the impact of minimum wages on youth employment in portugal textabstractfrom january 1 1987 the legal minimum wage for workers aged 18 and 19 in portugal was uprated to the full adult rate generating a 49 3 increase between 1986 and 1987 in the legal minimum wage for this age group this shock is used as a natural experiment to evaluate the impact of the minimum wage change on teenagers employment by using a large firm level micro data set it is shown that by comparing the employment growth of 18 19 year old workers with their 20 25 year old counterparts one can identify the employment effects of the minimum wage hike the same comparisons are done with 30 35 year old workers this study finds that the rise in the minimum wage significantly reduced employment this conclusion is reinforced by evidence showing that these employment effects are concentrated in firms more likely to be affected by the change in the law

integrated regressors and tests of the permanent income hypothesis abstract we use recent research on estimation and testing in the presence of unit roots to argue that hall s 1978 t and f tests of whether consumption is predicted by lagged income or by lags of consumption beyond the first are asymptotically valid a monte carlo experiment suggests that the asymptotic t and f distributions provide a good approximation to the actual finite sample distribution

dividend changes abnormal returns and intra lndustry firm valuations previous empirical research has established that dividend changes are associated with sig nificant abnormal returns this association is rationalized on the basis that the dividend announcement acts as a signal of future earnings another body of research has documented the existence of intra industry transfers of information where news about one firm is extrapolated to other companies in the same industry earnings information transfers have been found to be positive in nature with good news about one company leading to stock price increases for rival firms linking dividend signaling and information transfer tests were constructed to ascertain whether the dividend change of one firm is associated with the stock price performance of other companies in the same industry the results indicate there is some small positive information transfer the magnitude of information transfer is related to the degree of the dividend surprise the recent dividend history of the other companies and correlations in stock returns between the dividend announcer and the other companies information transfer is found to affect earnings and earnings growth estimates of the other firms and this leads to revisions in their stock prices

minimum wages and economic outcomes in europe abstract in this paper we review the arguments and consider evidence on the economic effects of minimum wages in europe we begin by outlining the systems of minimum wages that currently operate in european countries and then consider some evidence on the economic effects of minimum wages in four countries france the netherlands spain and the united kingdom we consider the relation between minimum wage floors and two economic outcomes employment and the distribution of income in working households we find little evidence that minimum wages have a bad effect on jobs and some evidence that they have an equalising impact on the distribution of income among families with someone in work

the speculative efficiency hypothesis the hypothesis that forward prices are the best unbiased forecast of future spot prices is often presented in the economic and financial analysis of futures markets this paper considers the hypothesis independently of its implications for rational expectations or market efficiency and in order to stress this fact the term speculative efficiency is used to characterize the state envisaged under the hypothesis if a market is subject to efficient speculation the supply of speculative funds is infinitely elastic at the forward price that is equal to the expected future spot price the expected future spot price is a market price determined as the solution to the underlying rational expectations macroeconomic model although the paper is primarily concerned with testing this hypothesis in the foreign exchange market the methodology introduced in the paper is of general application to all futures markets this abstract was borrowed from another version of this item

biased predictors rationality and the evaluation of forecasts abstract optimal rational forecasts are often biased and thus the empirical finding that actual forecasts are biased is not necessarily evidence of irrational behavior using an asymmetric loss function and a regression forecasting problem these points are explicitly demonstrated

a note on exchange rate expectations and nominal interest differentials a test of the fisher hypothesis this note tests the hypothesis that nominal interest differentials between similar assets denominated in different currencies can be explained entirely by the expected change in the exchange rate over the holding period this proposition often called the fisher open hypothesis or the hypothesis of perfect asset substitutability has been a major component of recent theories of exchange rate determination and has important implications for monetary policy 1 the fisher hypothesis differs from the covered interest parity theorem enunciated by keynes 11 while covered interest parity equates the nominal interest differential between financial centers to a known premium or discount on forward foreign exchange and is thus in principle riskless fisher parity involves risk in an essential way the two conditions are equivalent only when forward exchange rates equal expected future spot rates recent theoretical work for example that of grauer litzenberger and stehle 8 kouri 12 and frankel 6 shows that this need not be the case when market participants are risk averse thus while covered interest parity must always hold exactly in an informationally efficient asset market with no transactions costs fisher parity need not nominal interest differentials may reflect risk premia in addition to expected exchange rate movements 2 it should be emphasized at the outset that the tests conducted in this paper are really joint tests of the fisher hypothesis and a weak form of foreign exchange market informational efficiency levich 14 has argued that tests of market efficiency are always joint tests involving some hypothesized structure of normal equilibrium returns below we assume informational efficiency and instead test fisher s hypothesized arbitrage condition that nominal interest differentials equal expected percentage changes in exchange rates

using regional variation in wages to measure the effects of the federal minimum wage the imposition of a national minimum wage standard provides a natural experiment in which the treatment effect varies across states depending on the fraction of workers initially earning less than the new minimum the author exploits this fact to evaluate the effect of the april 1990 increase in the federal minimum wage on teenagers wages employment and school enrollment comparisons of grouped and individual state data confirm that the rise in the minimum wage increased teenagers wages there is no evidence of corresponding losses in teenage employment or changes in teenage school enrollment

mean reversion in g 10 nominal exchange rates according to conventional wisdom industrial country floating exchange rates contain unit roots sur tests on panels of monthly group of ten g 10 log nominal rates reject the null of unit roots for various samples over the current float with significance levels from 0 5 to 15 on average in out of sample forecasts mean reversion models beat random walks significantly in some forecast periods for monthly data the range of expected usd dem appreciation rates exceeds 15 per year in the mean reversion model mean reversion places strong restrictions on international models over the sample period the g 10 had to run monetary policies consistent with stable long run nominal rates

error correction mechanisms the interface between economic theory and applied econometrics is often one of uneasy compromise with the pragmatic justification for many accepted procedures resting on a theoretical base this paper examines the surprisingly strong arguments that exist in terms of economic theory for the use of error correction mechanisms in the specification of short run dynamic adjustment a common heresy exists that while economic theory provides a detailed analysis of comparative static equilibria it can offer no guidance as to the appropriate specification of dynamic adjustment towards an equilibrium perhaps in consequence it is not uncommon to find examples where the necessary dynamic specification is achieved by tacking onto an existing equilibrium specification some relatively ad hoc short run adjustment scheme the intercession of stochastic arguments in this process is confused and critical implications are frequently ignored in practice but perhaps more importantly there will typically be no guarantee that the dynamic specification is consistent with the prescribed equilibrium consistency in this sense requires that the short run dynamic adjustment be directed by the perceived disequilibrium and that eventual convergence to the equilibrium position be ensured that two separate theoretical arguments co exist within the final specification is the root cause of many difficulties both theoretical and empirical this abstract was borrowed from another version of this item

does the exchange rate follow a random walk a monte carlo study of four tests for a random walk abstract several authors have urged that real and nominal exchange rates follow a random walk conditions under which the exchange rate follows a random walk are reviewed in this paper many of these do not appear to hold therefore the empirical evidence presents a puzzle some evidence suggets the exchange rate follows a random walk while other evidence suggests the opposite should be true this paper attempts to reconcile the evidence it is argued that the tests for a random walk have low power monte carlo evidence on four tests for a random walk is presented that suppors this claim

market efficiency and cointegration an application to the sterling and deutschemark exchange markets abstract the assumption that the foreign exchange market is efficient that is that agents are risk neutral and use all available information rationally so that the forward exchange rate is an unbiased predictor of the future spot rate is a property often imposed in theoretical international macroeconomic models although a vast empirical literature has evolved to test market efficiency we use recent developments in the theory of cointegration to provide new methods of testing several aspects of foreign exchange market efficiency we ffind evidence inconsistent with market efficiency for both germany and the united kingdom

minimum wage exports and growth abstract using an endogenous growth model in an open economy we study the impact of minimum wages on growth for an innovator country we state that a minimum wage shifts efforts from production to r d but only in an open economy thus it speeds up long run growth in proportional to exports calibrations suggest the growth surplus can be significant an empirical study on 11 oecd countries illustrates these results the impact on welfare is ambiguous because the minimum wage induces unemployment however we show that in an open economy a minimum wage associated with unemployment benefits can pareto dominate laissez faire

disentangling the minimum wage puzzle an analysis of worker accessions and separations changes in the legislation in the mid 1980s in portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages as the minimum wage increased sharply for a very specific group of workers relying on a matched employer employee panel data set we model gross worker flows accessions and separations in continuing firms as well as in new firms and those going out of business using a count regression model applied to proportions employment trends for teenagers the affected group are contrasted to those of older workers before and after the raise in the youth minimum wage the major effect on teenagers of a rising minimum wage has been the reduction of separations from the employer which during the period under analysis has compensated for the reduction of accessions to new and continuing firms in this sense our results can reconcile some of the previous evidence in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow jel d21 j23 j38

uk wage underpayment implications for the minimum wage dynamic monopsony suggests that due to labour market frictions workers will be paid below their productivity this paper uses the stochastic frontier technique to estimate the degree of this underpayment for uk employees it finds evidence of significant underpayment the estimates are used to examine whether the predictions of dynamic monopsony are empirically accurate no conclusive evidence against this theoretical framework is found the paper also investigates whether payment according to productivity is a sufficient condition for the elimination of the working poor problem due to the existence of an unemployment barrier it finds that the minimum wage is not an effective anti poverty policy

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

employment and the introduction of a minimum wage in britain there has been and will continue to be a lot of controversy regarding the introduction of a minimum wage in britain much has been said about the economic effects of a minimum wage about the level at which it should or could be set about how other workers would be affected and about how a minimum wage may interact with the benefit system as the labour or liberal democrat parties will if they win the next election introduce a minimum wage it is evident that a clear and informed discussion of the economic effects is important most of the existing debate has concentrated on its impact on jobs and here the discussion varies from pure ideology to consideration of the statistical evidence the former is typified by the comments of a number of government ministers a recent example is that by ian lang the independent i3 september i995 who said that a minimum wage set at f4 i5 an hour would cost at least 950 000 jobs this comes from assuming large knock on effects from a minimum wage by asserting that the average worker would claim a pay increase of half the magnitude of the increase received by low paid workers when their pay is raised to the minimum and then that this wage increase has to transmit into job loss the qualitative prediction of job loss is of course entirely in line with orthodox models of the labour market which unambiguously predict that increases in minimum wages price workers out of jobs 1 it is also in line with the sentiments outlined in the recent oecd jobs study of i994 which stresses that minimum wages cause job loss in the member countries for example the jobs study argues that governments should ensure sufficient differentiation in wage rates by age and region to prevent the minimum wage from harming employment prospects for young people or low productivity regions oecd jobs study p 46 however a more recent body of work questions this conventional view quite a lot of empirical evidence has been accumulated in recent years that fails to find any evidence ofjob loss associated with minimum wages the emphasis seems to have shifted from how negative are the employment effects to is there an employment effect and in some circles what potential is there for a positive effect after a brief review of the history of minimum wages in britain we discuss this recent work in the next section of the paper on the

product market evidence on the employment effects of the minimum wage we infer the employment response to a minimum wage change by calibrating a model of employment for the restaurant industry whereas perfect competition implies that employment falls and prices rise after a minimum wage increase the monopsony model potentially implies the opposite we show that estimated price responses are consistent with the competitive model we place fairly tight bounds on the employment response with the most plausible parameter values suggesting that a 10 increase in the minimum wage lowers low skill employment by 2 4 and total restaurant employment by 1 3

managers earnings forecasts and intra industry information transfers abstract the effect that voluntarily disclosed managers earnings forecasts have on the security prices of the announcing firms and other firms in the same industry is examined the results are consistent with information content in managers forecasts and with information transfer between forecast firms and other firms in the industry these inferences are drawn from firms abnormal returns computed from single and two index pricing models where the latter includes market and industry indexes interestingly while a positive information transfer is evident with market model residuals once industry cross sectional covariation in firms returns is removed no directional relation is apparent

the relative adjustment of wages and prices direct tests within a multiple equation system in order to assess the relative rigidity of the aggregate price level and the nominal wage rate most researchers have focused on the implied behaviour of the real wage rate in response to a purely demand disturbance the present work examines the explicit behaviour of the two variables and is therefore able to analyse the variables short run responses within the context of their defined long run behaviour while the paper reports evidence of long run stability in the real wage rate additional evidence is presented which supports both sticky price and sticky wage models the determining factor is the choice of lag

low pay and income in urban and rural areas evidence from the british household panel survey this paper examines the extent of urban rural differences in low pay and the link between low pay and low incomes using data on urban and rural residents from the british household panel survey for 1991 98 the results suggest that overall urban wages were significantly less than accessible rural but significantly more than remote rural wages even after adjustments were made for differences in observed characteristics a lower percentage of urban workers who experienced low pay were also resident in low income households lower urban in employment and in self employment poverty were found relative to poor remote rural households even after differences in the characteristics across the different samples were controlled for

are foreign exchange forecasts rational new evidence from survey data abstract tests of rationality in foreign exchange markets have been inconclusive because of disagreement over the relevant asset pricing model this paper uses a newly available set of data on foreign exchange expectations to directly test the rationality of four foreign currency markets overall the results reject the rational expectations hypothesis

the effect of three mile island on electric utility stock prices a note the impact of events on the time series properties of common stock returns has been the subject of numerous articles in the finance literature most studies have shown that capital markets are highly efficient in the sense that prices quickly adjust to publicly available information as investors act to receive a return commensurate with the level of perceived risk this note examines the effect on the stock returns of public utility firms of the three mile island tmi nuclear accident in stock valuation models based on investor rationality permanent price declines are brought about either by a decline in expected cash flows or by an increase in the rate used to discount future cash flows such a nuclear accident may directly affect investors perceptions of both the expected cash flows of utilities and their risk these future cash flows are affected because a nuclear accident may cause additional costs due to extended shutdowns or abandonment of nuclear plants expenses of responding to a nuclear accident and costs of purchasing replacement power the response of utility returns to tmi is analyzed at three levels first the risk adjusted returns for the utility experiencing the nuclear accident general public utilities gpu are measured over monthly time periods surrounding tmi the same analysis is performed on an aggregate sample of electric utility firms to assess the direction and magnitude of tmi s impact on other firms in the industry lastly the sample is divided into utilities with significant nuclear generating capacity at the time of tmi and utilities with no nuclear generating capacity so that the differential impact of the nuclear accident on nuclear and non nuclear public utilities may be assessed both a single and two index market model are used to estimate risk adjusted returns the latter index model includes an interest rate index as well as an equity market index

rationality of survey data and tests for market efficiency in the foreign exchange markets abstract this paper tests the rational expectations hypothesis reh and the market efficiency hypothesis meh in the foreign exchange markets using survey data on expectations our results show that the spot exchange rates expected exchange rates and the forward rates all follow a random walk process hence the cointegration theory is employed to test the reh and meh all the test statistics support the reh but fail to support the meh we use survey data on expectations to identify the causes behind this failure of the meh jel f31 g14

a note on reit bankruptcy and intraindustry information transfers an empirical analysis abstract this paper examines the capital market response to the bankruptcy of residential resources res res a real estate investment trust reit we find a significant event day value decline for a broad portfolio of reits reits whose portfolios are most similar to res res experienced both a significant value decline and an increase in bankruptcy risk on the event day reits with dissimilar portfolios experienced neither of these effects among the reits with similar portfolios to res res leverage ratios explain 84 of the event day value declines our findings suggest that ignoring intraindustry firm differences can lead to spurious conclusions

a note on the rationality of survey inflation expectations in the united kingdom when actual and expected inflation rates are integrated process the rational expectations assumption involves a particular cointegrating relationship between them this makes it possible to test the rationality hypothesis using error correction formulations by using these cointegration and error correction techniques unbiasedness and weak form efficiency cannot be rejected on survey inflation expectations from british manufacturing industries

intraindustry information transfers associated with management forecasts of earnings this study documents information transfers associated with the sign and magnitude of the changes in earnings expectations conveyed by management forecasts that is the management forecast of one firm discloser generates unexpected price reactions for firms nondisclosers similar to the forecaster the results are consistent with information transfers documented for releases of actual earnings foster 1981 and sales announcements olsen and dietrich 1985 1 these results build on prior management forecast research that has documented a link between the sign and magnitude of the changes in earnings expectations conveyed by management forecasts and the unexpected share returns price reactions of forecasting firms ajinkya and

on the restricted cointegration test as a test of the rational expectations hypothesis one of the main consequences of the cointegration revolution on the domain of the direct tests of the rational expectations hypothesis reh was the substitution of the restricted cointegration test rct for the unbiasedness test however the results of a monte carlo study show that a simple t test can be much more powerful than the rct it is argued that the rct is adequate to investigate the asymptotic rationality but that it is not sufficient to assess the muthian rationality of expectations the discussion is empirically illustrated with the test of the reh for the portuguese retail trade inflation expectations

testing the hypothesis of market efficiency in the taiwan us forward exchange market since 1990 this article examines the applicability of the hypothesis of market efficiency in taiwan s foreign exchange market using daily data instead of linear regression based models we consider the possibility that the true data generating process may come from two different distributions and we employ the markov switching approach to analyse this from the results of the two state markov switching model we define state 1 as the efficient state and state 2 as the inefficient one only the 30 day forward rate is able to differentiate between the two states based on the unconditional probabilities from the markov switching model we also find that the 30 day forward rate has a 70 probability in the efficient state which indicates that 70 of all speculators fully extract information when predicting future spot rates while 30 of all investors do not

persistence in foreign exchange rates abstract this study examines the long run behavior of seven daily nominal exchange rates using univariate and multivariate persistence measures our results indicate that for some currencies the long run behavior deviates from that of a pure random walk in certain periods the multivariate estimates reflect the effect of both the ems exchange rate mechanism and increased post louvre accord coordinated intervention a large portion of the effect of a shock in one currency on another currency s long run value can be attributed to contemporaneous effects on the other currencies

intra industry information transfers associated with earnings releases abstract the impact that a firm s earnings releases have on the stock prices of other firms in its industry is examined for an identifiable sub set of firms the results are consistent with a significant information transfer occurring between the earnings release firm and the other firms in its industry this subset is identified by examining the impact of the release on the stock price of the announcing firm the magnitude of this impact is more significant for a sample of firms which have a larger percentage of their revenues in the same line of business as the earnings release firm vis a vis a sample with a lower percentage of their revenues from the same line of business alternative interpretations of the empirical results are also discussed the research findings have implications for information content and market efficiency research and for research on policy issues associated with disclosure regulation

what do economists know an empirical study of experts expectations for more than three decades economic columnist joseph a livingston has canvassed a panel of economists twice a year eliciting their six month and twelve month forecasts for more than a dozen key variables this study analyzes whether the experts predictions are unbiased and whether complete use was made of all relevant known information unbiasedness and completeness being necessary conditions for fully rational expectations little bias was found in either the half year or full year predictions but extensive underutilization of information particularly data on monetary growth occurred to prophecy is extremely difficult especially with respect to the future chinese proverb do economists expectations regarding key price and nonprice variables utilize all known relevant information in an unbiased efficient manner this is a worthy subject for research for several reasons properties of experts predictions likely form an upper bound for those of laymen further as john muth 14 has noted the character of dynamic processes is typically very sensitive to the way expectations are influenced by the actual course of events p 316 hence we need to know precisely how events do affect expectations finally the common practice of replacing a variable s generally unobserved expectation with a proxy based on its past values will be unbiased and will not cause bias in other

intra industry information releases a recursive systems approach abstract this paper investigates the extent of intra industry information transfers associated with the half yearly earnings announcements of a sample of australian firms the omitted factor interpretation of foster s 1981 results is examined using a recursive systems specification of the return generating process to model extra market return covariation in cross section although some aspects of the results do appear sensitive to the alternative methodologies the overall conclusion is consistent with foster 1981 and supports the existence of intra industry information transfers associated with firms earnings releases

econometric modelling of non ferrous metal prices abstract this article evaluates the significance of the empirical models and the distributional properties of prices in non ferrous metal spots and futures markets published in leading refereed economics and finance journals between 1980 and 2002 the survey focuses on econometric analyses of pricing and return models applied to exchange based spot and futures markets for the main industrially used non ferrous metals namely aluminium copper lead nickel tin and zinc published empirical research is evaluated in the light of the type of contract examined frequency of data used choice of both dependent and explanatory variables use of proxy variables type of model chosen economic hypotheses tested methods of estimation and calculation of ses for inference reported descriptive statistics use of diagnostic tests of auxiliary assumptions use of nested and non nested tests use of information criteria and empirical implications for non ferrous metals

comment on david neumark and william wascher employment effects of minimum and subminimum wages panel data on state minimum wage laws in their article published in the minimum wage research symposium in the october 1992 issue of this journal industrial and laborrelations review volume 45 number 1 pp 55 81 david neumark and william wascher claim to find empirical support for three propositions 1 a higher minimum wage leads to a lower teenage employmentpopulation rate 2 the effect of the minimum wage on employment can be seen within a year but becomes stronger after two years and 3 in states with legal subminimum wages a significant fraction of teenage employees are paid a subminimum wage and the availability of a subminimum wage blunts the disemployment effect of the minimum wage the same symposium contains three papers by us that present empirical evidence suggesting conclusions opposite those of neumark and wascher 1 since neumark and