alternative approaches to money and growth this paper reexamines the issue of money and growth in an economy with both endogenous labor supply and endogenous capital stock using three recently developed approaches the money in the utility function approach the cash in advance approach and the transactions costs approach by establishing a qualitative equivalence between alternative setups the authors find economically justifiable conditions such that all comparative statics results derived from the aforementioned approaches are identical copyright 1992 by ohio state university press

campaign contributions and congressional voting a simultaneous probit tobit model m any citizens and scholars have been troubled by the influence that special interest groups appear to exert over policymaking as a result of their roles in the financing of political campaigns these concerns inspired the enactment of a number of election law reforms in the 1970s and have led to increasing popular support for public financing of electoral campaigns despite the public attention these issues have attracted few social scientists have attempted to analyze the financial relationships between interest groups and policymakers empirically 1 one such study was reported by durden and silberman 1976 who included contributions from the afl cio political action committee as an independent variable in an equation explaining congressional voting on minimum wage legislation their results indicated that campaign contributions significantly affected voting on that issue the work i have done differs substantially from that of durden and silberman in two ways first i have chosen to examine issues which were of considerably narrower concern than the minimum wage issue in the interest of simplicity i examine issues of concern to just one or a few groups i have also used a different econometric technique if campaign contributions are actually endogenous as seems plausible the single equation estimation technique employed by durden and silberman is subject to a possible simultaneous equations bias for each issue studied i have therefore jointly estimated a two equation system explaining both votes on the bill and contributions from an associated interest group the simultaneous probit tobit model which i use takes into account the dichotomous nature of the variable indicating a congressman s vote the non negativity constraint imposed on the contribution variable and the possibility of correlation between the error terms for the equations explaining these two variables 2 full information maximum likelihood fiml estimates for the model are consistent and asymptotically efficient

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

consumption in developing countries tests for liquidity constraints and finite horizons adjustment programs in developing countries emphasize the importance of reducing fiscal deficits in order to improve aggregate saving and investment performance recent theoretical analyses associated with the ricardian equivalence proposition however suggest that changes in the level of public sector saving may be offset by a change in private saving the empirical relevance of this proposition depends among other things on the length of consumers horizons and on the extent to which households are liquidity constrained empirical tests of a consumption model for a sample of developing economies do not support the equivalence propositions owing to the prevalence of liquidity constraints copyright 1989 by mit press

tariff jumping antidumping duties abstract this paper examines the tariff jumping response of all firm and product combinations subject to us antidumping investigations from 1980 to 1990 using a newly constructed database previous studies have focused only on japanese fdi responses to antidumping protection and found large tariff jumping responses in contrast this paper finds quite modest tariff jumping responses and the evidence suggests that tariff jumping is only a realistic option for multinational firms from industrialized countries this may partially explain developing countries concerns about addressing ad protection in the wto despite high tariff jumping responses there is no evidence of a japanese specific propensity to tariff jump holding other economic factors constant

inflation and growth impatience and a qualitative equivalence this paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money in utility function miuf and transactions costs tc models we establish a qualitative equivalence between the two models in a setup without a labor leisure tradeoff when the time preference is decreasing or increasing in consumption and real balances both the miuf and tc models are qualitatively equivalent in terms of predicting a negative or positive relationship between inflation and growth in a steady state both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature while a decreasing time preference in real balances corroborates with empirical evidence there is no evidence in support of an increasing time preference in real balances

foreign direct investment and the political economy of protection this paper makes the point that an import competing industry may not want maximal protection the reason is that a high level of protection encourages inward foreign direct investment which could be even less desirable than import competition a government captured by the domestic import competing industry consequently will set the level of protection low enough to limit direct foreign entry this paper also establishes results regarding the form of protection voluntary export restraints are shown to be the domestic industry s desired means of protection because leaving export rents with foreigners inhibits foreign direct investment

balanced growth consistent recursive utility abstract koopmans s recursive utility has proven useful in a number of dynamic modelling contexts nonetheless recursive utility has not made significant inroads into what one would expect to be a natural haven models of balanced growth whether exogenous or endogenous mainly this is due to the dearth of interesting recursive utilities which are consistent with balanced growth in this paper i provide conditions on the aggregator which guarantee the existence of a recursive utility function which is consistent with balanced growth the result in turn shows how a family of such utility functions may be constructed i also provide a generalization of jones and manuelli s theorem on the existence of optimal endogenous growth

tough love and intergenerational altruism tough love and intergenerational altruism this article develops and studies a tough love model of intergenerational altruism we model tough love by modifying the barro becker standard altruism model in two ways first the child s discount factor is endogenously determined so lower childhood consumption leads to a higher discount factor later in life second the parent evaluates the child s lifetime utility with a constant high discount factor our model predicts that parental transfers will fall when the child s discount factor falls this is in contrast with the standard altruism model which predicts that parental transfers are independent of exogenous changes in the child s discount factor

market incentives for safe commercial airline operation using a sample of nearly all fatal u s airline accidents between 1960 and 1985 this paper attempts to quantify the costs that airlines incur due to crashes the potential costs include those due to loss of life and equipment tort liability increased regulatory oversight and loss of demand as consumers turn away from products perceived to be unsafe examination of the deviations from expected demand following accidents reveals little or no effect prior to airline deregulation and weak indication of a response to recent crashes these results are consistent with the changes in an airline s equity value following an accident which are statistically significant but quite small relative to the total social cost of the accident

panel discussion price stability how should long term monetary policy be determined these comments address the question of monetary strategy as distinct from monetary tactics they are not directed at the question of what monetary policy is appropriate at the present time or of how monetary policy should be determined at any specific point as a function of prevailing conditions instead the issue i take is one that has been of increasing interest to economists in recent years what should be the long terrn objectives of the monetary authority increased interest in this issue as opposed to the issue of fine tuning the economy reflects the general intellectual consensus that has emerged on two points first what the monetary authority surely can control in the long run is the growth rate of nominal income second issues of dynamic consistency and commitment are crucial to the design of appropriate monetary policies beyond its recognition of these points my view is that most of what the academic economics community has had to say on the issue of long run monetary strategy has been tangential at best and i fear that many of the papers at this conference have not done much to improve the situation i wish to advance four propositions about monetary policy and to discuss their implications first an optimal tax theory has little or nothing to do with sensible inflation policy second positive rates of inflation are almost certainly desirable third to an important extent institutions do the work of rules and monetary rules should be avoided instead institutions should be drafted to solve time inconsistency problems fourth h j res 409 the proposed zero inflation amendment is a good idea if it is not taken too seriously or too literally but is instead viewed as a device for strengthening the independence of the federal reserve system my first proposition is that the connection between optimal tax theory and infla

voluntary export restraints on automobiles evaluating a trade policy the authors evaluate the voluntary export restraint that was initially placed on exports of automobiles from japan in 1981 they evaluate the impact this policy had on u s consumer welfare firm profits and foregone tariff revenue from its initiation through 1990

trade restraints and japanese direct investment flows abstract this paper analyses the factors determining the scale and location of japanese foreign direct investment fdi over the 1980s we use a pooled cross section time series annual data set covering investment in the individual ec countries and the united states our results suggest that controlling for market size and relative labour costs investment was significantly influenced by trade protection measures and in particular by the level of anti dumping actions initiated in the last decade an additional effect from the cost of finance in japan is found suggesting that the tightening of monetary policy in japan in 1989 90 contributed significantly to the observed slowdown in fdi in the early 1990s

foreign direct investment with unemployment and endogenous taxes and tariffs it is well known that high tariffs can induce foreign direct investment or tariff jumping this paper analyzes tariff jumping in the context of a host government which can set specific tariffs and taxes subject to the credibility constraint that the chosen levels be optimal once capital is irreversibly in place the foreign multinational is assumed to choose its location and level of investment strategically taking into account the induced tax and tariff levels in the presence of unemployment the optimal tariff exceeds the optimal tax for any given level of capital investment leading to foreign direct investment

money and votes reconsidered congressional elections 1972 1982 the evolution of congressional campaign finance over the past decade is characterized by steady growth in campaign spending and other notable changes in campaign finance practices the main purpose of the research reported here was to determine whether these changes have altered the effects of campaign spending on election outcomes this required reexamination of auxiliary questions concerning how sending effects operate and can be measured it also required facing the limits of what analysis of aggregate campaign spending data can tell us about money in elections replication of ols and 2sls analyses of campaign spending effects produced solidly consistent results over the six congressional elections held between 1972 and 1982 taken at face value the evidence is overwhelming that the challenger s level of spending has a strong impact on the vote whereas that of the incumbent has virtually no impact at all but the evidence remains open to doubt on two grounds one is the probable inadequacy of the 2sls model or perhaps any possible model leaving the issue of simultaneity bias unsettled if bias remains the estimates exaggerate the electoral effects of the challenger s campaign expenditures the issue cannot be resolved with more of the same data but rather requires data of a different sort surveys taken over the course of a sample of campaigns would do the trick meanwhile i think it would be foolish to make policy on the assumption that bias is in fact substantial the greatest likelihood remains that restrictions on campaign money will have the general effect of hurting challengers jacobson 1979 the other doubtful albeit equally stable finding is that incumbents do not gain votes by spending in campaigns no incumbent seems to believe it and there is at least circumstantial evidence from for example the 1982 elections that their skepticism is quite justified if so the problem lies in the limits of what aggregate data of the kind analyzed here can tell us few incumbents do not spend heavily when they are strongly challenged if both candidates spend beyond the point needed to become thoroughly familiar to voters then the substance of the campaigns the contents of campaign messages become the dominant factors incumbents may need to spend money in order to change the message as new circumstances arise to frame new issues that would help them most or damage them least to win the battle of establishing the real issues like nonincumbents sitting members may sometimes need to spend beyond a certain threshold to remain competitive but nearly all of them do so when the necessity arises so aggregate spending data are largely uninformative how the money is spent rather than how much is what matters the two most notable developments in congressional campaign finance have opposing implications national party organizations particularly the republican have assumed an increasingly important role in financing campaigns greater central control leads to a more efficient distribution of the party s collective campaign resources which among other things promises to raise the overall level of electoral competition it also leads to more coordinated campaigning with greater emphasis on national themes and programs thus it should foster more cooperation and loyalty among fellow partisans in congress but pacs have also grown in numbers and in financial importance because most concentrate on gaining access to incumbents they do little to make elections more competitive because they usually pursue narrowly defined interests their influence fragments the congress and weakens party coalitions in this and other ways parties and pacs are natural rivals the most consequential decisions taken in the next round in campaign finance policy will be those which affect the relative importance of parties and pacs see u s congress 1984 for comments on this and other current campaign finance issues

the permanent income hypothesis estimation and testing by instrumental variables the permanent income hypothesis with rational expectation is restated estimated and tested by an instrumental variables technique on the postwar u s aggregate time series data the hypothesis is accepted on a consumption series which includes service flows from consumer durables if the consumption series is the one in the national income and product accounts the hypothesis is decisively rejected an explanation is suggested to reconcile the conflicting test results

admiration is a source of indeterminacy abstract are consumption externalities sources of indeterminacy the answer is negative in conventional wisdom this paper shows consumption externalities establish local indeterminacy if the degree of decreasing impatience is sufficiently large dynamic models with indeterminacy are valuable as they tend to explain economic fluctuations without relying on exogenous shocks and question interpretation of simple estimation obtained by pooling data among others

price undertakings vers and foreign direct investment the case of foreign rivalry antidumping ad petitions are often withdrawn in favour of voluntary export restraints vers and price undertakings this paper compares these policy options in the presence of protection jumping foreign direct investment fdi with special emphasis on rivalry between foreign firms we show that a ver is less likely to induce fdi than a price undertaking or ad as a result by settling ad cases with ver agreements the importing country can pursue a more protectionist policy without triggering fdi in this sense the gatt ban on vers following the proliferation of ad uses was a sensible decision les plaintes anti dumping ad sont souvent retirees quand le pays etranger propose des avp ou des rve ce memoire compare l impact de ces differentes possibilites sur l incitation des firmes etrangeres a s engager dans l ide avec une attention particuliere a la rivalite des firmes etrangeres on montre que les rve sont moins susceptibles d entrainer l ide que les avp ou l action ad en consequence en resolvant les plaintes ad a l aide de rve le pays importateur peut poursuivre une politique davantage protectionniste sans declencher les ide en ce sens la prohibition des rve par le gatt suite a la proliferation des plaintes ad etait une decision defendable

the real interest rate and aggregate supply abstract this paper analyzes the effects of the anticipated real interest rate on aggregate supply variables in a model where time to produce and variable capital utilization play a crucial role the potential importance of the present mechanism for business cycle theory lies in its ability to generate positive co movements of employment capital utilization labor productivity output and investment these variables are predicted to be affected negatively by the real interest rate reduced forms for output and employment are derived and tested with canadian data taking estimates of the real interest rate prevailing in the united states as the relevant exogenous price

multiple bgps in a growth model with habit persistence this paper establishes multiple balanced growth paths in an otherwise standard competitive growth model without externality or distortions and with households preference dependent upon how his her consumption compares to a habit stock formed by his her own past consumption the key feature in our model is that consumption forms habits in combination with existing habits this model establishes multiple equilibria because habit persistence induces an internal intertemporal complementarity effect among consumption flows with current consumption reinforcing future consumption as a result there exist two balanced growth paths with one path exhibiting low consumption and habits and high economic growth and the other path exhibiting high consumption and habits and low growth that is not necessarily a development trap both steady states are saddles but global indeterminacy arises where a high balanced growth path co exists with a low balanced growth path where the two equilibrium paths cannot be pareto ranked and history need not matter for the selection of the equilibrium path

strategic trade policy when firms can invest abroad when are tariffs and quotas equivalent abstract this paper investigates the equivalence of tariffs and quotas when the market in question is imperfectly competitive and open to direct foreign investment the absence of a foreign supply response under a quota so critical to the analysis of the differential impact of tariffs and quotas under imperfect competition is called into question by the potential occurence of direct foreign investment the paper proves the equivalence of optimal tariffs and quotas when the markets are oligopolistic and open to direct foreign investment

a simple dynamic general equilibrium model abstract we analyse a single sector economy with h 1 infinitely lived agents that operate in a continuous time framework utility functions are recursive but not additive both efficient and perfect foresight competitive equilibrium allocations are considered the existence and stability of such allocations are investigated locally i e in a neighbourhood of steady state allocations the model is shown to be useful for explaining the distribution of wealth and consumption across agents and for analysing the way in which wealth redistribution can affect the dynamics of aggregate economic variables

chinese investment in the eu renewable energy sector motives synergies and policy implications abstract this paper addresses three questions how have trade and investment in wind and solar sectors evolved between the eu and china in recent years is there a link between rising trade conflicts and trade and investment trends and what wider motivations and synergies can be identified in chinese investments in the eu s re sector to address these questions we analyze trade and investment data as well as qualitative data including information from media and company reports large increases in trade and investment were followed by rapid falls since 2012 13 trade tensions have not led to increases in investment rather the inverse we find that chinese investment in these two sectors is very concentrated in germany the key motivation for investment is market seeking although r d is also important especially for wind most investments are greenfield a preference that has persisted over time our qualitative analysis of several key acquisitions indicates that technology integration and the consolidation of capacities across the supply chain were key motivations in most of the cases studied we conclude with some policy orientations

time patience and specialization patterns in the presence of asset trade specialization patterns in an open economy two sector growth model with endogenous capital accumulation are examined in the presence of free international lending and borrowing without free international lending and borrowing it is known that whereas the less time patient country decumulates real capital the more patient country accumulates real capital and eventually specializes in a capital intensive industry however free trade of international financial assets causes a dramatic change in long run specialization patterns in this case the less patient country may well specialize in the capital intensive industry and the more patient country in the labor intensive industry

ec members fighting about surplus vers fdi and japanese cars the distribution of consumer and producer surplus among ec members of three different trade regimes free trade a voluntary export restraint ver and a ver in conjunction with foreign direct inv

elastic capital supply and the effects of fiscal policy i introduction perfectly elastic or perfectly inelastic supply or demand curves have much to recommend them equilibrium analysis which would otherwise be fraught with ambiguity yields forth sharp predictions when one assumes either demand or supply are either perfectly elastic or inelastic nonetheless this is not the way we typically teach equilibrium analysis nor in most circumstances perform it neoclassical macroeconomics is an exception to this rule specifically capital accumulation models in which a representative agent maximizes the standard additively separable fixed discount factor utility function to which class most equilibrium business cycle models based on the neoclassical growth model belong imply a long run supply curve for capital which is perfectly elastic at the agent s fixed rate of time preference this property of what we will refer to as the standard model is and has been well known and well criticized even by users of the standard model 1 but the question of exactly where and when this assumption ceases to be innocuous i e for what sorts of experiments it is or isn t a harmless simplification has been given surprisingly short shrift 2 in this paper we explore the implications for the equilibrium analysis of the effects of changes in government purchases of relaxing this assumption in particular we explore the implications of replacing the fixed discount factor beta in the standard utility specification summation of beta sup t u c sub t l sub t where t 0 to infinity where c sub t and l sub t denote consumption and leisure at date t with an endogenous discount factor beta c sub t l sub t in this way discounting of future utility is allowed to depend on the agent s enjoyment of current consumption and leisure the lifetime utility function that results from this modification is of the sort first formulated by uzawa 1968 and epstein and hynes 1983 the latter of these in particular demonstrated through a series of examples the extent to which models with endogenous discount factors can differ substantially from their fixed discount factor counterparts while these earlier papers were primarily concerned with developing theoretical results our analysis will be primarily quantitative the possibility that the rate of time preference varies across individuals and over time or equivalently that the rate at which the future is discounted responds to the current and previous decisions of individuals is more than a theoretical curiosum to start with there is a substantial body of evidence that rates of time preference differ across individuals people are not equally patient much of this evidence is summarized in table 1 of becker and mulligan 1997 at the aggregate level they point to the fact that rich countries have grown slightly faster than poor countries over the past 30 years as suggesting that the residents of rich countries may have lower rates of time preference than residents of poor countries differences between the united states and japan in the age consumption profile are also consistent with differences in the rate of time preference between the united states and japan and the fact that income is associated with consumption growth suggests that the rich may be more patient than the poor detailed micro evidence on differences in rates of time preference across households is also presented by lawrance 1991 she finds that the rates of time preference of poor consumers are three to five percentage points higher than those of rich consumers using panel data for the united states from the psid ogaki and atkeson 1997 estimate a model in which time preference is allowed to vary across rich and poor households using household level panel data from india furthermore there is evidence that rates of time preference vary not just across individuals at a point in time but also over time

the global stability of efficient intertemporal allocations this paper describes a continuous time model of an economy with finitely many infinitely lived consumers and a finite number of capital goods two objectives are achieved first recursive nonadditive utility functionals are formulated and analyzed second these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy two classes of global turnpike propositions are proven which provide the basis for a model of the long run distribution of wealth these propositions also provide new perspective regarding existing stability literature based on additive utilities copyright 1987 by the econometric society

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

the complete complementarity of consumption and real balances and the strong superneutrality of money abstract in the representative agent model with money in the utility function if consumption and real balances are perfect complements steady state capital intensity and real balance holdings are both invariant to monetary growth regardless of the nature of time preferences

windfall profits and vertical relationships who gained in the japanese auto industry from vers this paper employs an event study to analyze the effect of the 1981 voluntary export restraint agreements on profits in the japanese automobile industry stock price movements of seven japanese automakers and sixty nine of their suppliers are examined the results indicate that the profits of japan s producers of passenger cars rose as a result of the voluntary export restraints while only some suppliers large ones and those producing specialized parts or services appear to have shared the benefits voluntary export restraints increased profits for some firms in the japanese auto industry but many suppliers did not share the windfall copyright 1993 by blackwell publishing ltd

evolution of time preference by natural selection this paper entertains the hypothesis that human time preferences are in evolutionary equilibrium i e that no mutation changing time preferences could be favored by natural selection this hypothesis implies that the marginal rate of substitution mrs holding darwinian fitness constant must equal the mrs holding utility constant furthermore in a market economy the latter must equal the mrs in exchange exploiting these principles the author finds that the long term real interest rate should equal ln 2 per generation about 2 percent per year and that young adults should discount the future more rapidly than their elders copyright 1994 by american economic association

the output employment and interest rate effects of government consumption abstract we study the impact on aggregate variables of changes in government consumption using the neoclassical stochastic growth model we show theoretically that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary change we also show that in principle there can be an analog to the keynesian multiplier in the neoclassical growth model finally in an empirically plausible version of the model we show that the interest rate impact of a persistent government consumption shock exceeds that of a temporary one our results provide counterexamples to existing claims in the literature

rate of time preference intertemporal elasticity of substitution and level of wealth the rate of time preference rtp and the intertemporal elasticity of substitution ies are two important factors shaping intertemporal consumption decisions models in which the rtp and or the ies differ systematically between rich and poor households have different empirical and policy implications for economic development growth and the distribution of income and consumption from those of standard models in which these parameters are constant across households in this chapter we estimate a model in which both rtp and ies are allowed to differ across rich and poor households using household level panel data from india our empirical results are consistent with the view that the rtp is constant across poor and rich households but the ies is larger for the rich than it is for the poor

welfare costs of the u s antidumping and countervailing duty laws abstract the antidumping ad and countervailing duty cvd laws in the united states have become the most pervasive form of import relief sought by domestic producers this paper estimates the collective economic effect of the hundreds of active u s ad cvd orders using a computable general equilibrium model we estimate that the collective net economic welfare cost in 1993 of these orders to be 4 billion this welfare estimate is sensitive to various modeling assumptions which are explored in the paper with the implementation of the uruguay round agreements the ad cvd laws remain one of the costliest programs restraining u s trade

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

money and votes a simultaneous equation model this paper has specified and estimated a model of the interaction between money and voting in american politics convincingly establishing the identification of a system of equations can be difficult even when theory provides a guide in the study of money in politics however no theoretical perspective has been established in the literature to make the case for identification as unambiguous as possible this paper has done two things first the specification was based in part on theory which has formally been developed elsewhere and which satisfactorily describes data at the economic interest group level welch 1980 second part of the question of identification revolves around the relationship between party strength and socioeconomic variables because there are questions as to the best measurement of party strength results based on two measures were presented for a number of reasons the presidential vote was the preferred measure this study draws four conclusions first money influenced voting in u s house elections in 1972 although its effect was small second patterns of total contributions to a u s house candidate are consistent with the hypothesis that a majority of dollars come from contributors who prefer to support likely winners third the total contributions made to a candidate are a positive function of the district s median years of schooling completed and the gini coefficient total contributions made to a democratic candidate are also a positive function of the median income finally had house campaigns been financed in the early 1970s even to the point of giving each major party candidate 150 000 in 1978 dollars few elections would have been changed it is also worth mentioning some of the things about the financing of political campaigns that we still do not know the above conclusions involve only elections to the u s house there are good reasons for suspecting that money is more influential in u s senate elections ols statistics support this belief and the greater visibility of those races help justify it although money has little effect on house elections we do not know whether contributions affect legislative voting in the house representatives apparently believe that expenditure influences their reelection chances given the complexity of the process it should be no surprise that this belief conflicts with our findings acting on this belief a representative s vote may very well be influenced by the sources of his contributions either directly or indirectly through the giving of access to contributors finally we should be reminded that the above model is static while the electoral process is dynamic the amount contributed to a candidate is affected by his probability of winning in the previous time period e g week month and in turn affects that probability in the following time period as usual what we know is overshadowed by what we do not know the above questions are both interesting in their own right and of interest to policy making

the heterogeneous impact of brexit early indications from the ftse abstract the uk s decision to leave the eu is surrounded by several studies simulating its potential effects we take an alternative approach by examining how news of brexit affected expectations as embodied in stock returns using a two stage estimation process while most firms had negative returns following news of the referendum s result with nearly 3 trillion wiped off global markets there was considerable heterogeneity in their changes relative to expectations we show that this heterogeneity can be explained by the firm s global value chain with firms heavily exposed to the eu and uk doing worse in addition we find that firms reliant on imported intermediates also perform worse this however is partially offset via intra firm trade in intermediates when sterling fell relative to host currencies these changes were primarily in the first two trading days and highly persistent understanding these movements gives a better understanding of brexit s potential effects

political and economic factors affecting agricultural pac contribution strategies public choice describes a marketplace for political favors that could explain strong support for agriculture while many researchers have studied political markets few have examined agriculture this study addresses contributions from twenty six pac aggregates to senators in the 103rd congress using a tobit model legislative attributes such as tenure committee membership and ideology were regressed on contributions overall the agricultural industry targeted nonsenior conservative democrats from agriculturally dependent states in close election races and who served either on the agriculture committee or the agriculture appropriations committee however many differences were found across subsectors within agriculture such as crops and livestock

intertemporal dependence impatience and dynamics abstract this paper develops simple geometric methods for analyzing consumer behavior under recursive but intertemporally dependent tastes since the preferences studied need not be time additive they allow the marginal utility of consumption on a given date to vary with consumption on other dates intertemporal dependence is induced by the presence of a variable individual rate of time preference the optimal consumption responses to transitory and anticipated changes in incomes and interest rates are easily derived and are similar in many respects to the responses implied by the standard constant time preference model intuitive explanations of the first order conditions describing optimal paths are provided

labor hoarding and the business cycle this paper investigates the sensitivity of solow residual based measures of technology shocks to labor hoarding behavior using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption we estimate the fraction of the variability of the solow residual that is due to technology shocks our results support the view that a significant proportion of movements in the solow residual are artifacts of labor hoarding behavior specifically we estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models in addition our results suggest that existing real business cycle studies substantially overstate the extent to which technology shocks account for the variability of postwar aggregate u s output

time preference in dynamic trade models an empirical critique in this article i present an empirical critique of one of the results of certain two sector dynamic trade models that under free trade a country may save less than under autarky or limited trade this result implies that in the long run the attainable level of consumption per capita would be lower under free trade than under protectionism 2 in the short run of course consumption would be increased because of the reduced rate of savings associated with free trade dynamic trade models such as those formulated by stiglitz deardorff samuelson and findlay conclude that in general the opening up to trade increases the differences among countries in savings rates and in some other economic variables 3 in particular they conclude that a developing country with a low savings rate will reduce its rate of savings after increasing its trade with advanced countries that have relatively high savings rates this hypothesis is tested and rejected in this article i contend that what the existing dynamic trade models show us is not the likely path that each country will follow after opening to trade instead i demonstrate the limited usefulness of models based on the postulation of constant rates of time preference or preference structures the objection to the existing dynamic trade models is essentially that they take the time preference structures as given rather than as molded by international contact in this article it is suggested that trade is likely to shift the time preference structure of a developing country inducing the developing country to save more as its citizens strive to catch up with the higher living standards of the advanced country i contend that the most important result of opening to trade is the possible change in the time preference structure of each country itself which may lead to a reduction in disparities in steady state savings propensity as well as in capital labor ratio

tariff jumping fdi and domestic firms profits studies of the welfare implications of trade policy often do not take account of the potential for tariff jumping fdi to mitigate positive gains to domestic producers we use event study methodology to examine the market effects for u s domestic firms that petitioned for antidumping ad relief as well as the effect of announcements of fdi by their foreign rivals in the u s market on these u s petitioning firms on average affirmative u s ad decisions are associated with 3 abnormal gains to a petitioning firm when there is no tariff jumping fdi but no abnormal gains if there is tariff jumping fdi the evidence for this mitigating effect is strongest when announcements of the intended tariff jumping fdi have already occurred before an ad decision takes place which happened in fair number of cases we also find evidence that the announcements of plant expansions and to some extent new plants have significantly larger negative effects on u s domestic firms profits than other types of fdi including acquisitions and joint ventures

using repeat challengers to estimate the effect of campaign spending on election outcomes in the u s house previous studies of congressional spending have typically found a large positive effect of challenger spending but little evidence for effects of incumbent spending those studies however do not adequately control for inherent differences in vote getting ability across candidates high quality challengers are likely to receive a high fraction of the vote and have high campaign expenditures even if campaign spending has no impact on election outcomes to avoid that bias this paper examines elections in which the same two candidates face one another on more than one occasion differencing eliminates the influence of any fixed candidate or district attributes estimates of the effects of challenger spending are an order of magnitude below those of previous studies campaign spending has an extremely small impact on election outcomes regardless of who does the spending campaign spending limits appear socially desirable but public financing of campaigns does not

stock price effects of u s trade policy responses to japanese trading practices in semi conductors over much of the last decade the united states and japan have been embroiled in a trade dispute over access to japanese markets for semiconductors and downstream products this study examines stock price reactions for firms affected by a subset of events commencing with the filing of a section 301 petition by the u s semiconductor industry association alleging unfair practices by the japanese and culminating in the 1986 trade agreement the evidence suggests that u s semiconductor consumers as well as producers benefited from these events

interdependence in comparative politics substance theory empirics substance interdependence is ubiquitous and often central across comparative politics indeed as the authors show first theoretically any situation involving externalities from one unit s actions on others implies interdependence positive or negative externalities induce negative or positive interdependence which spurs competitive races or free riding with corresponding early or late mover advantages and thus strategic rush to act or delay and inaction the authors show next how to model interdependent processes empirically how not doing so risks omitted variable biases favoring domestic and exogenous external accounts over interdependence but how doing so naively risks simultaneity biases with the opposite substantive implications they then discuss how to estimate properly specified interdependence models and finally how to interpret and present estimated spatio temporally dynamic effects response paths and long run steady states with associated standard errors they illustrate by replicating a not

impatience and equilibrium indeterminacy abstract this paper extends the neoclassical one sector optimal growth model by postulating that individual agents time preference impatience depends on the economy wide average consumption and average income which are social factors taken as external by individual agents the paper shows that with the socially determined individual time preference local equilibrium indeterminacy can arise moreover local indeterminacy can also be associated with global indeterminacy in many cases the results hold in models with bounded and unbounded growth

does monetary policy have asymmetric effects on stock returns this paper investigates whether monetary policy has asymmetric effects on stock returns using markov switching models different measures of a monetary policy stance are adopted empirical evidence from monthly returns on the standard poor s 500 price index suggests that monetary policy has larger effects on stock returns in bear markets furthermore it is shown that a contractionary monetary policy leads to a higher probability of switching to the bear market regime

the effect of discretionary price control decisions on equity values abstract the macro literature presents conflicting evidence on the effects of price controls in this study the fact that the macro economic effect of wage and price controls is the aggregation of the micro economic effects is used to implement a different approach to measure the effects of price controls the effect of price controls is inferred from examining the impact of discretionary regulatory decisions on the equity values of individual firms during phase ii of nixon s economic stabilization program the empirical results indicate that violators of the regulations incurred significant abnormal losses that were unrelated to the explicit penalties this suggests that implicit penalties were imposed on offending firms the analysis of price increase decisions provides weak evidence that these price commission decisions had an impact on equity values

inflation and growth pecuniary transactions costs and qualitative equivalence this paper develops a pecuniary transactions costs tc approach to reexamine the principal relationships and results concerning inflation and growth in a model with a general tc function and an endogenous labor leisure choice we consider four special cases by distinguishing among money as 1 a consumption good 2 a production good 3 an investment good and 4 a consumption good as well as an investment good under some weaker conditions as in related studies a reversed tobin effect obtains for all cases a high monetary growth rate leads to lower steady state capital labor consumption and real money balances these findings suggest that a pecuniary tc model is qualitatively equivalent to alternative models in the literature

economic development and time preference schedule the case of japan and east asian nics the constancy of the time preference rate has been a traditional assumption of the literature on intertemporal choice of consumers this chapter examines empirically the validity of the constancy hypothesis of the time preference schedule three alternative hypotheses concerning the time preference rate are investigated the first hypothesis posits that the time preference rate decreases as the economy develops fisher hypothesis the second hypothesis posits that the time preference rate increases as the economy develops uzawa hypothesis the third hypothesis which is a combination of the second and third hypotheses posits that as a nation develops the time preference rate decreases up to a certain point and thereafter the time preference rate increases fukao hamada hypothesis post war annual time series data from taiwan japan and korea are employed to examine these hypotheses i find that the fukao hamada hypothesis is supported for taiwan and japan while the time preference rate is constant for korea

campaign finances and political platforms the economics of political controversy one implication of the widely used median voter model is that candidates have little to gain by disagreement apart from some epsilon of controversy necessary to demonstrate which candidate is closer to the median voter position in the policy dimension in question votes are maximized by taking essentially identical position this is true at the nash median voter equilibrium and is true away from equilibrium as a consequence two candidate competition within one dimensional policy domain is expected to generate considerable agreement about appropriate policy we do in fact observe that in many elections candidate positions converge to very similar positions on matters of broad concern it is largely this convergence that gives the median voter model its considerable credence in spite of the fragility of the underlying theory on the other hand the convergence is rarely as complete as might have been expected and there are elections where candidates take substantively different positions this paper explores the extent to which the campaign contributions of politically active groups may draw candidates away from the median voter position as candidate seek funds to run effective election campaigns candidates gener

looking for leverage in pac markets corporate and labor contributions considered in this paper we explore the popular perception that political action committees pacs have substantial influence over elected legislators we question whether the leverage in the pac market is on the side of the contribution maker or the contribution taker analysis of the structure of pac markets suggests most markets are sellers markets not buyers markets pac contributions then may be more like protection money than attempts to buy votes or access

the value of administered protection a capital market approach the focus of this paper i s on the escape clause petitions filed under the trade act of 1974 section 201 first the capital marketevent study method is used to analyze the effects of protection decisions then cross section regressions are performed to examine the influence of key variables on the observed market reaction the authors conc lude that while protection is beneficial to beleaguered industries the extent o f such benefits is quite narrowly circumscribed and is conditional on internal v ariables for each firm protection is thus not the panacea that its advocates cl aim copyright 1986 by mit press

on the existence of balanced growth equilibrium the authors characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth balanced and asymptotically balanced they show that under a constant returns to scale technology asymptotically constant discount rate and asymptotically constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a n asymptotically balanced growth equilibrium path the authors provide examples of recursive utility models that accept a n asymptotically balanced growth equilibrium and discuss their implications on cross country differences in growth rates as well as on savings behavior and wealth distribution copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

event studies in economics and finance the event study is an important research tool in economics and finance the goal of an event study is to measure the effects of an economic event on the value of firms event study methods exploit the fact that given rationality in the marketplace the effects of an event will be reflected immediately in security prices thus the impact can be measured by examining security prices surrounding the event in this paper event study methods are described including some of the potential complications an example is included to illustrate the approach

government spending and capital accumulation with endogenous time preference this paper extends s djajic 1987 to allow for an endogenous rate of time preference and reexamines djajic s experiment how the optimal rates of private consumption and capital accumulation will respond to an unanticipated temporary expansion in government spending the key factors determining the adjustment patterns are the difference between the marginal utility of private consumption and that of public spending the timing of policy reversion and the relationship between private and public consumption in household utility if private and public consumption are edgeworth independent whether investment increases with the length of fiscal expansion depends on whether the marginal utility of private consumption exceeds that of public consumption

voluntary export restraints antidumping procedure and domestic politics a voluntary export restraint ver is preferred to a tariff by a government concerned about electoral returns when the influence of industry profits is large relative to the losses to consumers from higher prices if the foreign firm is uncertain of these pressures the antidumping code facilitates the complete transfer of the relevant information and generates a ver rather than a tariff in equilibrium the choice across instruments is determined by the political attributes domestic and foreign profits rise with the antidumping generated ver and the ver lowers the volume of trade by more than the expected duty copyright 1996 by american economic association

tough love and intergenerational altruism this chapter develops and studies a tough love model of intergenerational altruism we model tough love by modifying the barro becker standard altruism model in two ways first the child s discount factor is endogenously determined so lower childhood consumption leads to a higher discount factor later in life second the parent evaluates the child s lifetime utility with a constant high discount factor our model predicts that parental transfers will fall when the child s discount factor falls this is in contrast with the standard altruism model which predicts that parental transfers are independent of exogenous changes in the child s discount factor