobs created by entrepreneurs scholars have yet to examine the quality of these jobs in this article the authors begin to address this important issue by examining nearly 5 000 businesses that began operations in 2004 they investigate the extent to which nascent employers provide what many think of as quality jobs those offering health care coverage and a retirement plan the authors find that because of small scale constrained resources and protection from institutional pressures start up companies do not provide their employees with either of these proxies for job quality and their likelihood of offering health or retirement benefits increases only marginally over their first six years of operation the finding that entrepreneurs impressive record of job creation is not matched by a similarly impressive outcome with respect to job quality challenges policymakers to ensure that entrepreneurs are encouraged to create quality employment opportunities in the course of creating new businesses abstract from author

price index convergence among united states cities we study the dynamics of price indices for major u s cities using panel econometric methods and find that relative price levels among cities mean revert at an exceptionally slow rate in a panel of 19 cities from 1918 to 1995 we estimate the half life of convergence to be approximately nine years the surprisingly slow rate of convergence can be explained by a combination of the presence of transportation costs differential speeds of adjustment to small and large shocks and the inclusion of nontraded goods prices in the overall price index do price indices in major u s cities share a common trend and if so how quickly do they revert to that trend following a local shock to the price index to answer this question we study the dynamics of consumer price indices for 19 major u s cities over the period from 1918 to 1995 the panel time series methods we employ are now commonly used for studying real output growth rates and levels of real exchange rates across countries we estimate that price index divergences across u s cities are temporary but surprisingly persistent with a half life of nearly nine years our research has two primary motivations first we hope to gain a better understanding of the sources of persistence in the deviations from purchasing power parity ppp found in studies of national price indices and exchange rate data second and more importantly we see the european monetary union as having many similarities to the united states and believe that studying the behavior of prices across u s cities will help us in understanding the likely nature of inflation convergence in the euro area the european central bank s stated inflation objective is a year on year change in the harmonized index of consumer prices hicp of not more than 2 but how large might we expect regional deviations from this euro area wide average to be and how long are they likely to persist the lack of data prevents us from answering this question directly using european prices under monetary union instead we look to the united states a mature common currency area of similar regional diversity size and industrial development

individual and opportunity factors influencing job creation in new firms we build on multiple theoretical perspectives to investigate the unique and joint effects of individual and opportunity level factors affecting job creation in new firms we tested hypotheses using survey data from individuals who transitioned from unemployment to self employment under the auspices of a german public policy program our findings reveal that an entrepreneur s breadth of knowledge has a negative influence on the firm s job creation whereas the entrepreneur s leadership experience has a positive influence however as the sector specific labor requirements of a business opportunity increase both breadth of knowledge and leadership experience allow founders to operate their firms with fewer employees

trends in european real exchange rates we study a newly created panel data set of relative prices for a large number of consumer goods among 31 european countries over a 15 year period the data set includes eurozone members both before and after the inception of the euro floating exchange rate countries of western europe and emerging market economies of eastern and southern europe we find that there is a substantial and continuing deviation from purchasing power parity ppp at all levels of aggregation both for traded and non traded goods even among eurozone members real exchange rates rer exhibit two clear properties in the sample a they are closely tied to gross domestic product gdp per capita relative to the european average at all levels of aggregation and for both cross country time series variation b they are highly positively correlated with variation in the relative price of non traded goods we then construct a simple two sector endowment economy model of real exchange rate determination which exhibits these two properties calibrated to match the data simulating the model using the historical relative gdp per capita for each country we find that for most countries there is a close fit between the actual and simulated real exchange rate in terms of policy relevance the model can offer suggestions of the degree to which real exchange rates in europe both in and out of the eurozone have been overvalued by approximately 15 in greece and portugal and 6 in italy and spain martin berka and michael b devereux

are international monetary fund quotas unfavorable to less developed countries a normative historical analysis abstract the international monetary fund criterion of economic size receives normative justification as the determinant of quotas but size must be represented by appropriately measured income reserves and trade the fund s income measure is deficient because it uses exchange rates rather than purchasing power parities to convert figures to a common currency if a favourable quota disparity is defined as an actual quota above the quota predicted by economic size less developed countries had adverse disparities early in imf history but increasingly favorable disparities over time given the inertia of relative quotas members would do well to maximize their initial quota

on why agriculture declines with economic growth abstract when economic growth is characterised by a slow rise in the demand for food and rapid growth in farm relative to non farm productivity it is understandable that agriculture in a closed economy declines in relative terms as that economy develops but why should agriculture decline in virtually all open growing economies as well including those able to retain a comparative advantage in agricultural products a key part of the answer is that the demand for non tradable goods tends to be income elastic so resources are diverted to their production even in open economies

explaining service price differences in international comparisons this paper reexamines observed international differences in the price of services and the positive correlation of these with per capita gdp differences using a general trade model with a nontraced sector the authors find that differences in countries factor endowments populations trade policies and trade balances will have ambiguous and sometimes opposite effects on their service prices and real incomes estimating the service price equation using recent data suggests that larger endowments of agricultural land minerals and capital larger trade deficits and higher prices for tradables increase service prices conversely larger populations and labor forces reduce service prices copyright 1991 by american economic association

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

efficiency wages and employment rents the employer size wage effect in the job market for lawyers the efficiency wage hypothesis offers an explanation for employment rents according to this hypothesis firms pay wages above the opportunity cost of labor to elicit productivity or quality enhancing behaviors from employees firms pursue this strategy when alternative incentive schemes are unavailable or too costly thus firms will not pay premium wages when employees post sufficiently large performance bonds this article examines employment rents in a setting where employees post sizable performance bonds large law firms contrary to the efficiency wage hypothesis we find that associates in these large firms post substantial performance bonds while also receiving substantial ex ante rents

human capital and information this paper examines the issue of the establishment size wage effect it analyzes a cross section for the year 1979 with information on 607 individuals and the 60 private sector establishments where they work it discusses four theories of the establishment size wage effect and uses empirical proxies to test them it shows that when a dummy variable on computer access in the establishment is introduced as a regressor the establishment size variable is an insignificant regressor this result and other evidence supports the contention that the establishment size coefficient captures the effect of unobserved human capital accumulation

wages health insurance and pension plans the relationship between employee compensation and small business owner income small business owners claim that their ability to provide higher wages and more frequent employee health insurance and pension benefits is severely constrained by the profitability of their firms this paper examines the proposition that employee wage levels provision of employee health insurance and sponsorship of an employee pension plan are associated with small business owner income a large trade association survey supplies the data for the inquiry regression analysis ols and logistic demonstrates that all three forms of employee compensation are tied to business owner income further the business owner income variable washes out the generally accepted relationship between size of business and wages though not the relationships between size of the business and the presence of health insurance nor between the size of business and the presence of pension benefits the regressions also indicate that unit costs of health insurance and pension benefits are higher for those employing 10 or fewer and 20 or fewer respectively compared the other small businesses

an aggregator model of canadian export supply and import demand responsiveness the aggregate canadian technology is modeled by a gnp function with four export and four import components included by the use of aggregator functions and a two stage estimation process the recently developed symmetric generalized mcfadden functional form is used at both the aggregator and gnp function levels the aggregate export own price elasticity is found to be 1 67 in 1970 while the import own price demand elasticity is 1 62 increases in the prices of both imports and labor are found to decrease the supply of exports while exports are found to be complementary to the output of domestic sales supply

how institutions and business strategies affect wages a cross national study of call centers this paper drawing on a 2003 2006 establishment level survey of 1 819 call centers in 15 countries examines effects of industrial relations institutions and employer strate gies on wage variation across coordinated liberal and emerging market economies the authors find several contradictory patterns which confirm theoretical predictions for some countries and contradict them for others suggesting diverse institutional reactions to the emergence of a new economic activity consistent with prior research denmark france and sweden exhibit patterns of low wage dispersion and no union wage premium and the united states canada and emerging market economies ex hibit quite high levels of dispersion contrary to prior research austria and germany resemble the united states in their levels of wage dispersion while the united kingdom resembles the coordinated market group finally employer strategies of outsourcing and market segmentation explain within country wage variation in most countries suggesting considerable flexibility in wage setting at the establishment level

exchange rate forecasts and expected fundamentals using a large panel of individual professionals forecasts this paper demonstrates that good exchange rate forecasts are related to a proper understanding of fundamentals specifically good interest rate forecasts this relationship is robust to individual fixed effects and further controls reassuringly the relationship is stronger during phases when the impact from fundamentals is more obvious e g when exchange rates substantially deviate from their ppp values finally forecasters largely agree that an interest rate increase relates to a currency appreciation but only good forecasters get expected interest rates right

differentials at firm level productive capacity realization in bangladesh food manufacturing an empirical analysis this article empirically estimates the firm specific productive capacity realization pcr indices using the stochastic frontier production function and analyses a number of variables explaining realization rates across firms and over time following battese and coelli 1995 the stochastic frontier production function is used to estimate capacity output and thereby pcr using the firm level panel data from bangladesh food manufacturing the results show that capacity realization rates widely vary across firms and over time the average rate of realization is about 65 implying that most of the firms are producing away from their full production capacity this article also identifies several firm specific and policy related variables explaining capacity realization the results show that firm size sze and outward orientation opn have positive while capital intensity cnsty market structure mstre and effective rate of assistance era have negative impact on realization rates strikingly both poli

unions norms and the rise in u s wage inequality from 1973 to 2007 private sector union membership in the united states declined from 34 to 8 percent for men and from 16 to 6 percent for women during this period inequality in hourly wages increased by over 40 percent we report a decomposition relating rising inequality to the union wage distribution s shrinking weight we argue that unions helped institutionalize norms of equity reducing the dispersion of nonunion wages in highly unionized regions and industries accounting for unions effect on union and nonunion wages suggests that the decline of organized labor explains a fifth to a third of the growth in inequality an effect comparable to the growing stratification of wages by education

exchange rate mean reversion from real shocks within an intertemporal equilibrium model abstract the post bretton woods era has been characterized by real exchange rates that exhibit mean reversion with mixed evidence as to whether this reversion is partial ppp never holds or essentially complete this paper generates these stylized facts theoretically by synthesizing a simple intertemporal open economy model with the elasticities approach to the current account a central feature of the model is the existence of non traded goods the model can generate partial or approximately complete mean reversion for the real exchange rate depending on parameter values if innovations in output are made up of permanent and temporary components in addition temporary output shocks generate a type of hysteresis wherein the short run path for the exchange rate permanently alters its long run equilibrium value

order flow and the monetary model of exchange rates evidence from a novel data set we propose an exchange rate model that is a hybrid of the conventional specification with monetary fundamentals and the evans lyons microstructure approach we estimate a model augmented with order flow variables using a unique data set almost 100 monthly observations on interdealer order flow on dollar euro and dollar yen the augmented macroeconomic or hybrid model exhibits greater in sample stability and out of sample forecasting improvement vis a vis the basic macroeconomic and random walk specifications

new directions in entrepreneurship research with the kauffman firm survey data is a fundamental impediment to a better understanding of the multifaceted process of new firm creation with better data we can form a better understanding of the causes constraints and outcomes associated with the decision to launch a new business towards this end the kauffman foundation commissioned an eight wave panel of businesses that were formed in 2004 chronicling a single cohort s evolution from birth through important business milestones this issue of small business economics focuses on papers that use the kauffman firm survey to examine new research questions in entrepreneurship articles in this issue analyze new research topics in entrepreneurship as well as shed light on enduring questions in the literature

a selectivity model of employer size wage differentials this article investigates wage differentials for employees of different size firms utilizing an econometric methodology that allows the size of employer to be treated as endogenous in the context of discrete ordered employer size data as a result we are able to estimate i employer size wage gaps which are corrected for selectivity bias and ii the magnitude and direction of the selection bias decompositions of the resulting wage differentials are computed with comparisons of the conditional on sorting across employer size and unconditional wage gaps

exchange rate predictability the main goal of this article is to provide an answer to the question does anything forecast exchange rates and if so which variables it is well known that exchange rate fluctuations are very difficult to predict using economic models and that a random walk forecasts exchange rates better than any economic model the meese and rogoff puzzle however the recent literature has identified a series of fundamentals methodologies that claim to have resolved the puzzle this article provides a critical review of the recent literature on exchange rate forecasting and illustrates the new methodologies and fundamentals that have been recently proposed in an up to date thorough empirical analysis overall our analysis of the literature and the data suggests that the answer to the question are exchange rates predictable is it depends on the choice of predictor forecast horizon sample period model and forecast evaluation method predictability is most apparent when one or more of the following hold the predictors are taylor rule or net foreign assets the model is linear and a small number of parameters are estimated the toughest benchmark is the random walk without drift

an assessment of the united nations scale of assessments from a developing country standpoint abstract the united nations apportionment of its expenses among its member countries is examined in a public choice context the special nature of un produced public goods the un voting rules and its zero sum method of allocating expenses all act to reduce the size of un output and to exacerbate country group conflict the developing country groups throw a disproportionate burden of un financing on the developed countries this result is captured by a model of un burden sharing both more rational and simpler than the un practice jel f33 h41

national price levels and the prices of tradables and nontradables this paper examines changes in national price levels and prices of tradables and nontradables and relates them to changes in variables found earlier to be associated with price level differences among countries across countries national price levels increase systematically with the level of a country s per capita income and the ratios of tradables to nontradables prices decrease over time increases in per capita income are generally associated with increases in price levels in the industrial countries although the opposite relationship tended to prevail among developing countries increases in income are associated with declines in the ratio of tradables to nontradables price levels more consistently than with the increases in general price levels increases in the exchange value of a currency are also associated with declines in the price levels for tradablesrelative to nontradables countries with price levels that were high or low relative to those predicted by the structural equations tended to move toward those predicted levels this abstract was borrowed from another version of this item

capital accumulation and the current account in a two country model abstract this paper examines the joint determination of international debt and capital accumulation in a two country model national rates of time preference are endogenous adjusting along an optimal path to come into equality with one another in the steady state the characteristics of short run current account dynamics are crucially linked to world capital accumulation and to a country s long run net external asset position steady state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries this gives rise to possible non monotonic adjustment in the current account and consumption

fiscal policy the terms of trade and the external balance abstract the effects of fiscal policies on the terms of trade and the external balance are analysed the external balance is decomposed into changes in the ownership of world wealth across residents of each country and changes in the distribution of world wealth represented by assets located in each country it is shown that a rise of government expenditure on the foreign good deteriorates the home country s terms of trade but improves its net foreign asset position whether a reduction in equity taxes improves or deteriorates the external balance depends upon the magnitude of a fiscal transmission effect

real exchange rates under the gold standard purchasing power parity is one of the most important equilibrium conditions in international macroeconomics empirically it is also one of the most hotly contested numerous recent studies for example have sought to determine the validity of purchasing power parity using data from the post bretton woods float and have reached different conclusions we assert that most such studies are flawed for two reasons first the post 1973 data contain by definition only a very limited amount of the low frequency information relevant for examination of long run parity second the dynamic econometric techniques used to model deviations from parity are typically quite crude with respect to admissible low frequency dynamics both deficiencies are rectified in the present paper with dramatic results we construct a new data set of 16 real exchange rates covering more than a century of the classic gold standard period and we study deviations from parity using long memory models that allow for subtle forms of mean

quantifying the evolution of world trade 1870 1949 abstract the typical narrative regarding the evolution of world trade prior to world war ii refers to a secular rise starting around 1870 and a subsequent collapse beginning in 1914 this narrative however is based on measures of trade openness that do not fully take into account purchasing power differences across countries due to lack of alternative data the measures employed in the existing literature are typically based on non ppp adjusted trade data denominated by ppp adjusted gdp data the present paper seeks to resolve this inconsistency by constructing new trade share estimates for 62 countries representing 90 of world gdp for the period from 1870 to 1949 our estimates combine historical import and export figures with non ppp adjusted gdp values that we estimate via the short cut method our estimates confirm qualitatively the narrative of a dramatic rise and fall of world trade over this period yet they indicate that this rise and fall was quantitatively much more pronounced we find that trade shares were on average 38 higher than previously documented and the world s level of trade openness in 1913 was comparable to that in 1974

revisiting the small firm effect on entrepreneurship evidence from firm dissolutions afrequent claim in the entrepreneurship literature is that employees learn to become entrepreneurs during paid employment we revisit this mechanism in the context of the well established finding that smaller firms generate higher rates of entrepreneurship we propose a novel mechanism responsible for higher rates of entrepreneurship emanating from smaller firms large firms might have a advantage over small firms in providing internal opportunities to retain entrepreneurial talent we test this claim in a setting where firm dissolution extinguishes internal opportunities using a new hand collected data set of career histories in the automatic speech recognition asr industry for nondefunct firms we replicate the small firm effect however the small firm effect no longer holds within the subsample of defunct firms entrepreneurship rates among individuals present at firm dissolution are in fact higher for larger firms additional analyses indicate that this effect is unlikely to be driven by the ea

on the estimation of union threat effects some researchers view unions primarily as functioning to increase earnings inequality among the working class while others see them as threatening employers so that they raise wages for unorganized workers and minimize working class inequality threat effects are defined as the tendency for nonunionized employers to respond to the threat of unionization by increasing the earnings and benefits of their workers this paper probes a contextual method for estimating the effects of unionization on the earnings of unorganized workers this method controls for structural characteristics that affect workers earnings and incorporates information about the organizational strength and vitality of specific unions using data from seven manufacturing industries in indianapolis the results suggest that 1 unionized workers earnings positively affect the earnings of unorganized workers in unionized plants 2 unionized workers earnings negatively affect nonunionized workers earnings in nonunionized plants and 3 when plant size is controlled unionized workers earnings have no significant effect on the earnings of nonunionized workers in nonunionized plants these results highlight the complexity and difficulty of estimating the effects of union threat and their importance for understanding earnings inequality in the workplace

does firm size matter anymore the new economy and firm size wage effects researchers have long known that large firms pay higher wages than small firms for workers with similar measured characteristics however an agreed upon explanation for this firm size wage effect fswe has not been reached recent changes in the economy provide new leverage for testing competing theories for the effect while questions about the existence and nature of the new economy provide new motivation for exploring this topic this study uses the 1988 2003 current population survey and finds that the fswe has declined by about one third over the study period examining the competing explanations for the fswe this study finds that while the sorting of workers by traits unions and industry factors all contribute to some portion of the effect in cross section they fail to explain why it has declined over time market power explanations also fail to find support shifts in organizational structures particularly a decline of internal labor markets appear to best fit the results these findings

wages and the intensity of labor effort efficiency wages versus compensating payments the distinction between efficiency wages and compensating payments is at best rather vague in both the theoretical and empirical literatures positing a relationship between wages and the intensity of labor effort while efficiency wages and compensating payments are both related to work intensity the mechanisms that generate these relationships are in each case quite distinct compensating payments exist in competitive labor markets to equalize overall compensation across identical workers with dissimilar working conditions workers who expend more labor effort must be paid more or they will seek employment elsewhere efficiency wages are employment rents paid by firms in order to ensure adequate labor effort these rents vary with the costs firms face in monitoring labor effort they cannot be competed away because without employment rents profit maximizing levels of work intensity would not be forthcoming in this paper we distinguish between the efficiency wage and compensating payments components in wage differences across workers and firms in the first section of the paper we use a theoretical model of optimal labor effort choice by workers and firms to make these two com

factor proportions relative efficiency and developing countries trade abstract this study attempts to assess the extent to which ldc trade in manufactures can be explained by the factor proportions theory and the economies of scale account on the one hand and by commodity characteristics that affect relative efficiency on the other among the relative efficiency characterictics that affects trade patterns are r d intensity total factor productivity in the more developed countries factory size and some input output measures of the degree to which the industry interacts with the rest of the economy

long run determinant of korean economic growth empirical evidence from manufacturing this paper challenges the recent contrarian view that the phenomenal growth of east asian nics is fuelled mainly by the accumulation of production inputs not by tfp growth to appraise this view we investigated and re evaluated south korean manufacturing growth 1973 q1 1993 q4 using johansen s cointegrating analysis our results show that south korean manufacturing appears to have increasing returns to scale in production technology the learning by doing effect defined by lucas 1988 is empirically supported this effect appears to be observed as a long run determinant of south korean manufacturing growth consequently south korean manufacturing growth can be described by an endogenous economic growth model such as the lucas 1988 model contradicting the contrarian view

fixed versus flexible lessons from ems order flow abstract we extend the literature on regime dependent volatility in two ways first our microstructural model provides a qualitatively new explanation second we test implications of our model using europe s recent shift to rigidly fixed rates ems to emu in the model shocks to order flow induce more volatility under flexible rates because the elasticity of speculative demand is endogenously low leading to pronounced portfolio balance effects new data on ff dm transactions show that order flow had persistent effects on the exchange rate before emu parities were announced after announcement the ff dm rate was decoupled from order flow as the model predicts

order flow information and spot rate dynamics abstract this paper examines why order flows are empirically important drivers of spot exchange rate dynamics we consider a decomposition for the depreciation rate that must hold in any model and show that order flows will appear as important proximate drivers when they convey significant incremental information about future interest rate differentials risk premiums and or long run exchange rate levels i e information that cannot be inferred from publicly observed variables we estimate the importance of these incremental information flows for the eurnok spot exchange rate using eight years of high quality disaggregated end user order flow data collected by the norges bank

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

the road taken origins and evolution of employment systems in emerging companies excerpt drawing on a unique archive of qualitative and quantitative data describing 100 bay area high technology firms within their first decade this paper examines the models of employment relations espoused by company founders and bow those models shaped the evolution of human resource management within their organizations information gleaned from interviews suggests that founders and others involved in designing and launching these companies had blueprints for the employment relation that varied along three key dimensions the primary basis of employee attachment and motivation the primary means for controlling and coordinating work and the primary criterion emphasized in selection based on combinations of these three dimensions firms in our sample cluster fall into one of four distinct types which we label the star factory engineering and commitment models multivariate statistical analyses document how the founder s employment model shaped the subsequent adoption and timing of various human resource policies and documents over these companies early histories as well as the speed with which the first full time human resource manager was appointed the findings are strongly suggestive of complementarities and a tendency toward internal consistency among dimensions of human resource management and of strong path dependence in the evolution of employment systems in organizations some implications of these findings for transactions cost perspectives on the employment relationship are discussed

determinants of agriculture s relative decline thailand during economic development agriculture declines as a proportion of aggregate national output a number of theoretical explanations for this phenomenon have been advanced in the economic literature but their relative historical significance has not been clear this paper develops an econometric methodology to analyze this issue and applies it to time series data for thailand the study investigates the importance of relative commodity prices factor endowments and technical progress as explanations for changing sectoral gdp shares of agriculture manufacturing and services it is concluded that the movement in thailand s aggregate factor endowment relative to labor was the most important determinant of agriculture s relative decline

accounting for agricultural decline with economic growth in taiwan abstract in this paper we propose an empirical model to decompose the evolution of the agricultural gdp share of taiwan into three components price changes factor endowment changes and technological change the full sample period is 1967 to 1997 the data were first tested to assess whether the time series are nonstationary and cointegrated after confirming their nonstationarity and cointegrated relation ship we then employ an error correction model ecm in the empirical estimation to capture the dynamic as well as long run equilibrium relationship among those economic variables the results suggest that relative prices have a positive influence on the share of agriculture in gdp in both the long run and the short run an increase in capital per unit of labor on the other hand is associated with a smaller agricultural share this result is consistent with the rybczynski theorem technical change has been biased in favor of this sector the strong negative impact of the change in factor endowments seems to dominate any possible positive effect of relative prices and technical change this result makes a strong case for a heckscher ohlin type model as a basis of understanding the development of the taiwanese economy

nontradable goods prices and per caita income an application to regional korean data pooled time series cross sectional regional data for korea over the period 1985 1991 are used to investigate points which emerged from the united nations international comparison project the results based on a regional analysis are opposite to those of the icp the prices of services do not increase more rapidly in fast growing than in slow growing regions this regional analysis provides constradictory evidence to the widely recognized stylized fact that the prices of nontradables increase with real per capital income by a larger margin than the prices of tradables increase

opening the box information technology work practices and wages using 1994 95 survey data on customer service representatives in 303 u s bank branches the authors investigate the effects on wages of information technology it of work practices and of those two factors in combination offline high involvement practices measured by the presence of quality circles were related positively to wages as was more extensive use of it that supports sales efforts where it was used more extensively to automate routine processes wages were lower in branches that did not have high involvement work practices the effects are partially explained by higher education requirements and more extensive introductory training in higher wage jobs

expectation errors in the foreign exchange market abstract a unified theoretical model is developed showing that forecasting errors can be explained by both informational rigidities and portfolio shifts this is applied to the brl usd exchange rate forecasting errors using a unique data set of daily consensus forecasts along with order flow derived from the fx futures market the results strongly support the theory

china s regional agricultural productivity growth in 1985 2007 a multilateral comparison1 in this study we estimate total factor productivity tfp growth as well as multilateral tfp index for 25 contiguous china provinces over the 1985 2007 period agricultural output growth for each province was decomposed into tfp growth and input growth where input growth was further disaggregated into contributions from growth of labor capital land and intermediate goods over the study period tfp growth contributed 2 7 percentage points to output growth annually which was slightly higher than the input growth contribution of 2 4 percentage points per annum on average the annual rate of productivity growth peaked during 1996 2000 at 5 1 it slowed in 2000 2005 to a rate of 3 2 per annum and declined in the most recent years 2005 2007 to 3 7 differences in productivity among regions persisted over the entire period the tendency toward faster tfp growth in relatively well off coastal regions may imply a widening of regional inequality

the effects of living wage laws evidence from failed and derailed living wage campaigns abstract living wage campaigns have succeeded in about 100 jurisdictions in the united states but have also been unsuccessful in numerous cities these unsuccessful campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a law and also permit the separate estimation of the effects of living wage laws and living wage campaigns we find that living wage laws raise wages of low wage workers but reduce employment among the least skilled especially when the laws cover business assistance recipients or are accompanied by similar laws in nearby cities

order flows and the exchange rate disconnect puzzle abstract the aim of this paper is to establish the link between the high frequency dynamics of spot exchange rates and developments in the macroeconomy to do so i first present a theoretical model of exchange rate determination that bridges the gap between existing microstructure and traditional models the model examines how dispersed microeconomic information known to individual agents outside the foreign exchange market is aggregated and transmitted to dealers via transaction flows i e order flow and how the information is then embedded in the spot exchange rate i then report empirical evidence that strongly supports the presence of the link between the macroeconomy order flow and high frequency exchange rate returns implied by the model in fact my empirical results indicate that between 20 and 30 of the variance in excess currency returns over one and two month horizons can be linked back to developments in the macroeconomy this level of explanatory power is an order of magnitude higher than that found in traditional models even the newly developed monetary models incorporating central banks reaction functions moreover it provides a straightforward solution to the exchange rate disconnect puzzle namely the high frequency behavior of spot exchange rates reflects the flow of new information reaching dealers concerning the slowly evolving state of the macroeconomy rather than the effects of shocks that drive rapidly changing macroeconomic conditions

what is a good job a new measure of labor market success no currently available index allows investigators to estimate the overall desirabitlity of specific jobs with data collected in the 1980 survey of job charactersitics an index of job desirability ijd can be constructed to fill this gap the ijd incorporates 13 nonmonetary job characteristics along with measures of earnings and weights all job characteristics according to their effects on workers judgments about how good their current jobs are compared with an average job while earnings are the most important single determinant of a job s desirability the 13 nonmonetary job characteristics together are twice as important as earnings unlike occupational status and earnings the proposed index explains almost the entire effect of race sex educational attainment and experience on job ratings it also explains almost all the variation in job ratings provided by workers in different occupations furthermore taking account of nonmonetary job characteristics more than doubles the estimated level of

meese rogoff redux micro based exchange rate forecasting meese rogoff redux micro based exchange rate forecasting by martin d d evans and richard k lyons this paper compares the true ex ante fore casting performance of a micro based model against both a standard macro model and a random walk in contrast to existing literature which is focused on longer horizon forecasting we examine forecasting over horizons from one day to one month the one month horizon being where micro and macro analysis begin to over lap over our three year forecasting sample we find that the micro based model consistently outperforms both the random walk and the macro model micro based forecasts account for almost 16 percent of the sample variance in monthly spot rate changes these results pro vide a level of empirical validation as yet unat tained by other models the forecasting experiment proposed by richard meese and kenneth rogoff 1983 re mains a benchmark against which exchange rate models are judged their result that structural macro models cannot outperform a naive random walk has proved robust over the decades yet the meese rogoff paper was never about forecasting in the true sense i e using tirrie f information to forecast exchange rates at t 1 b y using concurrent realized values of the forcing variables their regressions were more about concurrent explanation than about ex ante forecasting their only forecast ing element is in their reliance on ex ante data to estimate equation parameters which appro priately penalized models whose estimated pa rameters were unstable tion for the random walk nature of exchange rates is that there exists some unobserved fun damental that itself follows a random walk un observed being important because fundamentals proposed in most macro models do not follow random walks they offer a different explana tion one rooted in the asset approach to ex change rates and the present value relation that follows from it specifically they show that i f fundamentals are 1 1 but not necessarily ran dom walks then as the discount factor in the present value relation approaches 1 the ex change rate will follow a process arbitrarily close to a random walk intuitively given that an 1 1 process can be split into random walk and stationary components a discount factor near 1 means that most all of the weight is placed on fundamentals far into the future ex pectations of which are dominated by the random walk component charles engel and kenneth west 2004 2005 provide a valuable perspective on the forecastability of exchange rates one explana this paper takes the analysis of engel and west as an important reorientation of thinking and brings it to the natural next step specifi cally if there is little room for forecasting based on stationary components of fundamentals then one needs to focus on where all the action is namely exchange rate dynamics that come from expectational surprises though the sur prise part is by definition orthogonal to public information our micro based model shows that there should exist types of nonpublic infor mation that are useful for forecasting this part and where to look for these types of informa tion we then locate data on these types of nonpublic information and test whether they have true ex ante forecasting power we should evans department of economics georgetown uni versity washington dc 20057 and nber lyons haas school of business university of california berkeley c a 94720 1900 and nber we are grateful to ken west for his comments and to the national science foundation for financial support we refrain from using the word news because it has too strong an association with macro information that is public which even in the most careful of event studies explains less than 5 percent of exchange rate variation in total see torben andersen et al 2003

convergence of south korean productivity on west german levels 1966 1978 abstract south korean labor productivity in manufacturing converged rapidly on the productivity level in west german manufacturing during the period 1966 1978 achieving two thirds of the german level by 1978 this convergence was more rapid at the industry level than for all manufacturing the capital labor ratio and total factor productivity in south korean manufacturing also converged on west german levels during this period with the former accounting for two thirds and the latter one third of the labor productivity convergence the source of labor productivity convergence however differed greatly across industries with capital deepening the dominant source in heavy industries and total factor productivity tfp convergence the main source in light industries

radical political economy and the economics of labor markets this essay is the result of a long process involving many drafts and revisions i am grateful to duncan foley for the careful and constructive criticisms offered throughout the project the following people read the manuscript at different stages and although they often disagreed with me they generously provided helpful comments two anonymous referees for this journal samuel bowles william dickens greg dow robert drago richard edwards kathleen engel richard freeman james galbraith herbert gintis jody hoffer gittel sandfordjacoby tom kochan david levine lisa lynch paul osterman michael piore bob rebitzer gil skilman dan slesnick robert thomas and tsuyoshi tsuru comments from participants in seminars at the massachusetts institute of technology university of massachusetts at amherst and hitotsubashi university are also gratefully acknowledged

an analysis of short run response of export and domestic agriculture in sub saharan africa abstract short run responses of export and domestic shares of total agricultural output to changes in stocks of domestic savings sav development assistance oda private foreign commercial capital pfx and other variables is investigated a profit function approach is used time series data for 19 sub saharan african countries are pooled into three panels using similarities in changes in economic policy regime statistical evidence suggests that for the panel of countries that were undertaking liberalized economic reforms the slope coefficients of some of the variables in the models have changed significantly between 1970 1980 and 1981 1993 for the 1981 1993 period the impacts of oda pfx and sav on export and domestic shares were different for this panel the effect of increases in agricultural labor was different across the three panels there is also evidence that productivity growth in the export agriculture sub sector is negative in all the groups it is recommended that to halt the decline in export share of agricultural output in the group of countries that have undertaken substantial improvements in economic policy environment efforts must be made to reduce the negative impact of domestic savings and agricultural labor while at the same time working to reduce the bias of development assistance against food security