the hyperinflation model of money demand revisited in this paper we propose a test of the hyperinflation model of money demand which is valid under any assumption concerning agents expectations subject only to the restriction that forecasting errors are stationary it is also demonstrated that highly efficient parameter estimates can be obtained and restrictions on them tested under the same weak assumption finally it is shown how these first stage estimates can be utilized to test the stronger assumption of rational expectations the arguments are illustrated by analysis of the classic data on european hyperinflations previously analyzed by cagan 1956 barro 1970 and abel dornbusch huizinga and marcus 1979 copyright 1991 by ohio state university press

alternative approaches to money and growth this paper reexamines the issue of money and growth in an economy with both endogenous labor supply and endogenous capital stock using three recently developed approaches the money in the utility function approach the cash in advance approach and the transactions costs approach by establishing a qualitative equivalence between alternative setups the authors find economically justifiable conditions such that all comparative statics results derived from the aforementioned approaches are identical copyright 1992 by ohio state university press

growth and inequality in the dual model of development the role of demand factors this paper relates growth and income distribution in the development of a dual economy its originality lies in the fact that the analysis of income inequality uses the whole lorenz curve instead of some summary measures and that the dual economy is represented through a fully specified general equilibrium model conditions for particular shifts in the lorenz curve are derived they mostly involve the income and price elasticities of demand faced by the traditional sector of the economy and suggest that an unambiguous drop in income inequality is somewhat unlikely at the dual stage of development

human capital inequality and economic growth some new evidence this paper provides new measures of human capital inequality for a broad panel of countries taking attainment levels from barro and lee 2001 we compute gini coefficients and the distribution of education by quintiles for 108 countries over five year intervals from 1960 to 2000 using this new cross country data on human capital inequality two main conclusions are obtained first most countries in the world have tended to reduce the inequality in human capital distribution second human capital inequality measures provide more robust results than income inequality measures in the estimation of standard growth and investment equations

understanding long run african growth colonial institutions or colonial education abstract long term growth in developing countries has been explained in four frameworks extractive colonial institutions acemoglu et al 2001 colonial legal origin la porta et al 2004 geography gallup et al 1998 and colonial human capital glaeser et al 2004 in this paper we test the colonial human capital explanation for sub saharan africa controlling for legal origin and geography utilising data on colonial era education we find that instrumented human capital explains long term growth better and shows greater stability over time than instrumented measures for extractive institutions we suggest that the impact of the disease environment on african long term growth runs through a human capital channel rather than an extractive institutions channel the effect of education is robust to including variables capturing legal origin and geography which have additional explanatory power

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

nominal and real disturbances and money demand in chinese hyperinflation this paper reexamines the dynamics of hyperinflation by allowing variability in the relative price of capital goods in units of consumption goods that reflects interactions between the real and monetary sectors the theory generates empirically testable implications that suggest expanding the standard caganian money demand function to include both anticipated inflation and relative price effects in a nonlinear fashion employing data from the post world war ii chinese hyperinflationary episode the empirical findings suggest that conventional econometric investigations of money demand during hyperinflation overlook important nonlinear interactions between real and monetary activities and hence underestimate the welfare costs of hyperinflation

sources of fluctuations in relative prices evidence from high inflation countries casual analysis of six high inflation episodes indicates a strong positive relationship between movements in the relative price ratio measured by wpi cpi and the inflation rate the authors estimate a vector autoregression model in which relative price movements are driven by several fundamental disturbances fiscal monetary output and exchange rate identified using only long run restrictions based on a general equilibrium optimizing model analysis of the endogenous response of relative price changes to these disturbances suggests that output and monetary shocks are the most important driving forces although fiscal and exchange rate shocks are also influential in explaining relative price movements in some countries copyright 1993 by mit press

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

new ways of looking at old issues inequality and growth abstract the paper uses new cross country data on income and asset land distribution to show that i there is a strong negative relationship between initial inequality in the asset distribution and long term growth ii inequality reduces income growth for the poor but not for the rich and iii available longitudinal data provide little support for the kuznets hypothesis policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction

political economy of the 2014 farm bill this article assesses the political economy of the 2014 u s farm bill with a focus on the farm support safety net the farm bill secured substantial bipartisan majorities in a politically contentious congress planned outlays are predominately for nutrition assistance programs directed toward a traditional nonfarm constituency in the farm bill coalition while annual fixed direct payments to farmers are eliminated but replaced with enhanced downside risk protection against low prices or revenue the new support programs may prove more or less costly than the foregone fixed payments with farmers offered a choice between a price countercyclical program with increased reference prices and a revised moving average revenue guarantee program the role of insurance is enhanced notably by replacing past support programs with a new upland cotton revenue insurance program and dairy milk to feed margin protection program open policy issues that are highlighted include the costs and distortionary effects of moving average revenue benchmarks versus fixed reference prices the overall level of insurance premium subsidies the potential for overlap between commodity and insurance programs and lastly food environmental and biofuels concerns that reflect the diverse portfolio of products demanded from agriculture in an international context we conclude that the 2014 farm safety net likely would not have been enacted had multilateral agreement been reached on the 2008 doha round world trade organization negotiating documents conversely the 2014 farm bill makes achieving those limits more difficult research is discussed that can elucidate the ongoing political economy of u s farm policy and help shape future program design

education economic growth and measured income inequality in this paper education simultaneously affects growth and income inequality more education does not necessarily decrease inequality when the latter is assessed by the lorenz dominance criterion increases in education first increase and then decrease growth as well as income inequality when measured by the gini coefficient there is no clear functional relationship between growth and measured income inequality the model identifies regimes of this relationship which depend crucially on the production and schooling technology conventional growth regressions with human capital and inequality as regressors may miss the richness of the underlying nonlinearities but viewed as approximations may still provide important information on the nonlinear relationship between growth and education

economic exchange during hyperinflation historical evidence indicates that hyperinflations can disrupt individuals normal trading patterns and impede the orderly functioning of markets to explore these issues we construct a theoretical model of hyperinflation that focuses on individuals and their process of economic exchange in our model buyers must carry cash while shopping and some transactions take place in a decentralized setting in which buyer and seller negotiate over the terms of trade of an indivisible good since buyers face the constant threat of incoming younger hence richer customers their bargaining position is weakened by inflation allowing sellers to extract a higher real price however we show that higher inflation also reduces buyers search increasing sellers wait for customers as a result the volume of transactions concluded in the decentralized sector falls at high enough rates of inflation all agents suffer a welfare loss

income inequality education expenditures and growth abstract recent studies have reported a negative association between income inequality and economic growth if true what accounts for this finding what are possible transition mechanisms that might link the two this paper explores one such mechanism income inequality raises expenditures for public education as a fraction of gross domestic product gdp although public education expenditures are positively associated with future economic growth the contemporaneous effect upon growth is negative given this cost upon current growth these findings may help to explain the lack of a large positive effect from the growth of human capital upon economic growth as reported in the literature

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

equity and efficiency in human capital investment the local connection a general model of community formation and human capital accumulation with social spillovers and decentralized school funding is used to analyse the causes of economic segregation and its consequences for equity and efficiency significant polarization arises from minor differences in endowments preferences or access to capital markets this makes income inequality more persistent across generations but the same need not be true for wealth equilibrium stratification tends to be excessive resulting in low aggregate surplus whether state equalization of school resources can remedy these problems hinges on how purchased social and family inputs interact in education and in mobility decisions

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

money demand and the relative price of capital goods in hyperinflations abstract we investigate dynamic interactions between relative price movements and money demand behaviors during hyperinflations viewing relative price changes as resulting primarily from real disturbances we develop a general equilibrium model with heterogeneous consumption and capital goods to illustrate how monetary shocks may produce real effects through the relative price channel this motivates the design of long run restrictions to identify a structural vector autoregression employing data from the post wwi germany and the post wwii chinese hyperinflationary episodes the empirical results support the contention that both real and nominal shocks have important effects on the relative price and money demand during hyperinflations

the 2014 farm bill and the wto the 2014 farm bill reduced expected budgetary costs of us farm programs according to estimates prepared by the congressional budget office cost projections are very sensitive to market conditions and program participation assumptions and stochastic analysis indicates that farm program costs could easily differ from expected values by 5 billion or more in any given year by replacing direct payments with new policies that make payments tied to market prices and yields the bill could have important world trade organization wto implications if the new policies are classified as non commodity specific amber box support projections indicate that existing wto limits on the current aggregate measure of support would not be exceeded on average but could be under some market conditions furthermore the new policies are very likely to exceed some wto rules proposed by various parties in the doha round negotiations

anticipated inflation and the capital stock in a cash in advance economy abstract an economy is constructed in which the steady state capital stock is inversely related to the rate of inflation as a result that is directly opposite the usual conclusion

on relative price variability and hyperinflation abstract during the chinese hyperinflation 1946 1 1949 4 both anticipated inflation were found to influence relative price variability positively the non neutral effect of anticipated inflation rejects the conventional lucas island model while lending empirical support to the price adjustment cost theory

financing higher education and majority voting abstract this paper examines the state funding of higher education treated as an investment good generating an externality under majority voting the model considers a single cohort over two periods individuals maximise net lifetime income subject to the government s budget constraint with a proportional tax cyclical voting does not occur despite double peaked preferences comparative static results are obtained a fall in non education expenditure leads to a fall in the choice of grant and a positive externality is a necessary though not sufficient condition for ensuring majority support for some positive level of the grant

income inequality human capital accumulation and economic performance we show that greater income equality implies higher human capital accumulation and economic performance in an overlapping generations model with heterogeneity in income and talent given liquidity constraints and declining marginal utility individuals with a given level of talent receive education if their initial income is higher than a threshold level and the threshold is lower for more talented individuals assuming the more talented create more human capital when educated greater initial income equality for one generation then imply not only higher aggregate human capital accumulated by that generation but an improvement in all subsequent generations initial income distributions

measuring inequality change in an economy with income growth abstract this paper analyzes how to measure changes in inequality in an economy with income growth the discussion distinguishes three stylized kinds of economic growth 1 1 high income sector enrichment 2 2 low income sector enrichment 3 3 high income sector enlargement in which the high income sector expands and absorbs persons from the low income sector th e two enrichment types pose no problem for assessing inequality change in the course of economic growth for high income sector enrichment growth inequality might reasonably be said to increase whereas for low income sector enrichment inequality might be said to decrease these adjustments are non controversial and non problematical where problems arise is in the case of high income sector enlargement growth in that case the two alternative approaches have been shown in this paper to yield markedly results 1 1 the traditional inequality indices generate an inverted u pattern of inequality that is inequality rises in the early stages of high income sector enlargement growth and falls thereafter 2 2 the new approach suggested here based on axioms of gap inequality and numerical inequality generates a u pattern of inequality that is inequality falls in the early stages of high income sector enlargement growth and rises thereafter the discrepancy between the familiar indices and the alternative approach based on axioms of gap inequality and numerical inequality bears further scrutiny two courses of action are possible one might try to axiomatize inequality in ways that generate an inverted u pattern in high income sector enlargement growth thereby rationalizing the continued use of the usual inequality indices with the inverted u property alternatively one might retain the axioms proposed here embed them into a more formal structure and construct a family of inequality indices consistent with them others might wish to pursue the first course i am at work on the second

subsidies for higher education who should pay the resource costs of higher education this paper investigates a simple model of the general equilibrium of the labor market with three skill levels those in the population with the lower level of intelligence and or sophistication can only become low skilled workers but the brighter segment of the population can become either high or medium skilled workers given the tax structure the welfare of each group is maximized by a unique subsidy rate on the cost of training high skilled workers under several circumstances the lower iq group wants a higher subsidy rate than will the group that benefits directly from the training

factor shares and savings in endogenous growth in models of steady investment driven growth an individual s propensity to save depends on how much of his income is drawn from accumulated factors of production capital rather than from nonaccumulated factors when agents are heterogeneous in this respect growth oriented policies have distributional consequences and in the absence of lump sum redistribution their implementation faces political constraints if the median voter is capital poor relative to the economy s representative agent political interactions tend to slow down growth when policy acts on capital s income share and tend to accelerate it when investment subsidies are the policy instrument of choice copyright 1993 by american economic association

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

explaining international and intertemporal variations in income inequality this paper explores the propositions that income inequality is relatively stable within countries and that it varies significantly among countries a new and expanded data set provides broad support for both propositions drawing on a political economy and capital market imperfection arguments to explain the intertemporal and international variation in inequality the empirical analysis shows that the predicted variables associated with the first argument a measure of civil liberties and the initial level of secondary schooling and the second argument a measure of financial depth and the initial distribution of land are indeed important determinants of inequality this paper explores two propositions regarding income inequality they are first income inequality is relatively stable within countries and second it varies significantly across countries to illustrate note that the gini coefficient in india remained almost constant for forty years 1951 92 with mean 32 6 and standard deviation 2 0 2 in contrast the variation in gini coefficients across countries is large 61 9 in honduras in 1968 compared with 17 8 in bulgaria in 1976 if substantiated these propositions have potentially significant implications for poverty the significance of the first is obvious barring any fundamental socio political change poverty reduction will depend crucially on the rate of economic growth given this the significance of the second is that in inegalitarian economies the poor will enjoy a smaller share of any national increment in income than in more egalitarian ones drawing on a new and expanded data set on inequality deininger and squire 1996a the first of the paper s three sections conducts standard statistical tests of the two propositions the sample comprises 573 observations on the most common measure of inequality the gini coefficient for 49 developed and developing countries covering the period 1947 94 the results broadly confirm our two propositions specifically analysis of variance anova shows that about 90 of the total variance in the gini coefficients