rational heuristics expectations and behaviors in evolving economies with heterogeneous interacting agents we analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent based model populated by heterogeneous interacting firms agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change imperfect information coordination hurdles and structural breaks in these circumstances we find that neither individual nor macroeconomic dynamics improve when agents replace myopic expectations with less naive learning rules our results suggest that fast and frugal robust heuristics may not be a second best option but rather rational responses in complex and changing macroeconomic environments jel c63 d8 e32 e6 o4

are consumers spending decisions in line with an euler equation evaluating a new survey of german consumers we test whether individual consumption spending decisions are formed according to an euler equation model we find that consumers are more likely to inc

greenhouse gas emissions per unit of value added geva a corporate guide to voluntary climate action abstract how much must i reduce my greenhouse gas ghg emissions if i want to do my fair share to contribute towards the global effort to keep global warming below a 2 c rise in average temperature over preindustrial times this paper suggests an answer for nations and corporations that want to move ahead of legislation on a voluntary basis if all nations reduce their ghg emissions per unit of gdp by 5 per year global ghg emissions will be 50 lower in 2050 than in 2010 as long as the global economy continues to grow at its historical rate of 3 5 per year the suggested 5 per year decline can be translated into a corporate resolution to reduce corporate ghg emissions per unit of value added geva by 5 per year if all corporations cut their geva by 5 per year the same global result will be achieved the suggested 5 per year decline can be used as a guideline for responsible action on a voluntary basis the guideline is unlikely to be made mandatory soon but compulsory publication of the necessary emissions and productivity data by nations and corporations could help civil society highlight top performers

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

cut to the bone hospital takeovers and nurse employment contracts the authors examine changes in the wages employment and effort of nurses in california hospitals following takeovers by large chains in the 1990s the market for nurses has been described as a classic monopsony so that one might expect increases in firm market power to be associated with declines in wages however a basic contracting model predicts effects on effort rather than on wages which is what this analysis finds nurses experienced few declines in wages following takeovers but did see increases in the number of patients per nurse the measure of effort used here the authors show that their results are also consistent with an extended version of the monopsony model that considers effort and allows for revenue shifts following a takeover finally they find that these changes were similar in the largest for profit and non profit chains suggesting that market forces are more important than institutional form

do people understand monetary policy abstract we combine questions from the michigan survey about future inflation unemployment and interest rates to investigate whether households are aware of the basic features of u s monetary policy our findings provide evidence that some households form their expectations in a way that is consistent with a taylor 1993 type rule we also document a large degree of variation in the pattern of responses over the business cycle in particular the negative relationship between unemployment and interest rates that is apparent in the data only shows up in households answers during periods of labor market weakness

the effect of minimum salaries on employment of teachers a test of the monopsony model author affiliation william m boal college of business and public administration drake university des moines iowa 50311 usa e mail william boal drake edu acknowledgment this paper has benefited from helpful comments on earlier drafts by david harrington and ronald oaxaca by seminar participants at drake university and iowa state university and by anonymous referees 1 introductionthe market for schoolteachers has long been cited as an example of labor monopsony where employers that is school districts enjoy market power ehrenberg and smith 2000 hyclak johnes and thornton 2005 the reasons offered are plausible by definition school districts enjoy exclusive territories teachers have specialized training that might not be interesting to nearby nonschool employers many teachers are second earners in their families and might be unwilling to relocate in response to distant job offers there is some evidence that teachers have strong personal geographic preferences boyd et al 2005 it would appear that the set of potential employers available to a certified teacher is limited to the set of school districts within commuting distance of current residence for these reasons it is often argued that the greatest monopsony power is probably held by rural school districts because of their large geographic size an empirical literature dating back to landon and baird 1971 has tried to document monopsony in this market by regressing teacher salaries on measures of geographic concentration of school districts these studies often appear to find a negative effect of geographic concentration on teacher salaries see luizer and thornton 1986 for a survey a major difficulty with the salary concentration research strategy is that concentration is inversely related to urbanization because urban areas tend to have many school districts in close proximity and salaries for all workers tend to be higher in urban areas the apparent negative estimated effect of concentration may disappear when sufficient measures of urbanization are included ransom boal and beck 1998 moreover the urban rural difference in teacher salaries appears similar to the urban rural difference for other professionals hirsch and nottage 1998 1a second difficulty with the salary concentration research strategy is the increasing presence of teachers unions 2 a monopsonist faces or at least perceives an upward sloping supply of labor this upward slope raises marginal labor cost above the current wage causing the monopsonist to reduce employment equilibrium occurs on the labor supply curve but below the monopsonist s labor demand curve by contrast a union tries to raise the wage by moving the equilibrium above the supply curve estimates based on 1970s data show that unionized teachers enjoyed an average wage differential of roughly 10 3 in some cases a union might even move the equilibrium above the demand curve this is the prediction of the so called contract curve model for which eberts and stone 1984 1986 found some evidence among new york state school districts any test for monopsony ought to exclude unionized districts from the sample or control for unionism in some way this has not generally been done 4a recent seemingly unrelated literature has investigated the effects of legal minimum wages on employment in fast food restaurants katz and krueger 1992 card and krueger 1994 this literature has apparently documented slight increases in employment following increases in minimum wages the authors note that this result is incompatible with competitive labor markets and may be evidence for employer monopsony a modest increase in a minimum wage may increase employment in a monopsonized market because it flattens the employer s perceived labor supply curve and thereby lowers the employer s marginal labor cost curve

productivity gains from geographic concentration of human capital evidence from the cities abstract based on recent theoretical developments the argument is made that the average level of human capital is a local public good cities with higher average levels of human capital should therefore have higher wages and higher land rents after conditioning on the characteristics of individual workers and dwellings this prediction is supported by data for standard metropolitan statistical areas smsas in the united states where the smsa average levels of formal education and work experience are used as proxies for the average level of human capital the alternative explanations of omitted smsa variables and self selection are evaluated an estimate of the effect of an additional year of average education on total factor productivity is computed

underpaid or overpaid wage analysis for nurses using job and worker attributes the nursing labor market presents an apparent puzzle hospitals report chronic shortages yet standard wage analysis shows that nursing wages have increased over time and greatly exceed those received by other college educated women this paper addresses this puzzle data from the current population survey cps are matched with detailed job content descriptors from the occupational information network o net nursing jobs require higher levels of skills and more difficult working conditions than do jobs for other college educated workers a standard cps only wage regression shows a registered nurse rn wage advantage of 22 log points compared to a pooled male female group of college educated workers control for o net job attributes reduces the rn gap to 08 while an arguably preferable nonparametric estimator produces a wage gap estimate close to zero we conclude that nurses receive compensation close to long run opportunity costs narrowing if not resolving the rn wage shortage puzzle

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

the urban wage premium in imperfect labor markets mit administrativen verknupften betriebs beschaftigtendaten fur westdeutschland untersucht diese studie ob ein teil des urban wage premiums durch eine geringere lohnsetzungsmacht von arbeitgebern auf dichteren arbeitsmarkten erklart werden kann wir zeigen zunachst dass das arbeitsangebot an firmen in dichteren arbeitsmarkten lohnelastischer ist die lohnsetzungsmacht der arbeitgeber also weniger ausgepragt ist diese unterschiede lassen eine lohnpramie von 1 1 bis 1 6 prozent bei einem anstieg der bevolke rungsdichte um 100 log punkte erwarten anschliesend zeigen wir dass die geschatzte lohnpramie bei kontrolle fur unbeobachtete zeitkonstante personenheterogenitat um 1 1 bis 1 4 prozentpunkte fallt wenn wir auf die regionalen suchfriktionen bedingen unsere ergebnisse legen nahe dass ein wesentlicher teil des urban wage premiums auf geringere suchfriktionen in dichteren arbeitsmarkten zuruckzufuhren ist

is there monopsonistic discrimination against immigrants the authors investigate immigrants and natives labor supply to the firm within an estimation approach based on a dynamic monopsony framework applying duration models that account for unobserved worker heterogeneity to a large administrative employer employee data set for germany they find that immigrants supply labor less elastically to firms than do natives under monopsonistic wage setting the estimated elasticity differential predicts a 7 7 log points wage penalty for immigrants thereby accounting for the entire unexplained native immigrant wage differential of 5 8 to 8 2 log points when further distinguishing immigrant groups differing in their time spent in the german labor market their immigration cohort and their age at entry the authors find that the observed unexplained wage differential is larger for those groups that show a larger elasticity differential relative to natives these findings not only suggest that search frictions are a likely cause of employers more pronounced monopsony

how do firms form their expectations new survey evidence author s coibion o gorodnichenko y kumar s abstract 2018 american economic association all rights reserved we survey new zealand firms and document novel facts about their macroeconomic beliefs there is widespread dispersion in beliefs about past and future macroeconomic conditions especially inflation this dispersion in beliefs is consistent with firms incentives to collect and process information using experimental methods we find that firms update their beliefs in a bayesian manner when presented with new information about the economy and that changes in their beliefs affect their decisions inflation is not generally perceived as being important to business decisions so firms devote few resources to collecting and processing information about inflation

sticky information in general equilibrium this paper develops and analyzes a general equilibrium model with sticky information the only rigidity in goods labor and financial markets is that agents are inattentive sporadically updating their information sets when setting prices wages and consumption after presenting the ingredients of such a model the paper develops an algorithm to solve this class of models and uses it to study the model s dynamic properties it then estimates the parameters of the model using u s data on five key macroeconomic time series it finds that information stickiness is present in all markets and is especially pronounced for consumers and workers variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation output and hours jel e30 e10

competition among hospitals we examine competition in the hospital industry in particular the effect of ownership type for profit not for profit government we estimate a structural model of demand and pricing in the hospital industry in california then use the estimates to simulate the effect of a merger california hospitals in 1995 face an average price elasticity of demand of 4 85 not for profit hospitals face less elastic demand and act as if they have lower marginal costs their prices are lower than those of for profits but markups are higher we simulate the effects of the 1997 merger of two hospital chains in san luis obispo county where the merger creates a near monopoly prices rise by up to 53 and the predicted price increase would not be substantially smaller were the chains not for profit

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

nonprofit hospital mergers and the exercise of market power government challenges to mergers within the hospital industry have become more frequent many of those mergers involve nonprofit organizations rather than the for profit firms that are the norm in most other industries this difference in ownership has made no apparent difference in the antitrust agencies approach to proposed hospital mergers in this article i test the proposition that nonprofit and for profit hospitals price differently in response to the structure of the markets in which they compete based on a cross sectional analysis of california hospitals i find that estimated merger effects on hospital prices do vary by type of ownership in response to either higher market share or to the joint combination of higher share and higher market concentration private nonprofit hospital prices are statistically significantly lower than for profit hospital prices and on balance in this sample there is no evidence of any systematic price increasing effect on private nonprofit hospitals

valuing alternative work arrangements abstract we employ a discrete choice experiment in the employment process for a national call center to estimate the willingness to pay distribution for alternative work arrangements relative to tr

inflation expectations and behavior do survey respondents act on their beliefs we compare the inflation expectations reported by consumers in a survey with their behavior in a financially incentivized investment experiment the survey is found to be informative in the sense that the beliefs reported by the respondents are correlated with their choices in the experiment more importantly we find evidence that most respondents act on their inflation expectations showing patterns consistent with economic theory respondents whose behavior cannot be rationalized tend to have lower education and lower numeracy and financial literacy these findings help confirm the relevance of inflation expectations surveys and provide support to the microfoundations of modern macroeconomic models

wage gaps large and small author affiliation barry t hirsch barry t hirsch is the w j usery chair of the american workplace department of economics andrew young school of policy studies georgia state university atlanta ga 30302 3992 and research fellow iza bonn germany bhirsch gsu eduthis presidential address was presented at the annual meeting of the southern economic association new orleans la on november 20 2007 acknowledgment i thank the many economists with whom i have interacted or coauthored over the years in particular john addison chris bollinger bill breit bill johnson dave macpherson and ed schumacher barry t hirsch w j usery chair of the american workplace department of economics andrew young school of policy studies georgia state university 2007 president of the southern economic association figure omitted see article image 1 introductionin the wealth of nations adam smith posited theory and institutional explanations for why wages differ modern labor economics has retained a focus on wage differentials although much of the literature is unabashedly empirical it is informed by theory neoclassical economics including human capital theory remains the principal approach although labor economists recognize the role played by human nature workplace incentives institutions and public policy in wage determination in this address i highlight several topics i have studied all involving wage gaps 1 these include census imputation methods union premiums product market regulation wages in male and female jobs the wage effects of military service and interarea wages and cost of living the purpose is not to trumpet my work although it may appear as such but to draw broader conclusions about labor economists understanding of wage determination 2 equalizing differentials and the law of one wagethe theory of equalizing differentials states that in competitive labor markets workers with similar skills working in similarly attractive jobs and locations should receive similar compensation long run wage differentials are explained by differences in skill and job disamenities with a single price wage conditional on worker and job attributes 2 the law of one wage equal compensation for equivalent workers and jobs follows naturally from competitive theory empirical studies attempt to test the law of one price in product markets industrial organization economists focus on a narrow set of homogeneous goods in markets with low cost information and similar transportation costs i e purchases of electronics and books at internet sites international economists test for purchasing power parity for homogeneous goods i e big mac prices across countries for a recent paper see parsley and wei 2007 even in these markets there is considerable deviation from the law of one price one does not see an equivalent literature in labor economics yes there is a vast literature on wage gaps but authors rarely characterize such work as a test of a law of one wage because there is little expectation that there should be wage equality even conditional on controls why not first as emphasized in personnel economics pay schemes that maximize profits often involve wages deviating from spot marginal products thus creating competitive wage differences across similar workers in similar jobs lazear and oyer 2007 second unions or other institutions can affect wages third there are rigidities in labor markets owing to imperfect mobility say from information and search costs firm specific training personal job attachment or tied household decisions regarding jobs location and housing manning 2003 mortensen 2003 fourth are problems of measurement leading to apparent variation in wages even when there is none and fifth even if data are error free we cannot hope to measure all the multitude of worker and job attributes that influence wages

a naive sticky information model of households inflation expectations this paper provides a simple epidemiology model where households when forming their inflation expectations rationally adopt the past release of inflation with certain probability rather than the forward looking newspaper forecast as suggested in carroll 2003 macroeconomic expectations of households and professional forecasters quarterly journal of economics 118 269 298 the posterior model probabilities based on the michigan survey data strongly support the proposed model we also extend the agent based epidemiology model by deriving for it a simple adaptation which is suitable for estimation our results show that this model is able to capture the heterogeneity in households expectations very well

salience and consumer choice we present a theory of context dependent choice in which a consumer s attention is drawn to salient attributes of goods such as quality or price an attribute is salient for a good when it stands out among the good s attributes relative to that attribute s average level in the choice set or more broadly the choice context consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality price ratios the model accounts for a variety of disparate evidence including decoy effects and context dependent willingness to pay it also suggests a novel theory of misleading sales

socioeconomic status and macroeconomic expectations we show that individuals macroeconomic expectations are influenced by their socioeconomic status ses people with higher income or higher education are more optimistic about future macroeconomic developments including business conditions the national unemployment rate and stock market returns the spread in beliefs between high and low ses individuals diminishes significantly during recessions a comparison with professional forecasters and historical data reveals that the beliefs wedge reflects excessive pessimism on the part of low ses individuals ses driven expectations help explain why higher ses individuals are more inclined to invest in the stock market and more likely to consider purchasing homes durable goods or cars received november 13 2017 editorial decision february 12 2019 by editor wei jiang authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

assigning firm level ghge reductions based on national goals mathematical model empirical evidence abstract the so called paris agreement signed by 195 countries has led to the setting of some ambitious target reductions in greenhouse gas emissions by most developed countries the over arching goal of those reduction targets is to limit global warming to less than 2oc compared to pre industrial levels yet despite these commitments from the highest governance levels there is still no deterministic model on how these national target reductions will be cascaded down to the commercial sector which accounts for the lion s share of these emissions in this paper we present a novel framework which enables the setting measurement and tracking of the emissions performance of every commercial entity based on a single metric we further present empirical evidence from the automotive industry to illustrate how the model helps to readily identify the low versus high performers the model also reveals one car company that stands out as the industry benchmark by already exceeding the performance required by the 2025 emissions target set by the us the model proves successful in achieving the objectives of being science based goal driven equitable comparable and actionable and as such can be readily used to accurately compare competitors from the same industry and provide the basis of a more equitable performance based carbon tax market as well as the ability to assess accurately how well a specific country is meeting its reduction quota and how the various industry sectors are impacting that goal

sustainability reporting among mining corporations a constructive critique of the gri approach abstract the environmental crisis is giving rise to growing public demand for socially responsible and ecologically viable mining practices large mining corporations are responding by advancing the idea of a sustainable mining industry these responses are accompanied by concerted efforts to advertise a company s relative progress in this direction through the publication of sustainability reports based on the global reporting initiative gri framework many scholars contest the effectiveness of that framework arguing that gri based reports can mislead decision makers who are concerned with sustainability or even camouflage unsustainable practices particularly at the site level few scholars however have scratched below the surface of criticism in order to consider how to improve the effectiveness of that framework this article takes a closer look at this problem by answering the following question what needs to be changed in mining corporations gri based frameworks for the purpose of promoting more meaningful and reliable sustainability performance information this article followed a qualitative methodological approach based on literature reviews and 41 semi structured interviews the analysis was guided by an evaluation of the extent to which the predominant gri based approach to sustainability reporting meets a number of principles of sustainability assessment and reporting known as the bellagiostamp principles this paper outlines a number of specific changes that should be promoted in mining corporations frameworks if their reports are to provide meaningful and accurate information about sustainability progress such changes include a more systematic consideration of site level performance scenario building and legacy effects overall this article corroborates the view that meaningful and reliable standardized disclosures of contributions to sustainability are unlikely to emerge any time soon the geographical dispersion of mining facilities imposes substantial difficulties to the contextualization of sustainability evaluations

monetary policy announcements and expectations evidence from german firms abstract we assess empirically whether monetary policy announcements impact firm expectations two features of our data set are key first we rely on a survey of production and price expectations of german firms that is expectations of actual price setters second we observe the day on which firms submit their answers to the survey we compare the responses of firms before and after monetary policy surprises and obtain two results first firm expectations respond to policy surprises second the response becomes weaker as the surprise becomes bigger a contractionary surprise of moderate size reduces firm expectations while a moderate expansionary surprise raises them large surprises both negative and positive fail to alter expectations consistent with this result we find that many of the ecb s announcements of non conventional policies did not affect expectations significantly overall our results are consistent with the notion that monetary policy surprises generate an information effect which is endogenous to the size of the policy surprise

planning and financial literacy how do women fare many older us households have done little or no planning for retirement and there is a substantial population that seems to undersave for retirement of particular concern is the relative position of older women who are more vulnerable to old age poverty due to their longer longevity this paper uses data from a special module we devised on planning and financial literacy in the 2004 health and retirement study it shows that women display much lower levels of financial literacy than the older population as a whole in addition women who are less financially literate are also less likely to plan for retirement and be successful planners these findings have important implications for policy and for programs aimed at fostering financial security at older ages

monopsony power in the market for nurses estimates are presented of the inverse elasticity of supply of nursing services to the individual hospital a quantity which is a natural measure of employer market power the estimates corresponding to employment changes taking place over one year are quite high in the neighborhood of 0 79 and even for changes taking place over three years are substantial in the neighborhood of 0 26 the estimates do not significantly differ for hospitals in major metropolitan areas and do not depend very sensitively on the assumed form of the oligopsony equilibrium this abstract was borrowed from another version of this item

wage differentials across labor markets and workers does cost of living matter wage differentials studies rarely account for interarea differences in cost of living owing both to data limitations and theoretical ambiguity this study develops a price index for 185 metropolitan areas comprising about 70 of the u s labor force current population survey data for 1985 95 and data on sitespecific amenities are used to estimate earnings differentials based on nominal wages wages fully adjusted for measured cost of living and a simple approximation of real wages with partial adjustment for pricelevel differences dispersion in approximate real wages across 185 labor markets and differentials by region and city size are substantially lower than dispersion in nominal or full adjustment wages estimates of racial and ethnic differentials display moderate sensitivity to choice of a wage measure whereas other standard differentials do not both nominal wages and wages fully adjusted for cost of living may provide misleading estimates of real wage differentials absent data on interarea prices and amenities researchers should include detailed controls for region and city size in nominal wage equations jel j31 r23

monopsony in the low wage labor market evidence from minimum nurse staffing regulations this paper provides direct evidence on the extent of monopsony power in the low wage labor market by estimating the firm level elasticity of labor supply for nurse aides in the long term care nursing home industry using exogenous variation in hiring induced by the passage of a state minimum nurse staffing law i find that facilities initially out of compliance with the new law did not have to raise their wage offers relative to their competitors in order to hire more nurses while this is consistent with perfect competition in simple monopsony models of the labor market i discuss how the results may be more ambiguous in more complicated models

where modern macroeconomics went wrong this paper provides a critique of the dsge models that have come to dominate macroeconomics during the past quarter century it argues that at the heart of the failure were the wrong microfoundations which failed to incorporate key aspects of economic behaviour e g incorporating insights from information economics and behavioural economics inadequate modelling of the financial sector meant they were ill suited for predicting or responding to a financial crisis and a reliance on representative agent models meant they were ill suited for analysing either the role of distribution in fluctuations and crises or the consequences of fluctuations on inequality the paper proposes alternative benchmark models that may be more useful both in understanding deep downturns and responding to them

expectations heterogeneous forecast errors and consumption micro evidence from the michigan consumer sentiment surveys the household data underlying the michigan index of consumer sentiment are used to test the rationality of consumer expectations and their usefulness in forecasting expenditure the results can be interpreted as characterizing the shocks that hit different types of households over time expectations are found to be biased and inefficient at least ex post people underestimated the disinflation of the early 1980s and the severity of recent business cycles people s forecast errors are also systematically correlated with their demographic characteristics in part because of time varying group level shocks further sentiment helps forecast consumption growth some of this rejection of the permanent income hypothesis is due to the systematic demographic components in forecast errors

the expected price of keeping up with the joneses abstract inflation expectations elicited in surveys have been found to exhibit large dispersion across individuals although several explanations have been proposed none fully explain this puzzle we explore in this paper a new behavioral factor social comparison using original survey data we find that respondents who feel they are falling behind compared to their peers report significantly and substantially higher inflation expectations we argue that this result is consistent with an experience based belief formation model in which those unable to keep up with the joneses overweight the high prices of aspiration goods they are unable to purchase

economic literacy and inflation expectations evidence from a laboratory experiment we present experimental evidence of a link between economic literacy and inflation forecast accuracy the experiment investigates two channels through which economic literacy may enable better forecasts i choice of information and ii use of information more literate subjects choose more relevant information and use the given information more effectively starting from a 10th percentile score the boost in literacy from taking an economics course predicts a 0 64 standard deviation decline in mean absolute forecasting error our findings suggest that a significant portion of demographic heterogeneity in inflation expectations observed in survey data may be driven by heterogeneity in economic literacy

firms price cost and activity expectations evidence from micro data firms expectations play a central role in modern macroeconomic models but little is known empirically about how these are formed or whether they matter for economic outcomes using a novel panel data set of manufacturing firms expectations about prices and wage rates new orders employment and unit costs for the united kingdom we document a range of stylized facts about the properties of firms expectations and their relationship with recent experience there is wide dispersion of expectations across firms expected future price and wage growth are influenced by firm specific factors but macroeconomic factors also matter expectations of employment and new orders are influenced by firm specific measures of past orders while expected unit costs seem to be influenced more by firm specific cost pressures and aggregate import prices after controlling for a wide range of variables we find a significant connection between past expected price and wage increases and their out turns but there is also strong evidence that firms expectations are clearly not rational

inflation expectations as a policy tool abstract we assess the prospects for central banks using inflation expectations as a policy tool for stabilization purposes we review recent work on how expectations of agents are formed and how they affect their economic decisions empirical evidence suggests that inflation expectations of households and firms affect their actions but the underlying mechanisms remain unclear especially for firms two additional limitations prevent policy makers from being able to actively manage inflation expectations first available surveys of firms expectations are systematically deficient which can only be addressed through the creation of large nationally representative surveys of firms second neither households nor firms expectations respond much to monetary policy announcements in low inflation environments we provide suggestions for how monetary policy makers could pierce this veil of inattention through new communication strategies as well as the potential pitfalls to trying to do so

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

inattentive professional forecasters abstract using the ecb survey of professional forecasters to characterize expectations at the micro level we emphasize two new facts forecasters i fail to systematically update their forecasts and ii disagree even when updating it is moreover found that forecasters have predictable forecast errors these facts are qualitatively supportive of recent models of inattention and suggest a setup where agents imperfectly process information due to both sticky information a la mankiw reis and noisy information a la sims however building and estimating such an expectation model we find that it cannot quantitatively replicate the error and disagreement observed in the data

perceived inflation under loss aversion building on prospect theory we apply the concept of loss aversion to the formation of inflation perceptions and test empirically for nonlinearities in the inflation perceptions relation for a panel of 10 euro area countries specifically under the assumption of loss aversion inflation changes above a certain reference rate will be perceived more strongly rejecting rationality of inflation perceptions in general under symmetric loss and in a majority of cases under flexible loss functions panel smooth transition models give evidence of nonlinearities in the inflation perceptions relation regarding both actual inflation and time this result is confirmed by dynamic fixed effects estimates where the slope of the estimated value function is significantly steeper in the loss region and the implied average reference inflation rate is found close to 2

the price is right updating inflation expectations in a randomized price information experiment abstract using a unique randomized information experiment embedded in a survey this paper investigates how consumers inflation expectations respond to new information we find that respondents on average update their expectations in response to certain types of information and do so sensibly in a manner consistent with bayesian updating as a result of information provision the distribution of inflation expectations converges toward its center and cross sectional disagreement declines we document heterogeneous information processing by gender and present suggestive evidence of respondents forecasting under asymmetric loss our results provide support for expectation formation models in which agents form expectations rationally but face information constraints

public information and inflation expectations microeconometric evidence from a natural experiment abstract governments provide public information to reduce information imperfections do households rely on public signals to inform themselves about market conditions to identify the importance of public information in households price expectations we take advantage of a unique natural experiment in ecuador where the published inflation rate had been different from the correct rate over a period of fourteen months due to a software error we find that the public signal about prices plays an important role in households price expectations and the change in price expectations affects their savings choices the effect is stronger for better educated and older people

classic or new monopsony searching for evidence in nursing labor markets the market for registered nurses rns is often offered as an example of classic monopsony while a new monopsony literature emphasizes that firm labor supply is upward sloping independent of market structure using data from multiple sources we explore the relationship between nursing wages in hospitals and measures of classic and new monopsony wage level analysis fails to provide support for classic monopsony the relative wages of rns in 240 u s labor markets being largely uncorrelated with hospital system concentration longitudinal analysis shows nursing wages declining with increases in hospital concentration we interpret these results as providing support for classic monopsony effects in the short run but question whether wage effects are sustained in the long run no relationship is found between nursing wages and a new monopsony measure of mobility but support for new monopsony is found for women elsewhere in the labor market rns display greater interemployer mobility than do women or men in general two conclusions follow first upward sloping labor supply need not imply monopsonistic outcomes second absent more compelling evidence nursing should not be held up as a prototypical example of monopsony classic or new

rational adaptive and learning behavior of voters evidence from disaggregated popularity functions for sweden the disaggregated study confirms earlier aggregated studies showing that unemployment strongly affects the popularity of the swedish government the results presented here however suggest that there are differences among popularity functions estimated across groups differing in age income and gender consequently popularity functions estimated at an aggregated level ignore reaction patterns within various groups in society

firm sponsored general education and mobility frictions evidence from hospital sponsorship of nursing schools and faculty this study asks why hospitals provide direct financial support to nursing schools and faculty this support is striking because nursing education is clearly general clearly paid by the firm and information asymmetries appear minimal using aha and survey data i find hospitals employing a greater share of their msa s registered nurses are more likely to provide direct financial support to nursing schools and faculty net of size and other institutional controls given the institutional context i interpret this result as unusually specific evidence that technologically general skill training may be made de facto specific by imperfect and costly mobility

information induced heteroscedasticity in price expectations data this study tests the hypothesis that price expectations differ across individuals because they acquire different information about inflation if price information is a normal good then the amount of price information acquired will vary across individuals according to income education and other demand specific variables causing price expectations to be heteroscedastic with respect to these variables utilizing monthly household survey data the authors test the heteroscedasticity hypothesis and find support for the differential information model in addition they develop a novel method of incorporating the don t know response to questions about inflation into the estimation of price expectations copyright 1990 by mit press

optimal wages in the market for nurses an analysis based on heyes model in a recent paper the economics of vocation or why is a badly paid nurse a good nurse anthony heyes posits a novel adverse selection mechanism whereby the average quality of nurses employed is declining in the wage and evaluates the consequences for an optimizing monopsonistic national health service nhs i conduct a standard welfare analysis here based on the proposed model it turns out that contrary to concerns raised by heyes the nhs will always choose a wage that is lower than the wage chosen by a welfare maximizing social planner nurse are underpaid i also extend the analysis to the case of a competitive labor market for nurses

rational expectations and macroeconomic forecasts the article presents extensive results from testing for bias and serially correlated errors in a collection of time series of quarterly multiperiod forecasts for six variables including real gnp growth inflation and unemployment the analysis covers responses by 79 frequent participants in economic outlook surveys conducted regularly since 1968 it shows much greater incidence of apparently systematic errors for inflation than for the other variables also the tests are more favorable to composite group forecasts than to most of the individual forecast sets

assessing inflation expectations anchoring for heterogeneous agents analysts businesses and trade unions forecasts of agents who are actively involved in the setting of prices and wages are less readily available than those of professional analysts but may be more relevant for understanding inflation

competition and teacher pay i introduction recent policy initiatives are increasing the degree of competition in primary and secondary education the number of charter schools is growing at an astounding rate vouchers are available to eligible children in florida utah and a number of cities including washington d c kafer 2005 school districts throughout the country are experimenting with subcontracting campuses to private firms the increasing popularity of policies that foster school competition dovetails with a burgeoning literature on the effects of educational competition researchers have examined the effects of educational competition on academic outcomes average public school spending and school district efficiency l this research has largely ignored the effects of increased competition on teacher pay yet reductions in the market power of school districts could have a significant impact on teacher earnings if school districts behave as typical monopsonists or oligopsonists when hiring then a lack of competition suppresses wages and policies that are designed to enhance competition among schools could lead to higher teacher salaries ceteris paribus 2 alternatively if a school district s position as a monopolistic provider of education services generates economic rents there are few parties to whom those rents might be dissipated besides school district personnel if teachers have been able to appropriate a share of the economic rents generated by the market power of school districts then increased competition could lower teacher salaries 3 this study uses individual data on more than 335 000 teachers from 670 texas school districts to explore the empirical relationship between competition and teacher pay the analysis suggests that a lack of competition in the public school system has led to significant market power for texas school districts resulting in lower wages for most texas teachers but higher wages for teachers in relatively concentrated markets ii theoretical models the elementary and secondary education industry in the united states is often highly concentrated more than 30 of u s educational markets are served by a single public school district and there are many more that are served by only a handful of educational providers 4 the concentrated nature of education markets suggests two alternative models of teacher wage determination the first is a classic oligopsony model and the second is a rent sharing model an oligopsony model of teacher wage determination boal and ransom 1997 lay out a classic cournot model of oligopsony that can be directly applied to the educational labor market 5 firms school districts choose an employment level l sub i to maximize the firm s revenue function r sub i given the employment level of all other firms in the market l sub i 1 r sub i l sub i w l sub i l sub i l sub i the market wage is determined by the total employment of all firms the first order condition for each firm implies that it chooses l sub i such that 2 mrp sub i w w l sub i l epsilon sup 1 in this model the gap between the marginal revenue product of firm i mrp sub i and the wage rate w depends on the firm s employment share l sub i l and the inverse wage elasticity of labor supply for the market epsilon sup 1 6 assuming that firms have different marginal revenue products the employment weighted average across all the firms in the market is 3 summation over i mrp sub i w l sub i wl epsilon sup 1 summation over i l sub i l sup 2 the last term on the right hand side is the familiar herfindahl index of market concentration thus wages are a function of market concentration h the employment weighted average marginal revenue profit per worker bar

monopsony power and relative wages in the labor market for nurses this paper examines the thesis that monopsony power is an important determinant of wages in nursing labor markets using data from the 1985 93 current population surveys measures of relative nurse non nurse wage rates for 252 labor markets are constructed contrary to predictions from the monopsony model no positive relationship exists between relative nursing wages and hospital density or market size nor is support found for the presence of monopsony power based on evidence on union wage premiums slopes of experience profiles or the mix of rn to total hospital employment

differences in labor supply to monopsonistic firms and the gender pay gap an empirical analysis using linked employer employee data from germany this article investigates women s and men s labor supply to the firm within a semistructural approach based on a dynamic model of new monopsony using methods of survival analysis and a large linked employer employee data set for germany we find that labor supply elasticities are small 1 9 3 7 and that women s labor supply to the firm is less elastic than men s which is the reverse of gender differences in labor supply usually found at the level of the market our results imply that at least one third of the gender pay gap might be wage discrimination by profit maximizing monopsonistic employers

home biased expectations and macroeconomic imbalances in a monetary union abstract under monetary union economic dynamics may diverge across countries due to regional inflation differentials and a pro cyclical real interest rate channel yet stability is generally ensured through endogenous adjustment of the real exchange rate the speed of adjustment depends inter alia on the way agents form expectations we propose a model in which agents expectations are largely based on domestic variables and less so on foreign variables we show that such home bias in expectations strengthens the real interest rate channel and causes country specific shocks to generate larger and more prolonged macroeconomic imbalances

comparing the point predictions and subjective probability distributions of professional forecasters we use data from the survey of professional forecasters spf to compare point predictions of gross domestic product gdp growth and inflation with the subjective probability distributions held by forecasters we find that most spf point predictions are quite close to the central tendencies of forecasters subjective distributions tend to be asymmetric with spf forecasters tending to report point predictions that give a more favorable view of the economy than do their subjective means medians modes

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

effect of immigrant nurses on labor market outcomes of us nurses we study the effect of immigration of foreign trained registered nurses rns on the employment and wages of us trained rns we use the area approach and study effects of immigration in labor markets defined by the state we find substantial evidence that immigration by foreign trained nurses increases the supply of nurses and that this increase in supply is associated with a decrease in annual earnings estimates suggest that a 10 percent increase in supply due to immigration is associated with a one to four percent decrease in annual earnings

inflation at the household level abstract we use scanner data to estimate inflation rates at the household level households inflation rates have an annual interquartile range of 6 2 9 0 percentage points most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods lower income households experience higher inflation but most cross sectional variation is uncorrelated with observables households deviations from aggregate inflation exhibit only slightly negative serial correlation almost all variability in a household s inflation rate comes from variability in household level prices relative to average prices not from variability in aggregate inflation

current account dynamics under information rigidity and imperfect capital mobility abstract the current account in developed countries is highly persistent and volatile in comparison to their output growth the standard intertemporal current account model with rational expectations re fails to explain the observed current account and consumption dynamics the re model extended with imperfect capital mobility by shibata and shintani 1998 can account for the consumption dynamics but only at the cost of the explanatory power for the volatility of the current account this paper replaces re in the intertemporal current account model with sticky information si in which consumers are inattentive to shocks to their income the si model can better explain a persistent and volatile current account than the re model but it overpredicts the persistence of changes in consumption the si model extended with imperfect capital mobility explains both the current account and consumption provided that sufficiently high degrees of information rigidity and imperfect capital mobility are considered

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

formation of rationally heterogeneous expectations this paper models expectation formation by taking into account that agents may produce heterogeneous expectations because of informational frictions and differing levels of a capacity to process information we show that there are two general classes of steady states within this framework those where strictly dominated forecasting rules vanish and those heterogeneous states where a positive proportion of agents uses a more costly perfect foresight we demonstrate that intrinsic heterogeneity can also arise in a model where the forecasting rules are not equally costly and do not exhibit identical performance in the long run

firm performance and macro forecast accuracy abstract combining a unique survey of japanese firms gdp forecasts with accounting data for 25 years we find three main results first firms gdp forecasts are associated with their employment investment and output growth in the subsequent year second over optimistic and pessimistic forecast errors predict lower profitability and productivity consistent with our model of input choice under uncertainty third larger and more cyclical firms make forecasts closer to professionals presumably reflecting their higher return to accuracy forecasts by more productive and older firms are also more similar to professional forecasts implying forecasting ability is linked to management ability and experience

comment on m bruno theoretical developments in the light of macroeconomic policy and empirical research the paper by michael bruno is a very interesting and thought provoking survey of the key new likely desirable developments in macroeconomics as seen by a distinguished economist and policymaker i like and agree with most of bruno s arguments and assessments so all i will do is add three further reflections on points in his paper this is a comment in a volume dealing with no less than the development of macroeconomics therefore i have chosen to discuss grand subjects where all i can do is outline the problems and leave the answers to the reader let me begin with bruno s comments on the re emergence of the pricewage spiral in economic theory the importance of the cola the importance of external price rises etc broadly speaking these remarks deal with the importance of institutions for the dynamics of prices and wages i think these remarks are part of a complex something we all should have faced long ago maybe we academic economists have been led astray by analytical convenience into almost universal acceptance of a belief that we should never have accepted without solid empirical support even if it

frequency bias in consumers perceptions of inflation an experimental study we investigate whether the perception of economy wide inflation is affected by the frequency with which various goods prices are observed we provide novel experimental evidence that consumers perceptions of aggregate inflation are systematically biased toward the perceived inflation rates of the frequently purchased items this frequency bias may affect consumers consumption and investment decisions and thus have important macroeconomic consequences it may also explain why consumers typically over estimate inflation in surveys during periods where frequently purchased non durable goods are inflating faster than durables

are sunspots learnable an experimental investigation in a simple macroeconomic model abstract we conduct experiments with human subjects in a model with a positive production externality in which productivity is a nondecreasing function of the average level of employment of other firms the model has three steady states and a sunspot equilibrium that fluctuates between the high and low steady states steady states are payoff ranked low values give lower profits than higher values we investigate whether subjects can learn a sunspot equilibrium we observe coordination on the extrinsic announcements in our experimental economies cases of apparent convergence to the low and high steady states are also observed

monopsony in the labor market this paper surveys recent theoretical and empirical research on monopsony in labor markets broadly defined as upward sloping labor supply to an employer we compare older monopsony models based on small numbers of employers with newer models based on labor market frictions such as moving costs and search we also compare older econometric approaches that focus on static wage concentration relationships with newer approaches that focus on dynamics our review of empirical estimates suggests that monopsony power based on small numbers of employers is probably rare but occasionally large while monopsony power based on frictions is probably widespread but small on average

monopsony power pay structure and training although interest in monopsonistic influences on labor market outcomes has revived in recent years only a few empirical studies provide direct evidence on this topic in this article the authors analyze the effect of monopsony power on pay structure using a direct measure of labor market thinness the authors find evidence of monopsony power as firms facing fewer local competitors offer lower wages to skilled labor and trainees but not to unskilled labor the findings have important implications for the economic theory of training as most recent models assume monopsonistic pay setting for skilled labor but not for trainees

urban diversity and economic growth at the risk of some simplification it is possible to identify four periods of intense study of cities by economists each of these has led to an increased understanding of the economics of urban areas and the unique role played by cities in the modem economy the first of these periods occurred in the decade after world war i only about ten years after the truck revolutionized the transport of goods within urban areas this period included the first systematic empirical analysis of the forces affecting the location of firms and households within cities robert murray haig 1926 and a number of other microeconomists at columbia analyzed the spatial pattems of manufacturing activity in lower manhattan and in the rest of new york city haig jmd his colleagues devoted considerable attention to where things belong in an urban area p 402 providing the first systematic economic analysis of urban spatial structure for example they analyzed the garment industry concluding that it was destined by nature to disperse north of 14th street and predicting that it would follow the estabhshed spatial pattem of the cooperage barrelmaking industry standardization in size and quality of barrels had meant that identical barrels could be made throughout the new york metropolitan area even in new jersey and the introduction of the truck meant that they could be transported cheaply throughout the region and exported the second of these periods though not in chronological order began in the mid 1960s it formalized many of the insights about location incentives within urban areas which had been uncovered a half century before mixed them with the logic of heinrich von thunen s 1826 ancient theories about agricultural crops and land values and applied them to the hotisehold sector the works of william alonso 1964

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

match bias in wage gap estimates due to earnings imputation about 30 of workers in the current population survey have earnings imputed wage gap estimates are biased toward zero when the attribute being studied e g union status is not a criterion used to match donors to nonrespondents an expression for match bias is derived in which attenuation equals the sum of match error rates attenuation can be approximated by the proportion with imputed earnings union wage gap estimates with match bias removed are presented for 1973 2001 estimates for recent years are biased downward 5 percentage points bias in gap estimates accompanying other non match criteria public sector industry etc is examined

contingent valuation from dubious to hopeless abstract approximately 20 years ago peter diamond and i wrote an article for this journal analyzing contingent valuation methods at that time peter s view was that contingent valuation was hopele

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

are foreign trained nurses perfect substitutes for u s trained nurses the authors investigate whether foreign and u s trained nurses are substitutes by studying the differences in their wages and whether wage differentials respond to relative supplies of foreign and u s trained nurses regression estimates suggest that foreign trained nurses without a bachelor s degree enjoy a wage premium of 1 to 3 over similar u s trained nurses after adjusting for demographic workplace work type and geographic differences but no wage difference remains among those with a bachelor s degree for all nurses combined the wage difference is modest and statistically insignificant this result suggests that foreign and u s trained nurses are equally productive and close substitutes the authors also test explicitly for whether foreign and u s trained nurses are substitutes and cannot reject the hypothesis that they are

are perceptions of inflation rational some evidence for sweden this survey paper argues that walrasian markets and monetary exchan ge are alternative not complementary arrangements for coordinating economic activity that if one realizes this many informational anomalies and price rigidities that appear irrational in a walrasia n context can be understood as the outcome of maximizing behavior in a monetary economy and that the precautionary approach to modelin g the demand for money takes on a particular importance in this way of looking at things empirical evidence on the demand for money is cite d in support of this point of view which tends to reinstate the quantity of money as an important economic variable in contrast to the new classical vision of the economy whi ch downgrades money s importance this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

the formation of expectations inflation and the phillips curve this paper argues for a careful re consideration of the expectations formation process and a more systematic inclusion of real time expectations through survey data in macroeconomic analyses while the rational expectations revolution has allowed for great leaps in macroeconomic modeling the surveyed empirical micro evidence appears increasingly at odds with the full information rational expectation assumption we explore models of expectation formation that can potentially explain why and how survey data deviate from full information rational expectations using the new keynesian phillips curve as an extensive case study we demonstrate how incorporating survey data on inflation expectations can address a number of otherwise puzzling shortcomings that arise under the assumption of full information rational expectations

unions and hospitals some unresolved issues abstract this article investigates the impact of unions on the wages of hospital workers our ols findings agree with previous ols studies unions increase registered nurses rns wages by five percent and by about eight to ten percent for other hospital workers by contrast we find after correcting for selectivity bias in hospital unionization status a direct union effect of about twenty percent on rn wages and in excess of thirty percent on wages of other hospital workers while the results based on selectivity bias adjustments make us uneasy we do not reject them out of hand we also find indirect union effects up to five percent by other unionized occupations within a hospital and up to ten percent by other unionized hospitals in the local labor market prospective reimbursement programs have a negative impact on the wages of hospital workers but are only significant for non unionized occupations our three empirical tests of monopsony all reject the view that monopsony is a factor in hospital wage setting even considering the large union effects based on selectivity bias adjustment we conclude that unions have been a minor contributor to hospital cost inflation

training opportunities in monopsonistic labour markets this paper studies the empirical relationship between the extent of monopsonistic power observed in occupational labour markets and the training opportunities available to workers in those markets

effective lower bound risk abstract even when the policy rate is currently not constrained by its effective lower bound elb the possibility that the policy rate will become constrained in the future lowers today s inflation by creating tail risk in future inflation and thus reducing expected inflation in an empirically rich model calibrated to match key features of the u s economy we find that the tail risk induced by the elb causes inflation to undershoot the target rate of 2 by as much as 50 basis points at the economy s risky steady state our model suggests that achieving the inflation target may be more difficult now than before the great recession if the likely decline in long run neutral rates has led households and firms to revise up their estimate of the frequency of future elb events