intertemporal labor supply and human capital accumulation we solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption and that allows for both human capital accumulation and savings estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than the conventional estimates and the downward bias comes from the omission of the human capital accumulation effect the human capital accumulation effect renders the life cycle path of the shadow wage relatively flat even though wages increase with age hence a rather flat life cycle labor supply path can be reconciled with a high intertemporal elasticity of substitution

taxes benefits and careers complete versus incomplete markets abstract an incomplete market life cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non employment benefits we compare aggregate and individual outcomes in this individualistic incomplete market model with those in a comparable collectivist representative family model with employment lotteries and complete insurance markets the incomplete and complete market structures assign leisure to different types of individuals who are distinguished by their human capital and age these microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non employment benefits but remarkably not to labor tax changes

a joint dynamic model of fertility and work of married women this article estimates a dynamic model of fertility and labor supply of married women drawn from the national longitudinal survey of young women 1968 91 it distinguishes part time and full time employment sectors which differ by pecuniary and nonpecuniary returns and transferability of human capital the model with unobserved heterogeneity in earning ability and preferences for children fits the data and produces reasonable forecasts of labor force participation in decisions the estimates unpack important features of the persistence in labor market decisions intertemporal substitution of leisure over the life cycle and the effect of work interruptions due to childbirth on lifetime utility

why do monetary policies matter an experimental study of saving and inflation in an overlapping generations model we study experiments of an overlapping generations model where inflation is determined by the monetary policy and by the amount of average saving within each period we use a new experimental setup that allows us to observe more details of the process of expectation forming and separate this process from the actual saving process in contrast to experimental findings by lim prescott sunder marimon spear sunder and marimon sunder we find that 1 agents do not form first order adaptive expectations 2 subjects over save for precautionary reasons as a result 3 the so called friedman conjecture holds i e monetary policies which are equivalent in static equilibrium exhibit different levels and different volatility of inflation in the experiment this may generate important policy trade offs between monetary regimes we discuss our findings and relate them to current research on adaptive learning and the role it may have in ranking alternative monetary policies

the effect of work experience on female wages and labour supply this paper develops and implements a semiparametric estimator for investigating with panel data the importance of human capital and time nonseparable preferences to females when aggregate shocks are present it provides a set of conditions for making statistical inferences about agents expectations of their correlated future choices from a short panel under the assumption that observed allocations are pareto optimal a dynamic model of female labour supply and participation is estimated in which experience on the job raises future wages and time spent off the job in the past directly affects current utility or indirectly through productivity in the nonmarket sector

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

micro and macro labor supply elasticities a reassessment of conventional wisdom the response of aggregate labor supply to various changes in the economic environ ment is central to many economic issues especially the optimal design of tax policies conventional wisdom based on studies in the 1980s and 1990s has long held that the analysis of micro data leads one to conclude that aggregate labor supply elasticities are quite small in this paper we argue that this conventional wisdom does not hold up to empirically reasonable and relevant extensions of simple life cycle models that served as the basis for these conclusions in particular we show that several pieces of conventional wisdom fail in the presence of human capital accumulation or labor supply decisions that allow for adjustment along both the extensive and intensive margin we conclude that previous estimates of small labor supply elasticities based on micro data are fully consistent with large aggregate labor supply elasticities jel d91 e24 j22

a strategy experiment in dynamic asset pricing this study presents a strategy experiment in a simple dynamic asset pricing model where the current market equilibrium asset price is determined by aggregated individual expectations of next period s price after participating in an introductory laboratory experiment on expectation formation participants formulate a complete forecasting strategy these strategies are programmed and markets are simulated participants receive feedback from the results of these simulations and can adapt their strategy four rounds are played and the entire experiment lasts eight weeks a final laboratory experiment compares predictions of participants with the predictions of the submitted strategy we find that most of the participants submit complicated strategies and that strategies become more complicated over the rounds most markets converge to a steady state price only after many periods if at all the number of converging price sequences increases over the rounds these results suggest in general slow convergence and learning of the subjects over the rounds even in a stationary environment learning the correct fundamental price level turns out to be difficult an important part of the non convergence seems to be caused not by individual strategies but by the interaction of several strategies from the final experiment we conclude that the strategies are a good representation of what participants do in a laboratory experiment

experimental evidence on the persistence of output and inflation this article presents experimental evidence from a monetary sticky price economy in which output and inflation depend on expected future inflation rational inflation expectations do not allow for persistent deviations of output and inflation following a monetary shock in the experimental sessions however output and inflation display considerable persistence and regular cyclical patterns

nonexpert beliefs about the macroeconomic consequences of economic and noneconomic events economists assume that individuals think about the economy like economists which is especially important in all rational expectations and economic voting models despite contrasting evidence there has been little research on actual nonexpert macroeconomic beliefs in this paper i present the results of a survey among students designed to find out whether they distinguish macroeconomically relevant from irrelevant events i find that even people with some economic background tend to overestimate the effects of noneconomic events this bias is a function of gender economic training and the preferred means of mass communication

does the choice of consumption measure matter an application to the permanent income hypothesis abstract food consumption in the panel study of income dynamics is used as a proxy for total consumption in many applications in economics including tests of the permanent income hypothesis tests of separability between consumption and leisure and tests of intergenerational altruism food however explains only a small fraction of the variation in total consumption i propose a measure of composite consumption based on predicted wealth and compare it both to food consumption and to skinner s 1987 measure of predicted consumption in a test of the permanent income hypothesis using a log linear intertemporal consumption function i find that food does not reject the permanent income hypothesis but both skinner s predicted consumption and the composite measure proposed here to reject the hypothesis

animal spirits heterogeneous expectations and the amplification and duration of crises we introduce a simple equilibrium model of a market for loans households lend to firms and form expectations about their loan default probability under heterogeneous expectations with switching between forecasting strategies driven by reinforcement learning even a small fraction of pessimistic traders has a large aggregate effect causing a heterogeneous expectations risk premium i e significantly higher contract rates for loans and significantly lower output our stylized model illustrates how animal spirits and heterogeneous expectations may lead to aconfidence loss and to financial instability amplifying the magnitude of economic crises and slowing down recovery

business cycle fluctuations and the life cycle how important is on the job skill accumulation abstract we study the effects of on the job skill accumulation on average hours worked by age and the volatility of hours over the life cycle in a calibrated general equilibrium model two forms of skill accumulation are considered learning by doing and on the job training in our economy with learning by doing individuals supply more labor early in the life cycle and less as they approach retirement than they do in an economy without this feature the impact of this feature on the volatility of hours over the life cycle depends on the value of the intertemporal elasticity of labor supply when individuals accumulate skills by on the job training there are only weak effects on both the steady state labor supply and its volatility over the life cycle

co op advertising models in manufacturer retailer supply chains a game theory approach abstract in the literature of cooperative co op advertising the focus of research is on a relationship in which a manufacturer is the leader and retailers are followers this relationship implies the dominance of the manufacturer over retailers recent market structure reviews have shown a shift of retailing power from manufacturers to retailers retailers have equal or even greater power than a manufacturer when it comes to retailing based on this new market phenomenon we intend to explore the role of vertical co op advertising efficiency with respect to transactions between a manufacturer and a retailer through brand name investments local advertising expenditures and sharing rules of advertising expenses three co op advertising models are discussed which are based on two noncooperative games and one cooperative game in a leader follower noncooperative game the manufacturer is assumed to be a leader who first specifies the brand name investment and the co op subsidization policy the retailer as a follower then decides on the local advertising level in a noncooperative simultaneous move game the manufacturer and the retailer are assumed to act simultaneously and independently in a cooperative game the system profit is maximized for every pareto efficient co op advertising scheme but not for any other schemes all pareto efficient co op advertising schemes are associated with a single local advertising level and a single brand name investment level but with variable sharing policies of advertising expenses the best pareto efficient advertising scheme is obtained taking members risk attitudes into account utilizing the nash bargaining model we discuss two situations that a both members are risk averse and b both members are risk neutral our results are consistent with the bargaining literature

assessing the profitability of cooperative advertising programs in competing channels abstract a large literature studied the profitability effectiveness of cooperative advertising programs caps in distribution channels but very few studies modeled pricing decisions in competitive markets under different channel structures this paper fills this gap we propose a game theoretic model where two competing channels make pricing and promotional decisions the effectiveness of caps is studied under different channel structures to examine how vertical and horizontal externalities can impact the effectiveness of caps each channel structure can be integrated or decentralized to account for different vertical interaction effects resulting in three cases i both channels are decentralized dd ii both are integrated ii and iii a hybrid structure where one channel is decentralized and is competing with an integrated channel di we solve six non cooperative games 1 both manufacturers offer caps under dd 2 only one manufacturer offers a cap under dd 3 both manufacturers do not offer caps under dd 4 the decentralized manufacturer offers a cap under di 5 the decentralized manufacturer does not offer a cap under di and 6 the channel problem under ii then we obtain and compare equilibrium profits and strategies across these games the main results indicate that the profitability of caps depends on the levels of price competition and of the advertising effects also while manufacturers benefit from caps retailers may not find such programs profitable finally the decentralized or integrated structure of the competing channel significantly impacts the effects of cooperative advertising for example caps can effectively coordinate the dd channel and even help it exceed profits earned by a vertically integrated channel however in the di case although caps can improve total channel profits they do not fully coordinate the channel

intertemporal labour supply with search frictions starting in the 1970 s wage inequality and the number of hours worked by employed u s prime age male workers have both increased we argue that these two facts are related we use a labour market model with on the job search where by working longer hours individuals acquire greater skills since job candidates are ranked by productivity greater skills not only increase worker s productivity in the current job but also help the worker to obtain better jobs when job offers become more dispersed wage inequality increases and workers work longer hours to obtain better jobs as a result average hours per worker in the economy increase this mechanism accounts for around two thirds of the increase in hours observed in data part of the increase is inefficient since workers obtain better jobs at the expense of other workers competing for the same jobs copyright oxford university press

do fiscal variables affect fiscal expectations experiments with real world and lab data we generate observable expectations about fiscal variables through laboratory experiments using real world data from several european countries as stimuli we compare a var model of expectations for data which is presented in a fiscal frame with one for neutrally presented data we measure the degree to which participants use fiscal data for their forecasts agents expectations are found neither to be consistent with rational nor with purely adaptive expectations but instead follow an augmented adaptive scheme methodological implications of the present approach for experiments in macroeconomics are also discussed

expectations and bubbles in asset pricing experiments abstract we present results on expectation formation in a controlled experimental environment in each period subjects are asked to predict the next price of a risky asset the realized market price is derived from an unknown market equilibrium equation with feedback from individual forecasts in most experiments prices deviate from the benchmark fundamental and bubbles emerge endogenously these bubbles are inconsistent with rational expectations and seem to be driven by trend chasing behavior or positive feedback expectations of the participants we also analyze individual predictions of participants and find that participants within a group tend to coordinate on a common prediction strategy

effects of permanent and transitory tax changes in a life cycle labor supply model with human capital i examine effects of labor income taxation in life cycle models with human capital accumulation in this case the opportunity cost of time equals the wage plus returns to work experience this has several interesting consequences first the data appear consistent with larger labor supply elasticities than prior work suggests second contrary to conventional wisdom permanent tax changes can have larger effects on current labor supply than temporary changes third human capital dampens responses of young workers to transitory tax changes fourth labor supply elasticities increase with age fifth human capital amplifies the effect of permanent tax changes in the long run

structural analysis of manufacturer pricing in the presence of a strategic retailer consumer goods manufacturers usually sell their brands to consumers through common independent retailers theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer retailer interaction vertical strategic interaction research in empirical industrial organization has focused on analyzing the competitive interactions between manufacturers horizontal strategic interaction decision support systems have made various assumptions about retailer pricing rules e g constant markup category profit maximization the appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question this paper therefore empirically infers 1 the vertical strategic interaction vsi between manufacturers and retailer 2 the horizontal strategic interaction hsi between manufacturers simultaneously with the vsi and 3 the pricing rule used by a retailer the approach is particularly appealing because it can be used with widely available scanner data where there is no information on wholesale prices researchers usually have no access to wholesale prices even manufacturers who have access to their own wholesale prices usually have limited information on competitors wholesale prices in the absence of wholesale prices we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules we then embed the formulae for wholesale prices into the estimation equations while our empirical illustration is using scanner data without wholesale prices the model itself can be applied when wholesale prices are available early research on the inference of hsi among manufacturers in setting wholesale prices using scanner data e g kadiyali et al 1996 1999 made the simplifying assumption that retailers charge a constant margin this assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers in this paper we show that this model is econometrically identical to a model that measures retail price coordination across brands hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing category management done by the retailer we find empirical support for this argument this highlights the need to properly model and infer vsi simultaneously to accurately estimate the hsi when using data at the retail level functional forms of demand have been evaluated in terms of the fit of the model to sales data but recent theoretical research on channels lee and staelin 1997 tyagi 1999 has shown that the functional form has serious implications for strategic behavior such as retail passthrough while the logit and linear model implies equilibrium passthrough of less than 100 lee and staelin call this vertical strategic substitute vss the multiplicative model implies optimal passthrough of greater than 100 vertical strategic complement vsc because passthrough rates on promotions have been found to be below or above 100 chevalier and curhan 1976 armstrong 1991 we empirically test the appropriateness of the logit vss and the multiplicative vsc functional form for the data we perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market we found that the vss implications of the logit fit the data better than the multiplicative model we also find that for both categories the best fitting model is one in which 1 the retailer maximizes category profits 2 the vsi is manufacturer stackelberg and 3 manufacturer pricing hsi is tacitly collusive the fact that the retailer maximizes category profits is consistent with theoretical expectations the inference that the vsi is manufacturer stackelberg reflects the institutional reality of the timing of the game retailers set their retail prices after manufacturers set their wholesale prices note that in the stores and product categories that we analyze the two manufacturers own the dominant brands with combined market shares of about 82 in the yogurt market and 65 in the peanut butter market the result is also consistent with a balance of power argument in the literature the finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long term competition in concentrated markets can achieve tacit collusion managers use decision support systems for promotion planning that routinely make assumptions about vsi hsi and the functional form the results from our analysis are of substantive import in judging the appropriateness of assumptions made in such decision support systems

life cycle labor supply with human capital accumulation a dynamic model of labor supply under uncertainty with endogenous human capital accumulation is developed and estimated using 1968 81 panel study of income dynamics male panel data given a learning by doing technology for human capital investment and a translog utility function structural parameters for preferences and technology are estimated from the orthogonality conditions implied by the euler equations assuming rational expectations the parameter estimates conform to economic theory simulations of the model suggest that the intertemporal labor supply elasticity with endogenous wages will rise over the lifecycle producing different policy implications than typical models with exogenous wages and constant intertemporal elasticities copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

intertemporal preferences and labor supply in this paper the authors examine whether nonseparable preference structures ar e important in characterizing life cycle labor supply using longitud inal data on prime age males from the panel study of income dynamics they estimate a model of life cycle leisure and consumption under un certainty in which intertemporal preferences are allowed to be nonsep arable in leisure the model tests several alternative specifications considered in the literature they investigate the robustness of the ir findings to certain forms of population heterogeneity and types of model misspecification across alternative specifications the autho rs find that the standard assumption of intertemporally separable pre ferences for leisure is not consistent with the data copyright 1988 by the econometric society

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

life cycle labour supply with human capital econometric and behavioural implications i examine econometric and behavioural implications of including human capital in the life cycle labour supply model with human capital the wage is no longer the price of time which is instead the wage plus returns to work experience this has important implications first labour supply elasticities become functions of both preference and wage process parameters one cannot estimate them separately second the data appear consistent with larger elasticities than prior work suggests third contrary to conventional wisdom permanent tax changes can have larger effects on current labour supply than temporary changes fourth effects of permanent tax changes grow over time

household choices in equilibrium this paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply it exploits a simple factor structure rationalized by two assumptions that household allocations are pareto optimal and that the labor market is competitive the paper estimates household preferences and tests how well this parsimonious factor structure represents panel data on married couples and time series data on asset returns most of the estimates are roughly comparable to those found in previous work no evidence against the simple factor representation is found and the intertemporal capital asset pricing model is not rejected copyright 1990 by the econometric society

individual expectations limited rationality and aggregate outcomes recent studies suggest that the type of strategic environment or expectation feedback can have a large impact on whether the market can learn the rational fundamental price we present an experiment where the fundamental price experiences large unexpected shocks markets with negative expectation feedback strategic substitutes quickly converge to the new fundamental while markets with positive expectation feedback strategic complements do not converge but show underreaction in the short run and overreaction in the long run a simple evolutionary selection model of individual learning explains these differences in aggregate outcomes

cooperative advertising models in supply chain management a review this paper reviews articles on cooperative advertising a topic which has gained substantial interest in recent years thereby we first briefly distinguish five different definitions of cooperative advertising which can be found in operations research literature after that we concentrate on vertical cooperative advertising which is the most common object of investigation it is understood as a financial agreement where a manufacturer offers to pay a certain share of his retailer s advertising expenditures in total we identified 58 scientific papers considering mathematical modeling of vertical cooperative advertising these articles are then analyzed with regard to their general model setting e g the underlying supply chain structure and design of the cooperative advertising program after that we explain the different demand and cost functions that are employed whereupon we distinguish between static and dynamic models the last dimension of our review is dedicated to the game theoretic concepts which are mostly used to reflect different forms of distribution of power within the channel

the effect of income taxation on consumption and labor supply we estimate the incentive effects of income taxation in a life cycle model of consumption and labor supply without intratemporal strong separability we find that consumption and hours worked are direct complements in utility both increase with a compensated increase in the net wage the compensated net wage elasticity is about 0 3 nearly double estimates for u s men from a linear labor supply specification estimated intertemporal elasticities indicate significant intertemporal smoothing of utility the estimated marginal welfare cost of government revenue is 6 20 which is about half the estimated welfare cost when additivity between consumption and leisure is incorrectly imposed

female labour supply human capital and welfare reform we estimate a dynamic model of employment human capital accumulation including education and savings for women in the united kingdom exploiting tax and benefit reforms and use it to analyze the effects of welfare policy we find substantial elasticities for labor supply and particularly for lone mothers returns to experience which are important in determining the longer term effects of policy increase with education but experience mainly accumulates when in full time employment tax credits are welfare improving in the u k increase lone mother labor supply and marginally reduce educational attainment but the employment effects do not extend beyond the period of eligibility marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts

information learning and expectations in an experimental model economy the experimental learning to forecast literature finds that subjects use simple linear backward looking models when forecasting in environments with little to no inout the economic framework we study the formation of expectations in a laboratory economy of monopolistic firms and labour unions with almost complete knowledge of the model we observe simple backward looking rules but also a considerable share of model based expectations using information on the economic structure at least for some subjects expectations are informed by theory as in the previous literature we find individual prediction rules to be heterogeneous

health human capital and life cycle labor supply we use new psid data on consumption and health along with information on annual sick time to estimate a structural labor supply model that incorporates a health capital stock with the traditional human capital learning by doing model the estimates show strong evidence of learning by doing as well as strong persistence in health however the estimates reveal that time and money seem to have little effect on health consistent with flat of the curve medicine we find strong evidence that consumption and leisure are direct substitutes in preferences and consumption and leisure are each utility complements with good health

tests of the rational expectations hypothesis this paper reviews evidence on the structure of anticipation from a number of empirical studies jack muth s rational expectations hypothesis is compared with a variety of alternative models including ferber s law the implicit expectations model of edwin mills and muth s new errors in the variables model the cumulative evidence is of such strength as to compel the suspension of belief in the concept of rational expectations this implies that it is a mistake to proceed under the maintained hypothesis that expectations are rational instead it is necessary to test the sensitivity of empirical and theoretical results to alternative assumptions about the structure by which anticipations are generated copyright 1986 by american economic association

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

patinkin on keynes and meltzer abstract don patinkin s discussion of alternative interpretations of keyne s general theory gave considerable weight to an author s motivation particularly mine patinkin also restates his view that the general theory offers a short run disequilibrium approach i suggest that textual interpretation in economics should not consider motives because better methods are available and are now used i propose three standards applying these standards i find little support for patinkin s interpretation of the general theory although my interpretation better meets the three standards i conclude that the general theory does not have a single correct interpretation