inflation and relative price variability in the euro area evidence from a panel threshold model the impact of inflation on relative price variability rpv generates an important channel for real effects of inflation this article provides first evidence on the empirical relation between inflation and rpv in the euro area stirred by the widespread use of inflation caps or target bands in monetary policy practice we are particularly interested in threshold effects of inflation in line with the predictions of monetary search models our results indicate that expected inflation significantly increases rpv only if inflation is either very low below 0 95 per annum p a or very high above 4 96 p a

the impact of social capital on economic attitudes and outcomes abstract this article traces the extant literature on the impact of social capital on economic attitudes and outcomes special attention is paid to clarify conceptual ambiguities measurement techniques channels of influence and identification strategies insights derived from the literature are then used to analyze the marketplace lending industry in china where the size of the peer to peer p2p lending market is larger than that of the rest of the world combined ironically approximately two thirds of these online p2p lending platforms have failed empirical evidence from the monthly operating data of 735 lending platforms and transaction level data from one prominent platform renrendai shows that platforms in provinces with high social capital have low risk of failure and borrowers in provinces with high social capital can borrow at low interest rate and are less likely to default we also provide observations to guide future economic research on social capital

price setting during low and high inflation evidence from mexico this paper provides new insight into the relationship between inflation and the setting of individual prices by examining a large data set of mexican consumer prices covering episodes of both low and high inflation when the annual rate of inflation is low below 10 15 the frequency of price changes comoves weakly with inflation because movements in the frequency of price decreases and increases partly offset each other in contrast the average magnitude of price changes correlates strongly with inflation because it is sensitive to movements in the relative shares of price increases and decreases when inflation rises beyond 10 15 few price decreases are observed and both the frequency and average magnitude are important determinants of inflation i show that a menu cost model with idiosyncratic technology shocks predicts the average frequency and magnitude of price changes well over a range of inflation similar to that experienced by mexico

relational goods and participation incorporating sociability into a theory of rational action theoretical explanations of why rational individuals would participate in politics remain unsatisfactory this paper addresses the problem by developing and analyzing models which include among citizens payoffs relational goods objectives which depend upon interactions among persons the models predict more participation than do the standard approaches for example under some circumstances persons will be more likely to act if they believe others will act contrary to free rider logic more importantly conditions are identified under which leaders could increase mass activity thus a model is provided of mobilization in terms of the preferences and decisions of a rational individual

state dependent pricing and the dynamics of money and output standard macroeconomic models of price stickiness assume that each firm leaves its price unchanged for a fixed amount of time we present an alternative model in which the pricing decision depends on the state of the economy we find a method of aggregating individual price changes that allows a simple characterization of macroeconomic variables the model produces a positive money output correlation and an empirical phillips curve in addition the impact of monetary shocks depends crucially on the current level of output which points to a natural connection between state dependent microeconomics and state dependent macroeconomics i introduction there is a long tradition in macroeconomics of attributing the real effects of nominal demand shocks to nominal price stickiness in this view if there is no change in prices when nominal demand rises then quantities must bear the burden of adjustment hence nominal price rigidity provides the friction needed for nominal demand shocks to be transmitted to the real economy standard models of this transmission mechanism such as fischer 1977 and taylor 1980 are based on the assumption that each firm leaves its price unchanged for a fixed amount of time the main reason for considering such time dependent pricing rules is their analytic tractability constraining firms to adjust their prices at prespecified times both simplifies the derivation of equilibrium strategies and allows the use of powerful time series techniques to analyze aggregate dynamics the main disadvantage of the timedependent approach is that between price adjustments firms are not allowed to respond even to extreme changes of circumstance this makes it difficult to know whether the qualitative effects of money in these models are the result of nominal rigidities per se or of the exogenously imposed pattern of price changes an alternative approach to modeling price stickiness is to allow the price setting decision to depend on the actual state of the

the behavior of prices and inflation an empirical analysis of disaggregat price data this paper analyzes the effects of inflation on the dispersion of prices as well as other aspects of price behavior using disaggregated data on prices of foodstuffs in israel during 1978 84 we find that the effect of expected inflation on intramarket price variability is stronger than the effect of unexpected inflation we show that even in times of high inflation price quotations are not trivially short and price changes are not synchronized across firms these facts taken together confirm that there is some staggering in the setting of prices we find that the distribution of real prices is far from being uniform as many menu cost based models assume or conclude in fact as inflation increases to very high levels this distribution is not even symmetric when the annual inflation rate reaches 130 percent there are equal chances of finding real prices above or below the market average but upward deviations in the real price are further away from zero than downward ones furthermore as the annu

reconsidering the relationship between inflation and relative price variability it has long been popularly believed that the relationship between inflation and relative price variability rpv is positive and stable using disaggregated cpi data for the united states and japan however this study finds that the relationship is neither linear nor stable over time the overall relationship is approximately u shaped around a nonzero threshold inflation rate rpv therefore changes not with the inflation rate per se but with the deviation of inflation from the threshold inflation rate more importantly the relationship is by no means stable over time but instead varies significantly in a way that coincides with regime changes of inflation or monetary policy the relationship was positive during the period of high inflation of the 1970s and the early 1980s as has been documented by a number of previous studies whereas it takes a u shape profile during the great moderation the results are robust to the use of core inflation which excludes the traditionally volatile prices of food and energy this paper then presents a modified version of the calvo type sticky price model to describe the observed empirical regularities simulation experiments show that the modified calvo model fits the data well and that the underlying relationship hinges upon the degree of price rigidity which is systematically related to inflation regime for countries and periods with low inflation rates the relationship takes a u shape as price adjustment is more sticky in a high inflation environment when price setting becomes more flexible the u shaped profile vanishes

relative price variability and inflation evidence from us cities we test whether the time series positive correlation of inflation and intermarket relative price variability is also present in a cross section of u s cities we find this correlation to be a robu

elusive persistence wage and price rigidities the new keynesian phillips curve and inflation dynamics abstract we review the main new keynesian inflation equations that have arisen as a result of aggregation from individual firms price rigidities we find that on the whole they cannot account for inflation persistence a key feature of the empirical dynamics of inflation and with important policy implications the only exceptions seem to be when indexation is allowed in price setting or when price stickiness is combined with wage rigidity and staggering

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

nominal rigidities and retail price dispersion in canada over the twentieth century we introduce a new data set on over 230 000 monthly prices for 10 goods in 50 canadian cities over the 40 year period from 1910 to 1950 this information coupled with previously published price information from the late twentieth century allows us to present one of the first comprehensive views of nominal rigidities and retail price dispersion over the past 100 years we find that nominal rigidities have been conditioned upon prevailing rates of inflation with a greater frequency of price changes occurring in the 1920s and the 1970s additionally the process of retail market integration has followed a u shaped trajectory with many domestic markets being better integrated as measured by the average dispersion of retail prices at mid century than in the 1990s we also consider the linkages between nominal rigidities and price dispersion finding results consistent with present day data on utilise des donnees inedites de 230 000 prix mensuels pour 10 produits dans 50 villes canadiennes au cours de la periode de quarante ans qui va de 1910 a 1950 ces donnees ajoutees aux renseignements deja publies anterieurement sur les prix dans la derniere portion du vingtieme siecle permettent de presenter l un des premiers portraits comprehensifs des rigidites nominales et de la dispersion des prix de detail au cours des derniers 100 ans on decouvre que les rigidites nominales ont ete influencees par les taux d inflation qui ont prevalu avec pour consequence une plus grande frequence de changements de prix dans les annees 1920s et 1970s de plus chose surprenante le processus d integration du marche de detail a suivi une trajectoire en u plusieurs marches domestiques etant davantage integres en prenant comme mesure la dispersion moyenne des prix de detail au milieu du siecle que dans les annees 1990s on examine aussi les liens entre rigidites nominales et dispersion des prix et les resultats concordent avec ce que revelent les donnees recentes

rigid prices evidence from u s scanner data this paper uses over two years of weekly scanner data from two small us cities to characterize time and state dependence of grocers pricing decisions in these data the probability of a nominal adjustment declines with the time since the last price change even after controlling for heterogeneity across store product cells and replacing sale prices with regular prices we also detect state dependence the probability of a nominal adjustment is highest when a store s price substantially diers from the average of other stores prices however extreme prices typically reflect the selling store s recent nominal adjustments rather than changes in other stores prices

the effect of discrimination and of industry segmentation on japanese wage differentials in relation to education abstract the paper investigates japanese wage differentials based on the concept of industrial division the labor market is examined for two sectors separately namely competitive sectors and non competitive sectors the effects of female male difference of human capital and of occupation also are examined and the cost of discrimination is estimated by applying several quantitative methods it was found that worker characteristics such as education length of service and age were treated differently by sector sex and occupation also wage differentials by sex were mostly rooted in differential treatment of worker characteristics while wage differentials by sector were explained largely by firm size component the above general results however are greatly modified by workers occupations and industrial divisions

welfare distributional change and the measurement of social mobility a new approach to the measurement of welfare distributional change and social mobility is developed the novel feature of this model is the use of price dependent measures of individual and social welfare in evaluating t he magnitude and direction of the movement in the distribution in addition the proposed indexes of mobility are decomposed into the sum of between group and w ithin group mobility each measure is implemented for the united states over the period 1947 1982 it is found that in each year society is upwardly mobile rela tive to the 1947 distribution copyright 1986 by mit press

an index of inequality with applications to horizontal equity and social mobility horizontal equity and social mobility are discussed in terms of a non utilitarian social welfare function which takes account of the process by which an ex ante distribution is mapped into an ex post distribution by the tax system for example an index of inequality is proposed which decomposes into two components corresponding to vertical and horizontal equity respectively a functional form for the social welfare function is derived for the purposes of empirical work and an application to data for 5895 uk households is presented the paper contains a theoretical application of the index to a model of optimal taxation it is conventional to assess the merits of alternative public policies in terms of a trade off between equity and efficiency in practice however a change in say the tax system involves three effects first it may have incentive or disincentive effects leading to efficiency gains or losses secondly it may alter the distribution of welfare levels thirdly it may alter the ranking of individuals or households within the distribution these three effects correspond to efficiency vertical equity and we shall argue certain aspects of horizontal equity respectively and any assessment of a tax change must take into account all three the principal assumption of this paper is that government is concerned about the trade off between these three effects a strict utilitarian is concerned only with the consequences of an action and in the evaluation of a particular reform a utilitarian measure of social welfare is defined over the vector of ex post utilities no account is taken of the process by which the vector of ex ante utilities is mapped into the ex post vector and no ethical status is awarded to the ex ante distribution one does not have to adopt an entitlement theory of justice to believe that the utilitarian approach may ignore some relevant considerations such as the fairness of the redistributive process a striking example of this arises in the model used by mirrlees 11 to examine optimal income taxation in that model individuals have identical preferences defined over consumption and leisure and differ only in respect of their potential wage rates or ability levels clearly in the absence of taxation individual utility is an increasing function of ability suppose the government uses redistributive lump sum taxes to achieve the first best optimum then as mirrlees 11 12 shows the first best optimum for a utilitarian social welfare

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

normative indices for measuring social mobility this paper introduces relative and absolute indices of social mobility to each index there corresponds a different social welfare function when the symmetric mean of order 1 social welfare function is employed the relative index becomes the king 1983 index of social mobility

the slave trade and the origins of mistrust in africa in a recent study nunn 2008 examines the long term impacts of africa s slave trade he finds that the slave trade which occurred over a period of more than 400 years had a significant negative effect on long term economic development although the article arguably identifies a negative causal relationship between the slave trade and income today the analysis is unable to establish the exact causal mechanisms underlying this reduced form relationship in this article we examine one of the channels through which the slave trade may affect economic development today combining contemporary individual level survey data with historical data on slave shipments by ethnic group we ask whether the slave trade caused a culture of mistrust to develop within africa initially slaves were captured primarily through state organized raids and warfare but as the trade progressed the environment of ubiquitous insecurity caused individuals to turn on others including friends and family members and to kidnap trick and sell each other into slavery sigismund wilhelm koelle 1854 p e h hair 1965 charles piot 1996 we hypothesize that in this environment a culture of mistrust may have evolved which may persist to this day we show that current differences in trust levels within africa can be traced back to the transatlantic and indian ocean slave trades combining contemporary individual level survey data with historical data on slave shipments by ethnic group we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today evidence from a variety of identification strategies suggests that the relationship is causal examining causal mechanisms we show that most of the impact of the slave trade is through factors that are internal to the individual such as cultural norms beliefs and values jel j15 n57 z13

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

inherited trust and growth this paper develops a new method to uncover the causal effect of trust on economic growth by focusing on the inherited component of trust and its time variation we show that inherited trust of descendants of us immigrants is sig nificantly influenced by the country of origin and the timing of arrival of their forebears we thus use the inherited trust of descendants of us immigrants as a time varying measure of inherited trust in their country of origin this strategy allows to identify the sizeable causal impact of inherited trust on worldwide growth during the twentieth century by controlling for country fixed effects jel n11 n12 n31 n32 o47 z13

price dispersion and inflation evidence from israel the paper considers the question whether observed price differentials reflect perceived differences in quality service agreements or location or whether information imperfections can explain this phenomenon it sets out theoretical arguments linking inflation to reductions in the information stock held by agents and thus to greater price dispersion the hypothesis is tested using monthly price data for 13 uniquely defined goods sold in israel between 1971 and 1984 price dispersion is shown to be positively related to the rate of market price inflation since inflation is an unlikely proxy for changes in perceived characteristics the findings support price dispersion theories based on optimally imperfect decision making

social capital geography and survival gujarati immigrant entrepreneurs in the u s lodging industry immigrant entrepreneurs often rely on their groups local social capital in their new home market to establish and maintain their businesses in particular immigrant entrepreneurs with few resources of their own receive help from those possessing more resources supporting these arguments using the empirical setting of gujarati immigrant entrepreneurs in the lodging industry we find that the likelihood of survival of an immigrant entrepreneurs hotel increases when surrounded by higher counts of branded hotels representing high resource establishments owned by individuals from their ethnic group but is unaffected by unbranded motels representing low resource establishments owned by members of their ethnic group or by branded hotels owned by individuals from other ethnic groups these results isolate and reinforce the importance of social capital not only for immigrant entrepreneurs but also more generally for any entrepreneurs belonging to ethnic professional religious or social groups

reconsidering the natural rate hypothesis in a new keynesian framework abstract this paper formulates a stylized new keynesian model in which each individual firm can select the frequency of its price adjustments the endogeneity of contract duration has a dramatic impact on the magnitude of the aggregate effects of steady state inflation with a plausible calibration of the magnitude of menu costs and other structural parameters this model predicts a relationship between steady state inflation and the frequency of price adjustment that is reasonably close to the empirical findings of cross country studies furthermore at moderate inflation rates steady state inflation generates relative price distortions that have a non trivial impact on aggregate output but this impact wanes and eventually disappears at much higher annual inflation rates because the frequency of price adjustment approaches that of the flexible price economy

the concept and measurement of horizontal inequity abstract this paper discusses the concept of horizontal equity and presents three formal principles as a basis for making comparisons of the extent of horizontal inequity produced by different redistributions a condition analogous to the lorenz criterion used for inequality comparisons is established under which the horizontal inequities of redistributions can be ranked without recourse to a cardinal measure of inequity ordinal comparisons are not possible in many cases the three principles suggest three properties that reasonable measures of horizontal inequity should possess a class of measures which satisfies the properties is proposed most other existing measures are found not to satisfy them

relative price variability and inflation regression studies have established that there tend to be convex nonsymmetric relationships between relative price variability and the inflation rate unanticipated inflation and the change in the inflation rate this paper shows that such regression results follow as definitional artifacts for a simple but quite general stochastic model of price changes the analysis is based on the fact that the definitions of relative price variability the inflation rate unanticipated inflation and the change in the inflation rate imply a particular structure for the covariances among these variables the structure of these covariances has implications for the regression coefficients copyright 1991 by ohio state university press

menu costs and the neutrality of money a model of endogenous price adjustment under money growth is presented firms follow s s pricing policies and price revisions are imperfectly synchronized in the aggregate price stickiness disappears and money is neutral the connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated the results contrast with those obtained in models with exogenous fixed timing of price adjustment

the meaning and measurement of income mobility abstract income mobility may be seen as arising from two sources i the transfer of income among individuals with total income held constant and ii a change in the total amount of income available in this paper we propose several sensible properties defining the concept of income mobility and show that an easily applicable measure of mobility is uniquely implied by these properties we also show that the resulting measure is additively decomposable into the two sources listed above namely mobility due to the transfer of income within a given structure and mobility due to economic growth or contraction finally these results are compared and contrasted with other mobility concepts and measures in the literature journal of economic literature classification numbers d31 d63

sectoral variability and the foundations of optimal inflation rate abstractthe recent monetary search models argue that the real effects of inflation on economic activity can be gauged through relative price variability rpv our study uses a large panel data of

social interaction and stock market participation we propose that stock market participation is influenced by social interaction in our model any given social investor finds the market more attractive when more of his peers participate we test this theory using data from the health and retirement study and find that social households those who interact with their neighbors or attend church are substantially more likely to invest in the market than non social households controlling for wealth race education and risk tolerance moreover consistent with a peer effects story the impact of sociability is stronger in states where stock market participation rates are higher

the naicu and the phillips curve an approach based on micro data in this paper we propose a straightforward method to derive a non accelerating inflation capacity utilisation rate naicu based on micro data we condition the current capacity utilisation of firms on their current and planned price adjustments the non accelerating inflation capacity utilisation rate is then defined as the rate where a firm feels no price adjustment pressure one of the main advantages is that this methodology uses structural aspects and does not make it necessary to operate with often rather arbitrary statistical filters we show that our aggregate naicu performs remarkably well as an indicator of inflationary pressure in a phillips curve estimation

intergenerational exchange mobility and economic welfare the concepts of exchange and structural mobility are introduced and their relationship with the notion of equality of opportunity discussed it is then shown that exchange mobility can have an impact on social welfare when the utility of any one generation is dependent on the consumption levels of overlapping generations whether such consumption interrelationships imply a preference for mobility or the reverse depends on whether the marginal utility of current consumption is raised or lowered by an increase in the consumption level of the associated generation the rest of this paper examines these two cases in the context of a simple two class family model the analysis is concerned with the description of the optimal intergenerational behaviour within this framework in order to be able to say anything substantial however it is necessary to impose some restrictions on the structure of the utility function one restriction which has some appeal and which yields plausible patterns of optimal policy is that intergenerational links through the utility function be not too strong in a sense that is made specific in the paper imposing this condition one can show how intra generational equity is affected both by intergenerational considerations and by the inherited past where intragenerational transfers involve efficiency losses a simple tax model is examined the circumstances under which starting with no taxes the tax rates converge are worked out in both the cases where the utility function has a pro as well as an anti mobility bias finally a specific utility function is taken in which the fathers utility depends not only on his own consumption but also on the average consumption of his son and himself in this case the utility function has a pro mobility bias and one can evaluate the response of the long run tax rate to parameters that measure mobility and equality using a similation model one can also assess the speed of convergence and the sensitivity of the tax rates to the parameters

measures of distributional change an axiomatic approach in recent years a number of interesting papers have appeared in the general field of the analysis of changes in a frequency distribution the most common applications of such analysis are in the areas of income and wealth re distribution and the contributions have usually focussed on a particular specialised issue such as mobility of individuals within a structure or of horizontal inequity as opposed to vertical inequality implicit in the comparison of two distributions a number of approaches to each of these problems have been suggested and indeed several specific practical indices of mobility or inequity have been proposed 1 whilst some of these can be shown to have very useful features in their application it is probably fair to say that most derive from an ad hoc approach to the particular aspect of the problem on which the author had focussed it is interesting to note that comparatively few papers attempt to exploit the similarities involved in each of these issues all this contrasts rather sharply with the state of play in an obviously closely related game that of the measurement of inequality much of the essential foundation of the problem of measuring inequality as we presently understand it seems to be more or less sorted out in a systematic fashion roughly speaking what may be done is as follows given

social capital and contributions in a public goods experiment recent empirical studies from across the social and behavioral sciences find that social capital is associated with various measures of well being including economic growth stephen knack and phillip keefer 1997 and mortality ichiro kawachi bruce p kennedy and kimberly lochner 1997 these findings have inspired subsequent studies by economists examining the determinants of individual level measures of social capital e g alberto alesina and elianna la ferrara 2002 however experimental evidence from trust games conducted by edward l glaeser david i laibson jose a scheinkman and christine l soutter 2001 calls into question the efficacy of the most prevalent measures of social capital employed in the literature in contrast we show that these same measures are significantly associated with contributions in a public goods experiment and perform as well as the alternative measures of social trust suggested by glaeser et al because social capital is thought to influence wellbeing through its effect on public good provision our results bolster previous empirical work on the causes and consequences of social capital this abstract was borrowed from another version of this item

from hyperination to stable prices argentina s evidence on menu cost models we review and extend several comparative statics results of xed menu cost models of price setting rms facing real idiosyncratic shocks such as the type studied by golosov and lucas 2007 as well as by many others these results are confronted with their empirical counterparts using the micro data underlying argentina s consumer price index for a time period where ination rates vary from almost 5000 per year

war inflation and social capital we use weekly data from 79 russian regions to measure the impact of economic shocks and proximity to war in ukraine on social capital in russian regions we proxy social capital by the relative intensity of internet searches for the most salient dimensions of pro social behavior such as donate blood charity adopt a child etc this measure of social capital is correlated with a survey based measure of generalized social trust our search based measure of social capital responds negatively to the spikes of inflation and positively to the intensity of the conflict in ukraine controlling for region and week fixed effects

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

sticky prices new evidence from retail catalogs this paper presents new results on the size frequency and synchronization of price changes for twelve selected retail goods over the past 35 years three basic facts about the data are uncovered first nominal prices are typically fixed for more than one year although the time between changes is very irregular second prices change more often during periods of high overall inflation third when prices do change the sizes of the changes are widely dispersed both large and small changes occur for the same item and the sizes of these changes do not closely depend on overall inflation

labour supply and unemployment in japan abstract the paper investigated the relationship between labour supply and unemployment employment in japan the paper focused on the discouraged worker effect which specifies that a large number of workers in particular female labour forces retire from the labour market in a recession this lowers the rate of the published unemployment the paper estimated the labour supply function and presented the estimated figures of the modified or adjusted rate of unemployment finally the okun s coefficient was re estimated by using this modified rate of unemployment

saving and the life cycle a cohort analysis abstract this paper examines the life cycle hypothesis with reference to japanese employees the study is based on panel data created from successive cross section data which is expected to give better results than past studies the sample was categorized by many elements one important result is that empirical testing of saving and the life cycle is crucially dependent upon the samples it is found that the majority of japanese employees have not accumulated wealth enough to assure consumption during retirement the paper however did not reject a hump shaped course of wealth accumulation under the assumption of myopic behavior

inflation and price setting in a natural experiment abstract we analyze the behavior of price setters in poland during the transition from a planned to a market economy using a large disaggregated data set the size and frequency of price changes as well as relative price variability all increase as inflation rises the effect of expected inflation on relative price variability is much stronger than the effect of unexpected inflation despite the unusual economic environment the results are qualitatively identical and quantitatively stronger than those in lach and tsiddon 1992 journal of political economy 100 349 389

staggering and synchronization in price setting evidence from multiproduct firms theoretical work on price setting behavior focuses on the single product case while in reality a single price setter sells many products the authors use retail store level multiproduct pricing data to learn about price dynamics they find that while the timing of a product s price changes is staggered across stores selling the same product the timing of the price changes of different products sold within the same store is highly synchronized this finding validates the usual assumption that decisions are staggered across price setters and suggests that price rigidity is due mostly to mechanical reasons and not to informational asymmetries copyright 1996 by american economic association

does inequality of labor earnings emerge in young days or later abstract this paper examines the evolution of labor earnings inequality in an environment where individuals learn about their own ability productivity from wage realizations it is shown that innate ability heterogeneity and idiosyncratic income shock variance have distinct effects on the emergence of earnings inequality through changes in learning speed and effort decisions therefore given endogenous changes in individual perception we are able to explain different patterns of labor earnings inequality evolution in differently endowed societies actually observed in uk us germany and japan simulations illustrate inequality emergence patterns and earnings mobility in different environments

social capital and the cost of equity abstract we find that a firm s cost of equity is inversely related to the level of social capital in the state where the firm is headquartered further the cost of equity declines when firms move their headquarters from a low social capital state to a state with higher social capital the negative relation between social capital and the cost of equity is statistically significant only for firms facing relatively low levels of product market competition and is not significant for firms with good firm specific reputations we interpret these findings as indicating that social capital serves as a societal monitoring mechanism and can be value enhancing for firms that are perceived as having greater agency problems and face weak product market monitoring

synchronization of price changes by multiproduct firms evidence from canadian newspaper prices abstract using data for canadian daily newspapers we find that price changes of papers owned by the same firm are synchronized on the other hand independently owned newspapers do not appear to change their prices together

inflation and relative price variability in the short and long run new evidence from the united states this paper presents new evidence that a positive association exists between inflation and relative prices and relative inflation rates in very disaggregated data for the united states over the period 1975 through 1992 there is also evidence that the response of relative prices and relative inflation rates to inflation varies inversely with the information content of a given shock to inflation the relationship is studied from two cross sectional perspectives using individual price series collected from forty eight u s cities evidence on the persistence of the effects of inflation on relative prices is also presented results here demonstrate the absence of a long run relationship between inflation and relative price dispersion i e the two series are not cointegrated finally results from vector autoregressions further imply the effect is smaller than indicated by typical estimates copyright 1996 by ohio state university press

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

does social capital matter in corporate decisions evidence from corporate tax avoidance we investigate whether the levels of social capital in u s counties as captured by strength of civic norms and density of social networks in the counties are systematically related to tax avoidance activities of corporations with headquarters located in the counties we find strong negative associations between social capital and corporate tax avoidance as captured by effective tax rates and book tax differences these results are incremental to the effects of local religiosity and firm culture toward socially irresponsible activities they are robust to using organ donation as an alternative social capital proxy and fixed effect regressions they extend to aggressive tax avoidance practices additionally we provide corroborating evidence using firms with headquarters relocation that changes the exposure to social capital we conclude that social capital surrounding corporate headquarters provides environmental influences constraining corporate tax avoidance

mothers and sons preference formation and female labor force dynamics this paper argues that the growing presence of a new type of man one brought up in a family in which the mother worked has been a significant factor in the increase in female labor force participation over time we present cross sectional evidence showing that the wives of men whose mothers worked are themselves significantly more likely to work we use variation in the importance of world war ii as a shock to women s labor force participation as proxied by variation in the male draft rate across u s states to provide evidence in support of the intergenerational consequences of our propagation mechanism

relative price variability and inflation a disaggregated analysis relative price variability has been studied at the cross sectional intermarket level this paper addresses the equally important phenomenon of intramarket variability the dispersion of commodity price movements around the industry average using quarterly price data for 80 disaggregated commodity groups in the united kingdom from 1974 to 1984 the paper investigates the determinants of intramarket price variability and replicates some previous crosssectional tests for the united kingdom intermarket price variability is found to be positively related to inflation which confirms previous results for the united states and other countries intramarket variability is found to be positively related to the average market rate of price change but the strength of this relationship appears to be inversely related to the level of industry concentration these results generally support the propositions and findings reported by stigler and kindahl

reciprocity in groups and the limits to social capital robert putnam defines social capital as features of social organization such as networks norms and social trust that facilitate coordination and cooperation putnam 1995 67 such networks are typically associated with norms that promote coordination cooperation and reciprocity for the mutual benefit of network members these norms coupled with the appropriate use of sanctions in case of noncompliance are often thought to enable these groups to deal smoothly and effectively with multiple social and economic issues at the same time some authors have noted that strongly bonded groups may have adverse consequences for others see for instance alejandro portes and patricia landolt 1996 or even for themselves see for instance george akerlof 1976 or kaushik basu 1986 it is this latter aspect that we wish to emphasize in these notes

earnings distribution and inequality over time education versus relative position and cohort this paper constructs a theoretical model for analyzing the earnings distribution over time and provides an estimation procedure for the inequality of earnings over time the theoretical model incorporates gibrat s so called law of proportionate effect galton s regression toward the mean and serial correlation of the error terms under the condition that the density function of earnings for each age cohort in japan is distributed as log logistic an emphasis is placed upon comparison of the influence of the relative position in the distribution with the influence of education on earnings finally the coefficients of variation over time are presented copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

stochastic earnings functions risk and the rate of return to schooling it is generally accepted that there is a substantial degree of risk associated with investment in human capital when the decision to invest is made uncertainty arises for a variety of reasons an individual faces uncertainty about the length of life about the market conditions that will prevail during his or her lifetime and about the actual returns to investment over the life cycle one consequence of this uncertainty is that human capital investment will be affected not only by expected returns but also by the riskiness associated with the distribution of anticipated returns even though risk is deemed important empirical specifications of earnings functions typically found in cross section studies ignore the risk implications of the models 7 this is an important omission since failing to account for risk considerations may lead to biased estimates of the rate of return to education and may lead to inappropriate conclusions concerning wage discrimination the purpose of this paper is to investigate the impact of human capital investment on both expected earnings and the variance in earnings one measure of the riskiness of investment and to demonstrate the importance of risk and risk aversion in determining the rate of return to schooling the paper begins by showing that the standard stochastic specification of the earnings function is overly restrictive with respect to risk considerations in particular the traditional specification implies that the explanatory variables must have the same qualitative affect on both expected returns and risk thus the standard earnings function can not be used to examine the relation between human capital investment and risk in any meaningful way next we examine the risk implications of a more general stochastic earnings function the specification we use is based on the work of just and pope 3 and griffiths and anderson 2 it allows a variable to be either risk increasing or risk reducing independent of its impact on expected returns section iii contains the empirical results using data from the national longitudinal surveys we estimate the generalized earnings function we find that higher levels of general human capital as proxied by years of schooling experience and i q are positively correlated with the variance in earnings higher levels of specific human capital as proxied by job tenure are nega

measuring social mobility abstract the paper considers the ranking of mobility matrices in a simple markov model of social mobility the approach is the dynamic counterpart ot the static inequality ranking of income distributions by the lorenz curve the derived partial ordering is motivated by welfare considerations is shown to be equivalent to same intuitive mobility concepts and is used to screen some immobility indices the equivalence of the ranking with the permanent income lorenz ordering gives support to the claim that this approach is the natural extension of kolm s the optimal production of social justice in public economics j margolis and h guitton eds macmillan london 1969 atkinson s on the measurement of inequality j econ theory2 1970 244 263 and dasgupta sen and starrett s notes on the measurement of inequality j econ theory6 1973 180 187 approaches journal of economic literature classification numbers d31 d63 j62

measuring social mobility as unpredictability by associating mobility with the unpredictability of social states new measures of social mobility may be constructed we propose a family of three state by state and aggregate scalar predictability measures the first set of measures is based on the transition matrix the second uses a sampling approach and permits statistical testing of the hypothesis of perfect mobility providing a new justification for the use of the x2 statistic the third satisfies the demanding criterion of period consistency an empirical example demonstrates the usefulness of the new measures to complement existing ones in the literature

does local financial development matter we study the effects of differences in local financial development within an integrated financial market we construct a new indicator of financial development by estimating a regional effect on the probability that ceteris paribus a household is shut off from the credit market by using this indicator we find that financial development enhances the probability an individual starts his own business favors entry of new firms increases competition and promotes growth as predicted by theory these effects are weaker for larger firms which can more easily raise funds outside of the local area these effects are present even when we instrument our indicator with the structure of the local banking markets in 1936 which because of regulatory reasons affected the supply of credit in the following 50 years overall the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements

price dispersion and inflation new facts and theoretical implications abstract in workhorse macroeconomic models price dispersion is a central determinant of welfare the cost of business cycles optimal inflation and the tradeoff between inflation and output stability while price dispersion increases with inflation in the models this relationship is negative in the data due to sales prices the comovement of price dispersion and inflation for regular prices is positive a model with sales can quantitatively match the comovement in the data whereas a range of similar models without sales cannot even for regular prices these findings have important implications for welfare calculations optimal inflation and the effects of monetary shocks

price adjustment in an automobile insurance market a test of the sheshinski weiss model nominal price rigidity is explained in the sheshinski weiss sw model by costly price adjustment the predictions of the sw model which describe a firm s optimal forward looking price adjustment strategy were derived and tested using microdata on the timing and the magnitude of premium changes by sixty nine firms in the alberta automobile insurance market over the period 1974 82 the model was tested by estimating the structural equations of the model probit equations for premium changes and reduced form equations for the firm s new premium and its old premium the overall conclusion is that the sw model does not explain the price adjustments observed in the alberta automobile insurance market