an empirical study on taiwan s current account 1961 90 in this paper a simple intertemporal current account model is developed for a small open economy with imperfect capital markets the model nests both perfect and imperfect international capital mobilities as its special cases the model is empirically examined using taiwan s annual data for the period between 1961 and 1990 our results show that the model is able to explain some historical movements of taiwan s trade balance however in contrast to many findings from previous studies for other countries the model is rejected one important feature of the rejection of the model is that the actual trade balance series is much more volatile than can be explained by the model this is especially so for the periods when world oil shocks occurred these results indicates that changes in the terms of trade which our simple model neglects might be important factors in taiwan s current determination

exit from the meatpacking industry a microdata analysis we model the determinants of plant exit from the cattle slaughter industry using probit to distinguish between plant level e g age scale and scope and market level e g market share concentration and competitive fringe factors market variables are shown to be less important determinants of exit than plant level factors though a significant tendency for very small plants to exit already highly concentrated markets is apparent government actions to stem the industry s consolidation must consider the trade off between welfare gains from the reduction of market power and welfare losses from foregone technological efficiency improvements

expectations capital gains and income i introduction this article argues that the distinction between expected and unexpected capital gains losses is fundamental to the measurement of income the way capital gains are treated can have a significant impact on major macroeconomic statistics such as national income and saving the balance of payments government income and saving and depreciation see gale and sabelhaus 1999 joisce and wright 2001 the recent sale of spectrum licenses is a case in point the spectrum a natural asset over which governments enforce property rights became unexpectedly valuable as a result of the development of mobile telephones in 2000 and 2001 some governments realized gains of 30 billion or more in a day by auctioning licenses to use sections of the spectrum see un statistics division 2000 the concept of income although widely used remains vague it is necessary to inquire why the concept of income is needed and what use it serves the main purpose of income is to provide guidance to households or other economic units including government on the rate at which they can afford to consume when there is uncertainty about future resources the more successfully measured income meets this requirement the greater its power as an explanatory variable for the analysis of consumer behavior the treatment of expected and unexpected capital gains in income measurement is a continuing source of controversy 1 even in a perfect foresight setting the concept of income is not straightforward hicks 1946 considered a number of definitions two in particular command support in the literature hicksian income no 1 is the maximum amount that can be consumed while maintaining wealth intact 2 hicksian income no 2 is the maximum sustainable level of consumption the general consensus that emerges from the literature is that with perfect foresight all capital gains are included in hicksian income no 1 however asheim 1996 shows that some capital gains are excluded from hicksian income no 2 when the interest rate varies over time both income concepts coincide when the interest rate is fixed when the perfect foresight assumption is relaxed a distinction must be drawn between expected and unexpected capital gains it is important that we move beyond a perfect foresight setting because the concept of income has been developed primarily to assist decision taking under uncertainty if income is meant to act as a budget constraint indicating the resources available for consumption each period the important question is how should a rational consumer react to unexpected capital gains this article develops a general theoretical framework for the measurement of hicksian income no 1 under uncertainty that is capable of handling all kinds of capital gains on all kinds of assets ranging from money market assets to mineral deposits 3 first the concept of income with perfect foresight is developed and analyzed in the following section uncertainty is introduced income depends on expectations of future receipts that are liable to be revised with the passage of time the time at which income in a particular period is measured is therefore crucial income can be measured at any time but attention has tended to focus on the beginning and end of the period hicks 1946 178 79 described income as measured at these times as ex ante and ex post income ex ante income as noted by eisner 1990 p 1180 is essentially the same as friedman s 1957 concept of permanent income ex post income as defined by hicks now usually described as haig simons income after two earlier proponents of the concept is a widely used objective measure familiar to most economists however it is conceptually flawed because it utilizes two different and generally inconsistent set of expectations those held at the beginning and end of the period we define a family of conceptually consistent income measures each based only on the expectations held at the time of measurement that we describe as generalized hicksian income

elasticities of substitution in real business cycle models with home production this paper constructs a simple model of home production that demonstrates the connection between the intertemporal elasticity of substitution in market consumption ies and the static elasticity of substitution between home and market consumption ses understanding this connection is important because there is a large body of empirical evidence suggesting that the ies is small but little evidence on the size of the ses we use our framework to shed light on the properties of a home production model with a low ies we find that such a model must have three fundamental properties in order to match key aspects of aggregate u s data first the steady state growth rate of technology must be the same across sectors second shocks to technology must be sufficiently positively correlated across sectors third capital must be used more intensively in the market sector than in the home sector a home production model with these three properties can be surprisingly successful at reconciling the rbc paradigm with evidence for a low ies

social indicators and comparisons of living standards abstract construction of an international index of standards of living incorporating social indicators and economic output typically involves scaling and weighting procedures that lack welfare economic foundations revealed preference axioms can be used to make quality of life comparisons if we can estimate the representative household s production technology for the social indicators this method is applied to comparisons of gross domestic product gdp and life expectancy for 58 countries neither gdp rankings nor the rankings of the human development index hdi are consistent with the partial ordering of revealed preference a method of constructing a utility consistent index incorporating both consumption and life expectancy is suggested

legislative organization of fiscal policy in the voluminous literature on fiscal policy there is little evidence about the impact of legislative organization on shaping fiscal decisions by comparing different organizations of committee structure to control tax and spending policies this article presents such evidence regarding spending we test whether the dispersion of spending authority among multiple committees creates a problem similar to that of the common pool using american state data we find that when only one committee has the authority to spend spending is restrained relative to when spending authority is balkanized regarding taxation we hypothesize that if a single committee controls not only all spending authority but also all taxation authority that committee will have more incentive to tax than a committee that does not control spending it can obtain the benefits of increased taxation more directly again this proposition is supported by evidence at the state level

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

agent compensation and the limits of bonding agents in positions of trust may engage in malfeasance which is difficult to detect this paper develops a model in which employers seek to control malfeasance by paying wages contingent on imperfect monitoring and agents may be required to pay entry fees or post bonds we conclude that entry fees which exceed agents assets are ineffective in controlling malfeasance as a result conditions exist in which it is optimal to pay agents more than their opportunity cost such conditions lead to an excess supply of applicants and allow employers to engage in discrimination at zero cost to themselves

degradation of environmental capital and national accounting procedures abstract the capital theoretic approach to the environment as a wastable stock a stock with a flow of abatement services is explored in a simple ricardo like model involving wheat production and pollution production as an essential by product we then turn to how the national accounts are implicit in growth or capital theory models and how formulae emerge for accounting for the wasting of environmental capital airsheds and watersheds from excessive use

valuing lost home production of dual earner couples using a life cycle model in which women divide their time between home and market work we establish a link between retirement wealth and the value of forgone home production we use data from the health and retirement study to estimate the model s parameters and adjust the growth rate of gdp to reflect reductions in non market output we find that the value of forgone home production is modest about 25 percent of women s measured earnings

on the substitutability between private consumer expenditure and government spending in canada the purpose of this paper is twofold first to examine whether there is any substitutability between private consumer expendit ure and government spending in canada second to test the ricardian equivalence principle both hypotheses are nested within the life cyc le rational expectations model the results indicate that the joint h ypothesis of rational expectations and ricardian equivalence can not be rejected by the data moreover they suggest that government spend ing substitutes poorly for private consumer expenditure these result s imply that temporary increases in government spending will result i n an expansion of real output

present value tests of an intertemporal model of the current account abstract this paper first demonstrates that in a simple intertemporal open economy model the current account is equal to the expected decline of the present discounted value of net output of a country net output is defined as gross domestic product less the sum of investment plus government spending it then uses econometric methods for present value models to analyze the current account for four countries in two of these countries the model does a satisfactory job of explaining the current account

deficits and intergenerational welfare in open economies this paper deals with public debt in open economies extending diamond s overlapping generations model to a small open economy as well as an international equilibrium of two large economies it focuses on the intergenerational welfare redistributions caused by an increase in public debt triggered by a temporary government budget deficit and shows how these redistributions differ in open and closed economies the interplay between the deficits in the government budget and the current account is also analyzed it is shown how a single period with a government deficit can be followed by a sequence of periods with a deficit in the current account

labor tying in a poor agrarian economy a theoretical and empirical analysis in this paper we show how tied labor contrary to its common characterization as a feudal relic and as a symptom of economic stagnation may actually be strengthened by capitalist agricultural development we construct a simple two period theoretical model of a two tiered labor market to show how the proportional importance of voluntary labor tying contracts may increase with yield increasing improvements and with a tightening of the labor market we then provide in support of these hypotheses some general historical as well as more detailed econometric evidence from a variety of cross sectional data in rural india

excess capacity as a barrier to entry an empirical appraisal this paper examines excess capacity barriers to entry and investment dynamics in a sample of thirty eight chemical product industries logit and log linear models of investment behavior are estimated and specific case examples are considered the results show that incumbents rarely built excess capacity pre emptively in an effort to deter entry in general entrants and incumbents exhibited similar investment behavior

efficiency and equity tradeoffs incentive compatible contracts revisited abstract while the efficiency of certain contractual choices has been well established less attention has been given to the distributional outcomes of contracting in natural resource based industries data from a case study of seed gatherers in honduras demonstrates that workers paid under a relative payment system receive an earnings premium of about 25 of which 40 cannot be explained by observed differences in worker productivity a theoretical agency model is outlined in the appendix to explain why workers under tournaments necessarily enjoy a higher return than those under piece rates implying a more skewed income distribution as suggested in the efficiency wage literature

measuring sustainable welfare a new approach to the isew abstract sustainability and welfare assessment is a contemporary theme of major scientific and policy relevance requiring the consideration of multiple dimensions and diverse perspectives the economic approach to sustainability and welfare assessment has frequently relied on alternatives or adjustments to gdp widely used as an indicator of macroeconomic performance several authors have proposed alternative indicators such as the isew which intend to measure sustainability and economic welfare in a way that avoids the limitations of gdp namely accounting for the value of externalities the distribution of income and natural resources depletion since daly and cobb 1989 there have been proposed improvements to the isew however its aptitude to represent a sound alternative to gdp is still the subject of scientific debate this paper presents a new approach to the isew named modified isew including new components and methodological changes for the estimation of the index these have the purpose of avoiding some of the index shortcomings and allow for a direct comparison with the gdp which are advantages over previous studies an application is developed for the us case taking advantage of wide data availability and the possibility of comparing the results with previous works the results obtained provide a clearer picture of the success or failure of environmental and social policies namely by avoiding the tampering effect resulting from the cumulative accounting of environmental externalities this work also emphasizes the inadequacy of gdp as a welfare indicator as well as the need to develop and adopt alternative indicators

environmental accounting useful to whom and for what abstract the development of statistics as with any other tool can only be understood in relation to their particular uses this is confirmed by the development of national income estimates and of the national accounts proposals to integrate environmental costs and benefits into the national accounts can similarly only be evaluated by considering them in the context of their likely policy use the most important potential use is as a general measure of welfare or progress for policy to aim to maximise environmentally adjusted national accounts correspond to a very weak view of sustainability the use of adjusted national income as a measure of welfare essentially assumes complete substitutability between manufactured and natural capital problems of monetary valuation are likely to lead to huge underestimation of environmental costs issues of inequality and poverty essential to a more robust view of sustainability are ignored policy targeting a revised national income will continue to aim for ever higher output while making very limited concessions to environmental concerns adjusting the national accounts for environmental costs is not the only way to ensure they are allowed for in policy making an alternative approach more appropriate if sustainable development in the stronger sense is to be achieved is the construction and use of a set of social and environmental indicators

housework fixed effects and wages of married workers although the primacy of household responsibilities in determining gender differences in labor market outcomes is universally recognized there has been little investigation of the direct effect of housework on wages using data from the panel study of income dynamics cross sectional wage regressions reveal a substantial negative relation between wages and housework for wives which persists in specifications controlling for individual fixed effects the evidence for husbands is inconclusive married women s housework time is on average three times that of married men s the addition of housework time to the wage equations increases the explained component of the gender wage gap from 27 30 percent to 38 percent

east west joint ventures and buyback contracts abstract contractual joint ventures cjvs and the buyback form of countertrade are popular methods that socialist countries use to attract foreign investment in this paper we explore some reasons why this is so and also explain two predominant characteristics of these contracts the existence of sharing rules and minimum standard requirements on inputs the model stresses the incentive problems involved when a socialist host country which does not allow foreign direct investment uses a cjv to obtain the fruits of some knowledge based production process from a multinational enterprise

present value tests of the current account with durables consumption abstract the present value tests of the intertemporal model of the current account usually assume that all goods are traded and that aggregate consumption decisions can be closely approximated by a random walk process this paper extends these models by explicitly introducing durables and nontraded goods into an intertemporal model of the current account and tests the model using canadian data since aggregate consumption expenditures on durables do not exhibit random walk behavior even when the aggregate consumer has a quadratic utility function the model that includes durables makes predictions that differ from those of the basic approach when nontraded goods are also incorporated into the model the most appropriate income variable becomes output net of nontraded production these implications are examined using present value tests the results suggest that in the annual data introduction of both durables and nontraded goods improves upon the model with traded nondurables only this seems to be due to the combination of durables and nontraded goods as durables alone do not sufficiently refine the basic model

measuring personal savings consumption and disposable income in canada this paper highlights the fact that more adequate measurement of personal savings as well as a consumption and disposable income in canada yields a totally different picture from that projected by the national accounts niea the author measures of consumption excludes purchases of durables but includes their depreciation savings are measured as the change in the net real market value of the end of year balance sheet while according to the niea the savings income ratio reached 15 percent in 1981 their measure suggests that this ratio was negative and amounted to 10 5 percent in conclusion possible implications of the mismeasurement of savings on economic policy decisions are considered

spatially correlated exit strategies in the baking industry this article uses a unique data set to analyse economic factors that explain firm exit and the interrelation across firms in space when exiting results show the effectiveness of modelling spatial correlation in a logit exit model indeed in our application reliable statistical results could only be drawn from our data when including spatial correlation in the model

distinguished lecture on economics in government what we don t know could hurt us some reflections on the measurement of economic activity the routine production of u s economic statistics dates back to the early part of the twentieth century but in recent decades as services output has continued to expand a system of economic statistics that had been designed during the manufacturing era began to seem increasingly outdated over the past decade the statistical agencies have done yeoman work to expand the availability and quality of service sector statistics but the task is far from completed moreover the traditional accounting framework for economic statistics has focused almost exclusively on market transactions looking ahead more comprehensive measurement of productive activities however they may be organized must be a priority

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

productivity shocks budget deficits and the current account abstract productivity shocks and budget deficits are considered to be two key determinants of the current account in order to assess formally the role of both factors in driving current account movements the present paper extends the standard intertemporal model of the current account to allow for non ricardian household behavior testable cross equation restrictions for the current account and investment are derived by drawing on the distinction between country specific and global innovations to productivity as well as to the government budget we test the restrictions of the model against time series data for 21 oecd countries and find evidence in support of the model

terms of trade disturbances and fiscal policy in a small open economy this paper examines the dynamic and steady state effects of shifts in the terms of trade and the level of government debt in a small open economy the study is based on a simulation model that is loosely calibrated to the canadian economy there are three goods in the model nontradables importables and exportables consumers optimize over their expected lifetime and do not care about the well being of future generations so ricardian equivalence does not hold profit maximizing firms use inputs of capital labor and an intermediate good and face costly adjustment of capital copyright 1993 by royal economic society

equilibrium search unemployment endogenous participation and labor market flows the sustainability of welfare states requires high employment and high participation to raise the tax base to analyze labor supply in a world with market frictions we propose and solve a macro model of the labor market with unemployment and labor force participation as endogenous and distinct states in our world workers decisions of participating are determined by an entry decision and an exit decision a calibration of the model improves the usual representations of labor markets since it quantitatively accounts for the observed flows between employment and nonparticipation the paper investigates also the effect of payroll taxes and unemployment benefits on participation decisions taxes reduce entries and increase exits whereas unemployment benefits at a given job finding rate raise entries and have ambiguous effects on exits jel j2 j6

international business cycles financial markets and household production abstract this paper investigates the properties of an international real business cycle model with household production we show that a model with disturbances to both market and household technologies reproduces the main regularities of the data and improves existing models in matching international consumption investment and output correlations without irrealistic assumptions on the structure of international financial markets sensitivity analysis shows the robustness of the results to alternative specifications of the stochastic processes for the disturbances and to variations of unmeasured parameters within a reasonable range

rural labor legislation and permanent agricultural employment in northeastern brazil abstract permanent annual or longer term agricultural employment declined relative to temporary daily weekly or seasonal employment during the 1960s in a sugar cane producing region in northeastern brazil but increased rapidly during the 1970s predictions from economic theory are combined with observations about the economic forces at work during the period to argue that in the absence of government intervention permanent employment would likely have risen during both decades the argument renders the introduction of the brazilian rural labor statute rls of 1963 a strong candidate explanation for the decline of permanent employment in the 1960s the rls s employment stability provision which required employers to make severance payments to workers with at least one year tenure dismissed without just cause not only increased the expected cost of permanent contracts but also changed the very nature of permanent employment prior to the legislation employers induced permanent workers to be subject to them by giving them premium wage and benefits packages and threatening to dismiss them if caught shirking in subjection severance pay provisions made such threats incredible the elimination of farmers ability to derive subjection benefits from permanent employees reduced even further the incentive to hire workers under permanent contracts

the concept of income in a general equilibrium this paper derives a concept of aggregate real income for a competitive economy in general equilibrium consisting of heterogeneous infinitely lived people and relates it to current and future consumption possibilities an important characteristic of our measure of income which we call real income is that deflation is carried out using a consumption deflator rather than any price index of output we suggest that it may be inappropriate to regard capital gains as income we also present a coherent treatment of the effects of changes to the terms of trade on real income and explain the implications of this for resourceexporting economies hicks 1939 defined income as the maximum amount a man can spend and still be as well off at the end of the week as at the beginning since then there has been a succession of attempts to apply this definition the problem is as hicks acknowledged that the correct interpretation of as well off is by no means clear weitzman 1976 and asheim 1997 suggest that income is equal to the level of consumption which could be sustained indefinitely out of the capitalized value of current income and equate this to being as well off at the end of the week as at the beginning eisner 1988 argues specifically that in a total incomes system effects arising from asset price changes and conventionally regarded as capital gains should be included with income here building on earlier work by sefton and weale 1996 asheim and weitzman 2001 and pemberton and ulph 2001 we provide a comprehensive account of the implications of the idea that as well off should be understood to mean that the present discounted value of current and future utility should be unchanged over the interval considered we work in the context of a general equilibrium taking the prices established in the general equilibrium as given we first look at income from the production side showing that in an economy where prices and the interest rates satisfy an intertemporal efficiency condition income along an equilibrium path can be interpreted as a weighted average of the value of the current and future consumption bundle plus a term adjusting for changes in the nominal price level converting prices to real prices by deflating by the divisia consumption price index removes the need for this adjustment these results are suggestive first they offer a way of defining the income of a household entirely in terms of its consumption possibilities second they indicate that to calculate real income deflation is best carried out using a price index of consumption this is a substantial divergence from current national accounting practice third because we have assumed constant returns there is a trivial aggregation result that aggregate income is equal to the sum of the incomes from the individual sectors

liquidity constraints and the substitutability between private and government consumption the role of military and non military spending i introduction using data for a number of economies we investigate i the relationship between private consumption and two types of government spending military and non military and ii the severity of liquidity constraints because of their importance for macroeconomic modeling in theory and practice 1 both issues have been the subjects of considerable theoretical and empirical investigation on the issue of liquidity constraints the most influential research has relied on hall s 1978 euler equation approach to the permanent income hypothesis in an attempt to reconcile hall s and flavin s 1981 methodologies hayashi 1982 modified hall s martingale result to allow for the possibility that a subset of consumers are liquidity constrained and showed that liquidity constraints can result in consumption s excess sensitivity to current income campbell and mankiw 1989 1990 1991 and jappelli and pagano 1989 have applied hayashi s methodology using data from the u s and several other oecd countries on the substitutability issue aschauer 1985 has modified hall s euler equation to allow for substitutability between government spending and private consumption and found that the two are substitutes for the u s karras 1994 however using a similar approach and data for 30 countries concludes that private and government consumption are better described as complementary or unrelated liquidity constraints and substitutability have been combined in studies by graham and himarios 1991 cushing 1992 and graham 1993 using u s data and by evans and karras 1996 for a number of countries a crucial limitation of most of these studies is the use of aggregate government consumption data which counterintuitively imposes a common substitutability parameter on all components of government spending 2 using recently available time series data for a large number of countries the present paper relaxes this restriction by decomposing government consumption into military and non military components enabling us to separately identify their relationship to private consumption the allocation of government consumption between military and non military functions has varied greatly across countries the appendix reports the average size of military and non military government shares in gdp as well as the military non military ratio by country over the 1970 1989 period average military expenditure as a fraction of gdp for example has ranged in our sample from 0 11 in mexico to 12 30 in jordan similarly the fraction of government consumption absorbed by military expenditure has ranged from 1 09 in mauritius to 66 82 in poland this sizable variability is promising in terms of cross sectional identification power but it also suggests that the estimated parameters must not be assumed to be common across countries the estimated model is derived in section ii which combines liquidity constraints and substitutability by nesting the approaches of hayashi 1982 and aschauer 1985 in the same section we discuss data sources and the estimation strategy which permits the estimated parameters to vary by country in a way that helps determine how they are influenced by country specific factors section iii estimates the model for a panel of the 66 countries for which annual data on all series are available for the 1970 1989 period the paper s main conclusions are given in section iv ii methodology and data we assume that consumers in economy i at time t derive utility from effective consumption c sup which we define as 1 mathematical expression omitted where c is private consumption g sup m and g sup nm are the military and non military components of government consumption the parameters theta sup m and theta sup nm measure the degree of substitutability between c and g sup m and c and g sup nm respectively

capital mobility in the world economy an alternative test abstract this paper proposes a new measure and test of international capital mobility in order to investigate capital flows we utilize a small open economy version of campbell and mankiw s nber macroeconomic annual 1989 185 216 permanent income model our capital mobility measure focuses on the correlation between the country s consumption and net output instead of the correlation between domestic saving and domestic investment proposed by feldstein and horioka economic journal 90 1980 314 329 the model is estimated for 11 oecd countries the results suggest that the null hypothesis of perfect capital mobility cannot be rejected for more than a half of these countries on the other hand some kind of capital mobility constraints are detected for several countries including the united states and japan

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

understanding the persistence properties of international macroeconomic aggregates in this paper the ability of a two country model of growth and cycles is evaluated to explain the persistence properties of output and consumption across countries simulated output and consumption levels replicate the observed appearance of noncointegration across countries simulated output growth rates however do not explain the observed positive serial correlation of output growth rates the reallocation of resources in response to technology shocks generates a negative serial correlation for output growth rates

accumulation and growth in a two country model a simulation approach abstract this paper analyzes saving and capital accumulation in a two good growth model of two market economies in which economic agents optimize with perfect foresight the goal is to present a model in which short run dynamics and the steady state are soundly integrated we stress the importance of asset markets as the linkage that transmits disturbances both internationally and intertemporally while many components of the model described below can be found in the literature on optimal consumption investment and international growth models we provide a consistent synthesis our framework permits the analysis of structural adjustment in the global economy and the dynamic effects of a wide range of public policies

this blessed plot when should capital gains on land be regarded as income national balance sheets for a number of advanced economies show land to be a valuable form of natural capital whose value has increased sharply over the last twenty years or so this paper investigates when or whether capital gains on land should be counted as a component of income while development projects can lead to increases in rental rates and land values it is shown that although the benefits any project should be counted as income increases in rental rates and land values should not normally be seen as additional real income however if land benefits from exogenous land saving technical progress the resulting capital gains can be seen as income applying the same principle to human capital it is shown on a steady growth path that these capital gains are equal to weitzman s 1997 growth premium in the relationship between income and sustainable consumption

poverty and distorted industrialization in the brazilian northeast abstract dramaric federal intervention and extensive industrialization in the brazilian northeast have not overcome its stagnant economy and society after centuries of isolation and dependence on sugar exports the northeast was integrated economicallu into brazil during 1930 1960 and since then it has been partially industrialized the regional economy however is weakly integrated and highly unequal leaving local markets small industrial growth remains keyed to other parts of brazil and dependent politics distort the region s relations with brasilia social inequality is extreme prospects for the future are bleak

real government saving and the future abstract government saving should properly include government financed investment changes in public tangible investment and investment in education are found to be positively related to changes in inflation adjusted structural deficits changes in these deficits have also been associated with changes in the same direction in gross private domestic investment and even changes in narrow measures of national saving hence changes in real deficits have been associated a fortiori with changes in the same direction in a broader measure of national saving including government and household investment in tangible capital our data also suggest that the pay off to more public tangible investment at least is distinctly positive and very possibly larger than that to more private investment

indeterminacy home production and the business cycle a calibrated analysis abstract in this paper i present a business cycle model with one market sector that produces a standard good and another that produces a non market or home good the model can have multiple equilibria and therefore cycles driven only by self fulfilling expectations with low externalities to market production in particular an upward sloping aggregate labor demand as e g in farmer and guo j economic theory 63 1994 42 72 is not required for indeterminacy the effect of technology shocks is also studied in all cases the time series that are generated have properties that are comparable to the real us postwar series

the probability of exit a firm may leave an industry in at least three ways through merger voluntary liquidation or bankruptcy there are important economic differences between forms of exit yet previous work has treated exits as homogeneous this article develops a model of the relation between the forms of exit and uses it to guide selection of simple estimated statistical models an empirical example from the cotton textile industry demonstrates the arguments the results in this data are that the form of exit is not related to profitability that there is some heterogeneity across forms of exit and that information about the characteristics of the firm alone is not sufficient to predict all forms of exit

empirical evidence on the strength of the monetary transmission mechanism in canada an aggregate approach abstract this paper examines the transmission of monetary policy in canada it emphasizes the transmission through interest rates and the exchange rate rather than through changes in monetary aggregates and provides empirical evidence on the strength of these channels using a highly aggregated structural model implications of these structural equations for the dynamic effects of monetary policy are explored through a simulation analysis

swedish economic performance and swedish economic debate a view from outside the papers by korpi henrekson and agell raise important questions both about the swedish economy and about the way in which evidence on economic growth should be handled in debate on economic policy i want to comment in particular on the fundamental question of whether the international evidence allows us to judge that swedish growth has been below par the papers raise two further questions on the first whether growth is inhibited by high taxation and a large welfare state the hallmarks of the post war swedish economy agell provides as good an assessment of the cross country macroeconomic evidence as we can probably hope to get at the moment unproven on the final vexed question of whether the structure of the economics profession has been inimical to open debate i have only a few comments to make let me start with the criteria and method by which we should attempt to assess relative economic performance this is a methodological minefield there are numerous paths leading to divergent conclusions the least we can do is to be explicit about our choices and subject our provisional conclusions to some checks for robustness what performance measure is relevant we could look at gdp or consumption scaled per head of population or per member of the workforce or per hour worked what deflators do we use we can reduce measures denominated in local currency to a common unit using exchange rates or using fixed international prices or using utility based indexes which derivative of the performance measure do we use we might want to compare levels or rankings or we might choose to assess relative rates of growth or even relative changes in growth rates which time period is relevant in particular comparisons of growth rates are often very sensitive to choice of start and end years when business cycle fluctuations are asynchronous what is the reference pointfor assessing underor overachievement the definition of par might be either the best performance or average performance for some group of countries for some period of time finally what exogenousfactors are to be taken into account we might wish to control for the influence on our preferred performance measure of a wide range of factors which are extraneous to the policy question under examination i will take a brisk jog through this minefield explaining briefly some of the choices which seem most relevant to the problem in hand but without attempting a full exposition of the problems the most usual starting place is to choose real gdp per capita as a measure of aggregate performance this

testing an optimizing model of the current account via the consumption function abstract as the intertemporal allocation of consumption lies at the heart of the optimizing approach to current account determination we assess the validity of this new view by testing an open economy consumption function this method avoids some interpretation difficulties in previous studies for the four countries examined we generally could not reject the overidentifying restrictions imposed by the specification of our model an extended version of the model does not find any clear evidence of substitution between private and public consumption all our results are robust to two different measures of the external asset stock

attached farm labor limited horizons and servility abstract two facets of attached farm labor arrangements the servility often required of attached laborers and employers interest in maintaining such workers limited horizons are described and incorporated into an otherwise standard model of attached and temporary agricultural employment substantially modifying the model s predictions the dependence of workers preferences on reference group behavior which underlies employers interest in limiting horizons may enable employers to drive even freely mobile workers wellbeing below competitive levels may imply that abolishing servility arrangements would benefit all workers gives rise to multiple equilibria in community layout and culture and sheds light on some characteristics of agrarian revolts

collateral constraints and the current account theory and evidence we investigate the impact of domestic financial frictions on the current account dynamics in asian countries before and after the asian financial crisis in 1997 1998 by introducing collateral constraints into the intertemporal current account approach we examine six asian countries before the crisis collateral constraints significantly impact the current account in korea malaysia the philippines and thailand but after the crisis they do not our study shows that the impact of domestic financial frictions on the current account changes before and after a financial crisis jel f32 f41

consumption permanent income and financial wealth in canada empirical evidence on the intertemporal approach to the current account the intertemporal approach to the current account is rejected as a complete explanation of the canadian current account federal government fiscal policy plays an important role in the determination of the current account a private sector agent that treats its holdings of net liabilities of the federal government as net wealth accumulates the sum of these liabilities and the net liabilities of non residents as part of an intertemporally optimal plan this result indicates both fiscal policy and intertemporal considerations are important determinants of current account behaviour consommation revenu permanent et richesse financiere au canada resultats empiriques d une approche au compte courant mettant l accent sur la dimension intertemporelle cet article montre que l approche mettant l accent sur la dimension intertemporelle ne produit pas une explication complte du comportement du compte courant canadien i1 semble que la politique fiscale du gouvernement federal joue un r6le important dans la conformation du compte courant un agent economique prive composite qui traite son portefeuille de dettes nettes du gouvernement federal comme richesse nette va accumuler la somme de ces dettes et des dettes nettes des non residents dans le cadre de son plan intertemporel optimal les resultats montrent que la politique fiscale et des considerations intertemporelles sont des elements determinants du comportement du compte courant

national account of timber and forest environmental resources in sweden this paper outlines an extension of the national account of income from forest resources in sweden 1987 incorporating changes in timber inventories production of nonmarketed timber and nontimber goods and depletion or improvement in vital environmental stocks such as soil nutrients biodiversity and carbon sinks the total net value added provided by forest resources and forestry labour 1987 is estimated to 22 billions sek this is one third more than the contribution of forestry to ordinary gnp

an operative framework for total hicksian income measurement application to a multiple use forest a methodology for estimating total hicksian income in multiple use forests is presented the approach consistently incorporates commercial as well as non commercial economic values and enables the measurement of national accounting aggregates taking into account variation in man made and natural capital innovative solutions are developed i for the estimation of non market values such as recreation where an attempt to determine exchange values has been made simulating markets ii for timber where standing timber valuation methods have been extended to cover uneven stands and iii for carbon fixation valuation where only permanently fixed carbon after 1990 has been taken into account the methodology is applied to a multiple use pinewood in the guadarrama mountains near madrid spain timber cattle grazing hunting recreation carbon fixation and conservation values are measured and integrated in the accounting system using primary microeconomic data from the case study results indicate the importance of non commercial income which accounts for 51 of the total income and the social relevance of the analysed forest implying that only 31 of the total income generated is appropriated by the forest owner

a new approach in analyzing the effect of deficit announcements of interest rates using alternative methods the authors find less support than previous authors for significant interest rate responses to deficit announcements the main results are that interest rates respond only 40 percent of the time to deficit announcements and when they do respond the impact is only temporary lasting between one to six days and involving a 0 25 basis point response per percentage change in the deficit copyright 1994 by ohio state university press

the examination of pecan price differences using spatial correlation estimation a spatial analysis is used to model factors that explain the price received by pecan growers besides the statistical aspect of the study focussing on spatial autoregressive residuals the economic analysis of the paper identifies linkages between the price for in shell pecans received by growers and the characteristics of the orchard production costs and resources and the orchard location

natural resources national accounting and economic depreciation abstract the current value hamiltonian in an aggregate optimal growth problem with heterogeneous capital stocks including exhaustible renewable and environmental stocks is the nnp function routine substitutions reveal that the using up of natural resource stocks is representable as easy to interpret economic depreciation magnitudes we obtain true nnp inclusive of natural resource stock diminution implications for actual national accounting practices are also discussed

the economy of high wages an agency problem latitude with respect to the effort they supply and monitoring of effort and output is costly in this paper we examine the agency problem that arises in these circumstances the agent employee is assumed to maximize expected utility which depends on wages and effort a bad we assume that output is a deterministic function of effort that either effort or output can be accurately monitored and that monitoring is costly the firm s problem is to select a level of monitoring and a compensation package that will minimize the cost of obtaining a desired level of effort given the cost of monitoring the agent s preferences and the agent s opportunity cost of accepting employment with the firm his labour supply constraint the firm chooses a compensation scheme from the set in which compensation is contingent on effort if the agent is monitored and is equal to a standard

catching up with the economy in his presidential address five years ago zvi griliches 1994 called attention to the severe difficulties that beset current attempts to measure the growth of labor productivity in the american economy because of these difficulties it is likely that the true rate of economic growth is substantially underestimated the root of the problem is the difficulty in measuring output in the service sector which now represents two thirds of the economy in such sectors as health care and information services the contribution to gross domestic product gdp is measured by inputs rather than outputs a procedure that makes it impossible to gauge accurately improvements in the quality of output thus in the case of computers which are transforming american society economists have been unable so far to find a measurable contribution of computers to the rise in labor productivity an astonishing paradox i want to follow up on this problem of mismeasurements my thesis is that the profession

budget deficit persistence and the twin deficits hypothesis abstract this paper gauges the twin deficits hypothesis i e a positive causal relationship between the external and budget deficits this relationship is measured by the responses of the external deficit to changes in the budget deficit induced by blanchard s model these responses are positively affected by the birth rate and by the degree of persistence of the budget deficit empirical results for the canadian and us economies reveal that although the relevant birth rates are small the great persistence of the budget deficits yields responses that are numerically large and statistically positive this contrasts with previous tests of the twin deficits hypothesis which have never formally taken into account the stochastic properties of the budget deficit

agglomeration economies localization or urbanization i estimate localization and urbanization economies with a methodology and data different from those of henderson and nakamura after demonstrating the problems associated with using a single agglomeration variable i present my estimates as nakamura found for japanese cities i find evidence of both localization economies and urbanization economies but i also find evidence of urbanization diseconomies in some industries as did henderson my evidence for localization and urbanization economies in american cities is stronger than henderson s evidence finally i show that the pattern of agglomeration economies by industry is consistent with observed patterns of industrial location

dematerialization and capital maintenance two sides of the sustainability coin abstract the reductionist trend of equating sustainable development with sustained economic growth needs to be reversed new accounts and balances help to operationalize the elusive notion of sustainability they provide a coherent picture of the interaction between environment and economy greened national accounts measure economic sustainability in terms of produced and natural capital maintenance balances of material flows assess ecological sustainability as the dematerialization of production and consumption both concepts aim to preserve environmental assets but differ in scope strength and evaluation of sustainability first results for germany indicate weak sustainability of the economy strong sustainability is not in sight because of insufficient reduction of material throughput attaining sustainability through integrated policies needs the support of share and stakeholders of sustainable development

real interest rates home goods and optimal external borrowing the paper investigates the optimal time path of consumption and external borrowing in the dependent economy model the small country faces given world prices and a given world real interest rate the presence of a home goods sector implies that the relevant real interest rate appropriate to consumption decisions depends on the rate of change of the real price of home goods the paper shows how transitory disturbances in output or in the world real interest rate affect the time profile of consumption and the trade balance in particular it is shown that the presence of a home goods sector dampens the consumption effects of changes in the world interest rate

simon kuznets sectoral shares in labor force a different explanation of his i s a ratio in estimating intersectoral productivity differences kuznets concludes that per worker product in agriculture is significantly lower than in industry and services agriculture s productivity backlog is explained by labor market failure especially in developing countries structural dualism however by analyzing agriculture as an economic activity organized by farm households competing with off farm and household production efficient allocation of resources in agriculture can be demonstrated therefore productivity measurements based on the concept of the farm as a firm are misleading a model of the farm household and empirical evidence are presented in his seminal book economic growth of nations simon kuznets 1971 has systematically analyzed intersectoral productivity differences to be observed in almost all countries with respect to labor productivity in agriculture a as compared to industry and services i s he has found out that per worker product in the a sector is significantly lower than in the i s sector and intersectoral inequality in per worker product is greatest at the low per capita product levels and smallest at the high per capita product levels p 236 hollis chenery and moises syrquin 1975 p 53 have confirmed but somewhat modified kuznets findings by explaining that relative labor productivity in the primary sector falls from about 70 percent to 50 percent at an income level of 500 and then gradually rises as agricultural technology is modernized and the surplus agricultural labor is absorbed by the rest of the economy as far as developing countries are concerned kuznets p 156 illustrates this explanation by the most plausible combination of economic determinants affecting an absolute decline in per worker product in the a sector resulting from increased pressure of population on land under conditions of relatively stagnant agricultural technology and some rise in per worker product in the i s sector resulting from a growth of modern components in industry and services in discussing several explanations of intersectoral differentials in per worker product p 238 kuznets finally comes to the conclusion that whatever the formulation the discussion tended justifiably to emphasize various aspects of duality in structure in the less developed countries p 247 he thereby confirms the dogma of structural dualism as the main source of disguised unemployment in agriculture seen as the cornerstone of the theory of development of underdeveloped countries since the 1940s according to paul rosenstein rodan 1957 p 1 already in 1954 arthur lewis has generated a micro model of agriculture within economic development with unlimited supplies of labour 1954 which during following years has been extended and modified by various development economists 2 with respect to developed professor of agricultural economics university of gottingen federal republic of germany platz der gottinger sieben 5 d 3400 gottingen the author acknowledges helpful comments of two unknown referees to an earlier draft of this article wide ranging international differences in intersectoral productivity discrepancies have been already observed and discussed mainly with respect to agriculture by marc latil 1956 j r bellerby 1956 and colin clark 1957 but none of them has provided a consistent explanation therefore clark p 254 had to admit that no immediate deductions can be drawn from the data more recent information on far reaching sectoral productivity differences between oecd countries are provided by oecd see table 1 2various models of agriculture in a dual economy are discussed inter alia by hans bemd schafer 1983

unemployment in regional labor markets using structural theories to understand local jobless rates in west virginia the author uses a range of structural labor market models to understand differing regional jobless rates in a state affected by pockets of structural unemployment four theories of regional structural unemployment are presented and their hypotheses are statistically evaluated using west virginia county panel data the author then presents case study evidence to compare these statistical results with the realities of the county labor markets both types of empirical evidence suggest that a segmented non market clearing model in which structural unemployment stems from queuing for above market clearing wages in both a high wage primary sector and a lower wage secondary sector can shed the most light on regional unemployment rates in west virginia

dynamics of a floating exchange rate regime we study the full equilibrium dynamics of a two country world economy with a floating exchange rate traded and nontraded goods and explicit modeling of the use of money the resulting exchange rate equation depends on several details of the economic structure such as the supply structure and propensities to spend on various goods although real exchange rate movements have the usual association with the current account the ordinary exchange rate may appreciate or depreciate when there are deficits on current account even when the quantities of money do not change deviations from purchasing power parity and the fisher equation are shown to be the rule rather than the exception

estimation of ses for heteroscedastic and cross sectionally correlated data this study develops se estimators for heteroscedastic and cross sectionally correlated data the new estimators are a cross sectional version of the white and domowitz 1984 and newey and west 1987 estimators and therefore consistent in the presence of heteroscedasticity and cross correlation of unknown form unlike the estimators in the literature these estimators can control for cross correlation even for single period cross sectional data

testing a present value model of the current account evidence from us and canadian time series abstract this paper presents a simple model of current account determination based upon the permanent income hypothesis of private consumption behavior under rational expectations the model employs a representative national agent who is forward looking and can borrow and lend at a constant world interest rate a present value relationship for the current account is derived and its implications are tested on post war data for the united states and canada testing is done using the framework developed by campbell and shiller 1987 which allows the forcing variables in the model to be difference rather than trend stationary our empirical results indicate the most stringent restrictions of the present value model are strongly rejected by the us and canadian data however less formal procedures suggest the consumption smoothing model has some ability to track the dynamic behavior of the us current account jel f32

natural resources national accounting and economic depreciation stock effects abstract hartwick s analysis of incorporating resource depletion in standard national income accounting is extended to the consideration of stock effects under both certainty and uncertainty

cost and income based measures of human capital human capital is increasingly believed to play an important role in the growth process however adequately measuring its stock remains controversial in this paper three general approaches to measurement are identified cost based income based and educational stock based this survey focuses on the first two approaches and provides a critical review of the theories and their applications to data from a range of countries particular emphasis is placed upon the work of jorgenson and fraumeni 1989 1992 and some new results for new zealand based upon their approach are also presented