stabilization policy a reconsideration i introduction in 1936 keynes s general theory explained how fiscal and monetary policy could be used to end depressions since that time no developed country has ever seen a downturn on the scale of the 1930s the general theory was not just a how to book on the avoidance of depressions it was an argument for stabilization policy itself the years since the general theory have seen a revolt against keynesian economics in a revisionist mode milton friedman argued that countercyclical policy cannot affect the average level of unemployment and output robert lucas and thomas sargent 1979 went further contending that it is not only impossible to increase average output it is also impossible to stabilize it more recently lucas 1987 2003 has argued that policies to stabilize output even if effective would yield negligible welfare gains thus stabilization policy should not be a macroeconomic priority lucas s conclusion notwithstanding stabilization policy has long been an explicit or implicit objective of monetary policy in most industrial countries even including those countries with inflation targets the volatility of output has in fact declined in most major industrial countries since the mid 1980s and monetary policy arguably deserves at least partial credit see bernanke 2004 mirroring practice monetary policy research commonly takes it as given that along with price stability stabilization policy the minimization of squared deviations of output around potential is an appropriate policy objective see for example clarida et al 1999 in this article we explore the economic rationale for stabilization as a policy goal concluding that it does in fact deserve high policy priority we survey a large body of literature that critiques the validity of key assumptions in lucas s argument we also offer suggestive evidence that stabilization policy can significantly reduce average levels of unemployment by providing stimulus to demand in circumstances where unemployment is high but underutilization of labor and capital does little to lower inflation a monetary policy that vigorously fights high unemployment should however also be complemented by a policy that equally vigorously fights inflation when it rises above a modest target level the federal reserve act thus wisely enunciated price stability and maximum employment as twin goals for monetary policy ii the case against stabilization policy macroeconomic analysis typically assumes that social welfare depends negatively on both inflation above a modest target level here assumed zero and unemployment above some minimum socially efficient level for example a standard social welfare function is the discounted sum of period losses l sub t of the form see among others barro and gordon 1983 pp 592 93 1 l sub t a u sub t 1 k u sup 2 b pi sup 2 sub t where u sub t and pi sub t are the unemployment and inflation rates in period t and u sup is the natural rate of unemployment the coefficient k is positive reflecting the desirability of unemployment below the natural rate because real economies deviate in many respects from perfect competition the natural rate of unemployment is likely to exceed the socially optimal unemployment rate for example with monopolistic competition goods are underproduced because they are priced above marginal cost so potential output is inefficiently low and equilibrium unemployment is too high standard macroeconomic analysis additionally assumes that inflation is determined by an expectations augmented accelerationist phillips curve of the form 2 pi sub t pi sup e sub t f u sub t u sup epsilon sub t where pi sup e sub t is the expected inflation rate at time t with expectations formed at t 1 and epsilon sub t captures supply shocks to the phillips curve at t

nonmonetary effects of financial crises abstract this paper empirically examines the nonmonetary effects of financial crises it exploits the special nature of the great depression in canada to test propositions linking financial structure and aggregate economic activity canada s large domestic debt and shrinking banking system had little impact on the course of the depression in comparison with results for the united states this implicates bank failures as a prime factor in the real effects of financial crises

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

the decoupling of farm programs revisiting the wealth effect recent reforms of agricultural policies in developed countries have introduced direct payments as replacements for traditional production enhancing instruments whereas these new instruments can in principle influence production through several channels current empirical studies show no significant impact on production direct payments mainly increase land values in this article we revisit the evaluation of the coupling effects passing through the wealth of agricultural households the initial wealth of these agents while mainly being in the form of land asset holding is always assumed to be fixed to the contrary we show theoretically and through an empirical simulation exercise that once the impact of farm programs on initial wealth is properly accounted for the measure of the coupling effects is not as negligible as found in previous studies copyright 2010 oxford university press

wage rigidity in canadian collective bargaining agreements the authors search information on the provisions of 10 947 wage contracts signed in the canadian unionized sector between 1976 and 1999 for evidence of downward nominal wage rigidity the disinclination of wages to fall in nominal dollars below their established level over the sample period real wage reductions were common but nominal wage reductions were rare the probability of downward nominal wage rigidity increased substantially during low inflation periods during such periods apparently there was no reduction in the incidence of real wage cuts but the magnitude of those cuts was modest suggesting a lesser ability of wages to adjust to labor market conditions than at other times

excess demand and capacity utilization an empirical analysis with swiss business survey data this paper presents an approach to the estimation of excess demand in the goods market on the basis of business survey data the model uses a normal density function to describe the distribution of demand supply ratios in the population of firms mean and variance of this distribution reflecting aggregate excess demand and the dispersion of excess demand across firms determine the average degree of capacity utilization and the proportion of firms facing excess demand this theoretical relationship can be used to infer the underlying distribution parameters mean and variance of excess demand from related survey data providing thus a measure of tension in the product market as perceived by firms additional parameters of the model account for the share of economically obsolete equipment in total capacities and the extra capacities held by firms to meet unanticipated fluctuations in demand application to quarterly swiss survey data 1967 1986 yields plausible parameter estimates

escalators and elevators a phillips curve for keynesians the negatively sloped long run phillips curve remains an issue of contention this paper presents a theoretical model of the phillips curve in which nominal demand growth reduces unemployment caused by stochastic shifts of demand between sectors the model can be understood through the following metaphor keynesian economies are escalator economies in which markets adjust back to equilibrium slowly so that nominal demand growth presents a means of speeding up the escalator process contrastingly new classical economies as set forth by e g lucas 1973 are elevator economies in which adjustment is instantaneous consequently there is no role for nominal demand growth in the adjustment process and to the extent that policy sponsored nominal demand growth is uncertain it may actually disrupt the economy by sending the elevator to the wrong floor

dynamic factor demand in a rationing model in this paper a dynamic decision model of the firm with a delayed adjustment of employment and investment is developed special attention is devoted to dynamic inefficiencies i e underutilizations of the capital stock and labour hoarding market disequilibrium is introduced by allowing for a sluggish adjustment of wages and prices the model of the firm is complemented by explicit aggregation and the aggregate model is estimated for the frg for the period 1960 to 1989 the empirical results reveal that dynamic adjustment constraints for employment and capital contributed to the persistence of unemployment in germany in the 1980s

interest rates and the fisher effect in india an empirical study abstract this study throws light on the importance of adjustment lags variability of inflation changes in real income etc in the empirical estimation of fisher hypothesis variability of inflation has a significant negative impact on both short and long term interest rates in a developing economy like india the philips curve effect has not been operative in a developing country

marketing quotas and random yields marginal effects of inframarginal subsidies on peanut supply the u s peanut program restricts domestic sales with poundage quota but allows surplus production to be exported or crushed empirical analysis of north carolina peanut production reveals that the marginal and lower price received by production above quota that is the world price is far more important in determining acreage than is the inframarginal subsidy of the quota support price

efficiency of decoupled farm programs under distortionary taxation when lump sum taxation is not feasible decoupled transfers to farmers which require raising government revenue will entail welfare loss somewhere in the economy assuming the government s objective is to assure a given welfare level for farmers we show that when decoupling is possible free trade is always superior to some tariff protection for a small country even under distortionary taxation as expected for a large country there is scope for an optimal tariff policy that improves the terms of trade however we show a separation between the exercise of market power through an optimal tariff and the interaction of distortionary taxation with transfers to farmers we conclude that decoupling is usually desirable even in a distorted economy in which lump sum taxation is not feasible

a disequilibrium model with smooth regime transitions and a keynesian spillover for switzerland s labor market abstract this paper presents a disequilibrium labor market model in which aggregation over a continuum of micro markets with different demand supply ratios produces smooth macro relationships mapping aggregate demand and supply onto actual employment and regime proportions aggregate labor demand consists of a classical part derived on a putty clay assumption and a keynesian spillover from the goods market the specification of labor supply incorporates intertemporal substitution the degree of aggregate imbalances on labor and goods markets is measured by business survey data the estimated model indicates a growing mismatch between the micro structures of demand and supply of labor the short run fluctuations of employment are primarily traced back to the keynesian spillover classical determinants of labor demand are relevant as well but only in the medium term labor supply is rather inert and thus absorbs the swings of labor demand only partly

on the use of disequilibrium models in applied microeconomic research and the value of sample separation information the use of disequilibrium models in applied microeconomic research is evaluated a disequilibrium or switching regime model is used to explainsales levels of individual retail stores it is investigated whether substantial differences are found if an equilibrium approach is followed instead disequilibrium models are known to suffer from the fact that sample separation is unknown usually this information is not available our sample contains explicit information with respect to the regime to which an observation belongs therefore the value of sample separation information in estimating the disequilibrium model is investigated finally monte carlo experiments are conducted to get more insight into these matters

corporate borrowing and credit constraints structural disequilibrium estimates for the u k this paper develops a structural model of the market for corporate borrowing in the united kingdom the authors allow trade to be dispersed across a number of submarkets and suppose that disequilibrium operates at this disaggregated level solving for the level of aggregate trade they can estimate nonlinear equations for the demand and supply of borrowing and for the associated interest rate the authors use survey data to measure the strength of spillover from other markets the estimates reveal that disequilibrium has had substantial effects the authors also obtain interesting and plausible estimates for the parameters of the behavioral equations copyright 1990 by mit press

smoothing the aggregate fix price model and the use of business survey data recently there have been several attempts to implement empirical versions of the aggregate two market fix price quantity rationing model due to barro and grossman i97i i976 and malinvaud i977 in particular artus et al i98i and vilares 198i for france kooiman and kloek i980 i982 for the netherlands sneessens i98i for belgium and vilares i982 for portugal in these models the explanation of output and employment switches discretely between a small number of alternatives or regimes each of which represents a particular supply or demand constraint it has been stressed by several authors that discrete jumps between all or nothing explanations from the supply side or the demand side may overstate the case in actual aggregate economies supply constraints and demand constraints will always coexist albeit in varying proportions muellbauer i978 was the first to employ explicit aggregation as a smoothing device in this context starting from a continuum of micro markets in disequilibrium he obtains aggregate transactions as the mathematical expectation of the minimum of supply and demand given the size distribution of supply and demand in the population of micro markets as a result the contributions of the supply side and the demand side vary smoothly with the proportion of markets in excess demand both kooiman and kloek i979 and malinvaud i982 have elaborated on muellbauer s approach and the present study essentially contains a further extension in the sense that the goods market and the labour market are now simultaneously dealt with the present approach also deviates from the earlier ones in that the aggregation by integration technique is applied to firms in disequilibrium instead of markets in disequilibrium this has the advantage that one can proceed from a single population of micro level entities from which both aggregate output and employment are obtained 2 spillovers arise naturally when considering the interaction effects between the output and employment decisions of individual firms moreover we automatically obtain expressions for the proportion of firms whose operations are constrained by demand for goods by supply of labour

the effects of policy expectations on crop supply with an application to base updating we develop a dynamic model to assess the effects of policy expectations on crop supply and illustrate the approach with estimates of the effects of base updating in u s crop programs for corn and soybeans in the corn belt the effect of base updating is relatively small because relevant crop alternatives are subject to similar policies and the alternatives are substitutes in production increasing acreage of one program crop to capture future payments from base updating reduces future payments from the alternative crop we also use our model to assess the effect of base updating on acreage response to prices

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

cross subsidization due to inframarginal support in agriculture a general theory and empirical evidence a general theory of cross subsidization due to inframarginal support is developed two sources of output distortion are identified exit deterrence and extramarginal output some firms would not be in business without the subsidy cost savings due to declining average costs are always greater than the losses incurred where price equals marginal cost moreover it is theoretically possible for inframarginal subsidies to expand output more than equivalent fully coupled subsidies empirical analysis of u s dairy subsidies isolates these components of cross subsidization and finds distortions from inframarginal support to be substantial with implications for trade negotiations dispute settlement and policy formulation copyright 2008 oxford university press

optimal two part pricing in a carbon offset market a comparison of organizational types author affiliation murray fulton johnson shoyama graduate school of public policy diefenbaker building university of saskatchewan saskatoon sk s7n 5b8 canada e mail murray fulton usask ca corresponding author james vercammen food and resource economics and sauder school of business 2053 main mall university of british columbia vancouver bc v6t 1z2 canada e mail james vercammen ubc ca acknowledgment the authors would like to thank tom ross and ralph winter for valuable comments on an early version of this article as well as the southern economic journal editor and two anonymous reviewers the usual caveats apply 1 introductionone of the consequences of the kyoto protocol kp and the increased focus on the role of greenhouse gases ghgs in climate change is that market based approaches to reducing ghg emissions are being actively developed in europe the european union eu operates an emissions trading scheme ets 1 while in the united states the chicago climate exchange ccx trades carbon offsets among exchange members 2 in canada a number of provinces have announced plans for carbon trading schemes four of them have joined the western climate initiative wci a consortium of canadian provinces and states developing a regional cap and trade system wci 2008 the wci and the regional greenhouse gas initiative rggi a consortium of northeastern and mid atlantic states see rggi 2008 are part of the international carbon action partnership a group of countries and regions from around the world that has formed to actively pursue the development of mandatory cap and trade systems in carbon 3the agriculture and forestry sectors are likely to be important suppliers of carbon offsets to the carbon market both through carbon sequestration activities for example the storing of carbon in the soil or in trees and through activities that reduce ghg emissions for instance estimates made by the united states at the time the kp was being negotiated projected that forest cropland and grazing land management sinks could have accounted for about half of u s reduction commitments u s department of state 2002 in canada the federal government estimated that agricultural and forestry sinks could provide in the order of 15 20 million metric tons of carbon offsets relative to a total of 270 300 million metric tons of reductions required under the kp government of canada 2005 food and agricultural organization fao estimates indicate that dryland soils in the world could sequester somewhere in the range of 12 000 16 000 million metric tons of carbon fao 2004 in the case of agriculture since carbon offsets are sold in units that are much larger than most individual farmers can supply carbon sequestration from a number of producers must be aggregated to fulfill contracts 4 as a consequence market intermediaries or aggregators as they are known are emerging to perform this economic function some of these aggregators are organized as for profit firms while others are organized by farmers associations examples of for profit firms are as follows c green aggregators ltd a privately owned company that contracts with farmers in manitoba saskatchewan and alberta for carbon sequestration the carbon they acquire is sold on the ccx c green aggregators 2008 and agcert international an irish company founded to generate emission reductions from livestock farms agcert international 2008 much of agcert s sales of carbon credits has been direct to individual emitters on the producer association side the iowa farm bureau has created agragate climate credits corporation to aggregate carbon credits for sale on the ccx agragate climate credits corporation 2008 agragate administers the project transacts trades on the exchange and distributes earnings to project participants

production incentives from static decoupling land use exclusion restrictions many agricultural support payments are based on past production with restrictions on how land may currently be used when support payments to field crops are analyzed in a static framework they do not directly impact current production decisions however over time as relative profits change these payments affect current output the payments may keep land in less profitable production of program crops through restrictions prohibiting potentially more profitable endeavors such as cultivating fruits and vegetables these payments have the potential to lead to production and trade distortions similar in magnitude to the distortions associated with direct production subsidies

restricting the market for quota an analysis of tobacco production rights with corroboration from congressional testimony regulatory programs that restrict output levels often impose restrictions on the transfer of rights to produce or to use particular inputs in this paper we use a unique cross section time series data set from north carolina to quantify the welfare effects of transfer restrictions for poundage quota under the u s flue cured tobacco program we find that the deadweight costs of such restrictions are small but that the distributional effects are substantial we analyze congressional testimony on quota transfer legislation and conclude that our estimates of the distributional effects are consistent with expressed views of market participants

on inflation and real price variability this paper studies the consequences of costly price adjustments for the variability of real prices accompanying inflation for constant elasticity demand and cost of production it is shown that a higher demand a lower cost of production or a lower cost of price adjustment leads to less intertemporal variability of real prices if the marginal cost of production does not increase too fast then the average real price is less than the real price that would prevail in the absence of inflation additionally a higher demand a lower cost of production or a lower cost of price adjustment leads to a higher level of real prices

the economic effects of supply controls the simple analytics of the u s peanut program a gricultural commodity programs employ a wide variety of policy tools to regulate u s agriculture price supports are the most common form of intervention but rights to sell at the supported price are allocated very differently under different commodity programs under recent feed grain programs for example the right to sell at the supported price is linked to acreage set asides agreements not to produce on certain acres in other programs sales by individual farmers are controlled under marketing orders sponsored by the u s department of agriculture usda 2 a third method is through permanent maketing quotas that directly limit output only two major commodity programs those for tobacco and peanuts currently allocate the right to sell in this way the peanut program is the subject of this article 3

the effects of farm subsidies on farm exports in the united states we estimate the elasticity of u s farm exports to u s farm subsidies using a gravity model of state level farm exports to 100 major trading destinations for the period 1999 to 2011 our identification strategy exploits the within state variation that is free of endogeneity bias in the levels and trends of farm subsidies and farm exports we find that a 1 decrease in farm subsidies would reduce u s farm exports by 0 40 per annum this equivalently means that the complete abolishment of the farm subsidy program would reduce u s farm exports by approximately 15 3 billion per year importantly we document robust evidence that amber box subsidy programs such as counter cyclical payments and marketing loan gains have the strongest effect on farm exports while green box subsidy payments such as direct payments have negligible effects finally subsidy payments affect exports only in agricultural commodities not in livestock our subsidy elasticity estimates are statistically significant stable and economically meaningful and are vitally needed by u s and global policymakers in the face of critical domestic and international developments

an empirical two market disequilibrium model for dutch manufacturing abstract we develop an empirical version of the aggregate two market fixprice model due to barro and grossman maximum likelihood estimation of the model appears to be difficult as a large number of local maxima occurs the number of local maxima is considerably reduced by the introduction of prior information on some of the standard deviations of the disturbance terms in the model satisfactory estimation results are obtained this way the model closely reproduces the post war dutch trade cycle although some problems remain especially with the seventies

was there policy reform evolution of eu domestic support for processed fruits and vegetables policy reform in agricultural markets is often associated with less government regulation and expenditures or a shift towards more efficient interventions the european union eu adopted major policy changes for processed fruits and vegetables in 2001 and again in 2008 and we employ a simulation model to examine the effects of the three policy regimes in place before and after each of the changes our analysis incorporates the heterogeneity of processing firms in the eu and considers how they responded to the different policy regimes simulation results indicate that the eu subsidies increased eu tomato production by 3 8 for the regime that began in 2008 and 9 1 for the regime that began in 2001 compared to no subsidies the policy regime that was in place from 2001 through 2007 led to the greatest distortions in global processing tomato markets in part because it directed more of the benefits to eu growers and less to eu processors and consumers thus changes in 2001 reformed policy by redistributing gains within the eu while changes in 2008 reformed policy by reducing distortions in global markets

the relationship between inflation and inflation uncertainty in the uk 1885 1998 abstract using a long series of uk inflation data i have provided strong evidence in favour of the hypothesis that inflationary periods are associated with high inflation uncertainty this result supports the friedman ball hypothesis and has important implications for the inflation output relationship provided that more inflation uncertainty leads to lower output

behavioral incentives equilibrium endemic disease and health management policy for farmed animals the article develops a dynamic capital valuation model in which farms can act with farm varying cost to increase the probability of avoiding an infectious endemic animal disease multiple endemic disease equilibria can exist and the one with the largest set of action takers is socially optimal costly capital markets are shown to be a factor in determining the extent of disease frictions such as dealing with a veterinary public health bureaucracy can enhance social welfare by encouraging precautionary biosecurity actions technical innovations can reduce social welfare and a disease indemnification scheme is also studied suggestions for empirical implementation are provided

on the asymmetric u shaped relationship between inflation inflation uncertainty and relative price skewness in the uk we investigate the asymmetric relationships between aggregate inflation and the second and third moments of the cross sectional distribution of relative prices using a modified calvo pricing model with regime dependent price rigidities calibration experiments reveal that the inflation standard deviation and inflation skewness relationships exhibit u shaped asymmetries around the historical mean inflation rate uk sectoral data support our results we conclude that monetary policy should target an inflation rate proximate to the common minima of these nonlinear relationships and that core inflation measures should not be used for policy purposes as they exclude much of the information contained in the higher moments

the great crash and the onset of the great depression this paper argues that the collapse of stock prices in october 1929 generated temporary uncertainty about future income which led consumers to forgo purchases of durable goods that the great crash generated uncertainty is evidenced by the decline in surety expressed by contemporary forecasters that this uncertainty affected consumer behavior is shown by the fact that spending on consumer durables declined drastically in late 1929 while spending on perishable goods rose slightly this effect is confirmed by the fact that there is a significant negative relationship between stock market variability and the production of consumer durables in the prewar era

price support acreage controls and efficient redistribution this study is concerned with the combination of target price and acreage controls as the two major mechanisms of farm policy acreage controls are shown to enhance the efficiency of redistribution under a target price program more specifically this study demonstrates that if the traditional cobb douglas production function is assumed acreage controls do not enhance the efficiency of target price programs in the process of redistributing income to the farm sector the study proves that if the elasticity of substitution between land and all other inputs is less than one then the income redistributional costs are likely to be reduced moreover by using an empirical estimate of the elasticity of substitution and farm data for the time period 1984 88 this study demonstrates that acreage control programs have drastically reduced the deadweight losses associated with income redistribution flowing from target price programs these results lend strong support to the public choice notion that politicians favo

testing for labor market equilibrium with an exact excess demand disequilibrium model a bstract the standard disequilibrium model is supplemented with outside information on the extent of market excess demand estimation of this supplemented model is considerably less involved than that of the standard model and certain desirable structural features such as improved dynamics are obtained in addition a simple nested test of the hypothesis of market equilibrium is available the model is estimated with aggregate u s post war labor market data and the econometric test rejects the hypothesis of labor market equilibrium

downward wage rigidities and optimal monetary policy in a monetary union this paper analyses the implications of heterogeneity in the type of downward wage rigidity nominal or real for optimal monetary policy in a monetary union with asymmetric wage adjustment costs indexation in one region of the union reduces optimal grease inflation in the presence of common productivity shocks large common shocks may have sizeable and persistent effects on the intra union terms of trade whereby the region characterized by downward real wage rigidity adjusts with a persistent loss of competitiveness in response to asymmetric productivity shocks there is no role for grease inflation because relative price changes facilitating the real wage changes dominate the adjustment mechanism

the production effects of agricultural income support policies under uncertainty this analysis decomposes the production impacts of income support programs into wealth insurance and coupling effects under the usual assumptions about preferences the wealth and insurance effects of many support programs increase optimal input levels even for supposedly decoupled programs if the program is coupled in the usual sense then all three effects often act in the same direction it is concluded that studies of trade and domestic policy reform in stochastic environments should consider insurance and wealth effects the derivative conditions required to obtain results are also subjected to scrutiny simulations for an iowa corn producer confirm the comparative statics

quotas without supply control effects of dairy quota policy in california unlike the federal milk marketing order system california s system includes a milk quota program oddly this quota restricts neither production nor marketing in aggregate the quota program leads to more milk production than a typical marketing quota but less milk than blend pricing without the quota the california program generates more producer surplus and smaller welfare losses than a federal style program without quota when class 1 milk sales expand production expands less under the quota program than with blend pricing without a quota finally increases in aggregate quota lower production because they lower the marginal price of milk facing producers

disentangling the consequences of direct payment schemes in agriculture on fixed costs exit decisions and output this paper goes beyond orthodox considerations of direct payment effects on agricultural output by highlighting the role of subsidies in affecting individual producers ability to cover fixed costs and in distorting the volume of aggregate production and net trade by implicitly discouraging exits the theoretical model considers both taxpayer and consumer financed decoupled direct payment schemes and compares them to a coupled production subsidy in terms of possible producer responses to direct payments the paper proposes an analytical framework of production decision making in the presence of a stochastic distribution of fixed costs across representative farms the paper shows that decoupled payments in theory can have a larger effect on output than coupled payments the model explicitly recognizes three consequences of domestic support a induce exit or entry b bias production incentives to domestic markets and c cross subsidize export in global markets an empirical model of the u s wheat sector is developed to illustrate the relative potential impacts of coupled versus decoupled payments on output through the effects on a farmer s ability to cover fixed costs and hence exit decisions

slack shortage and discouraged consumers in eastern europe estimates based on smoothing by aggregation as a consequence of aggregation over markets the observed quantity may be less than the quantity demanded and less than the quantity supplied to deal with such situations a new technique is proposed for estimating demand and supply curves and the extent of shortage and slack the technique is applied to the consumption goods markets of czechoslovakia the german democratic republic hungary poland and yugoslavia it is found that shortage even corrected for a discouraged consumer effect is seldom as great as slack

bottlenecks and the phillips curve a disaggregated keynesian model of inflation output and unemployment benchmark macroeconomic models of output and inflation combine the demand side of the economy with aggregate supply equations based upon some version of the phillips curve in contrast to classical and new classical models such as lucas i972 and sargent 1979 chs i xii and xvi in which prices jump instantaneously to market clearing levels the gradual price adjustment approach represented by tobin 1972 laidler and parkin i975 section 4 barro and grossman 1976 ch 5 sargent 1979 ch ii and ch v i okun i98i and perry i983 take wages and or prices to be predetermined at an instant in time while their rates of change depend on the level of aggregate output in the prototype complete macroeconomic model incorporating this approach output is determined by aggregate demand equations while the augmented phillips curve specifies that prices move in a direction which will tend to return output to its equilibrium value this short run keynesian long run monetarist character is typical of many structural macroeconometric models it is the standard textbook account found for example in dornbusch and fischer i98i and is implicit in much current research there are fundamental questions of consistency in the type of model just described the central difficulty is that with wages and prices predetermined the non market clearing analysis ofbarro and grossman i 976 ch 2 and malinvaud i977 is applicable but in this world the aggregate demand equations are decisive only in the keynesian regime in the other regimes which must arise at high levels of aggregate demand the effective supplies of output or labour or both must be modelled indeed at the aggregate level it is difficult to provide a coherent account of how it is possible to have output above its equilibrium value since this would require labour and output in excess of their notional supplies violating barro and grossman s min condition that quantities be determined by the short side of the market an appealing line for addressing this last difficulty is to disaggregate markets an approach taken by hansen i970 tobin i972 and barro and grossman i976 ch 5 however because each market can be in either excess supply or demand a formal fixed price general equilibrium model appears to be intractable due to the resulting multiplicity of regimes and is not attempted by these authors in this paper these problems are overcome in a disaggregated model in which

how decoupled is the single farm payment and does it matter for international trade the extent to which decoupled agricultural support including the european union single farm payment sfp creates production incentives remains unclear we apply an extended version of the standard global trade analysis project model and generate a set of 21 databases that captures a comprehensive representation of domestic support by considering and modeling a range of different assumptions regarding the sfp s degree of decoupling we investigate the sfp s effect on the model s results the results of our analysis reveal substantially different effects that depend on the degree of decoupling and the findings can help validate trade analysis results particularly for developing countries

united kingdom manpower policy against a background of national economic decline the welsh example chakravarty s p jones d r and mackay r r 1983 united kingdom manpower policy against a background of national economic decline the welsh example reg studies 17 91 104 economic policy has been strongly influenced by a theory which emphasises that only one rate of unemployment is consistent with price stability claims that unemployment is either temporary or voluntary and stresses that lasting reductions in unemployment depend on selective policies designed to encourage adjustments within the labour market this paper outlines experience in wales the evidence is not consistent with the view of unemployment provided by the underlying theory moreover there are considerable problems in applying policies which are designed to reduce the obstacles and frictions to labour market adjustment when unemployment is severe and widespread

prices during the great depression was the deflation of 1930 1932 really unanticipated this paper examines inflationary expectations in order to investigate whether the deflation of 1930 32 could have been anticipated the major conclusion is that beginning in late 1930 and possibly as early as late 1929 deflation could have been anticipated at horizons of three six months this implies in turn that short run ex ante real interest rates were very high during the initial phases of the great depression these results provide further support for the proposition that monetary contraction was the driving force behind the economic decline copyright 1992 by american economic association

credit market imperfections and the distribution of policy rents this article shows that credit market imperfections have important implications for the distribution of policy rents in a model with land as fixed factor and credit market imperfections when an area payment is given land rents go up by more than the subsidy on aggregate farms may lose from the subsidy the results depend on the extent to which subsidies have direct and indirect effects on the credit constraints on whether farms rent or own land and on farm heterogeneity

the impact of decoupled payments on farm choices conceptual and methodological challenges abstract in this paper we review the methodological framework for analysing decoupled payments in models of agricultural production market and technological uncertainty farm efficiency credit constraints farm household choices involving extra agricultural decisions policy uncertainty and long run impact of decoupling on investment and land values are the relevant issues that should be pursued by methodological and empirical analysis future research should refine the analysis of decoupled payments mainly trying to provide results that can be useful for policy simulation to bridge the gap between analysis at the individual level and sector policy models

output and input bias effects of u s direct payments this study examines the national effect of u s direct payments on the extent and direction of biased technical change on u s agriculture we also assess the economic significance of the estimated bias effects for economic policy modeling endeavors involving a reduction of domestic support payments a two outputs livestock and crops and four inputs labor capital land and material translog cost function was estimated from national time series 1948 2011 data results indicate that payments do not induce output biased technical change we do find evidence of hicksian bias that is land using and material input saving attributable to support payments global computable general equilibrium simulations suggest that price and output effects of discontinuing direct payments are 1 4 to 1 3 the size once the bias effects are incorporated