on the estimation of an implicitly additive demand system motivated by a lack of engel flexibility in commonly used demand systems rimmer and powell developed a new demand system this system referred to aidads is implicitly directly additive possesses marginal budget shares and thus engel elasticities that vary nonlinearly with expenditure such that predicted budget shares are restricted to the 0 1 interval due to these attractive engel properties aidads represents a significant contribution to the literature on demand analysis this paper presents an alternative estimation procedure to the one used by rimmer and powell and examines its properties via a case study the proposed approach avoids a linear approximation employed in rimmer and powell s estimation framework based on a small monte carlo study it appears that the approach produces more accurate estimates of the parameters and engel elasticities

global dynamics in a model with search and matching in labor and capital markets abstract in this paper global macroeconomic dynamics are studied when search frictions are present in both labor and capital markets on the basis of the merz 1995 macroeconomic model with labor market frictions and capital accumulation our paper offers an extension to frictions in capital markets analogously modeled as a search and matching process using the merz model as limit case we consider exogenous as well as endogenous borrowing constraints we also allow the cost of issuing bonds to change endogenously as we show capital market frictions exacerbate and accentuate the interaction between the two markets and magnify the effects of shocks on output consumption employment and welfare this interaction of the frictions in labor and capital markets are also shown to give rise to multiple equilibria on the basis of numerical solution techniques instead of relying on first or second order approximations around a unique steady state our paper uses dynamic programming techniques to compute decision variables and the value function directly and assess the local and global dynamics of the model the steady state solutions are studied by using the hamiltonian and the dynamics are assessed for various model variants by using dynamic programming techniques

entrepreneurship start up costs and employment abstract we study the effects of business start up costs on employment in a model with managers workers and matching we show that higher start up costs discourage entrepreneurs and increase the fraction of the population who become workers job creation suffers and employment settles at a lower level we illustrate with evidence from major oecd economies where large variations in start up costs are correlated with large variations in employment levels

risk unemployment and the stock market a rare event based explanation of labor market volatility what is the driving force behind the cyclical behavior of unemployment and vacancies what is the relation between job creation incentives of firms and stock market valuations we answer these questions in a model with time varying risk modeled as a small and variable probability of an economic disaster a high probability implies greater risk and lower future growth lowering the incentives of firms to invest in hiring during periods of high risk stock market valuations are low and unemployment rises the model thus explains volatility in equity and labor markets and the relation between the two first draft november 15 2014 kilic mkilic wharton upenn edu wachter jwachter wharton upenn edu we are grateful to andy abel gabriel chodorow reich max croce giuliano curatola zvi eckstein joao gomes urban jermann christian opp sang byung seo ctirad slavik mathieu taschereau dumouchel michael wachter nancy ran xu amir yaron and seminar participants at the wharton school at the trans atlantic doctoral conference at the western finance association meetings and at the safe asset pricing workshop for helpful comments

the return of the wage phillips curve the standard new keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment under some assumptions that relation takes a form similar to that found in empirical applications starting with the original phillips 1958 curve and may thus be viewed as providing some theoretical foundations to the latter the structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the unemployment rate in the u s economy even under the strong assumption of a constant natural rate of unemployment

vacancies unemployment and the phillips curve abstract the canonical new keynesian phillips curve has become a standard component of models designed for monetary policy analysis however in the basic new keynesian model there is no unemployment all variation in labor input occurs along the intensive hours margin and the driving variable for inflation depends on workers marginal rates of substitution between leisure and consumption in this paper we incorporate a theory of unemployment into the new keynesian theory of inflation and empirically test its implications for inflation dynamics we show how a traditional phillips curve linking inflation and unemployment can be derived and how the elasticity of inflation with respect to unemployment depends on structural characteristics of the labor market such as the matching technology that pairs vacancies with unemployed workers we estimate on us data the phillips curve generated by the model while we can reject the baseline new keynesian phillips curve in favor of the search frictions specification we show it is still too stylized to fully describe the dynamics of firms marginal costs

short versus long run implications of trade liberalization for poverty in three developing countries the impacts of global trade reform on poverty are a key concern in the current trade negotiations under the doha development agenda the aggregate poverty impacts of trade reform are in turn strongly linked to the impacts of such reforms on the rural population as they constitute the overwhelming majority of the poor in almost all developing countries this paper uses a new micro simulation methodology designed to analyze this critical issue the methodology is first explained and then applied to three developing countries of particular interest chile malawi and vietnam a key feature is the distinction between the short run impacts of reform where many factors most importantly selfemployed labor of the poor tend to be immobile between sectors and the longer run impacts when factors find their highest return regardless of the sector of employment this distinction makes an enormous difference and

wage formation towards isolating search and bargaining effects from the marginal product this article estimates the importance of workers outside options in wage determination the article uses the predictions of search and bargaining theory and proposes novel identification strategies to separate the respective effects of outside options from those of unobserved productivity using an administrative panel database for germany this study exploits differences in both the employment composition across cities of germany and mobility across jobs as sources of variation for identification the main finding of the article is that a 10 increase in the outside options of a worker generates a 7 wage increase

the medium is the measure technical change and employment 1909 1949 abstract new indicators based on technology titles are used to measure the impact of innovative activity on the u s labor market between 1909 and 1949 we find that positive technology shocks raised productivity employment vacancies and labor turnover and lowered unemployment and business failures moreover automotive and electrical innovations quintessential general purpose technologies had a greater positive impact on employment than those in mechanical innovations the overall results compatible with the predictions of the real business cycle model raise questions about the anemic recovery in employment after 1934 since the strong upsurge in technical change failed to be accompanied by vigorous job expansion

labour markets liquidity and monetary policy regimes dans leur etude les auteurs elaborent un modele d equilibre du mecanisme de transmission de la politique monetaire qui fait ressortir les elements de friction relatifs a l acquisition d information sur le marche de la monnaie et a la recherche d emploi

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

political instability pro business market reforms and their impacts on national systems of innovation abstract we investigate the impacts of political instability and pro business market reforms on national systems of innovation nsi across a range of developing and developed countries evidence suggests that national systems of innovation are most likely to flourish in developed politically stable countries and less likely to prosper in historically unstable countries while research has shown that pro business market reforms can be a valuable policy instrument to boost economic development in less developed countries the extent to which these reforms affect a country s innovativeness has been neglected in the literature in particular the degree to which pro business market reforms may compensate for political instability when it comes to fostering national systems of innovation remains under researched our findings support established arguments concerning the strong influence of political instability on inputs to national innovation systems we find however mixed effects for pro business market reforms while results indicate a negative direct influence on nsi they consistently show a strong moderating effect that counterbalances the negative impact of political instability especially in those developing country environments where science and technology are lagging these results provide important implications for policymakers as well as for our understanding of emerging and transition economies and national technological capability

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

accounting for labor gaps abstract this study explains the impact of taxes and labor market institutions on the total hours observed in france germany the united kingdom and the united states we develop a balanced growth model with matching frictions in the labor market distinguishing between the extensive margin and intensive margin of labor supply we show that i hours are more sensitive to changes in taxes whereas employment reacts more to shifts in labor market institutions and ii a substitution effect exists between employment and hours counterfactual experiments show that if france had experienced the same trend in labor market institutions as the united states its employment rate would have increased by 25 percentage points whereas its number of hours worked per employee would have reduced by 1 percentage point if france had chosen the us paths of both taxes and labor market institutions then its employment rate would have been larger by 20 percentage points and the number of hours worked by employees would have been larger by 3 percentage points than the current one a situation observed before the 1970s

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

imperfect mobility of labor across sectors a reappraisal of the balassa samuelson effect this paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two sector open economy model with imperfect substitutability in hours worked across sectors the balassa samuelson 1964 model predicts that a rise in the sectoral productivity ratio by 1 raises the relative price of non tradables by 1 while leaving the non traded wage traded wage ratio unchanged applying cointegration methods to a panel of fourteen oecd countries over the period 1970 2007 our estimates show that the relative price rises by only 0 78 and the relative wage falls by 0 27 while our first set of empirical findings cast doubt on the quantitative predictions of the balassa samuelson model our second set of evidence highlights the role of imperfect labor mobility the relative price responds more to a productivity differential between tradables and non tradables while the reaction of the relative wage is more muted in countries with higher intersectoral reallocation of labor we show that the ability of the two sector model to account for our evidence quantitatively relies upon two ingredients i imperfect mobility of labor across sectors and ii physical capital accumulation finally our numerical results reveal that the model predicts the relative price response fairly well and to a lesser extent the relative wage response

search theory the 2010 nobel memorial prize in economic sciences this paper surveys search theory with an emphasis on the contributions of the 2010 laureates for the nobel memorial prize in economic sciences peter diamond dale mortensen and christopher pissarides

technology shocks and job flows we consider a version of the solow growth model where technological progress can be investment specific or investment neutral the labour market is subject to search frictions and the existing productive units may fail to adopt the most recent technological advances technological progress can lead to the destruction of technologically obsolete jobs and cause unemployment we calibrate the model to replicate the high persistence that characterizes the dynamics of firms neutral technology and the frequency of firms capital adjustment we find that neutral technological advances increase job destruction and job reallocation and reduce aggregate employment investment specific technological advances reduce job destruction have mild effects on job creation and are expansionary hence neutral technological progress prompts schumpeterian creative destruction while investment specific technological progress operates essentially as in the standard neoclassical growth model using structural var models we provide support to the key dynamic implications of the model copyright 2007 wiley blackwell

unemployment and market size without strong empirical support labour market matching models typically assume constant returns to scale in matching we construct a tractable equilibrium random matching model with a general matching technology introducing market size effects the job finding rate varies with unemployment stable steady states may occur in regions of increasing or decreasing returns and multiple equilibria are welfare ranked by market size while the standard model relies on high frequency shocks to the steady state to explain the co movement of unemployment and job finding locally decreasing returns in matching generate plausible adjustment dynamics and slower convergence lastly an extension of the hosios condition internalises search externalities

would freeing up world trade reduce poverty and inequality the vexed role of agricultural distortions trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries yet global trade in farm products continues to be far more distorted than trade in nonfarm goods those distortions reduce some forms of poverty and inequality but worsen others so the net effects are unclear without empirical modeling this paper summarizes a series of new economy wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries the global linkage model results suggest that removing those remaining distortions would reduce international inequality largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries and would reduce the number of poor people worldwide by 3 percent the analysis based on the global trade analysis project model for a sample of 15 countries and nine stand alone national case studies all point to larger reductions in poverty especially if only the non poor are subjected to increased income taxation to compensate for the loss of trade tax revenue

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

reducing start up costs for new firms the double dividend on the labor market starting a firm with expansive potential is an option for educated and high skilled workers if there are labor market frictions this additional option can be seen as reducing the chances of ending up in a low wage job and hence as increasing the incentives for education in a matching model we show that reducing the start up costs for new firms results in higher take up rates of education it also gives rise through a thick market externality to higher rates of job creation for high skilled labor as well as average match productivity we provide empirical evidence to support our argument

cross country differences in unemployment fiscal policy unions and household preferences in general equilibrium we develop a five period overlapping generations model with individuals who differ by ability and with an imperfect labour market union wage setting for the individuals of lower ability the model explains human capital formation hours worked and unemployment within one coherent framework its predictions match the differences in the unemployment rate across 12 oecd countries remarkably well a shapley decomposition of these differences reveals an almost equal role for fiscal policy variables and union preferences as to fiscal policy differences in unemployment benefits play a much more important role than tax differences differences in households taste for leisure are unimportant

changes in the structure of global food demand may 1998 purdue agec staff paper 98 5 a newly developed demand system is used to estimate the response of food and food product demand to per capita expenditure changes the resulting engel elasticities are then used to project food and food product demand in 2020 assuming per capita expenditure and population changes results suggest that while food expenditure is projected to grow it accounts for a smaller proportion of total expenditure further analysis indicates change in the composition of food demand away from a grain and towards livestock is projected to occur in lower income countries in 2020

reconciling endogenous job destruction with labor market stylized facts the role of hiring costs abstract this note considers a real business cycle model with search and matching frictions as well as purely endogenous separations in line with the model of mortensen and pissarides 1994 in order to solve the shimer 2005 puzzle this puzzle shows the inconsistency of such a model to capture the high volatility of labor market variables unemployment vacancies and cyclical property beveridge curve job creation and destruction using hiring costs rather than vacancy posting cost in this setup allows to solve this puzzle

estimating consumer demands across the development spectrum maximum likelihood estimates of an implicit direct additivity model abstract this paper characterizes consumer demand patterns across the development spectrum using elasticity estimates from a demand system possessing non linear engel effects demands for six broadly defined goods are then projected under the assumption that per capita expenditure growth rates differ across the development spectrum such projections illustrate the extent to which non linear income effects generate more plausible demand responses estimated marginal budget shares for food decline in a logistical manner and range from about 0 5 for ethiopia to less than 0 05 for the usa engel elasticities for food range from 0 95 for ethiopia to less than 0 1 for the usa

the role of product market regulations in the process of structural change abstract the sectoral allocation of labor differs considerably across developed economies even in the presence of similar patterns of structural change a general equilibrium model that captures the stylized facts of structural change is presented in this framework economy wide product market regulations hinder the development of dynamic sectors such as service industries this is consistent with the negative cross country relationship between product market regulations and the service employment share discussed in the paper additionally the model suggests that higher service prices and rents in regulated economies reduce labor supply providing a rationale for the negative association between product market regulations and the employment rate previously found in the literature

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

the true protection concept a comment on greenaway and milner empirical studies estimating shift parameters to evaluate the true protection especially for developing countries often reach the result that those parameters have very high values this study is to show that it is not substitutional relationships but much more the very inflationary monetary policy of many developing countries which forces the shift parameters towards one moreover it is shown that it makes little sense to distinguish between traditional and non traditional exports and that shift parameters are not necessarily stable over time

unemployment dynamics in britain we examine the inter related dynamics of the unemployment flows and stock our model allows them to be linked through the standard accounting identity but also through behavioural relationships we find that for the uk the bulk of the correlation between duration and the unemployment stock arises from the dependence of duration on unemployment taking careful account of the inter temporal identity outflow shocks have contributed little to the evolution of unemployment since the late 1960s given that the correlation of duration and unemployment arises from the behavioural relationship we show that unemployment dynamics arise mostly from shocks to the inflow unemployment remains one of europe s more pressing economic and social problems as highlighted in the eu s lisbon declaration of 2000 a dynamic approach to unemployment starts from the recognition that unemployment is a stock and changes through shocks to the outflow and inflow the research and policy focus has generally been on the outflow process or equivalently unemployment duration a glance at figure 1 shows why this might be so it reveals a very strong co movement of the unemployment rate and the proportion of the unemployed out of work for a year or more analysts have used data like this to argue that the source of unemployment fluctuations has been changes in the outflow process 1 possibly as a consequence of this most policies directed at reducing unemployment focus on improving the search effectiveness and employability of the currently unemployed the unemployment flows and stock are related in quite complex ways and in this paper we focus on these inter related dynamics the model we use allows them to be linked in two ways first there is the simple accounting relationship whereby shocks to the flows accumulate in the stock second search and matching models suggest behavioural relationships of the flows depending on unemployment the presence of the nonlinear accounting identity in the model makes the analysis of the joint system problematic so we proceed sequentially investigating first one link and then the other we find that for the uk the bulk of the correlation between duration and the unemployment stock displayed in figure 1 arises from the dependence of the former on the latter we find a strong dependence of the outflow rate on unemployment taking careful account of the inter temporal identity on the other hand outflow shocks have contributed little to the evolution of unem

optimal fiscal policy with labor selection this paper characterizes long run and short run optimal scal policy in the labor selection framework quantitatively the time series volatility of the labor income tax rate is orders of magnitude larger than the tax smoothing results based on walrasian labor markets but is a few times smaller than the results based on search and matching labor markets to understand these results in terms of model primitives we develop a welfare relevant analytic concept of externalities for the selection model which we label tightness this concept of tightness is the source of the decentralized economy s inecient cross sectional wage premia between the average newly hired worker and the marginal newly hired worker compared to the traditional concept of labor market tightness in the search and matching literature this new concept of tightness plays a highly similar role and like in the matching model is crucial for understanding eciency and optimal policy

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

real and nominal propagation of nominal shocks the role of real and nominal propagation mechanisms in generating persistent real effects of nominal shocks is analysed analytically in a fully specified intertemporal general equilibrium model while neither a real propagation mechanism capital acccumulation with one period nominal contracts nor nominal propagation staggered nominal contracts in the absence of any real propagation can generate plausible impulse responses with strong persistence it is shown that the two mechanisms interact so as to strengthen persistence possibly unit roots and generate more plausible impulse responses

entry costs and labor market dynamics abstract we study the cyclical dynamics of the value of a vacant position in labor markets characterized by search and matching frictions we present a model of aggregate fluctuations in which firms face sunk costs to enter the production process our specification of sunk costs gives rise to a countercyclical value of a vacancy we find that this overlooked object has important quantitative implications for the study of labor markets and business cycles it affects the cyclical dynamics of the surplus division between workers and firms and provides a better characterization of the movements in income shares over recessions and expansions understanding movements in the value of a vacant position helps to link the dynamics of income shares with recent volatility puzzles found in models of search and matching in labor markets

labor market search endogenous disasters and the equity premium puzzle abstract the present paper investigates i the endogenous disaster mechanism in a textbook search and matching model when calibrated with a constant flow value of unemployment that is close to average labor productivity and ii its contribution to solve the equity premium puzzle i offer a simple explanation for the core of the disaster mechanism the lower bound say xkink on the annuitized costs the firm incurs from investing in a match lies sufficiently close to the body of productivity s distribution if labor productivity drops close to or even below xkink for consecutive periods the firm s annuitized share in expected future productivity of a worker can either only barely or even no longer at all break even the annuitized lower bound of the costs the firm faces vacancies become unprofitable and the economy quickly enters a downward spiral the core of the mechanism relies critically on an unreasonably high and constant flow value of unemployment disasters disappear entirely for slightly smaller or procyclical values and the effects cannot be compensated by empirically plausible adjustments of the model s remaining parameters while the model can generate a sizeable equity premium combined with a small risk free rate if the flow value of unemployment is large and constant and if the coefficient of relative risk aversion and the elasticity of intertemporal substitution are both high premia again collapse by an order of magnitude in the versions of the model without disasters

job search and cyclical unemployment a model economy is described that integrates job search and signal extraction analysis equilibrium differs from search models without signal extraction in that even with a fixed real sector unemployment fluctuates stochastically it differs from standard signal extraction models because search introduces persistence in fact unemployment follows a second order difference equation with coefficient that are functions of current and lagged values of the stochastic shocks thus the model has the potential to mimic actual business cycle data despite the fact that the underlying shocks are independently and identically distributed policy implications are discussed

search for a monetary propagation mechanism abstract this paper examines a monetary propagation mechanism in an economy where exchanges in goods and labor markets involve costly search it is shown that an increase in the money growth rate increases steady state employment and output when the money growth rate is low but reduces steady state employment and output when the money growth rate is already high the model produces persistent hump shaped responses in employment and output to money growth shocks even when the shocks have no persistence the model also generates desirable features in job vacancy sales inventory and the velocity of money all these features emerge here in an economy with perfectly flexible prices and wages journal of economic literatureclassification numbers e40 e30

social security and cross country differences in hours a general equilibrium analysis abstract i develop a general equilibrium life cycle model with an intensive and extensive margin of labor supply and endogenous human capital accumulation i use the model to assess the effects of changes to various features of social security on labor supply outcomes of particular interest are changes to the scale of the program and to the relevant eligibility rules i find that the cross country differences in social security programs account for at least 79 of the differences in employment rates of people aged 55 64 and 17 31 of the differences in aggregate hours worked between the us and continental europe

does entry regulation hinder job creation evidence from the french retail industry are product market and entry regulation key sources of low employment growth in many european countries we investigate this question in the context of the french retail trade industry since 1974 approval by regional zoning boards has been required for the creation or extension of any large retain store in france we exploit a unique database that provides time and region specific variation in boards approval decisions we show that stronger deterrence of entry by the boards increased retailer concentration and slowed down employment growth in france

macroeconomic effects of regulation and deregulation in goods and labor markets product and labor market deregulation reduce and redistribute rents leading economic players to adjust to this new distribution it typically comes with distribution and dynamic effects to study these effects we build a macroeconomic model on two central assumptions monopolistic competition in the goods market which determines the size of rents and bargaining in the labor market which determines the distribution of rents product market regulation determines entry costs and the degree of competition labor market regulation determines the bargaining power of workers we show the effects of deregulation we then use our results to discuss the political economy of deregulation and recent macroeconomic evolutions in europe

hysteresis in a new keynesian model this paper examines hysteresis in which persistent unemployment takes on structural characteristics over time hysteresis is modeled as deterioration in labor market matching efficiency as the average duration of unemployment increases this is embedded in a simple new keynesian macro model a decline in labor market matching efficiency would be consistent with the observed rightward shift of the beveridge curve since the 2007 09 recession hysteresis is shown to lead to larger and more persistent responses of the unemployment rate and unemployment duration to productivity intertemporal preference and monetary shocks hysteresis also generates an increase in the natural rate of unemployment

homeownership and new entrepreneurs first empirical evidence of a bidirectional interaction abstractliterature linking housing and professional choices focuses on the supply side of the labour market the search for a job as employee thus considering the unemployment rate as the only measure of labour market outcomes indeed the usually neglected link between homeownership and entrepreneurship is equally important for assessing labour market performance this empirical article represents one of the first attempts to test the interplay between homeownership and new entrepreneurs effectively using a panel data analysis in italy we find a first empirical evidence of a positive and bidirectional interaction between homeownership and new entrepreneurs precisely small businesses and the self employed

the labor wedge as a matching friction abstract we use a search and matching model to decompose the labor wedge into three classes of labor market frictions and evaluate their role for the labor wedge and unemployment we find that there is an asymmetric effect of labor market frictions on the labor wedge and unemployment while the wedge is to a large extent explained by changes in matching efficiency unemployment is accounted for by the combination of frictions to matching efficiency job destruction and bargaining if search and matching frictions give rise to the labor wedge then it is relevant for explaining unemployment mainly through changes in matching efficiency

unemployment insurance and the business cycle an equilibrium model is developed to study the interaction of the business cycle unemployment insurance and the labor market for young men in canada the model combines optimal job oer layo and recall decisions within a numerically solved and restricted bayesian nash equilibrium we consider the long run implications of changes made to unemployment insurance in canada during the 1990s the changes lead to equilibrium increases in average rates of unemployment layos and recalls eliminating ui lowers the equilibrium unemployment

factor complementarity and labour market dynamics abstract we propose and estimate a dynamic stochastic general equilibrium model featuring search and matching frictions deep habits and a ces production function the model successfully replicates the cyclical properties of labour market variables in the us economy for three main reasons first two of the endogenous mechanisms of the model factor complementarity and unemployment benefits play a key role for explaining the amplification in unemployment and vacancies second deep habits have a smaller but significant role as an endogenous mechanism third capital augmenting productivity investment specific and matching efficiency innovations explain large part of the variation in labour market variables

a modified implicit directly additive demand system a recently developed demand system nicknamed aidads an implicit directly additive demand system offers an approach to capturing consumer preferences across a wide range of expenditure levels aidads generalizes the les by assuming marginal budget shares vary with utility and hence with expenditure like the les aidads includes subsistence parameters that define minimum consumption levels here we present a modified aidads maidads that replaces the constant subsistence parameters with functions that also vary with utility these transformed subsistence levels are referred to as minimum consumption quantities this model is applied to the 1996 international consumption project data as these data span a wide range of expenditure levels maidads offers a viable alternative for the estimation of a global demand system results suggest minimum consumption quantities for staple grains livestock other food products alcohol and tobacco clothing and footwear and transport and transport services vary

human capital formation and business cycle persistence abstract in this paper we examine the role of the formation of human capital in propagating shocks over the business cycle we show that a two sector equilibrium business cycle model with human capital is able to generate persistence in the growth of output and other aggregate variables comparable to that observed in the post war us data a key feature is the relatively low elasticity of substitution between skilled and unskilled labor in the production of human capital

policy analysis in a matching model with intensive and extensive margins the large differences in hours of work across rich countries reflect large differences in both employment to population ratios and hours per worker we imbed the canonical model of labor supply into a matching model to produce a model with operative intensive and extensive margins and assess the implications of several policies for changes along the two margins tax and transfer policies lead to decreases along both margins whereas regulations that increase the cost of creating or maintaining a job may lead to decreases in employment but necessarily lead to increases in hours per worker

an implicitly additive demand system the problem of endowing large applied general equilibrium models with numerical values for parameters is formidable for example a complete set of own and cross price elasticities of demands for the monash model of the australianeconomy involves in excess of 50000 items invoking the minimal assumptions that demand is generated by utility maximization reduces the load to about 26000 obviously still a number much too large for unrestrained econometric estimation to obtain demand systems estimates for a dozen or so generic commodities at a top level of aggregation categories like food clothing and footwear etc typically johansen s lead has been followed and directly additive preferences imposed upon the underlying utility function with the move beyond one step linearized solutions of applied general equilibrium models the functional form of the demand system adopted becomes an issue the most celebrated of the additive preference demand systems the linear expenditure system les has one

payroll taxes social insurance and business cycles payroll taxes represent a major distortionary influence of governments on labor markets this paper examines the role of time varying payroll taxes and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance when the latter is only imperfectly related to search effort a balanced social insurance budget induces countercyclical payroll taxation renders gross wages more rigid over the cycle and strengthens the model s endogenous propagation mechanism for conventional calibrations the model generates a negatively sloped beveridge curve and countercyclical unemployment as well as substantial volatility and persistence of vacancies and unemployment

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

financial markets and firm size the role of employment protection laws and barriers to entrepreneurship this article provides evidence on the institutional determinants of firm size for the period 1980 1998 using a comprehensive longitudinal database across 29 industrial sectors in 15 organisation f

the long run impact of biofuels on food prices more than 40 of us corn is now used to produce biofuels which are used as substitutes for gasoline in transportation biofuels have been blamed universally for past increases in world food prices and many studies have shown that these energy mandates in the us and eu may have a large 30 60 impact on food prices in this paper we use a partial equilibrium framework to show that demand side effects in the form of population growth and income driven preferences for meat and dairy products rather than cereals may play as much of a role in raising food prices as biofuel policy by specifying a ricardian model with differential land quality we find that a significant amount of new land will be converted to farming which is likely to cause a modest increase in food prices however biofuels may increase aggregate world carbon emissions due to leakage from lower oil prices and conversion of pasture and forest land for farming

equilibrium in a production economy with an income tax this paper develops a method to study an infinite horizon production economy distorted by a state dependent income tax this setting permits taxes to depend on the capital stock an endogenous state variable and thus captures situations where the evolution for capital and taxes is jointly determined to solve this model the consumption function is represented as a fixed point of a nonlinear monotone operator that is defined such that its nth iteration computes the consumption function n steps away from the horizon for a corresponding finite horizon economy the oparator s monotonicity is exploited in proving the existence of and constructing an equilibrium copyright 1991 by the econometric society

on the job search and cyclical unemployment crowding out vs vacancy effects incorporating on the job search otjs into a real business cycle model has been shown to increase the cyclical volatility of unemployment using a particularly simple model of otjs we show that the increased search of employed workers during expansions induces firms to open more vacancies but also crowds out unemployed workers in the job search resulting in an ambiguous overall effect on unemployment volatility we show analytically and numerically that the difference between the employer s share of the match surplus with an employed versus an unemployed job seeker determines the degree to which otjs increases unemployment volatility we use this result to re consider some related papers of otjs and explain the amplification of volatility they obtain finally we show that a plausible calibration of the otjs model allows us to reproduce most significant features of the us labor data

agricultural research spending must increase in light of future uncertainties abstract agricultural productivity depends critically on investments in research and development r d but there is a long lag in this response failing to invest today in improvements of agricultural productivity cannot be simply corrected a few decades later if the world finds itself short of food at that point in time this fundamental irreversibility is particularly problematic in light of uncertain future population income and climate change as portrayed in the ipcc s shared socio economic pathways ssps this paper finds the optimal path of agricultural r d spending over the 21st century for each ssp along with valuation of those regrets associated with investment decisions later revealed to be in error the maximum regret is minimized to find a robust optimal r d pathway that factors in key uncertainties and the lag in productivity response to r d results indicate that the whole of uncertainty s impact on r d is greater than the sum of its individual parts uncertainty in future population has the dominant impact on the optimal r d expenditure path the robust solution suggests that the optimal r d spending strategy is very close to the one that will increase agricultural productivity fast enough to feed the world under the most populous scenario it also suggests that society should accelerate r d spending up to mid century thereafter moderating this growth rate

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

world food demand long term projections of global food demand are heavily dependent on which functional form of the food demand equation is used given that real incomes can change substantially over the long term key elements are the dependence of the income elasticity on income which ensures that the food budget share always lies within the 0 1 range and the role of income inequality this article analyzes these issues proposes a new functional form that deals with them and presents estimates of income and price elasticities for food in 138 countries copyright 2012 oxford university press

true protection concepts and their role in evaluating trade policies in ldcs in many ldcs it is not uncommon to find incentives designed to encourage import substitution activities coexisting alongside incentives aimed at encouraging export activities this article evaluates a recent approach to evaluating commercial policy which among other things highlights some of the implications of simultaneously pursuing import substitution and export promotion the study develops a model which emphasises the incidence of protection and identifies the concept of true protection empirical results for a number of ldcs are discussed and the implications of these results evaluated in addition the article contrasts this approach with the effective protection approach to evaluating commercial policy

the economic future of europe after three years of near stagnation the mood in europe is definitely gloomy many doubt that the european model has a future in this paper i argue that things are not so bad and there is room for optimism over the last thirty years productivity growth has been much faster in europe than in the united states productivity levels are roughly similar today in the european union and in the united states the main difference is that europe has used some of the increase in productivity to increase leisure rather than income while the united states has done the opposite still not everything is well unemployment is still high and europe suffers from inefficient regulation here also however there is more action than often perceived and a wide ranging reform process is taking place this process is driven by reforms in financial and product markets reforms in those markets are in turn putting pressure for reform in the labor market reform in the labor market is slowly taking place but not without political tensions these tensions dominate the news but they are a symptom of change not a reflection of immobility

the impact of minimum wages on labour market transitions we investigate dierences in labour market transition rates in high versus low minimum wage regimes using canadian data spanning 1979 to 2008 the data include consistent questions on job tenure and reason for job separation for the whole period over the same time frame there were over 140 minimum wage changes in canada we nd that higher minimum wages are associated with lower hiring rates but also with lower job separation rates importantly the reduced separation rates are due mainly to reductions in layos occur in the rst 6 months of a job and are present for unskilled workers of all ages our estimates imply that a 10 increase in the minimum wage generates a 3 9 reduction in the layo rate we present a search and matching model that ts with these patterns and test its implications overall our results imply

household debt and labor market fluctuations abstract the co movements of labor productivity with output total hours vacancies and unemployment have changed since the mid 1980s this paper offers an explanation for the sharp break in the fluctuations of labor market variables based on endogenous labor supply decisions following the mortgage market deregulation we set up a search model with efficient bargaining and financial frictions in which impatient borrowers can take an amount of credit that cannot exceed a proportion of the expected value of their real estate holdings when borrowers equity requirements are low the impact of a positive technology shock on the marginal utility of consumption is strengthened which in turn results in lower hours per worker and higher wages in the bargaining process this shift in labor supply discourages firms from opening vacancies reducing the impact of the shock on employment we simulate the effects of an increase in both the loan to value ratio and the share of borrowers in total population our exercise shows that the response of labor market variables might have been substantially affected by the increase in household leverage in the us in the last twenty years

labor search and matching in macroeconomics abstract the labor search and matching model plays a growing role in macroeconomic analysis this paper provides a critical selective survey of the literature four fundamental questions are explored how are unemployment job vacancies and employment determined as equilibrium phenomena what determines worker flows and transition rates from one labor market state to another how are wages determined what role do labor market dynamics play in explaining business cycles and growth the survey describes the basic model reviews its theoretical extensions and discusses its empirical applications in macroeconomics the model has been developed against the background of difficulties with the use of the neo classical frictionless model of the labor market in macroeconomics its success includes the modelling of labor market outcomes as equilibrium phenomena the reasonable fit of the data and when inserted into business cycle models improved performance of more general macroeconomic models at the same time there is evidence against the nash solution used for wage setting and an active debate as to the ability of the model to account for some of the cyclical facts

personality characteristics of self employed an empirical study this paper is concerned with the personality characteristics of self employed most existing studies on personality characteristics of entrepreneurs concentrate on factors like age educational profile and motivations to become self employed there is a lack of significant empirical findings to claim that entrepreneurs are psychologically different from the general population based on a large sample of 14 846 individuals we compare self employed with the general population and with wage and salary earners we empirically show that entrepreneurs differ from the general population and wage and salary earners in a number of characteristics entrepreneurs are more individually oriented than the rest of the population individual responsibility and effort are distinguishing characteristics when asked about important qualities that children can be encouraged to learn at home entrepreneurs answer that it is important to teach children an ethic of working hard except for the latter characteristic the same holds if we compare self employed with wage and salary earners

spatial equilibrium with unemployment and wage bargaining theory and estimation abstract in this paper we present a spatial equilibrium model where search frictions hinder the immediate reallocation of workers both within and across local labor markets because of the frictions firms and workers find themselves in bilateral monopoly positions when determining wages although workers are not at each instant perfectly mobile across cities in the baseline model we assume that workers flows are sufficient to equate expected utility across markets we use the model to explore the joint determination of wages unemployment house prices and city size or migration a key role of the model is to clarify conditions under which this type of spatial equilibrium setup can be estimated we then use u s data over the period 1970 2007 to explore the fit and quantitative properties of the model our main goal is to highlight forces that influence spatial equilibria at 10 year intervals

optimal monetary policy and downward nominal wage rigidity in frictional labor markets empirical evidence suggests that nominal wages in the u s are downwardly rigid this paper studies the optimal long run inflation rate in a labor search and matching framework under the presence of downward nominal wage rigidity dnwr in this environment optimal monetary policy targets a positive inflation rate the annual long run inflation rate for the u s is around 2 percent positive inflation greases the wheels of the labor market by facilitating real wage adjustments and hence it eases job creation and prevents excessive increase in unemployment following recessionary shocks these findings are related to standard ramsey theory of wedge smoothing by following a positive inflation policy under sticky prices the monetary authority manages to reduce the volatility and the size of the intertemporal distortion significantly the intertemporal wedge is completely smoothed when prices are fully flexible since the optimal long run inflation rate predicted by this study is considerably higher than in otherwise neoclassical labor markets the nature of the labor market in which dnwr is studied can be relevant for policy recommendations

search frictions real rigidities and inflation dynamics the standard new keynesian model suffers from the so called macro micro pricing conflict in order to match the dynamics of inflation implied by macroeconomic data the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data here i show how departing from the standard model s assumption of a perfectly competitive labor market can help resolve the pricing conflict i do so by assuming search frictions in the labor market in this framework labor becomes firm specific and marginal cost curves become upward sloping this mechanism reduces the slope of the new keynesian phillips curve given a frequency of price adjustment conversely given an estimate of this slope my model implies shorter price durations than the standard model for a plausible calibration and for different slope values my model consistently delivers price durations that are roughly half of those implied by the standard model

a multisectorial matching model of unions abstract we develop an equilibrium matching model where unions have an important institutional presence monopolistic competition characterizes the goods market where only some sectors are unionized thus the model can vary the coverage of collective bargaining it can vary the degree of coordination between unions and alternatively consider national and sectorial unions calibration to the union premium implies a workers rent extraction parameter much lower than assumed in the matching literature we introduce unemployment insurance to study the interactions of policies with unions and find that unions only push for more generous benefits if this does not entail higher payroll taxes

do more heavily regulated economies have poorer performing new ventures evidence from britain and spain we test two alternative perspectives on the start up size and subsequent growth of new firms in a heavily regulated hr economy and a lightly regulated lr economy the first argues that in an hr economy there will be fewer new firms and those that do start will be larger than those in an lr economy but they will grow more slowly a second perspective is that regulation does not influence the scale of entrepreneurship merely its distribution between that which is registered and that which is not registered using parallel datasets for hr spain and lr britain we find some support for both perspectives specifically we find that registered new firms in britain do start smaller than in spain and do grow faster however when both registered and unregistered firms are included these differences disappear

business cycles with costly search and recruiting a business cycle model is developed in which output is traded on lucas phelps islands and labor services on each island are exchanged through costly search and recruiting with transactions externalities the model exhibits persistent involuntary unemployment and inefficient equilibria even though there are no nominal rigidities and no unexploited privately attainable gains from trade it also exhibits employment fluctuations without any real wage fluctuations it yields a lucas aggregate supply curve to a linear approximation it also implies that the natural rate of unemployment depends positively upon the variability and persistence of relative price shocks

nutrition transition and the structure of global food demand estimating future demand for food is a critical aspect of global food security analyses the process linking dietary changes to wealth is known as the nutrition transition and presents well identified features that help to predict consumption changes in poor countries this study proposes to represent the nutrition transition with a nonhomothetic flexible in income demand system known as the modified implicitly directly additive demand system maidads the resulting model is transparent and estimated statistically based on cross sectional information from faostat it captures the main features of the nutrition transition rise in demand for calories associated with income growth diversification of diets away from starchy staples and a large increase in caloric demand for animal based products fats and sweeteners the estimated model is used to project food demand between 2010 and 2050 based on a set of plausible futures trend projections and shared socioeconomic pathways scenarios the main results of these projections are as follows 1 global food demand will increase by 46 less than half the growth in the previous four decades 2 this growth will be attributable mainly to lower middle income and low income countries 3 the structure of global food demand will change over the period with a 95 increase in demand for animal based calories and a much smaller 18 increase in demand for starchy staples and 4 the analysis of a range of population and income projections reveals important uncertainties depending on the scenario the projected increases in demand for animal based and vegetal based calories range from 78 to 109 and from 20 to 42 respectively

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

world product and income international comparisons of real gross product the volume reports on the third phase of the united nations international comparison project icp the main results provide comparisons of real gross domestic product gdp per capita for thirty four countries in 1975 quantity and price comparisons are given also for personal consumption capital formation and public consumption and further subdivisions of final expenditures on gdp are estimated

employment and hours of work abstract this paper develops a dynamic model of the labor market in which the degree of substitution between employment and hours of work is determined as part of a search equilibrium each firm chooses its demand for working hours and number of vacancies and the earnings profile is determined by nash bargaining the earnings profile is generally nonlinear in hours of work and defines the trade off between employment and hours of work concave production technology induces firms to overemploy and as a result hours of work are below their optimal level the hosios condition is not sufficient for efficiency when there are two industries workers employed by firms with higher recruitment costs work longer and earn more that is good jobs require longer hours of work interestingly technology differentials cannot account for working hours differentials