the demographic deficit abstract there has been a slowdown in growth in the world s most advanced economies in this paper we argue that changing demographics in particular aging populations combined with increased life expectancy may be part of the explanation for why we observe slower growth falling interest rates and falling productivity growth using japan and the u s in the years prior to the financial crises as a case study we provide estimates of the growth deficit that arises from an aging cohort structure and increasing life expectancy we also provide projections of the impact of predictable demographic changes on future growth in the u s and japan

where does price discovery occur for stocks traded in multiple markets evidence from hong kong and london using a sample of hong kong listed stocks that are also traded on the london stock exchange we document the following results first london market makers use hong kong s closing prices as the benchmark for setting the opening prices in london second trading in the london market plays only a limited role in price discovery in the hong kong market third the stock returns from london trading are closely correlated with those of the hong kong market the above findings are consistent with the explanation that london trading is predominantly liquidity driven but not information driven

on the optimal progressivity of the income tax code this paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor pro ductivity risk gives rise to a nontrivial income and wealth distribution a progressive tax system serves as a partial substitute for missing insurance markets and enhances an equal distribution of economic welfare these bene cial eects of a progressive tax system have to be traded oagainst the e ciency loss arising from distorting endoge nous labor supply and capital accumulation decisions a determination of the optimal progressivity of the income tax code therefore calls for a quantitative exploration using a utilitarian steady state social welfare criterion we nd that the optimal us income tax is well approximated by a at tax rate of19 5 and a xed deduction of about 3 700 the steady state welfare gains from a fundamental tax reform towards this tax system are equivalent to 0 4 higher consumption in each state of the world an explicit computation of the transition path induced by a reform of the current towards the optimal tax system indicates however that a majority of the population currently alive would suer welfare losses calling into question the political feasibility of such

global demographic trends and social security reform how sustainable are the current social security systems in the developed economies given the projected demographic trends the most recent literature has answered this question through dynamic general equilibrium models in a closed economy framework this paper provides a new quantitative benchmark of analysis for this question represented by a two region model south and north of the world economy where capital flows across regions the timing and the extent of the demographic transition and the associated economic forces shaping capital accumulation and equilibrium factor prices are very different in the two regions thus the projected paths of interest rate and wage rate in the north diverge substantially between closed and open economy we perform a wide range of policy experiments under both scenarios our main conclusion is that if one is interested in quantifying the path of the fiscal variables e g the value of the payroll tax needed to keep the social security system viable or to finance a transition towards a fully funded system then these two benchmarks yield similar results however if the focus is on quantifying the path of factor prices aggregate variables and ultimately welfare then the two approaches can diverge significantly

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

an investment model for the supply of training by employers this paper explores the incentives faced by employers for supplying general training of the type given to craft apprentices an investment model is developed in which the employer s return takes the form of reduced recruitment costs for skilled labor an empirical model is derived and fitted to apprentice recruitment data for the british engineering industry 1966 88 the model succeeds in predicting the collapse of apprentice training in the 1980s important explanatory variables are the real interest rate and an index of skill shortages copyright 1994 by royal economic society

labor supply responses and welfare effects of tax reforms during the late 1 980s and early 1 990s taxation of wage income has undergone a change towards a proportional tax regime in many countries our analysis shows that gradual tax reforms in norway may have removed some of the distortions on worker behavior moreover we find that proportional taxes may reduce the inequality in the distribution of disposable household income yet when the distributional consequences are related to changes in individual welfare we find that rich households may benefit far more than households at the other tail of the income distribution because they earn more without any significant increase in effort

new evidence on labor supply employment versus hours elasticities by sex and marital status using the tri annual micro panel data of the survey of income and program participation we estimate fixed effects labor supply models separating the extensive and intensive margins the employment elasticity is 0 6 for single men versus 1 1 for married men the employment elasticity is 2 4 for single women versus 1 8 for married women the compensated hours worked elasticity is 0 4 for employed single and married men and 0 7 for employed single and married women the implied aggregate employment elasticity of 1 5 and hours per employee elasticity of 0 5 indicate employment fluctuations account for three fourths of wage induced variation in labor hours

micro and macro elasticities in a life cycle model with taxes we build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work we find that changes in taxes have large aggregate effects on hours of work moreover we find that there is no inconsistency between this result and the empirical finding of small labor elasticities for prime age workers in our model micro and macro elasticities are effectively unrelated our model is also consistent with other cross country patterns

fiscal policy effects in a heterogeneous agent olg economy with an aging population this paper incorporates the aging population projected by the u s social security administration to a heterogeneous agent olg model with idiosyncratic wage shocks and analyzes its effects on individual households the government budget and the overall economy the fiscal gap caused by the demographic change is 2 92 of gdp under the ssa s intermediate projection the effect of the aging population is large by itself and depends significantly on how the government finances the cost of the demographic change there is a strong trade off between efficiency and equity and this paper quantitatively assesses the pros and cons of stylized fiscal reform plans

aging and pensions in general equilibrium labor market imperfections matter we re examine the effects of population aging and pension reforms in an olg model with labor market frictions the most important feature brought about by labor market frictions is the connection between the interest rate and the unemployment rate exogenous shocks such as aging leading to lower interest rates also imply lower equilibrium unemployment rates because lower capital costs stimulate labor demand and induce firms to advertise more vacancies these effects may be reinforced by increases in the participation rate of older workers induced by the higher wage rates and the larger probability of finding a job these results imply that neglecting labor market frictions and employment rate dynamics may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate

schooling training growth and minimum wages we examine how the long run growth performance of an economy is affected by a labor market distortion in our model growth occurs through skill formation and skills are generated through schooling and training of unskilled workers we analyze how a minimum wage legislation affects long ran growth in general the effects are ambiguous the reason is that while a minimum wage discourages training it also encourages schooling the net effect then depends on whether training or schooling dominates the long run increases in labor productivity jel classification i20 j31 o40

the estimation of a joint wage hours labor supply model in this paper the standard cross sectional static model of labor supply is modified to make the wage endogenous and a joint wage hours model is estimated the econometric technique addresses the non linearity of the budget constraint by approximating the constraint by a series of discrete points the results show that the budget constraint is indeed nonlinear that hours affect the wage quadratically that true wage elasticities are lower as a result and that the model fits the hours distribution much better than the standard tobit model

the effect of income taxation on the labor supply of married men in sweden abstract this paper presents labor supply functions estimated on a sample of prime age swedish males the model used takes account of the nonlinear character of individuals budget sets caused by the progressive income tax it also allows preferences to vary between individuals calculations with the estimated functions using a partial equilibrium framework indicate a sizeable effect of the income tax on hours of work the average expected deadweight loss of the income tax is found to be approximately 20 percent of tax revenue

a characterization of the price behavior of international dual stocks an error correction approach abstract the purpose of this study was to investigate dominant satellite relationships of dually listed stocks it deals with the interrelations between stocks listed and traded in two international unsynchronized markets the data exhibit first order non stationarity and the series across markets are cointegrated this gives a justification for an error correction model which incorporates a short run adjustment mechanism the model is applied for different day groups the main findings are 1 arbitrage opportunities are generally not available 2 the domestic country usually emerges as the dominant market and the foreign market as the satellite one 3 the adjustment mechanism coefficient is highly significant for most shares 4 different behavioral patterns emerge for middle of the week days as compared with beginning end of week days and 5 the model fits better for the more heavily traded shares

the cyclical and secular behaviour of the labour input comparing efficiency units and hours worked summary a monthly labour input series designed to correct for the fact that all hours worked are not of the same quality is constructed and its properties compared with unadjusted hours worked this efficiency units series is constructed from bls data on hours worked and earnings by age and sex the cyclical fluctuations displayed by the efficiency units series are smaller on average than those displayed by hours worked although the difference is not large however the secular behaviour of the series is quite different hours worked per capita displays a significant positive trend while efficiency units per capita does not

how much of the diversification discount can be explained by poor corporate governance we investigate whether the diversification discount occurs partly as an artifact of poor corporate governance in panel data models we find that the discount narrows by 16 to 21 when we add governance variables as regression controls we also estimate heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance we find that the diversification discount persists even with these controls for endogeneity however in selection models the discount disappears entirely when we introduce governance variables in the second stage and in dynamic panel gmm models the discount narrows by 37 when we include governance variables

a life cycle consistent empirical model of family labour supply using cross section data this paper estimates a utility maximising model of the joint determination of male and female labour supplies using a sample of married couples from the u k family expenditure survey the emphasis is on the estimation of within period preferences that are consistent with intertemporal two stage budgeting under uncertainty however the approach we adopt provides an alternative method of estimating certain aspects of life cycle behaviour to the fixed effects constant approach of heckman and macurdy 1980 macurdy 1981 and browning deaton and irish 1985 moreover it relaxes some of the underlying restrictions that are implicit in these constant models under uncertainty

public saving and policy coordination in aging economies in the coming decades the share of people of working age will fall significantly in most developed countries according to optimal taxation theory public debts should be reduced before the baby boom generation retires i find that if debts are instead maintained at current levels welfare may be reduced substantially in countries with a large public sector and or a large demographic change since population aging will be less dramatic in the united states than in europe and japan capital will move from europe and japan to the united states these capital movements will facilitate the us demographic transition but aggravate the transition in most european countries

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

should germany have built a new wall macroeconomic lessons from the 2015 18 refugee wave abstract in 2015 2016 germany experienced a wave of predominantly low skilled refugee immigration we evaluate its macroeconomic and distributional effects using a quantitative overlapping generations model calibrated using german micro data to replicate education and productivity differentials between foreign born and native workers workers are modelled as imperfect substitutes in aggregate production leading to endogenous wage differentials we simulate the dynamic effects of this refugee wave with specific focus on the welfare impact on low skilled natives our results indicate that the small losses this group suffers can be compensated by welfare gains of other parts of the native population

endogeneity and the dynamics of internal corporate governance abstract we use a well developed dynamic panel generalized method of moments gmm estimator to alleviate endogeneity concerns in two aspects of corporate governance research the effect of board structure on firm performance and the determinants of board structure the estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity we re examine the relation between board structure and performance using the gmm estimator in a panel of 6 000 firms over a period from 1991 to 2003 and find no causal relation between board structure and current firm performance we illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased we discuss where it may be appropriate to consider the dynamic panel gmm estimator in corporate governance research as well as caveats to its use

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

labor supply and taxes a survey i survey the male and female labor supply literatures focusing on implications for effects of wages and taxes for males i describe and contrast results from three basic types of model static models especially those that account for nonlinear taxes life cycle models with savings and life cycle models with both savings and human capital for women more important distinctions are whether models include fixed costs of work and whether they treat demographics like fertility and marriage and human capital as exogenous or endogenous the literature is characterized by considerable controversy over the responsiveness of labor supply to changes in wages and taxes at least for males it is fair to say that most economists believe labor supply elasticities are small but a sizeable minority of studies that i examine obtain large values hence there is no clear consensus on this point in fact a simple average of hicks elasticities across all the studies i examine is 0 30 several simulation studies have shown that such a value is large enough to generate large welfare costs of income taxation for males i conclude that two factors drive many of the differences in results across studies one factor is use of direct vs ratio wage measures with studies that use the former tending to find larger elasticties another factor is the failure of most studies to account for human capital returns to work experience i argue that this may lead to downward bias in elasticity estimates in a model that includes human capital i show how even modest elasticities as conventionally measured can be consistent with large welfare costs of taxation

on the consequences of demographic change for rates of returns to capital and the distribution of wealth and welfare in the industrialized world the population is aging over time reducing the fraction of the population in working age consequently labor is expected to be scarce relative to capital with an ensuing decline in the real return on capital this paper uses demographic projections together with a large scale multi country overlapping generations model with uninsurable idiosyncratic uncertainty to quantify the distributional and welfare consequences of these changes in factor prices induced by the demographic transition in our model capital can freely flow between different regions in the oecd the u s the eu and the rest of the oecd thus international capital flows may in principle mitigate the decline in rates of returns one would expect in the u s if it were a closed economy we find exactly the opposite in the u s as an open economy rates of return are predicted to decline by 86 basis points between 2005 and 2080 if the u s were a closed economy this decline would amount to only 78 basis points this result is due to the fact that other regions in the oecd will age even more rapidly therefore the u s is importing the more severe aging problem from these regions especially europe a similar conclusion is reached if we let capital flow freely between the oecd and the rest of the world row while row currently has a younger population structure it is predicted to age even more severely in the next decades giving rise to an even more pronounced decline in world rates of return to capital in order to evaluate the welfare consequences of the demographic transition we ask the following hypothetical question suppose a household economically born in 2005 would live through the economic transition with changing factor prices induced by the demographic change but keeping her own survival probabilities constant at their 2005 values how would its welfare have changed relative to a situation without a demographic transition we find that households experience significant welfare losses due to the demographic transition in the order of 2 5 of consumption depending on their initial productivity level and the design of the pension system these losses are mainly due to the fact that lower future returns to capital make it harder for households to save for retirement on the other hand if the oecd suddenly opens up to row in 2005 and row has higher returns to capital before the world capital market integration then these losses are reduced to 1 5 2 5

the determinants of price discovery evidence from us canadian cross listed shares abstract we examine the determinants of price discovery for canadian firms cross listed on the main us stock exchanges over the period 1996 2011 sampling at a one minute frequency we compute gonzalo and granger component shares cs and employ a system gmm approach to control for persistence in price discovery and endogeneity between cs and its determinants we find that price discovery is highly persistent and that there is strong evidence of simultaneity between cs and its determinants we conclude that lower relative spreads and higher relative trading activity increase an exchange s contribution to price discovery we also document that it is small trades that drive price discovery particularly since the introduction of decimalization

an explanation of international differences in education and workplace training abstract we develop a simple search equilibrium model of workplace training and education based on two features first investment in education improves job related learning skills and reduces training costs by firms second firms with vacant skilled job slots can choose between recruitment from the market and training compared to germany and japan the us has both a higher inflow rate into unemployment and a higher efficiency of the matching process while the combined effect of these differences on the share of educated labor is ambiguous the effect on the percentage of firms undertaking workplace training is to unambiguously reduce it

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

eighths sixteenths and market depth changes in tick size and liquidity provision on the nyse using limit order data provided by the nyse we investigate the impact of reducing the minimum tick size on the liquidity of the market while both spreads and depths quoted and on the limit order book declined after the nyse s change from eighths to sixteenths depth declined throughout the entire limit order book as well the combined e ect of smaller spreads and reduced cumulative limit order book depth has made liquidity demanders trading small orders better o however traders who submitted

time varying arbitrage and dynamic price discovery abstract we introduce time varying measures of price discovery based on underlying profit maximizing behavior by combining the heterogeneous agent modelling literature with the market microstructure literature we set up a heterogeneous agent model with arbitrageurs and trend chasers chartists and allow agents to switch between the strategies conditional on recent forecasting performance estimation of the model on canadian us cross listed stocks on high frequency data shows that there is significant heterogeneity and switching causing ample variation in the information processing capacity of markets

global trends in interest rates abstract the trend in the world real interest rate for safe and liquid assets fluctuated close to 2 for more than a century but has dropped significantly over the past three decades this decline has been common among advanced economies as trends in real interest rates across countries have converged over this period it was driven by an increase in the convenience yield for safety and liquidity and by lower global economic growth

population aging social security and fiscal limits abstract we use an overlapping generations olg life cycle model with distortionary taxation on labor and capital to derive a threshold dependency ratio i e a point in the cross section distribution of the population beyond which tax revenues can no longer sustain the planned level of transfers to retirees we quantify the level of the threshold the distance of the economy from the threshold and the probability of reaching the threshold at some point in the future the model is calibrated on the united states and fourteen european countries which have dependency ratios among the highest in the world we examine the effects on the threshold and welfare of a number of policies often advocated to improve the sustainability of pension systems new tax data on dynamic laffer effects are provided

investment in general training the role of information and labour mobility following the seminal work of becker i964 it is widely accepted in the literature that firms will be unwilling to finance training which workers may use in other firms this paper takes issue with this prediction and suggests that firms will frequently share in the cost of such general training 1 becker argues that a firm which pays for the training of workers in skills of potential use to other firms will lose these workers since other firms bear none of the costs of general training they can attract a worker with such training by outbidding the firm which trained him recognising this absence of property rights over an investment in general training firms will refuse to provide it hence if general training is to take place the trainee will have to pay for it if potential trainees are unwilling or unable to pay general training will not take place a shortage in general training is likely to emerge this may be especially pronounced in developing countries 2 in contrast the outlook for

skill biased technical change and the cost of higher education we document the growth in higher education costs and tuition over the past 50 years to explain these trends we develop a general equilibrium model with skill and sector biased technical change finding the model s parameters through a combination of estimation and calibration we show that it can explain the rise in college costs between 1961 and 2009 along with the increase in college attainment and the change in the relative earnings of college graduates the model predicts that if college costs had ceased to grow after 1961 enrollment in 2010 would have been 3 6 higher

demographics and real interest rates inspecting the mechanism abstract the demographic transition can affect the equilibrium real interest rate through three channels an increase in longevity or expectations thereof puts downward pressure on the real interest rate as agents build up their savings in anticipation of a longer retirement period a reduction in the population growth rate has two counteracting effects on the one hand capital per worker rises thus inducing lower real interest rates through a reduction in the marginal product of capital on the other hand the decline in population growth eventually leads to a higher dependency ratio the fraction of retirees to workers because retirees save less than workers this compositional effect lowers the aggregate savings rate and pushes real rates up we calibrate a tractable life cycle model to capture salient features of the demographic transition in developed economies and find that its overall effect is a reduction of the equilibrium interest rate by at least one and a half percentage points between 1990 and 2014 demographic trends have important implications for the conduct of monetary policy especially in light of the zero lower bound on nominal interest rates other policies can offset the negative effects of the demographic transition on real rates with different degrees of success

demographics and the natural interest rate in the euro area abstract we investigate the impact of demographics on the natural rate of interest nri in the euro area with a particular focus on the role played by economic openness migrations and pension system design to this end we construct a life cycle model and calibrate it to match the life cycle profiles from hfcs data we show that population aging contributes significantly to the decline in the nri explaining about two thirds of its secular decline between 1985 and 2030 openness to international capital flows has not been important in driving the ea real interest rate as aging in europe has been similar to that in the rest of the world so far of two possible pension reforms only an increase in the retirement age can revert the downward trend on the equilibrium interest rate while a fall in the replacement rate would make the decline in nri even deeper the demographic pressure on the eurozone nri can be alleviated by increased immigration but only to a small extent and with a substantial lag

cross border listings and price discovery evidence from u s listed canadian stocks we examine the contribution of cross listings to price discovery for a sample of canadian stocks listed on both the toronto stock exchange tse and a u s exchange we nd that priceson the tse and u s exchange are cointegrated and mutually adjusting the u s share of price discovery ranges from 0 2 percent to 98 2 percent with an average of 38 1 percent the u s share is directly related to the u s share of trading and to the ratio of proportions of informative tradeson the u s exchange and the tse and inversely related to the ratio of bid ask spreads with the enhanced globalization of nancial markets the number of non u s rms cross listing shares on a u s exchange has substantially increased attracting non u s listings is now a top priority of the u s stock exchanges at the end of 2000 420 non u s rmswere listed on the new york stock exchange nyse the number of foreign rmslisted on nasdaq waseven higher the popularity of international cross listings has prompted many academic studies on the topic 1 most of these studies focus on the bene ts of international cross listings including the reduced cost of capital and the enhanced liquidity of a rm s stock studiessuch asalexander eun and janakiramanan 1987 1988 and foerster and karolyi 1993 suggest that the cost of capital declines because the portion of the risk premium that compensates for cross border investment barriers dissipates miller 1999 and foerster and karolyi 1999 propose increased investor recognition as another possible explanation several studies examine changes in trading volume and costs due to international cross listing foerster and karolyi 1998 nd that the bid ask spreads in canada decrease after the cross listing of canadian stocks in the united states domowitz glen and madhavan 1998 suggest that the impact of cross listing is complex and depends on the degree of quote transparency that is the extent to which price information is observable in the two markets smith and so anos 1997 examine if cross listing is a zerosum game with increased trading in the united states being oiset by reduced

a quantitative assessment of the decline in the u s current account low frequency changes in the u s current account can be understood in terms of the influence of differences in productivity growth rates across time and across countries using standard growth theory in particular the secular decline is primarily driven by the increase in the u s tfp growth rate relative to its trading partners differences in population growth rates or fiscal policy have no significant effects on the low frequency changes in the u s current account

rules of thumb in life cycle saving decisions we analyse life cycle saving decisions when households use simple heuristics or rules of thumb rather than solve the underlying intertemporal optimisation problem we simulate life cycle saving decisions using three simple rules and compute utility losses relative to the solution of the optimisation problem our simulations suggest that utility losses induced by following simple decision rules are relatively low moreover the two main saving motives reflected by the canonical life cycle model long run consumption smoothing and short run insurance against income shocks can be addressed quite well by saving rules that do not require computationally demanding tasks such as backwards induction

consumption over the life cycle facts from consumer expenditure survey data this paper uses consumer expenditure survey data and a seminonparametric statistical model to estimate life cycle profiles of consumption controlling for demographics cohort and time effects we construct age profiles for total and nondurable consumption as well as expenditure patterns for consumer durables special emphasis is placed on the comparison of different approaches to control for changes in demo graphics over the life cycle we find significant humps over the life cycle for total nondurable and durable expenditures changes in household size account for roughly half of these humps bootstrap simulations suggest that our empirical estimates are tight in that standard errors are small

retirement and consumption in a life cycle model consumption expenditure declines sharply at the time of retirement for many households but the majority maintain a smooth consumption path a simple life cycle model with uncertainty about the time of retirement can account for this pattern a richer version of the model is calibrated to data from the health and retirement study hrs the median change in consumption expenditure at retirement generated by the model is zero while the mean is negative matching the hrs data however the magnitude of the drop in consumption among households that experience a decline is too small in the model compared to the data

dynamic labour force participation of married women and endogenous work experience this paper presents and estimates a dynamic model of married women s labour force participation and fertility in which the effect of work experience on wages is explicitly taken into account because current participation alters future potential earnings the investment return to work will be an important factor in the current work decision in any forward looking behavioural model the model is estimated using the national longitudinal surveys mature women s cohort we use the estimates of our model to predict changes in the lifecycle patterns of employment due to changes in schooling fertility husband s income and the magnitude of the experience effect on wages we find that although work experience increases the disutility of further work the effect is overwhelmed by the positive effect of experience on wages leading to persistence in the employment patterns of these women in addition we find that an increase in young children and in husband s income substantially reduces participation while increased schooling has a powerful positive impact on participation this paper presents an estimable structural dynamic model of married women s labour force participation and fertility in which wages are stochastic and work experience or cumulative participation is endogeneous the model is structural in the sense that the parameters which are estimated are contained in the fundamental relationships governing behaviour namely the utility function and the constraints the model is contained in the class of models which describe the life cycle capital accumulation process with endogeneous labour supply such as weiss 1972 and heckman 1976 it is closest in spirit to that of weiss and gronau 1981 1 the basic feature of their model and ours is that labour market participation affects future wages which then affects future participation the investment return to current work will necessarily be taken into account in any forward looking optimizing model as weiss and gronau note estimates of labour supply models have ignored the inherent behavioural dynamics associated with a positive wageexperience profile there is no adequate empirical treatment of the human capital investment dimension of the labour force participation decision in the literature heckman and willis 1977 have studied a sequential discrete choice model of the labour force participation of married women in a reduced form framework their work

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

general training by firms apprentice contracts and public policy workers will not pay for general on the job training if contracts are not enforceable firms may if there are mobility frictions private information about worker productivities however prevents workers who quit receiving their marginal products elsewhere their new employers then receive external benefits from their training in this paper training firms increase profits by offering apprenticeships which commit firms to high wages for those trainees retained on completion at these high wages only good workers are retained this signals their productivity and reduces the external benefits if they subsequently quit regulation of apprenticeship length a historically important feature enhances efficiency appropriate subsidies enhance it further

stealth trading which traders trades move stock prices usingaudit trail data for a sample of nyse firms we show that medium size trades are associated with a disproportionately large cumulative stock price change relative to their proportion of all trades and volume this result is consistent with the predictions of barclay and warner s 1993 stealth tradinghypothesis we find that the source of this disproportionately large cumulative price impact of medium size trades is trades initiated by institutions this result is robust to various sensitivity checks our findings appear to confirm street lore that institutions are informed traders 2001 elsevier science s a all rights reserved

the effects of health wealth and wages on labour supply and retirement behaviour this paper estimates a life cycle model of labour supply retirement and savings behaviour in which future health status and wages are uncertain individuals face a fixed cost of work and cannot borrow against future labour pension or social security income the method of simulated moments is used to match the life cycle profiles of labour force participation hours worked and assets that are estimated from the data to those that are generated by the model the model establishes that the tax structure of the social security system and pensions are key determinants of the high observed job exit rates at ages 62 and 65 removing the tax wedge embedded in the social security earnings test for individuals aged 65 and older would delay job exit by almost one year by contrast social security benefit levels health and borrowing constraints are less important determinants of job exit at older ages for example reducing social security benefits by 20 would cause workers to delay exit from the labour force by only three months

an evaluation of yts the youth training scheme yts is much the most significant public policy intervention in the uk training market since the 1964 industrial training act ita this paper presents an economic evaluation of yts we begin in part ii by outlining the history and mechanics of the scheme part iii describes the market failure or failures which yts addresses and part iv assesses how successful it has been in tackling these problems finally part v considers the scheme s future what further changes are needed to improve its effectiveness

income risk macroeconomic and demographic change and economic inequality in japan abstract using an olg model with heterogeneous households we investigate the relationship among income risk macroeconomic and demographic changes and economic inequality between 1980 and 2000 in japan by decomposing the primary factors in earnings and consumption inequality into macroeconomic variables and the demographic variable we find that our model replicates the evolution of economic inequality in japan by performing counterfactual simulations we demonstrate that two factors changes in time varying macroeconomic factors and the unexpected decline in the total factor productivity growth rate played important roles in the increase in earnings and consumption inequality in the 1990s

demographic change and bank profitability empirical evidence from german savings banks most european economies will experience significant demographic changes in the decades ahead due to low birth rates populations are shrinking and ageing at the same time this paper explores the impact of demographic change on the banking industry a unique data set which contains detailed information on almost 2 5 million accounts in 11 german savings banks allows us estimating the socio demographic determinants of retail profitability using a simulation model we are able to predict the development of bank profitability due to demographic shifts up to 2025 one of the main findings is that the effects of population ageing will partially offset the impact of shrinking customer bases while the decline in the size of the population reduces the customer base ageing per se increases profitability as older customers typically generate higher profits for their banks

the dynamics of price discovery for cross listed shares evidence from australia and new zealand abstract this paper studies the dynamics of price discovery for markets with bilateral cross listings using a sample of four australian stocks cross listed in new zealand and five new zealand stocks cross listed in australia for the period january 2002 to december 2007 we assess hasbrouck 1995 information shares and grammig et al 2005 conditional information shares over time we observe that in both cases the home market is dominant in terms of price discovery however when studying price discovery over time we find that the importance of the australian market the larger of the two markets is increasing for both australian and new zealand domiciled firms finally using panel regression analysis we find that the growth in the importance of the australian market is positively related to the growth in the size of the firm and negatively related to the size of the percentage spread in the australian market implying that as firms grow larger and their cost of trading in australia declines the australian market becomes more informative

aging pension reform and capital flows a multi country simulation model we present a quantitative analysis of the effects of population aging and pension reform on international capital markets first demographic change alters the time path of aggregate savings within each country second this process may be amplified when a pension reform shifts old age provision towards more pre funding third while the patterns of population aging are similar in most countries timing and initial conditions differ substantially hence to the extent that capital is internationally mobile population aging will induce capital flows between countries all three effects influence the rate of return to capital and interact with the demand for capital in production and with labor supply in order to quantify these effects we develop a computational general equilibrium model we feed this multi country overlapping generations model with detailed long term demographic projections for seven world regions our simulations indicate that capital flows from fast aging regions to the rest of the world will initially be substantial but that trends are reversed when households decumulate savings we also conclude that closed economy models of pension reform miss quantitatively important effects of international capital mobility this version 25 august 2004

population pensions and endogenous economic growth abstract we study the effect of a declining labor force on the incentives to engage in labor saving technical change and ask how this effect is influenced by institutional characteristics of the pension scheme when labor is scarcer it becomes more expensive and innovation investments that increase labor productivity are more profitable we incorporate this channel in a new dynamic general equilibrium model with endogenous economic growth and heterogeneous overlapping generations we calibrate the model for the us economy and obtain the following results first the effect of a decline in population growth on labor productivity growth is positive and quantitatively significant in our benchmark it is predicted to increase from an average annual growth rate of 1 74 over 1990 2000 to 2 41 in 2100 second institutional characteristics of the pension system matter both for the growth performance and for individual welfare third the assessment of pension reform proposals may depend on whether economic growth is endogenous or exogenous

consumption and risk sharing over the life cycle a striking feature of u s data on income and consumption is that inequality increases with age this paper asks if individual specific earnings risk can provide a coherent explanation we find that it can we construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes earnings inequality is exogenous and is calibrated to match data from the u s panel study on income dynamics consumption inequality is endogenous and matches well data from the u s consumer expenditure survey the total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years in welfare terms the latter is found to be more important than the former

intergenerational redistribution in the great recession in this paper we construct a stochastic overlapping generations general equilibrium model in which households are subject to aggregate shocks that aect both wages and asset prices we use a calibrated version of the model to quantify how the welfare costs of severe recessions are distributed across dierent household age groups the model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages asset price declines hurt the old who rely on asset sales to nance consumption but benet the young who purchase assets at depressed prices in our preferred calibration asset prices decline more than twice as much as wages consistent with the experience of the us economy in the great recession a model recession is approximately welfare neutral for households in the 20 29 age group but translates into a large welfare loss of around 10 percent of lifetime consumption for households aged 70 and over

the rate of return on everything 1870 2015 what is the aggregate real rate of return in the economy is it higher than the growth rate of the economy and if so by how much is there a tendency for returns to fall in the long run which particular assets have the highest long run returns we answer these questions on the basis of a new and comprehensive data set for all major asset classes including housing the annual data on total returns for equity housing bonds and bills cover 16 advanced economies from 1870 to 2015 and our new evidence reveals many new findings and puzzles

labour supply the roles of human capital and the extensive margin we specify and estimate a life cycle labour supply model that expands on earlier work by simultaneously including human capital accumulation saving and bequests an active extensive margin a realistic specification of the progressive tax structure and the social security system and an accounting for private pensions and health expenditures by incorporating all these features we develop new insights into how taxes affect life cycle labour supply for instance we find that labour supply elasticities vary in important ways with age education and the tax structure itself we also show how human capital affects elasticities differently on the intensive versus extensive margins

simulating fundamental tax reform in the united states this paper uses a new large scale dynamic life cycle simulation model to compare the welfare and macroeconomic effects of transitions to five fundamental alternatives to the u s federal income tax including a proportional consumption tax and a flat tax the model incorporates intragenerational heterogeneity and a detailed specification of alternative tax systems simulation results project significant long run increases in output for some reforms for other reforms namely those that seek to insulate the poor and initial older generations from adverse welfare changes long run output gains are modest

corrigendum on a life cycle model of female labour supply in the empirical work in our article on the intertemporal substitution of leisure time for married women heckman and macurdy 1980 we inadvertently constrained the estimated intertemporal substitution elasticity to be too high since this parameter plays a prominent role in discussions of equilibrium models of the business cycle and since our empirical work has been cited in discussions on this topic e g hall 1980 we would like to present a corrected set of empirical results for our model the period t utility function adopted in this note is in the notation of our original paper equation 15