engineering robust instruments for gmm estimation of panel data regression models with errors in variables a note econometricians have long recognized the need to account in some way for measurement errors specification errors and endogeneity to ensure that the ordinary least squares estimator is consistent this article introduces a new generalized method of moments estimator that relies on robust instruments to estimate panel data regression models containing errors in variables we show how this gmm approach can be generalized for the panel data framework using higher moments and cumulants as instruments the new instruments engineered for greater robustness are proposed to tackle the pervasive problem of weak instruments

in search of smoking guns what makes income inequality vary over time in different countries we investigate the forces affecting the distribution of income by analyzing an unbalanced panel of information for 16 industrialized countries for the years 1966 through 1994 income inequality is measured with the gini coefficient of equivalent disposable income individuals are the unit of analysis the statistical analysis uses panel methods the results suggest that many factors affect the development of income inequality some factors are strictly economic a decreased industrial sector generally fosters inequality and some support is found for the view that increased trade of manufactured goods from developing countries is also a factor other forces are outside a strictly defined market sphere low inequality is found when a large proportion of the labor force belongs to a trade union and also when there is a large public sector in addition demographic circumstances are important since the proportion of the population under age 15 has a positive effect on inequality we find however no association between the unemployment rate and inequality

trade in fossil fuel deposits for preservation and strategic action abstract in the world economy with interdependent markets for fossil fuel deposits and extracted fossil fuel some coalition of countries may fight climate change by purchasing and preserving fossil fuel deposits which would be exploited otherwise assuming that deposits are traded on a market with a uniform price we find that the outcome is efficient if the coalition is a price taker in both markets but inefficient if it acts strategically in the deposit market but not in the fuel market or acts strategically in both markets the latter result demonstrates that harstad s 2012 theorem 1 efficiency despite strategic action result is not robust with respect to changes in the concepts of the deposit market and market or bargaining power in a simplified parametric version of the game a strategically acting coalition buys fewer deposits consumes more fuel and puts up with higher climate damage than in first best

fickle consumers durable goods and business cycles abstract this paper develops a three sector dynamic general equilibrium model with the specific aim of evaluating the role of consumer durables in the generation and propagation of business cycles the model displays indeterminacy at commonly considered realistic parameter restrictions and basically constant returns to scale if calibrated at modest increasing returns to scale the sunspots driven model version produces a close match to moments of aggregate u s data journal of economic literatureclassification numbers e00 e32

non uniformity of job matching in a transition economy a nonparametric analysis for the czech republic this study explores the properties and development of the matching technology in the czech republic during the transition to a market economy nonparametric additive modelling allows us to assess flexible functional forms which comprise for instance ces and trans log specifications this enables us to evaluate the matching process locally for each combination of unemployment and vacancies rather than being restricted to global coefficients special interest is devoted to analysis and economic determinants of regional variation in the returns to scale of the matching function non linearities are found in the partial adjustment process of unemployment outflows and a negative coefficient on vacancies in some years moreover increasing returns to scale in job matching are found locally returns to scale are found to be negatively correlated to the share in employment in services and to outmigration positively correlated to the employment share in industry the unemployment rate and various measures of ac

incomplete international cooperation to reduce co2 emissions alternative policies abstract as a first step toward a global treaty to control co2 emissions individual countries contemplate unilateral reductions in their fuel use such actions if significant would reduce world market fuel prices thereby stimulating fuel use elsewhere and causing problems for exporting countries possibly jeopardizing this policy initiative among the policy alternatives for mitigating the price effects of reduced demand reduced fuel consumption combined with buying or leasing fuel deposits to achieve a reduced supply is discussed in particular this policy which at first seems prohibitively costly is shown to dominate the original policy approach under a fairly wide set of circumstances

environmental management policy under international carbon leakage this article studies environmental management policy when two fossil fuel consuming countries noncooperatively regulate greenhouse gas emissions through emission taxes or quotas the presence of carbon leakage caused by fuel price changes affects the tax quota equivalence we explore each country s incentive to choose a policy instrument in a two stage policy choice game and find subgame perfect nash equilibria this sheds new light on the questions of which policy instrument is more stringent and of why adopted instruments could be different among countries in particular our result suggests a reason why developing countries tend to employ emission taxes whereas developed countries tend to adopt quotas

indeterminacy and sunspots with constant returns recently there has been a renewed interest in the possibility of indeterminacy and sunspots or alternatively put in the existence of a continuum of equilibria that arises in dynamic economies with some market imperfections much of the research in this area has been concerned with the empirical plausibility of indeterminacy in markets with external effects or with monopolistic competition and which exhibit some degree of increasing returns while the early results on indeterminacy relied on relatively large increasing returns and high markups more recently benhabib and farmer 1996a showed that indeterminacy can also occur in two sector models with small sector specific external effects and very mild increasing returns

was vietnam s economic growth in the 1990s pro poor an analysis of panel data from vietnam abstractinternational aid agencies and almost all economists agree that economic growth is necessary for reducing poverty yet some economists question whether it is sufficient for poverty reduction vietnam enjoyed rapid economic growth in the 1990s but a modest increase in inequality during that decade raises the possibility that the poor in vietnam benefited little from that growth this article examines the extent to which vietnam s economic growth has been pro poor giving particular attention to two issues the first is the appropriate comparison group when comparing the poorest x of the population at two points in time should the poorest x in the first time period be compared to the poorest x in the second time period some of whom were not the poorest x in the first time period or to the same people in the second time period some of whom are no longer among the poorest x the second is measurement error estimates of growth among the poorest x of the population are likely to be biase

national pro poor spending programmes and their effect on income inequality and poverty evidence from vietnam abstractthis article examines the causal effects of the national pro poor targeted programmes ntps on both poverty incidence and inequality in vietnam over the period 2002 2010 while the links between ntps and poverty alleviation and income inequality have previously been analysed independently this study is the first to offer a comprehensive analysis of ntps expenditure on poverty and inequality simultaneously applying the system generalized method of moments estimator to a panel of vietnamese regional data we are unable to establish that ntps have significantly mitigated poverty incidence however we estimate that ntps have significantly increased inequality we offer possible explanations why the ntps have resulted in these unintended outcomes and discuss potential policies which can reduce both poverty and inequality

supply side climate policy on the role of exploration and asymmetric information in the world economy with interdependent markets for fossil fuel deposits and extracted fossil fuel a coalition of countries may fight climate change by purchasing fossil fuel deposits for preservation harstad j polit econ 120 77 115 2012 has shown that the coalition s supply side climate policy implements the first best the present paper focuses on the role exploration and asymmetric information with respect to climate damage plays for the efficiency of unilateral supply side climate policy under the assumption of non strategic exploration and truthful reporting of climate damage the deposit policy turns out to be efficient if exploration is used strategically or the coalition misreports its climate damage however the deposit policy becomes inefficient

a refinement of the relationship between economic growth and income inequality there is mixed evidence in the literature of a clear relationship between income inequality and economic growth most of that work has focused almost exclusively on developed economies in what we believe to be a first effort our emphasis is solely on developing economics which we classify as high income and low income developing countries hidc and lidc we make such distinction on theoretical and empirical grounds empirically the world bank has classified developing economies in this manner since 1978 the data in our sample are also supportive of such classifications we provide theoretical scaffolding that uses asymmetric credit constraints as a premise for separating developing economies in such a way we find strong evidence of a negative relationship between income inequality and economic growth in lidc to be in stark contrast with a positive inequality growth relationship for hidc both correlations are statistically significant across multiple econometric specifications using international

programs for the poorest learning from the igvgd program in bangladesh abstract this article examines a program that seeks to reach bangladesh s hardcore poor by combining elements of livelihood protection food aid with livelihood promotion skills training and microfinance bangladesh rural advancement committee s income generation for vulnerable group development program has deepened the outreach of its poverty reduction activity and achieved impressive results detailed local level fieldwork revealed however that program practice differed markedly from program plans this is found to have important implications for both future program design and the understanding of who does not benefit from such innovative programs we conclude that while such programs mixing livelihood protection and promotion should be a major focus for anti poverty strategies there will remain a role for more traditional social welfare schemes

efficient climate policy in the presence of free riders abstract if all countries participate in a climate agreement policies affecting the supply of fossil fuels have identical economic consequences as policies affecting the demand of fossil fuels this is no longer true when there is limited participation in an international agreement in the paper it is assumed that a group of countries commit themselves to cooperating while the remaining countries act independently and in pure self interest the paper compares supply and demand policies in this context and demonstrates that policies which affect only demand or only supply of carbon generally are inferior to policies affecting both demand and supply of carbon the optimal mix of supply and demand policies is derived in the paper with particular emphasis on carbon taxes an important result is that if the marginal environmental costs of total emissions are sufficiently high in the cooperating countries then both production and consumption of carbon should be taxed at a positive rate if on the other hand the marginal environmental costs of total emissions are sufficiently low it may be optimal to subsidize production or consumption in this case production should be subsidized if the cooperating countries are net importers of carbon while consumption should be subsidized if the cooperating countries are net exporters of carbon another important conclusion of the paper is that the cooperating countries should try to induce the non cooperating countries through appropriate transfers to tax consumption and production of carbon at the same rate as in the cooperating countries

pollution content tariffs environmental rent shifting and the control of cross border pollution this paper considers the optimal unilateral policy for a country that imports a good from a neighbouring country and is harmed by pollution generated during the production of that good if the foreign country has a variable abatement technology then home has an incentive to impose a tax on the pollution content of imports a pollution content tariff foreign regulation of pollution does not eliminate home s incentives to intervene but instead may create rent shifting opportunities by making the right to pollute a scarce asset foreign pollution quotas create rents that the home government can try to extract

the role of intratemporal adjustment costs in a multisector economy abstract in this paper we construct a multisector business cycle model which is capable of reproducing the procyclical behavior of cross sector measures of capital employment and output we start by documenting the difficulty that a standard variant of a conventional real business cycle model has in accounting for these facts we then show how the introduction of intratemporal adjustment costs for investment can significantly enhance the performance of such a model these costs make it difficult to alter the composition of production of new capital goods the presence of these costs eliminates many counterfactual observations of the model that would otherwise be present the dynamic response of variables in the model is different from what one would observe in the standard one sector model we also examine the implications of imposing intratemporal adjustment costs for labor the model can also account for the cross sector behavior of employment observed in the data

buy coal a case for supply side environmental policy free riding is at the core of environmental problems if a climate coalition reduces its emissions world prices change and nonparticipants typically emit more they may also extract the dirtiest type of fossil fuel and invest too little in green technology the coalition s second best policy distorts trade and is not time consistent however suppose that the countries can trade the rights to exploit fossil fuel deposits as soon as the market clears the above mentioned problems vanish and the first best is implemented in short the coalition s best policy is to simply buy foreign deposits and conserve them

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

monopolistic competition business cycles and the composition of aggregate demand abstract we develop a dynamic general equilibrium model with monopolistically competitive firms and endogenous markups and show the possibility of equilibria with persistent fluctuations driven by self fulfilling revisions of expectations for some parameter values such fluctuations are characterized by time series properties similar to those observed in u s postwar business cycles in contrast with the existing literature our results do not rely on the presence of increasing returns or nominal rigidities a key ingredient of the model is the link between markups and the composition of aggregate demand some econometric evidence on the latter is also reported journal of economic literature classification number d43 d58 e32

corruption and the costs of redistribution micro evidence from indonesia this paper examines the degree to which the corruption in developing countries may impair the ability of governments to redistribute wealth among their citizens specifically i examine a large antipoverty program in indonesia that distributed subsidized rice to poor households i estimate the extent of corruption in the program by comparing administrative data on the amount of rice distributed with survey data on the amount actually received by households the central estimates suggest that on average at least 18 of the rice appears to have disappeared ethnically heterogeneous and sparsely populated areas are more likely to be missing rice using conservative assumptions for the marginal cost of public funds i estimate that the welfare losses from this corruption may have been large enough to offset the potential welfare gains from the redistributive intent of the program these findings suggest that corruption may impose substantial limitations on developing countries redistributive efforts and may help explain the low level of transfer programs in developing countries d 2005 elsevier b v all rights reserved

do supply curves slope up this paper examines the short run responses of price and quantity to exogenous demand shocks for disaggregated u s manufacturing industries using prior information on input output linkages to identify industries whose fluctuations are likely to function as approximately exogenous demand shocks for other industries i find that demand shocks induce positive covariation between price and quantity for 16 out of 26 sample industries controlling for observable cost shift variables when sample industries are pooled i estimate that a demand shock which initially raises industry output by 1 percent generates a price increase of 0 182 percent within one year i find that input output instruments detect upward sloping supply curves more readily than least squares or other commonly used demand shift instruments

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

the coase theorem is tautological incoherent or wrong the coase theorem is commonly understood to mean that costless bargaining ensures efficiency in the economy for any assignment of property rights the standard demonstration of the theorem suggests that costless bargaining ensures efficiency without an assignment of property rights 1998 elsevier science s a all rights reserved

opec unconventional oil and climate change on the importance of the order of extraction we show that opec s market power contributes to climate change by enabling producers of relatively expensive and dirty oil to start producing before opec reserves are depleted we examine the importance of this extraction sequence effect by calibrating and simulating a cartel fringe model of the global oil market while welfare net of climate damage under the cartel fringe equilibrium can be significantly lower than under a first best outcome almost the entire welfare loss is due to the sequence effect of opec s market power in our benchmark calibration the cost of the sequence effect amounts to 15 trillion us which corresponds to 97 percent of the welfare loss moreover we find that an increase in non opec oil reserves decreases global welfare in a counterfactual world without non opec oil global welfare would be 13 trillion us higher 10 trillion us of which is due to lower climate damages

growth inequality and poverty looking beyond averages the evidence is compelling that the poor in developing countries do typically share in the gains from rising aggregate affluence and in the losses from aggregate contraction but how much do poor people share in growth do they gain more in some settings than others do some gain while others lose does pro poor growth mean more or less aggregate growth recent theories and evidence suggest some answers but deeper microeconomic empirical work is needed on growth and distributed change only then will we have a firm basis for identifying the specific policies and programs needed to complement and possibly modify growth oriented policies

sources of ethnic inequality in vietnam vietnam s ethnic minorities who tend to live mostly in remote rural areas typically have lower living standards than the ethnic majority how much is this because of differences in economic characteristics such as education levels and land rather than low returns to characteristics is there a self reinforcing culture of poverty in the minority groups reflecting patterns of past discrimination the authors find that differences in levels of living are due in part to the fact that the minorities live in less productive areas characterized by difficult terrain poor infrastructure less access to off farm work and the market economy and inferior access to education geographic disparities tend to persist because of immobility and regional differences in living standards but the authors also find large differences within geographical areas even after controlling for household characteristics they find differences in returns to productive characteristics to be the most important explanation for ethnic inequality but the minorities do not obtain lower returns to all characteristics there is evidence of compensating behavior for example pure returns to location even in remote inhospitable areas tend to be higher for minorities though not high enough to overcome the large consumption difference with the majority the majority ethnic group s model of income generation is a poor guide on how to fight poverty among ethnic minority groups nor is it enough to target poor areas to redress ethnic inequality policies must be designed to reach minority households in poor areas and to explicitly recognize behavior patterns including compensating behavior that have served the minorities well in the short term but intensify ethnic inequalities in the longer term it will be important to open up options for minority groups both by ensuring that they are not disadvantaged in labor markets for example and by changing the conditions that have caused their isolation and social exclusion

indeterminacy home production and the business cycle a calibrated analysis abstract in this paper i present a business cycle model with one market sector that produces a standard good and another that produces a non market or home good the model can have multiple equilibria and therefore cycles driven only by self fulfilling expectations with low externalities to market production in particular an upward sloping aggregate labor demand as e g in farmer and guo j economic theory 63 1994 42 72 is not required for indeterminacy the effect of technology shocks is also studied in all cases the time series that are generated have properties that are comparable to the real us postwar series

cross border externalities and trade liberalization the strategic control of pollution the authors examine international trade in a commodity whose production creates a negative externality for the importing country and they consider the nations strategic policy choices when they can restrict trade and when they are bound by a free trade agreement when pollution abatement technology is available the exporting country induces its adoption despite national indifference to the externality in order to reduce the tariff in a free trade agreement environmental policy is used to exploit monopoly power in trade an alternative policy instrument a process standard is introduced national competition in controlling emissions leads to very restrictive antipollution measures we examine international trade in a commodity whose production creates a negative externality for the importing country and we consider the nations strategic policy choices when they can restrict trade and when they are bound by a free trade agreement when pollution abatement technology is available the exporting country induces its adoption despite national indifference to the externality in order to reduce the tariff in a free trade agreement environmental policy is used to exploit monopoly power in trade an alternative policy instrument a process standard is introduced national competition in controlling emissions leads to very restrictive anti pollution measures

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

a distributional argument for supply side climate policies this paper presents a distributional argument for the use of supply side climate policies whereby carbon emissions are controlled through i depletion quotas or ii permanent confiscation of a fraction of the in situ carbon stocks the modeling considers intertemporal competitive equilibria in the cobb douglas version of the dasgupta heal solow stiglitz model of capital accumulation and costless resource extraction it is shown how policies i and ii preserve the functional distribution of income between capital owners and resource owners compared to the case where no climate policy is needed while suggested demand side policies do not such observations are of interest as avoiding functional redistribution may facilitate climate change negotiations the paper discusses policy implications of the analysis outside the simplified setting of the stylized model

buy coal and act strategically on the fuel market abstract a coalition of given size fights climate change by a policy of purchasing fossil fuel deposits and it seeks to manipulate the fuel price in its favor assuming that non signatories are price takers in the fuel market harstad 2012 designs a policy of trading deposits that attains efficiency despite the coalition s option to act strategically in the fuel market the deposit transactions constituting that policy include the trade of deposits which the non signatories would have exploited and the coalition will exploit the present paper shows that in a proper subset of economies a simpler policy is also efficient that consists of deposit purchases for preservation only in these economies the coalition is unable to raise its welfare above the level in the benchmark case of fuel price taking in the economies where the efficient policy requires deposit transactions for exploitation the coalition is better off and the non signatories are worse off than in case of price taking

tracing externalities as sources of indeterminacy abstract this paper offers further inquiry into sources of indeterminacy in general equilibrium we take a more agnostic approach than previous work as we allow for a more general interpretation of externalities in particular we identify the origin of scale economies as being from either labor or capital we find that in the one sector model it is primarily the externalities associated with labor that generate the result however in the two sector model indeterminacy can be ultimately traced back to the externalities from capital in the investment sector

pro poor growth and sustainable development framework evidence from two step gmm estimator abstract the environmental sustainability agenda is not easy to be achieved without implementing pro growth and pro poor growth policies across the globe pakistan s economy is no exception that strive hard to managed environmental resource capital and pro poor growth expenditures in order to reduce poverty incidence and carbon mitigation policies while many efforts need more sustainable instruments to be achieved united nation s assigned sustainable development target till 2030 the study selected an annual time series data from 1975 to 2016 and employed two step generalized method of moments gmm estimator for robust inferences the results show that higher economic growth decreases poverty incidence through social reforms while deforestation under 5 mortality rate trade openness carbon emissions and fdi inflows largely increases poverty incidence in a country the study confirmed environmental kuznets curve ekc hypothesis of carbon emissions in relation of per capita income and public spending on education while pollution haven hypothesis is confirmed due to high involvement of dirty polluting industries in country s economic transformation process the fossil fuel combustion and high population density increases carbon emissions that sabotage the process of sustainable development in a country thus it is imperative to device sustainable policies for mitigating carbon fossil emissions with cleaner production techniques and improves the quality of life of poor people through increase social expenditures that trickle down to the poor as compared to the non poor

self enforcing environmental agreements and international trade abstract in the basic model of the literature on international environmental agreements ieas barrett 1994 rubio and ulph 2006 the number of signatories of self enforcing ieas does not exceed three if non positive emissions are ruled out we extend that model by introducing a composite consumer good and fossil fuel that are produced and consumed in each country and traded on world markets when signatory countries act as a stackelberg leader and emissions are positive the size of stable ieas may be significantly larger in our model with international trade this would be good news if larger self enforcing ieas would lead to stronger reductions of total emissions unfortunately in the presence of self enforcing ieas total emissions turn out to be only slightly less than in the business as usual scenario independent of the number of signatories we also investigate the role of international trade by comparing our free trade results with the outcome in the regime of autarky our autarky model turns out to be coincident with the basic model of the literature alluded to above we contribute to that literature by showing that in autarky the outcome of self enforcing ieas is also almost the same as in the business as usual scenario

how do income and education affect health inequality evidence from four developing countries using household survey data from four countries albania nepal tajikistan and tanzania this article calculates income related inequality in health care utilization we measure health disparity separately for generally and chronically ill individuals by constructing two models one for the probability of a visit to a physician and another for the number of visits following model based measurements we decompose inequality into two major parts one accounted for by identity related factors and another by socioeconomic and other factors such as education geography and distance to a clinic we propose a new method to quantify the effect of changes in income and education on health disparity one of our important findings suggests that health disparity is pro rich in all our sample countries the pro rich disparity is prevalent among generally ill as well as chronically ill patients in both visit probability and visit frequency models health inequality seems primarily driven by income differences foll

dynamics of income distribution in this paper we have obtained closed form solutions in cass koopmans growth models with heterogeneous agents the relationship between the form of the production function and the dynamics of income distribution is made explicit we then use this relationship to determine what production structure is simultaneously consistent with facts on growth and income inequality our empirical findings give support to models with decreasing returns in the reproducible factor jel classification d3 o1 o4 dans ce memoire les auteurs obtiennent des solutions pour des modeles de croissance a la cass koopmans dans le cas ou les agents sont heterogenes on explicite la relation entre la forme de la fonction de production et la dynamique de la repartition des revenus on utilise alors cette relation pour determiner quelle structure de production est arrimee aux faits connus a la fois quant a la croissance economique et a la repartition des revenus les resultats empiriques supportent les modeles ou les rendements sur les acteurs de production reproductibles sont decroissants

on the stability of the two sector neoclassical growth model with externalities we study a class of two sector growth models with sector specific externalities in which one sector produces consumption and the other sector produces investment the novelty is that investment allocated to the consumption sector is an imperfect substitute for investment allocated to the investment sector we show analytically that in this case local indeterminacy near the steady state is impossible for every empirically plausible specification of the model parameters more specifically we show that a necessary condition for local indeterminacy is an upward sloping aggregate labor demand curve in the investment sector which requires a counterfactual strength of the externality we show numerically that an elasticity of substitution of plausible size implies determinacy near the steady state these findings differ sharply from the standard result for two sector models that if the investments allocated to the two sectors are perfect substitutes then local indeterminacy occurs for a wide range of plausible parameter values