an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

price dynamics financial fragility and aggregate volatility within a standard framework a la arrow debreu we investigate the dynamics emerging from the interactions of heterogeneous households and firms that are adaptive price setters and financially constrained we show that depending on the stringency of the financial constraints the model can settle in two very different regimes one characterized by equilibrium the other by disequilibrium and financial fragility we then investigate how the structure of the production network affects the emergence of aggregate volatility from micro level price and financial shocks hence providing a dynamical counterpart to recent results of acemoglu and al 2012

growing sub systems vertically hyper integrated sectors and the labour theory of value the author starts from piero sraffa s notion of subsystem and from his own notion of vertically integrated sector and goes on to a complete generalization to dynamic analysis a production system is partitioned into a set of self contained growing subsystems each of which compactly considered is characterized by one single unit of consumption good at one extreme and one single labor coefficient at the other extreme a vertically hyper integrated sector this logical construction is shown to possess remarkable analytical and normative properties particularly suitable for dynamic analysis among these properties a complete generalization is obtained of ada m smith s pure labor theory of value copyright 1988 by oxford university press

can self control explain avoiding free money evidence from interest free student loans abstract this paper uses insights from behavioral economics to explain a particularly surprising borrowing phenomenon one in six undergraduate students offered interest free loans turns them down models of impulse control predict that students may optimally reject subsidized loans to avoid excessive consumption during school using the national postsecondary student aid study we investigate students take up decisions and identify a group of students for whom the loans create an especially tempting liquidity increase students who would receive the loan in cash are significantly more likely to turn it down suggesting that consumers choose to limit their liquidity in economically meaningful situations

theoretical approaches to monetary disinflation abstract during the 1980s many countries adopted tight monetary policies to reduce high inflation rates which were the legacy of the 1970s as inflation threatens to rise at the beginning of this decade this paper provides a survey of the 1980s literature which sought to provide theoretical understandings of how monetary disinflation is achieved four models are presented monetarist neo keynesian new classical and post keynesian each model s explanation of the recession which accompanies the monetary disinflation is outlined as well as possible policy measures to reduce the extent of the recession and to hasten the return to full employment

cyclical and causal relations between real wages and employment in the eu this paper analyses and compares the joint behaviour of real wages and employment over the business cycle in the european union eu economies using both annual and quarterly data since 1960 further investigation of the cointegrating properties and the existence of causal effects in the real wage employment relation is undertaken by employing appropriate var models the evidence suggests weak procyclical or acyclic behaviour of real wages relative to cyclical employment in the quarterly data and stronger procyclicality in the annual data thus confirming the dunlop tarshis result for the majority of the eu economies with a few exceptions no cointegrating relations were detected while the granger causality tests suggest either weak or lack of unidirectional causality finally the sensitivity analysis showed that the filtering method has not much influence on the results but the choice of deflator may overturn them in certain cases

testing for superexogeneity of wage equations the superexogeneity of wage equations is tested in four major european countries this is an important issue because while only weak exogeneity is needed for estimation purposes and for testing and strong exogeneity for forecasting superexogeneity is required for policy analysis the procedure suggested by engle and hendry 1993 is adopted to carry out the empirical analysis in all cases the conditional model is not affected by the first and second moments of the residuals from the marginal models this invariance result implies that the estimated linear regression models are not subject to the lucas critique over the period examined differences in wage determination between the various countries can be plausibly interpreted as resulting from the bargaining environment

why have private savings rates in the united states and canada diverged abstract one of the central questions in macroeconomics for many years has been whether government policy can affect private saving rates and if so to what extent and through what channels the question has remained controversial because as with other macroeconomic questions experiments to check divergent hypotheses cannot be deliberately performed so economists must rely upon the often dubious evidence from the limited experiments with which nature and history have endowed us this paper discusses the results of an exceptionally good natural experiment that has been provided by canada and the u s over the past thirty five years after moving in tandem for almost twenty five years american and canadian private saving rates have diverged dramatically over the last decade the primary conclusion emerging from our analysis of this phenomenon is that tax policies can have a potent impact on private savings behavior differences in tax structures and in the interactions of taxation and inflation appear to be important factors explaining the divergent behavior of the american and canadian private savings rates recognizing the importance of asset revaluations caused partially but not entirely by tax effects also helps to explain the different behavior of u s and canadian savings there may also be a relationship between government deficits and the private savings differential

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

pension plan characteristics and framing effects in employee savings behavior abstract defined contribution pensions in many postsecondary institutions are funded by a combination of an employer premium and a mandatory employee premium individuals can also contribute to a supplemental savings account holding constant total compensation standard reasoning suggests that supplemental savings should depend negatively on the sum of the employer and employee pension contributions contrarily we find that the supplementary savings of professors are significantly more sensitive to employee contributions than to employer contributions this asymmetry is consistent with different marginal propensities to save out of the salary and pension components of compensation nevertheless impacts on lifetime utility are relatively modest

consumer response to tax rebates many households received income tax rebates in 2001 of 300 or 600 these rebates represented advance payments of the tax cut from the new 10 percent tax bracket based on a survey of a representative sample of households this paper finds that only 22 percent of households receiving the rebate would spent it instead they would either save it or use it to pay off debt this very low rate of spending represents a striking break with past behavior which would have suggested a much higher rate of spending the low spending rate implies that the tax rebate provided a very limited stimulus to aggregate demand this abstract was borrowed from another version of this item

fiscal and monetary policies in complex evolving economies what is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions we study this issue using an agent based model that is able to reproduce a wide array of macro and micro empirical regularities simulation results suggest that policy mixes associating unconstrained counter cyclical fiscal policy and monetary policy targeting employment is required to stabilise the economy we also show that discipline guided fiscal rules can be self defeating as they depress the economy without improving public finances finally we find that the effects of monetary and fiscal policies become sharper as the level of income inequality increases

opportunity costs in buying and short selling do they really matter abstract the experimental results of the paper reveal that people do not take into consideration opportunity costs or opportunity profits when buying and short selling lottery tickets these results are inconsistent with basic economic and finance theories

post keynesian stock flow consistent modelling a survey the aim of the paper is to provide an overview of the current stock ow consistent sfc literature indeed we feel the sfc approach has recently led to a blossoming literature requiring a new summary after the work of dos santos and above all after the publication of the main reference work on the methodology godley and lavoie s monetary economics an integrated approach to credit money income production and wealth the paper is developed along the following lines first a brief historical analysis investigates the roots of this class of models that can be traced as far back as 1949 and the work of copeland second the competing points of view regarding some of its main controversial aspects are underlined and used to classify the different methodological approaches followed in using these models namely we discuss i how the models are solved ii the treatment of time and its implication and ii the need or not for microfoundations these results are then used in the third section of the paper to develop a bifocal perspective which allows us to divide the literature reviewed according to both its subject and the methodology we explore various topics such as financialisation exchange rate modelling policy implication the need for a common framework within the post keynesian literature and the empirical use of sfc models finally the conclusions present some hypotheses and wishes for the possible lines of development of sfc models

microenterprise growth and the flypaper effect evidence from a randomized experiment in ghana standard models of investment predict that credit constrained firms should grow rapidly when given additional capital and that how this capital is provided should not affect decisions to invest in the business or consume the capital we randomly gave cash and in kind grants to male and female owned microenterprises in urban ghana for women running subsistence enterprises we find no gain in profits from either treatment for women with larger businesses we strongly reject equality of the cash and in kind grants only in kind grants cause growth in profits suggesting a flypaper effect whereby capital coming directly into the business sticks there but cash does not the results for men also suggest a lower impact of cash but differences between cash and in kind grants are less robust there is suggestive evidence that the difference in the effects of cash and in kind grants is associated more with lack of self control than with external pressure

state aid formulas and the local incentive to chase or shun ratables most programmes of state aid to local governments in the us are designed to fix problems of interjurisdictional or interpersonal equity not to address the effect that local tax reliance might have

macroeconomic forecasting a survey developments in macroeconomic forecasting over the last twenty years are surveyed in this paper which takes the i969 presidential address to the royal economic society cairncross i969 as its starting point sir alec cairncross had found no previous occasion on which the royal economic society had discussed this new activity and so selected economic forecasting as the topic for his address as retiring chief economic adviser to the treasury he had been preoccupied with forecasting for the preceding few years and was well placed to reflect on the new kind of economic forecasting that was emerging and the new ways in which it was being organised at the time these were changing fast with forecasting becoming in particular more heavily based on computable models a conference in april i969 heard that in the treasury a more elaborate fully formalised model is being programmed for a computer roy i970 in august i969 at the national institute of economic and social research niesr an econometric model of the whole economy became an integral part of the quarterly forecasting exercises that had begun with the publication of the national institute economic review in i 959 these developments followed the inauguration by the london business school lbs in i966 of the first series of published forecasts based on the direct application of a complete statistical model of the economy in the late i960s and early i970s confidence in forecasting was growing extra resources were put in and there were hopes that the accumulation of data and more sophisticated techniques would lead to major improvements in accuracy of forecasts and understanding of the economy burns i986 this confidence rested in part on the wide acceptance of the neoclassical synthesis as a framework for macroeconomic analysis the phrase originated with samuelson who was largely instrumental in constructing and promulgating the grand neoclassical synthesis which was given considerable prominence in the third edition of his textbook here it was noted that economists instead of being keynesian or anti keynesian have worked toward a synthesis of whatever is valuable in older economics and in modern theories of income determination the result might be called neo classical economics and is accepted in its broad outlines by all but about 5 per cent of extreme left wing

recent developments in macroeconomics underlying the existence of macroeconomics as a separate field of study are the phenomena of economy wide fluctuations of output and prices and sometimes persistent high levels of unemployment two basic views of macroeconomic behavior have persisted even as conceptual innovati ons and the application of more powerful analytic and empirical techn iques have brought significant changes in understanding of the macroe conomy copyright 1988 by royal economic society

terms of trade shock and the current account in a monetary economy over the period 1973 81 the terms of trade of non oil developing countries deteriorated at about 2 per cent per annum this was accompanied by an increase in current account deficits in excess of 3 per cent above what they had been in the previous decade see khan and knight 1983 for a discussion these authors find the terms of trade shocks the major cause of the deficits this has led to a renewal of interest in the effects of changes in terms of trade for a small open economy the conventional wisdom first put forward by laursen and metzler 1950 and harberger 1950 emphasized the fact that a terms of trade worsening lowered real income which in turn lowered savings and worsened the current account the laursen metzler effect the recent reappraisal was initiated by obstfeld 1982 he showed in an infinite horizon optimizing framework with perfect capital mobilizing that if the discount rate was a function of the level of utility surpluses and not deficits accompany an unanticipated and permanent terms of trade worsening the long run level of the discount rate is tied down by the given world rate of interest this in turn fixes the long run level of utility the terms of trade shock tends to lower the level of utility and agents save to offset this across steady states there is only a substitution effect on the other hand if the discount rate is fixed and equal to the world interest rate then the economy adjusts to the terms of trade shock by immediately lowering real expenditure by the same amount as the decline in real income so that the current account is always balanced svensson and razin 1983 showed that in a two period framework this does not necessarily happen for the infinite horizon case they showed that if preferences were separable over time and the discount rate was increasing in instantaneous utility then obstfeld s results were indeed obtained in a two period overlapping generations model the results could be modified owing to the fact that human wealth and non human wealth are not perfect substitutes and a terms of trade shock affects these differently see matsuyama 1988 for a discussion but it is still true that an unanticipated permanent terms of trade shock has a one shot effect on the current account unless some ad hoc costs of adjustment are introduced see e g persson and svensson 1985 and matsuyama 1988 the uncertain lifetime model see e g frenkel and razin 1988 and matsuyama 1987 generates non trivial

the near optimality of mark up pricing mark up pricing policies result in a loss of profits compared to marginal pricing behavior these losses however are often very small even for large changes in the money supply but by adopting a simple pricing rule the firm does not have to forecast the future and avoids the informational and computational costs required to determine the profit maximizing price each period thus even if these costs are small mark up pricing policies may be optimal or approximately so at least for some firms in a macro model this is likely to imply large monetary non neutralities

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

estimating the effect of unearned income on labor supply earnings savings and consumption evidence from a survey of lottery players this paper provides empirical evidence about the effect of unearned income on earnings consumption and savings using an original survey of people playing the lottery in massachusetts in the mid 1980 s the effects of the magnitude of lottery prizes on economic behavior are analyzed the critical assumption is that among lottery winners the magnitude of the prize is randomly assigned it is found that unearned income reduces labor earnings with a marginal propensity to consume leisure of approximately 11 percent with larger effects for individuals between 55 and 65 years old after receiving about half their prize individuals saved about 16 percent

saving more in groups field experimental evidence from chile abstract we test the impact of a peer group program on savings in a sample of microcredit clients we conduct two randomized trials among these 2687 microcredit clients the first finds that a savings group treatment which combines public goal setting monitoring in the group and non financial rewards increases savings in a new savings account significantly the number of deposits grows 3 7 fold and the average balance almost doubles in contrast a more classical measure a substantially increased interest rate has no effect for most participants and raises the savings balance only for the very top of the distribution a second experiment conducted a year later tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages without meetings rewards or peer pressure given that participants are borrowing at 90 apr we discuss how and when saving more could be harmful or beneficial

beyond economic base theory the role of the residential economy in attracting income to swiss regions segessemann a and crevoisier o beyond economic base theory the role of the residential economy in attracting income to swiss regions regional studies regional development theories are mainly focused on export based activities to explain regional competitiveness the increasing mobility of workers and residents leads to a reconsideration of this approach residential economy has become a strategic issue to generate incomes within regions with this view the paper analyses the link between economic activities and incomes from workers and annuitants residents a spatial typology breakdown is compiled for swiss regions using a hierarchical cluster analysis hca empirical results highlight various regional development profiles conversely to export based theories regions with higher income are those with strong residential economy thus opening new avenues for local governance

mental accounting and decision making the relationship between relative and absolute savings abstract the formation of mental accounts by individuals has been hypothesised to explain an apparent departure from rationality in certain decision making scenarios in particular the potential monetary saving on an item is viewed topically relative to the original expected cost of that item rather than relative to the original expected cost of all items purchased on the same shopping trip in other words in a number of contexts the relative saving to be made has been found to be more important than the absolute saving this paper extends previous experimental work by describing a new experiment that seeks to discover whether this mental accounting characteristic applies more widely we find that the effect is not detected as the level of absolute saving to be gained increases suggesting that topical accounts are less important in such contexts

the footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics evolutionary theories of economic change identify the processes of idiosyncratic learning by individual firms and of market selection as the two main drivers of the dynamics of industries are such processes able to account for the statistical regularities which industrial structures and dynamics display in this work we address this question by means of a simple multi firm model formalizing the mechanisms of learning and selection as such despite its simplicity the model is able to robustly reproduce an ensemble of empirical stylized facts including ample heterogeneity in productivity distributions persistent market turbulence and fat tailed distribution of growth rates

the timing of markets and monetary transfers in cash in advance economies in cash in advance models do the timing of markets and the timing of the monetary transfer affect equilibrium money demand the timing of markets generates different individual money demands however under the common assumption that agents are identical these differences do not affect the behavior of equilibrium real balances in contrast the timing of the monetary transfer has important implications for agent s information sets these implications can influence the equilibrium characteristics of real balances

the effects of benefit timing and income fungibility on food purchasing decisions among supplemental nutrition assistance program households the supplemental nutrition assistance program snap is the largest nutritional safety net in the united states prior research has found that participants have higher consumption shortly after receiving their benefits followed by lower consumption towards the end of the benefit month known as the snap benefit cycle this consumption pattern has been found to have negative effects on beneficiaries we hypothesize two behavioral responses of snap participants may work in tandem to drive much of the cycle 1 short run impatience a higher preference to consume today and 2 fungibility of income the degree of substitutability between a snap dollar and a cash dollar using data from the national food acquisition and purchase survey foodaps a newly developed nationally representative survey of daily food acquisitions by snap households we find evidence of both behavioral responses however the degree of short run impatience and fungibility of income is found to differ significantly across poverty levels and use of grocery lists to plan food purchases snap households could gain from food purchase planning education

an interpretive history of challenges to neoclassical microeconomics and how they have fared contemporary microeconomics has witnessed a resurgence of behavioral institutional and evolutionary critiques of the neoclassical mainstream that came to dominate the field during the 1980s today s critiques and proposals for reform have a long tradition in economics while synthesizing the intellectual history of these challenges this article explores the reasons why such critical strands of microeconomics fared poorly in the past and in contrast what factors may account for their partial acceptance into the mainstream in recent times

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

the citizen versus consumer distinction an exploration of individuals preferences in contingent valuation studies abstract contingent valuation has been used extensively in estimating the value of environmental goods one criticism of this approach however is that respondents in referendum style contingent valuation surveys may express citizen assessments that take into account benefits to others rather than benefits that accrue purely to the respondent themselves within this context the aim of this paper is to examine to what extent individuals express different preferences when adopting a personal or a social citizen perspective while this paper provides some support for the hypothesis that individuals express different preferences when adopting collective as opposed to personal choices reported willingness to pay wtp was found to be insensitive to whether or not the respondents were asked the wtp question from a personal or social perspective

the behavioral life cycle hypothesis self control mental accounting and framing are incorporated in a behavioral enrichment of the life cycle theory of saving called the behavioral life cycle blc hypothesis the key assumption of the blc theory is that households treat components of their wealth as nonfungible even in the absence of credit rationing specifically wealth is assumed to be divided into three mental accounts current income current assets and future income the temptation to spend is assumed to be greatest for current income and least for future income considerable empirical support for the blc theory is presented primarily drawn from published econometric studies

did tax flattening affect rrsp contributions in 1988 marginal personal income tax rates changed in canada for some individuals by reasonably substantial amounts in this note a large sample of tax filer data is examined and the conclusion is drawn that when attention is paid to the possible confounding of marginal tax rate and non linear income effects there is no convincing evidence that the tax rate changes affected contributions to registered retirement saving plans rrsps est ce que l aplatissement des taux d imposition influence les contributions au reer en 1988 les taux marginaux d imposition du revenu personnel ont change au canada et pour certaines personnes ces changements ont ete substantiels cette note examine un grand echantillon de rapports d impots et en arrive a la conclusion que quand on prend en compte le melange possible des effets du taux marginal d imposition et des effets de revenu non lineaires il n y a pas de resultats qui montrent de facon probante que les changements dans les taux d imposition ont influence les contributions au reer

the sunk cost fallacy in penny auctions this article theoretically and empirically analyses behaviour in penny auctions a relatively new auction mechanism as in the us dollars or war of attrition players in penny auctions commit higher non refundable costs as the auction continues and only win if all other players stop bidding i first show that in any equilibria that does not end immediately players bid probabilistically such that the expected profit from every bid is zero then using two large data sets covering 166 000 auctions i calculate that average profit margins actually exceed 50 to explain this deviation i incorporate a sunk cost fallacy into the theoretical model to generate a set of predictions about hazard rates and player behaviour which i confirm empirically while players do slowly learn to correct this bias and there are few obvious barriers to competition activity in the market is rising and concentration remains relatively high

a model of income unemployment and inflation for the usa a simple three equation macroeconomic model is developed to explain the dynamics of output umemployment and inflation for the usa the model is estimated with the annual data for 1946 1989 insights gained through some recent developments are used to specify and estimate the model

social security benefits consumption expenditure and the life cycle hypothesis this paper examines the impact of changes in social security benefits on aggregate consumption expenditure under the null hypothesis there should be no contemporaneous effect at the monthly frequency because increases in benefits have always been announced at least 6 weeks prior to payment the paper develops overwhelming evidence contrary to the null that benefits have affected aggregate spending the results have strong implications for several important issues including ricardian equivalence government policy irrelevance and the excess sensitivity of consumption to changes in income

new classical macroeconomics a sympathetic account the essential ingredients of new classical nc macroeconomics are 1 adoption of the equilibrium approach to model construction 2 acceptance of the natural rate hypothesis 3 a belief in the superiority of policy based on rules and 4 a strong skepticism regarding the empirical relevance for macroeconomic issues of rational bubble phenomena recent keynesian analyses stressing the interaction of monopolistic competition with pricechange menu costs are not incompatible with the nc approach but have not been highly successful a nc policy strategy that recognizes current weaknesses in macroeconomic understanding is described and rationalized and an analytical basis for nc skepticism regarding bubbles sunspots etc is outlined

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

mental accounting access motives and overinsurance people exercising mental accounting have an additional motive for buying insurance they perceive a risk of having insu cient funds available to self insure in this way insurance protects the consumption value of the insured asset beyond the expenditure to acquire replace it this complements previous approaches based on probability weighting and loss aversion to explain the high pro tability of warranties and an aversion toward deductibles it helps to account for why the value of a warranty is found to be positively related to the value of the product and why there is seemingly contradictory empirical evidence on how household income a ects demand for warranties the adapted model rationalizes a strong aversion to deductibles and explains the observed sensitivity of this aversion to the insurance context finally it predicts a strong impact of how an insurer pays out bene ts on the value and cost of insurance this can explain both the evidence on strong deductible aversion for ood insurance and the lack of such evidence for long term care insurance jel classi cation d11 d14 d81 g22

spousal control and intra household decision making an experimental study in the philippines i elicit causal effects of spousal observability and communication on financial choices of married individuals in the philippines when choices are private men put money into their personal accounts when choices are observable men commit money to consumption for their own benefit when required to communicate men put money into their wives account these strong treatment effects on men but not women appear related more to control than to gender men whose wives control household savings respond more strongly to the treat ment and women whose husbands control savings exhibit the same response changes in information and communication interact with underlying control to produce mutable gender specific outcomes

the life cycle model of consumption and saving a central implication of life cycle models is that agents smooth consumption we review the empirical evidence on smoothing at frequencies from within the year up to across a lifetime we find that life cycle models particular those which incorporate realistic features of markets and goods have more empirical successes than failures we also show that some apparent deviations from theoretical predictions imply very small welfare losses for agents finally we emphasize that the coherence of life cycle models imposes an important discipline when incorporating new features into models

economic valuation of the environment how citizens make sense of contingent valuation questions this study adopts a qualitative approach in order to investigate how people make sense of contingent valuation cv questions of a global environmental amenity the objective is not only to capture people s motivations and considerations of willingness to pay wtp but also to determine if they adequately comprehend an economic valuation of such public goods the findings indicate that a large proportion of respondents do not interpret the valuation task as intended however this lack of understanding is not always expressed unless probed in relation to the elicitation question and some people have the tendency to provide monetary estimates anyway whatever meaning they attach to these

parental net wealth and personal consumption this paper uses data from the 1988 to 1991 psid to examine the relationship between parental net wealth and consumption behavior of adult children in a model where the probability of receiving a future transfer from the parent is an increasing function of the level of parental net wealth a non linear relationship is expected the results in this study are consistent with such a relationship parental net wealth is found to have a positive influence on children s consumption only at very high levels in addition this relationship appears to apply only to parental housing wealth and not parental non housing wealth

inventory investment over the business cycle in the eu and the us abstract this paper investigates the business cycle properties of aggregate inventory investment in the countries of the european union eu and the us given the experience of the latest recessions this issue becomes particularly interesting for the study of the propagation mechanism of business cycles the kydland prescott methodology was used to derive and organize the business cycle features the results showed that business cycle fluctuations in the eu are more volatile than those in the us the contribution of the declines of inventory investment in recessions has also been greater in the eu important similarities though were identified as to the extent of the destabilizing effect of inventory investment cycles in the overall economic activity

sensitivity to market incentives the case of policy loans the standard neoclassical theory is rejected as an explanation for the observed reluctance of most holders of whole life insurance to borrow against the cash value of their policies at favorable rates of interest even when the neoclassical theory is augmented with transactions costs and short awareness lags several empirical tests using survey and time series data reject the standard theory in favor of an explanation invoking self imposed rules against borrowing or the debt ethic this evidence lends support to the psychology based theories of thaler and shefrin 1981 copyright 1987 by mit press

further evidence of excess sensitivity of consumption nonseparability among goods and heterogeneity across households the standard theoretical framework for analysing households intertemporal decisions is the life cycle permanent income model among its implications testing the model allows to analyse the response of consumption to fiscal policy however the empirical literature with microdata has yielded mixed results this article examines the sensitivity of the results to the assumption of separability among goods and of homogeneity across households for that purpose we test a rational expectations permanent income model with household data drawn from the spanish family expenditure survey this survey contains detailed information on total expenditure and the income presents large exogenous quarterly changes due to an institutional feature the article shows that assuming separability among commodities biases the test against the model when separability is not imposed we show that the rejection of the model depends on heterogeneity across households in terms of their members being unemployed or not for those

what drives markups evolutionary pricing in an agent based stock flow consistent macroeconomic model this paper studies coordination between firms in a multi sectoral macroeconomic model with endogenous business cycles firms are both in competition and interdependent and set their prices with a markup over unit costs markups are heterogeneous and evolve under market pressure we observe a systematic coordination within firms in each sector and between each sector the resulting pattern of relative prices are consistent with the labor theory of value those emerging features are robust to technology shocks

aging and the income value of housing wealth abstract the potential of reverse annuity mortgages to increase the current income of the elderly is analyzed we conclude that most low income elderly also have little housing equity in general a reverse annuity mortgage would substantially affect the income only of the single elderly who are very old whose life expectancy is short on the other hand if the transfer were in the form of a lump sum payment rather than an annuity the payment would increase the liquid wealth of most elderly families by a large fraction thus legislation that would facilitate the market for reverse mortgages could improve substantially the financial status of a small proportion of the elderly

are community nuisance fiscal zoning arrangements undermined by state property tax reforms evidence from nuclear power plants and school finance equalization the conventional view of fiscal zoning is that communities make land use accommodations only for nuisance entities that generate sufficient net fiscal benefits state reforms that redistribute property tax revenues have been accused of undermining these decisions ex post this paper tests this critique by examining communities with nuclear power plants sited before the school finance equalization reforms of the 1970s and 1980s hedonic regressions reveal these reforms to disproportionately reduce housing prices in nuclear plant communities but increase them among neighboring areas this pattern of interjurisdictional capitalization is consistent with the concerns raised by critics of these reforms jel h71 h73

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

the effects of pensions on household wealth a reevaluation of theory and evidence this paper examines the extent to which households offset pension wealth with reductions in other wealth systematic econometric biases imply that the estimated offsets in previous empirical studies are smaller than the true offset and may even have the wrong sign new empirical estimates that do not correct for the biases generate little offset between pensions and other wealth estimates that correct for the biases show substantially more offset a smaller impact of pensions on overall saving than in most previous studies the estimates also indicate that the effects of pensions on wealth vary significantly across households

on socioeconomic causes of wait unemployment abstract this paper discusses implications of wait unemployment in a two sector model with a dual labour market primary sector firms pay efficiency wages the wage rate in the secondary sector is determined by labour supply and demand most queueing models assume that workers for the primary sector are only recruited from the pool of unemployed instead this paper explains wait unemployment by assuming that people care about their relative status in society the model is presented in general terms and a closed form solution is obtained by specifying functional forms the results emphasize the need for proper manpower policies to reduce structural unemployment

does purchase price matter for the waiting time to start using energy efficient technologies experimental evidence from rural ethiopia abstract in this study we conducted a randomized experiment in rural ethiopia to test on how quickly energy efficient technology an improved stove is put in use after the technologies is disseminated we evaluate two concepts that may affect usage of a product screening related to valuation of a product and sunk cost effects based on the price the potential user paid for the product a standard tobit and iv tobit methods of estimations are used for testing sunk cost and screening effects respectively results based on the baseline survey and follow up data shows that there is no difference in the length of waiting time to start using the energy efficient technology between those who got the stove for free and those that paid money for it in other words the sunk cost effect is absent however we find a difference in the waiting time between those with high valuation for the stove and those with lower valuation for it in other words we find an evidence of the screening effect the result has pricing policy implications for government and non government organizations involved in dissemination of such technologies that have both public environmental and private benefits

agent based stock flow consistent macroeconomics towards a benchmark model abstract the paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the dsge community although several recent improvements have enhanced the realism of standard models we argue that major drawbacks still undermine their reliability in particular dsge models still fail to recognize the complex adaptive nature of economic systems and the implications of money endogeneity the paper argues that a coherent and exhaustive representation of the inter linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the agent based and stock flow consistent approaches the papers aims at contributing to the nascent ab sfc literature under two fundamental respects first we develop a fully decentralized ab sfc model with several innovative features and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications results suggest that the properties of the model match many empirical regularities ranking among the best performers in the related literature and that these properties are robust across different parameterizations second the paper has also a methodological purpose in that we try to provide a set or rules and tools to build calibrate validate and display ab sfc models

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

the relative stickiness of wages and prices i introduction a continuing challenge to macroeconomics is to explain how a purely nominal disturbance produces short term aggregate real effects in the classical paradigm in which wages and prices are perfectly flexible a positive nominal aggregate demand disturbance will cause nominal wages and output prices to rise in the same proportion leaving real wages unchanged thus neither employment nor output will be affected consequently many business cycle theories posit the existence of wage and or price stickiness to explain how nominal aggregate demand disturbances generate real macroeconomic effects according to these theories the failure of nominal wages or prices to fully adjust in the short run to purely nominal disturbances explains why shocks to aggregate demand will cause both employment and output to temporarily deviate from their natural rates the relative importance of wage and price stickiness in the transmission of nominal shocks to the real economy however remains an unsettled issue the purpose of this paper is to exploit evidence on the behavior of real wages in an attempt to assess the relative importance of these two sources of stickiness first consider models emphasizing sticky or slowly adjusting nominal wages 1 if for example output prices are free to adjust but nominal wages are sticky a positive aggregate demand shock will cause prices to rise and real wages to temporarily fall below market clearing levels the fall in real wages will stimulate employment and thus output as the aggregate demand shock induces movement along a stable labor demand curve consequently sticky wage models predict a negative correlation between aggregate demand shocks and real wages if on the other hand wages are flexible while output prices are sticky 2 aggregate demand disturbances and real wages will tend to be positively correlated in the short run in sticky price models imperfectly competitive firms may resist adjusting output prices in response to changes in demand perhaps due to menu costs instead increases in demand are met by corresponding increases in output this requires an increase in labor inputs which in turn requires an increase in the real wage rate if wages are flexible and the labor supply curve is positively sloped thus when prices are sticky but wages are flexible a positive aggregate demand shock is associated with an increase in real wages it may be that neither prices nor wages are fully flexible if prices and wages both exhibit stickiness we would expect real wages to be positively correlated or negatively correlated with aggregate demand shocks depending in large part on whether prices or wages are stickier thus knowledge of the direction of the short run response of real wages to aggregate demand disturbances would offer important evidence on the relative stickiness of nominal wages and output prices if all business cycle fluctuations are due solely to aggregate demand disturbances such evidence could be obtained by examining the cyclical behavior of real wages since regardless of the source of stickiness aggregate demand disturbances are positively correlated with employment and output countercyclical procyclical real wages would indicate that nominal wages are stickier more flexible than output prices indeed some consider the stylized fact of slightly procyclical real wages 3 to be an important challenge to models that emphasize wage stickiness for example bennett mccallum 1986 argues for the superiority of models with sticky output prices since if wage stickiness alone were responsible for the real effects of monetary actions with product prices adjusting flexibly then we should observe countercyclical movements in the real wage that we do not has recently been reconfirmed in a study by bils 1985 gregory mankiw 1987 107 has concluded the final and perhaps most serious problem with the unadorned nominal wage story is that real wages do not move over the business cycle as the theory predicts

the benefits of emergency reserves greater preference and persistence for goals that have slack with a cost abstractmarketers of programs that are designed to help consumers reach goals face dual challenges of making the program attractive enough to encourage consumer signup while still motivating consumers to reach desirable goals and thus stay satisfied with the program the authors offer a possible solution to this challenge the emergency reserve or slack with a cost they demonstrate how an explicitly defined emergency reserve not only is preferred over other options for goal related programs but can also lead to increased persistence study 1 demonstrates that consumers prefer programs with emergency reserves to programs that do not have them and study 2 further clarifies that consumers preference for an emergency reserve depends on the presence of a superordinate goal study 3 reveals that consumers prefer goals with emergency reserves because they perceive them to have both higher attainability and value than other goals study 4 demonstrates that reserves can lead to increased goal persistence in a

stabilizing an unstable complex economy on the limitations of simple rules abstract this paper offers a systematic comparison of a wide range of leaning against the wind interest rate policy rules within a macroeconomic stock flow consistent agent based model the model generates endogenous booms and busts along credit cycles as feedback loops on aggregate demand affect the goods and the labor markets the real and the financial sides of the economy are closely interconnected the baseline scenario is able to qualitatively reproduce a wide range of stylized facts we show that a monetary policy rule that targets the movements in the net worth of firms significantly dampens the credit cycles and reduces the employment costs of financial crises because this indicator incorporates early signals of financial imbalances performances of this three mandate taylor rule are also more robust to the specific parameter values and regulatory framework than the standard dual mandate taylor rules nonetheless none of the policy rules under study completely eliminates the high employment costs of financial crises

imprecise preferences and survey design in contingent valuation during recent years the contingent valuation cv method has been widely used to value non marketed goods and services we present the results of a cv study of the value of road safety we find that stated preferences for road safety exhibit considerable imprecision appear subject to various systematic biases and are insensitive to variations in the quantity and quality of the safety improvements concerned one broad implication of these findings may be that for an important class of goods of which safety is one example standard assumptions about the structure of people s preferences may be much too strong a more specific implication concerning the design and conduct of cv surveys is that the noaa panel s widely cited blueprint for good cv practice may rely far too heavily on assumptions about the precision and sensitivity of people s preferences

monopolistic competition technology shocks and aggregate fluctuations abstract we analyze a real business cycle rbc model in which aggregate production exhibits increasing returns to specialization in conjunction with imperfect competition and free entry and exit of firms over the business cycle we show that the requirements of both high variance and high persistence in technology shocks that have been noted by critics of rbc theory may arise from the assumptions of perfect competition and constant returns to scale rather than from the general proposition that real productivity shocks can significantly account for the business cycle

toward a new microfounded macroeconomics in the wake of the crisis the great recession that followed the financial crisis of 2007 is not only the largest economic crisis after the great depression of the 1930s it also signals a crisis of economics as a discipline this is not only the consequence of the inadequacy of mainstream macroeconomics and specifically the dynamic stochastic general equilibrium dsge workhorse model to forecast such a huge event or at least to detect the worrying tendencies towards it even more relevant is the choice to explicitly avoid the modeling of large crises that for someone is a motivation for not attacking pre crisis dsge models focused on the analysis of small deviations from the steady state so denying the intrinsic nature of capitalism a system that necessarily proceeds through cycles and extended crises the replies of the dsge approach to critics have led to extensions regarding for instance the role of financial frictions heterogeneous agents and bounded rationality though typically in the form of quasi rational expectations the alternative paradigm of agent based ab macroeconomics can take into account all these elements at once within an evolutionary modeling framework based on heterogeneity and interaction so capable to endogenously reproduce complex dynamics from small fluctuations to large crises due to innovation and industrial dynamics rising inequality and financial instability and so on the integration between ab macroeconomics and the post keynesian stock flow consistent approach represents a promising way for the future development of this research field

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

the effects of money growth on inflation and interest rates across spectral frequency bands band spectral regression techniques are used to identify the frequency bands that are most important in the relationships between money growth and inflation and between money growth and the nominal interest rate the results show that cycles in the growth rate of m1 from one to two years long produce higher frequency cycles in inflation and two distinct sets of higher frequency cycles in changes in the nominal interest rate the results support models where predictable changes in money growth produce liquidity and anticipated inflation effects on nominal interest rates copyright 1994 by ohio state university press

stock market wealth and consumption this paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending it presents data on the distribution of corporate stock ownership based on the 1998 survey of consumer finances it also uses time series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate the wealth effect it concludes that in the year after a change in stock market values consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock

emergent dynamics of a macroeconomic agent based model with capital and credit in this paper we present and discuss a macroeconomic agent based model with capital and credit cc mabm which builds upon the framework put forward by delli gatti et al 2011 the novelty of this model with respect to the previous framework consists in the introduction of a stylized supply chain where upstream firms i e producers of capital goods k firms supply a durable and sticky input capital to the downstream firms who produce consumption goods c firms to be sold to households both c firms and k firms resort to bank loans to satisfy their financing needs there are two way feedbacks between firms and markets which yield interesting emerging properties at the macro level we show that the interaction of upstream and downstream firms and the evolution of their financial conditions in a nutshell capital and credit are essential ingredients of a crisis i e a sizable slump followed by a long recovery

the deviation of production prices from labour values some methodology and empirical evidence contrary to what is expected from indirect evidence and two commodity hypothetical examples the evdie nce provided in this paper supports david ricardo s empirical proposi tion that relative prices of production are mainly determined by labo r value ratios the results obtained indicate that a 1 percent change in profit rate will cause relative prices to change up to 2 percent and as the profit rate on gross capital is approximately 5 percent o ne ends up with a 90 percent labor theory of value the empirical evidence refers to the yugoslav economy but the factors that determ ine the deviations considered turn out to be of the same order of mag nitude as in other economies copyright 1987 by oxford university press