from shadow to green linking environmental fiscal reforms and the informal economy in the past few decades many papers have analysed in some depth different environmental tax reforms and the double dividend hypothesis i e the possibility of improving not only the environment but also the economy through the reduction of distortions in the tax system recently more stress has been placed on testing empirically what effects a reduction in labour taxes may have on unemployment when accompanied by a carbon or other environmental tax however such studies have not modelled the effects of the presence of a shadow economy even though informal markets account for a significant and growing part of gdp in many developed economies this paper analyses this link using an applied general equilibrium model for the case of spain which has one of the highest unemployment rates in the world and one of the biggest informal economies of any wealthy country we conclude that our analysis strengthens the case for an environmental tax reform in spain if revenues from a co2 tax are recycled via a labour tax reduction

democracy volatility and economic development growth stability is an important objective because development requires sustained increases in income because volatility is costly for the poor and because volatility deters growth we study the determinants of average growth and its volatility as a two equation system and find that higher levels of democracy and diversification lower volatility whereas volatility itself reduces growth muslim countries instrument for democracy and measures of diversification identify volatility in contrast to the lack of consensus on the democracy growth relationship the democracy stability link is robust rather than focus on growth this paper forges an alternative link between democracy and development through the volatility channel

democracy and economic growth a meta analysis despite a sizeable theoretical and empirical literature no firm conclusions have been drawn regarding the impact of political democracy on economic growth this article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy growth literature it applies meta regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth using traditional meta analysis estimators the bootstrap and fixed and random effects meta regression models it derives several robust conclusions taking all the available published evidence together it concludes that democracy does not have a direct impact on economic growth however democracy has robust significant and positive indirect effects through higher human capital lower inflation lower political instability and higher levels of economic freedom democracies may also be associated with larger governments and less free international trade there also appear to be country and region specific democracy growth effects overall democracy s net effect on the economy does not seem to be detrimental

unemployment growth and taxation in industrial countries unemployeement and taxes do taxes affect the rate of umemployeement to the layman the upward trend in european unemployment is related to the slowdown of economic growth we argue that the layman s view is correct the increase in european unemployment and the slowdown in economic growth are related because they stem from a common cause an excessively rapid growth in the cost of labour in europe labour costs have gone up for many reasons but one is particularly easy to identify higher taxes on labour if wages are set by strong and decentralized trade unions an increase in labour taxes is shifted onto higher real wages this has two effects first it reduces labour demand and thus creates unemployment secondly as firms substitute capital for labour the marginal product of capital falls over long periods of time this in turn diminishes the incentive to invest and to grow the data strongly support this view according to our estimates the observed rise of 14 percentage points in labour tax rates between 1965 and 1995 in the eu could account for a rise in eu unemployment of roughly 4 percentage points a reduction of the investment share of output of about 3 percentage points and a growth slowdown of about 0 4 percentage points a year francesco daveri and guido tabellini

are contributions to public pension programmes a tax on employment many studies describe the potentially adverse impact on employment of the payroll costs of financing public pension programmes conventionally empirical studies treat contributions to public pension programmes as a pure tax in for example calculations of the tax wedge by oecd but this approach ignores any future rights to benefits that are perceived by contributors in fact public pension programmes contain both an actuarial and a redistributive component the former closer to saving the latter a tax the paper constructs indicators of the tax component of pension programmes both between and within generations across a range of oecd countries and time periods it uses these measures in a cross country panel analysis of the determinants of age and gender specific economic activity rates the results reveal robust evidence that when public pension programme contributions are broken down into a tax component and a savings component the tax component of the payroll contribution reduces economic activity rates among women while a higher retirement saving component has the opposite effect there is little evidence that average tax rates however constructed have any adverse impact on the economic activity rates of men richard disney

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

behavioral modes for a firm facing an uncertain supply or demand curve this paper contains a theoretical analys is of the behavior of a firmfacing a stochastic supply and demand curve certai n behavioral modes can be ranked under weaker conditions than in corresponding s tudies on stochastic demand for other comparisons the authors derive sufficien t conditions for one mode to dominate another earlier results indicate that a f irm which faces demand uncertainty prefers price variability to quantity variabi lity it is shown by a counter example that the price variability preference which is troublesome for proponents of temporary fixed price equilibrium models is a consequence of restrictive stochastic specification copyright 1987 by the editors of the scandinavian journal of economics

is incomes policy the answer to unemployment in western europe unemployment has remained obstinately high ever since 1975 what has prevented governments from reducing it the answer is simple if unemployment were reduced by normal methods inflation would rise it follows that the only way to cut the long run level of unemployment is to find some other way of controlling inflation no such device will be costless but if we could find any method that was less costly than unemployment we ought to adopt it maurice chevalier was asked in later life what he thought of old age it s not so bad he replied when you consider the alternative that was a true economist talking and it is also the spirit in which i shall approach the unhappy choices open to us my argument will proceed roughly as follows first imagine that a costless incomes policy is available then most people would probably agree that if inflation was too high a temporary incomes policy would be a good idea in order to get inflation down but what then when it was down we would still be left with far too high an unemployment rate only a permanent incomes policy can substantially reduce the non inflationary level of unemployment however against these benefits have to be set the costs of an incomes policy a conventional incomes policy which permanently suspended collective bargaining would be out of the question in a free society so we have to have an incomes policy that works by incentive rather than by regulation the best thing would be a tax on wage increases levied on employers and proportional to wage increases above a prescribed norm i shall spend some time discussing this tax using various different models of wage setting to explain how it would have its effect and finally i shall try producing a first draft of the operator s manual

democracy political risks and stock market performance this study examines the impacts of democracy and political risk on stock market using annualized panel data for 49 emerging markets for 2000 2012 we find evidence that democracy and political risk do have impact on stock market returns and the relationship between democracy and political risk is parabolic i e there is a threshold level of democracy after which political risk begins to decline also our results suggest that decreases in political risk lead to higher returns

social security incentives human capital investment and mobility of labor migration between countries with earnings related and flat rate pay as you go social security systems may change human capital investments in both countries the possibility of emigration boosts investments in human capital in the country with flat rate benefits correspondingly those expecting to migrate from the country with earnings related benefits to a country with flat rate benefits may reduce their investment in education allowing for migration may generate an intertemporal pareto improvement with cross border transfers and the contribution rates satisfying certain conditions however these conditions are not satisfied with those contribution rates that would arise if the governments maximize the welfare of their citizens without migration

portfolio choice in the presence of background risk in this paper we focus on how the presence of background risks from sources such as labour and entrepreneurial income influences portfolio allocations this interaction is explored in a theoretical model that is calibrated using cross sectional data from a variety of sources the model is shown to be consistent with some but not all aspects of cross sectional observations of portfolio holdings the paper also provides a survey of the extensive theoretical and empirical literature on portfolio choice

would you like to shrink the welfare state a survey of european citizens welfare state reform a survey of what europeans want the fundamental problems facing european welfare states high unemployment and unsustainable public pensions plans in particular have been in the political debate for years so why have we seen so little reform to find out we surveyed the opinions of citizens in france germany italy and spain on their welfare states and on various reform options this is what we found first most workers underestimate the costs of public pensions though they are aware of their unsustainability second the status quo is a majoritarian outcome a majority of citizens opposes cuts to social security and welfare spending but also opposes further increases since population ageing without reform implies an automatic expansion our results suggest that most citizens would favour reforms that stabilize but do not shrink the current welfare states third many would welcome changes in the allocation of benefits a large number of workers in italy and germany would be willing to opt out of public pensions and replace them with private pensions though the details of how this scheme is formulated matter for its popularity and many italians and spaniards would welcome an extension of the coverage of unemployment insurance fourth conflicts over the welfare state are mainly shaped by the economic situation of the respondent while political ideology plays a limited role disagreements are found along three dimensions young versus old rich versus poor and outsider versus insider in terms of labour market status from a practical point of view this suggests that there is scope to bundle reforms strategically in order to build a large and mixed coalition of supporters tito boeri axel borsch supan and guido tabellini

towards a dynamic schumpeterian welfare economics knowledge plays an increasingly important role in shaping the dynamics of an economy a static paretian welfare economics is therefore inadequate and needs to be supplemented by a dynamic schumpeterian welfare theory a dynamic welfare economics acknowledges the role of knowledge and communication as knowledge develops cumulatively in a social environment knowledge may not be readily diffused or exchanged different costs of communication need to be considered each affecting the creation of new knowledge recent developments in intellectual property right ipr law are evaluated to determine the extent to which they affect communication costs and thus future economic welfare

multiproduct technology and market structure a recent line of research has exposed some technological determinants of the structure of industries that produce more than one good the analyses of both multiproduct perfect competition and natural monopoly require a generalized notion of average cost and in addition several newly identified technological characteristics pertinent only to joint production this paper provides an overview of these new results and suggests a unifying framework in which the theory can be further developed

a positive theory of the earnings relationship of unemployment benefits in a wage bargaining model a stronger earnings relationship of unemployment benefits may reduce wages therefore the benefit structure significantly influences profits and trade union utility raising the question as to how the benefit structure is determined in the political process we consider a government that chooses the earnings relationship in order to maximize its political support our model predicts a strong earnings relationship under right wing governments and a weak relationship when unions are influential using panel data for 19 oecd countries we find support for these theoretical predictions moreover we show that the earnings relationship varies negatively with openness

life expectancy heterogeneity and the political support for collective annuities individuals differing in productivity and life expectancy vote over the size and type of a collective annuity its type is represented by the fraction of the contributive bismarckian component based on the worker s past earnings as opposed to the non contributive beveridgean part based on average contribution the equilibrium collective annuity is either a large mostly bismarckian program a smaller pure beveridgean one in accordance with empirical evidence or nil a larger correlation between longevity and productivity or a larger average life expectancy both make the equilibrium collective annuity program more beveridgean although at the expense of its size

political risk in emerging and developed markets using analyst estimates of political risk we show that political risk represents a more important determinant of stock returns in emerging than developed markets average returns in emerging markets experiencing decreased political risk exceed those of emerging markets experiencing increased political risk by approximately 11 per quarter in contrast the difference is only 2 5 per quarter for developed markets further the difference between the impact of political risk in emerging and developed markets is statistically significant we also document a global convergence in political risk over the last 10 years political risk has decreased in emerging markets and increased in developed markets if this trend continues the differential impact of political risk in emerging vs developed markets may narrow

capital flight and political risk abstract this paper provides the first serious attempt to examine the relationship between political risk and capital flight for a large set of developing countries the outcomes of the analysis show that in most cases political risk variables do have a statistically robust relationship to capital flight once domestic and international macroeconomic circumstances are added at least when the robustness test as proposed by sala i martin is applied we conclude that on the basis of the analysis in this paper we have found support for the hypothesis that political risk leads to increased capital flight

the internationalisation of public welfare policy with increasing globalisation of knowledge there are increased opportunities to learn from the experience of policy interventions elsewhere this paper presents evidence on the extent of international convergence in public policy with particular focus on labour welfare savings and retirement policy questions addressed in this framework include to what extent is policy diffusion or convergence a real and relevant phenomenon what role have economists played in the transfer of policy across national domains has policy transfer led to better public policy are there any practical limitations to policy convergence

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

what is a promise from the government worth quantifying political risk in state and personal pension schemes in the united kingdom there are three key types of political risk facing pension schemes those induced by demographic economic and pure political factors the state scheme in the united kingdom has been susceptible to all three types since 1980 with the result that the annual real internal rate of return on the second pillar state pension for the average male worker fell from 5 1 to 1 5 over 25 years the flat rate first pillar basic state pension has also experienced a fall in its irr of 3 percentage points as a result of the indexation basis changing from earnings to prices

the redistributive design of social security systems countries with low intragenerational redistribution in social security systems bismarckian are associated with larger public pension expenditures a smaller fraction of private pension and lower income inequality than countries with more redistributive social security beveridgean this article introduces a bidimensional voting model to account for these features agents different in age income and in their ability to invest in the capital market vote on the degree of redistribution of the social security system and on the size of the transfer in an economy with three income groups a small beveridgean system is supported by low income agents who gain from its redistributive feature and high income individuals who seek to minimise their tax contribution and to invest in a private scheme middle income individuals instead favour a large bismarckian system

labour hoarding price rigidity and the theory of imperfect competition under uncertain demand it is shown that a monopolistic firm under uncertainty may be inclined to keep some of its output unsold when demand is low this gives rise to changes in conventional results under uncertainty a risk neutral monopolistic firm produces more than in a deterministic environment and it refuses to sell its total output when demand is low because the marginal revenue could become negative or lower than the cost of selling the product moreover in this framework prices are shown to be more rigid downwards than upwards the model also provides a new explanation for labour hoarding jel classification d24 d42

optimal monetary policy in economies with dual labor markets abstract we present a dynamic stochastic general equilibrium dsge new keynesian model with indivisible labor and a dual labor market a walrasian one where wages are fully flexible and a unionized one characterized by real wage rigidity we show that the negative effect of a productivity shock on inflation and the positive effect of a cost push shock are crucially determined by the proportion of firms that belong to the unionized sector the larger this number the larger are these effects consequently the larger the union coverage the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost push shocks the optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases

the impact of employment tax cuts on unemployment and wages the role of unemployment benefits and tax structure abstract i model and simulate the effects of employment tax cuts on unemployment and wages in four equilibrium models competitive union bargaining search and efficiency wages i find that if the ratio of unemployment compensation to wages is fixed the effect of the tax cut is mainly on wages but if income out of work is fixed in real terms there are substantial employment effects when wages are determined by bargaining revenueneutral reforms that make the tax more progressive also reduce unemployment thus policy towards unemployment compensation and tax structure are key influences on the effect of taxes on unemployment

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

oil price shocks and chinese banking performance do country risks matter abstract this paper contributes to the existing literature by investigating the impacts of oil prices on bank performance through a broad array of camel capital adequacy asset quality management earnings and liquidity indicators in china over the period 2000 2014 to gain further insights into this issue we also discuss whether the correlations change with different dimensions of country risk i e economic financial and political which extant studies ignored the results reveal that oil prices have a significant impact on banking performance as their increase triggers a reduction in banking performance in terms of capitalization management efficiency earning power and liquidity however these adverse effects are mitigated by country stability especially economic stability and political stability these results are important for policy makers who should be cautious when formulating a strategy for macroeconomic stability from the managerial perspective bank managers should consider establishing early warning and response mechanisms on the back of oil price shocks in order to operate under better performance

employment insurance and competitive equilibrium labor contracts it is now recognized that risk trading between risk neutral firms and riskaverse workers the central theme of implicit contract theory azariadis 1975 baily 1974 and gordon 1974 is sufficient but not necessary to rationalize wage rigidity but is absolutely inconsequential in explaining layoffs rather it is solely the existence of non trivial value of leisure and or outside unemployment compensation that causes workers to prefer the layoff contract over the full employment alternative e g akerlof and miyazaki 1980 pissarides 1981 thus while risk trading per se leads to a contractual labour market the added assumption of differential risk attitudes between riskneutral firms and risk averse workers plays a negligible role in rationalizing the joint phenomena of wage rigidity and layoffs in this paper it is argued that the strong assumption that all firms are risk neutral should be abandoned2 for the following reasons first it can be shown to be neither necessary nor even sufficient for the existence and efficiency of the fixed wage variable employment i e wage rigidity cumlayoff contract second short of perfect negative correlation between profits of different firms which rules out macroeconomic risks shareholders generally cannot diversify away all risks third the presence of transactions costs or inherent differences in information between economic agents suggests that shareholders would differ in their ability to diversify away their risks finally it is not even clear whether shareholders preferences should be of concern the property rights definition of the firm e g fama 1980 indicates that shareholder ownership should be separated from management control thus making managerial preferences the focus of attention for all these reasons we find it necessary in this paper to extend the implicit contract model to accommodate firms with varying degrees of risk aversion in particular we shall demonstrate the properties of the equilibrium contract structure when risk neutral and risk averse firms coexist furthermore we also analyse the interesting question of how increasing uncertainty will affect the various equilibrium contracts the interest of this exercise is due to the fact that existing works that do consider risk averse firms e g akerlof and miyazaki 1980 and grossman and hart 1981 have not proceeded further than the well known observation that replacing risk neutral firms with risk averse firms simply implies that in equilibrium a variable wage across states of nature contract would replace the fixed wage contract but at the same time coexistence of both classes of contracts is commonly observed in any economy hence it is essential to consider a model capable of explaining such a phenomenon

compiling the actuarial balance for pay as you go pension systems is it better to use the hidden asset or the contribution asset the aim of this article is twofold to establish the connection between the contribution asset ca and the hidden asset ha and to determine whether using either of them to compile the actuarial balance ab sheet in the pay as you go payg pension system will provide a reliable solvency indicator with these aims in mind we develop a model based on those first put forward by settergren and mikula 2005 and boado penas et al 2008 to obtain the analytical properties of the ca and to confirm its soundness as a measure of the assets of a payg scheme our model also enables us to explore whether and to what extent the ha can be considered a second alternative measure of the assets for payg schemes the main theoretical finding is that despite their very different natures the ha and the ca may nearly coincide at the limit when the interest rate of the financial market approaches the growth of the covered wage bill from above but the ha supplies a solvency indicator which is not always consiste

a rational economic model of paygo tax rates abstract we argue that paygo rates are determined by a representative agent and a benevolent government jointly maximizing the expected life time utility of the agent the distributions of labor and capital income are calculated from national data on real gdp real wages and the real return to capital since 1950 with uniform risk aversion predicted rates explain 83 of the variance of observed rates the globalization of capital markets would lead to convergence of paygo rates our results are immune to crises like 2008

information as a substitute for inventories abstract in recent years the ratio of inventories to sales in north american manufacturing has fallen without the offsetting increases in unfilled orders or price variation that are predicted by some theoretical models the explanation offered here is that in the face of falling relative costs of communications firms will substitute information for inventories thereby allowing their production systems to absorb a greater part of demand shocks the implicit hypothesis that the demands for communications and inventories are therefore determined simultaneously is tested with data on canadian inventories and on telecommunications between canada and europe and is not rejected

dumping at less than marginal cost abstract the traditional analysis of dumping in an export market treats the term merely as a synonym for price discrimination in an international context crucially it does not predict that goods will be sold overseas at price less than marginal cost this paper explores the possibility that dumping can occur in the more obvious lay sense of selling at less than marginal cost it suggests three reasons why this may occur in circumstances of uncertainty pursuance of managerial goals and strategic entry deterrence in the first of these the traditional prediction of reduced surplus for domestic consumers is no longer assured

communication and inventory as substitutes in organizing production a major organizational design decision for manufacturing firms is the extent to which production should be to stock versus to order inventories and communication with customers are substitutes we show that profits are convex in the share of the market supplied from inventory thus firms will tend to specialize in one mode of organization we examine how this choice depends on market size the level and variability of demand the costs of communication price levels production costs and the costs of expanding product lines the results are consistent with observed patterns in several industries

the relationship between waste paper and other inputs in the swedish paper industry a number of life cycle assessment studies havecompared the environmental impacts of materialrecycling and incineration of waste paper theyhave shown that in most cases a recyclingscenario results in lower total energy use butgreater use of fossil fuels if waste paper andfossil fuels are complements parts of theenvironmental argument for recycling isabolished this paper estimates a cost functionfor the swedish paper industry if the costshares are co integrated an error correctionmodel will be used to model the dynamics short and long run elasticities are thencalculated to address the relationship betweenwaste paper and the other inputs capital labor purchased pulp fiber fossil fuels andelectricity contrary to the life cycleassessment studies the results show that wastepaper and fossil fuels are substitutes andthat waste paper and electricity arecomplements

employment effects of payroll taxes an empirical test for germany this study tests to what degree the incidence of payroll taxes in germany is on employment and whether in consequence payroll taxes in particular social insurance contributions are the culprit behind the growing unemployment problem using industry level data for 18 years 1977 1994 a system of five dynamic factor demand equations is estimated various simulations indicate that the employment effects of payroll taxes are minimal

reforming our pension system is it a demographic financial or political problem we argue that economic and demographic factors play a relatively small role in the old age crisis political factors are far more important a benevolent social planner can address the problems raised by population ageing and declining productivity growth however in reality social security systems are established and reformed through the political process majority voting and lobbying consequently the outcome is likely not to be socially optimal majority voting typically results in overspending on social security but also in rapidly phasing it out in case of unexpected shocks then the entrenched interests of retirees that oppose drastic cuts in benefits can be socially desirable

cyclical dumping and correlated business cycles in imperfect markets empirical applications to the canadian pulp and paper industry this paper deals with theoretical and empirical aspects of firm behaviour under imperfect competition and uncertainty it contains an analysis of the behaviour of a firm facing a stochastic demand

do political factors affect stock returns during presidential elections abstract this study investigates whether or not political factors such as government policy and political connections affected stock returns during the 2008 taiwanese presidential election we find that firms that benefitted from were threatened by the proposed three links policy of the winning party experienced positive negative stock returns during the election we use the sensitivities of firms returns to bilateral trade flows between taiwan and china to measure the government policy effect our results show that the effects of political connections weakly exist but they become more significant when the support ratio of the winning party increased in polling data we also find that only the government policy effect holds for different crash risk and corporate governance levels finally investment strategies based on both political factors can generate positive abnormal returns with respect to the fama french three factor model

credit rationing as a temporary suboptimal equilibrium with imperfect information abstract jaffee and russell 1976 characterized partial rationing as a contract rate and contract size below those of the no rationing equilibrium their non price rationing here obtains as a suboptimal equilibrium for a risk averse rate setting intermediary with marginal increasing cost and a monopolistically competitive loan demand the temporary dis equilibrium corresponds to a dominated strategy and the wider class of models of which j r s solution is but a singular case is touched upon

optimal redistributive taxation in a search equilibrium model this paper characterizes optimal non linear income taxation in an economy with a continuum of unobservable productivity levels and endogenous involuntary unemployment due to frictions in the labour markets redistributive taxation distorts labour demand and wages compared to their efficient values gross wages unemployment and participation are lower average tax rates are increasing marginal tax rates are positive even at the top finally numerical simulations suggest that redistribution is much more important in our setting than in a comparable mirrlees type setting

lessons for an aging society the political sustainability of social security systems what is the future of social systems in oecd countries in our view the answer belongs to the realm of politics we evaluate how political constraints shape the social security system in six countries france germany italy spain the uk and the us under population aging two main aspects of the aging process are relevant to the analysis first the increase in the dependency ratio the ratio of retirees of workers reduces the average profitability of the unfunded social security system thereby inducing the agents to reduce the size of the system by substituting their claims towards future pensions with more private savings second an aging electorate leads to larger systems since it increases the relevance of pension spending on the policy makers agenda the overall assessment from our simulations is that the political aspect dominates in all countries albeit with some differences spain the fastest aging country faces the largest increase in the social security contribution rate when labor market considerations are introduced the political effect still dominates but it is less sizeable country specific characteristics not accounted for in our simulations such as the degree of redistribution in the pension system and the existence of family ties in the society may also matter our simulations deliver a strong policy implication an increase in the effective retirement age always decreases the size of the system chosen by the voters while often increasing its generosity finally delegation of pension policy to the ec may reduce political accountability and hence help to reform the systems

how democracy affects growth abstract this paper introduces a new methodology to examine the empirical relationship between democracy and economic growth democratic institutions are assumed to affect growth through a series of channels we specify and estimate a full system of equations determining growth and the channel variables results suggest that democracy fosters growth by improving the accumulation of human capital and less robustly by lowering income inequality on the other hand democracy hinders growth by reducing the rate of physical capital accumulation and less robustly by raising the ratio of government consumption to gdp once all of these indirect effects are accounted for the overall effect of democracy on economic growth is moderately negative our results indicate that democratic institutions are responsive to the demands of the poor by expanding access to education and lowering income inequality but do so at the expense of physical capital accumulation

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

implicit contracts with heterogeneous labor the formation of implicit contracts in labor markets with heterogeneous employees is studied if layoffs occur the firm finds it optimal to offer differing contracts to differing employees with employees who place a higher priority on leisure accepting contracts with higher layoff probabilities the firm can do so without violating the constraint that employees voluntarily sort themselves into these contracts under plausible assumptions the contracts match the empirical observation that relatively low wage rates and high unemployment probabilities tend to be correlated finally an average or composite wage rate varies over states of nature calling into question the ability of implicit contracts models to account for the constant representative wage rate often found in macroeconomic models

corruption and democracy abstract most models and empirical tests of the relationship between corruption and democracy assume corruption falls as democracy matures yet recent theoretical developments and case evidence suggest an inverted u relationship between the two although so far no one has tested for this relationship by drawing on a panel data set covering a large number of countries between 1982 1997 substantial empirical support is found for an inverted u relationship between the durability age of democracy and corruption fortunately the turning point in corruption occurs rather early in the life of new democracies between 10 12 years

effect of qatar diplomatic and economic isolation on qatar stock market volatility an event study approach in this study we assess the impact of the political and economic blockade of qatar as well as four other events related to the blockade on qatar s stock market volatility one of these events occu

postponing retirement the political effect of aging abstract conventional economic wisdom suggests that because of the aging process social security systems will have to be retrenched in particular retirement age will have to be largely increased yet is this policy measure feasible in oecd countries since the answer belongs mainly to the realm of politics i evaluate the political feasibility of postponing retirement under aging in france italy the uk and the us simulations for the year 2050 steady state demographic economic and political scenario suggest that retirement age will be postponed in all countries while the social security contribution rate will rise in all countries but italy the political support for increasing the retirement age stems mainly from the negative income effect induced by aging which reduces the profitability of the existing social security system and thus the individuals net social security wealth

endogenous information acquisition in supply chain management in this paper we analyze an endogenous determination of efforts put into information acquisition and its impact on supply chain management more specifically we consider a supplier who sells a product to a buyer during a single selling season prior to placing an order with the supplier the buyer has an option to acquire additional information about the demand by hiring experts who are capable of providing forecasts because a commission fee must be paid to each hired expert there exists a tradeoff between the cost and the value of the information and the buyer needs to determine how much information to acquire we derive the optimal information acquisition level in an integrated setting and compare it with that determined in a decentralized setting we also analyze several types of supply contracts to examine if they can coordinate the supply chain and allow an arbitrary division of system profit between the supplier and the buyer

the effects of pensions on household wealth a reevaluation of theory and evidence this paper examines the extent to which households offset pension wealth with reductions in other wealth systematic econometric biases imply that the estimated offsets in previous empirical studies are smaller than the true offset and may even have the wrong sign new empirical estimates that do not correct for the biases generate little offset between pensions and other wealth estimates that correct for the biases show substantially more offset a smaller impact of pensions on overall saving than in most previous studies the estimates also indicate that the effects of pensions on wealth vary significantly across households

social security and households saving this paper provides new evidence on the substitutability between private and pension wealth by exploiting the italian pension reform of 1992 we use a difference in difference estimator that exploits the differential effects of the reform on individuals belonging to several yea of birth cohorts and different occupational groups we find convincing evidence that saving rates increase as a result of a reduction in pension wealth by allowing for the possibility that substitutability changes with age we find that substitutability is particularly high and precisely estimated for workers between 35 and 45

declining public pensions in an era of demographic ageing will private provision fill the gap abstract demographic crisis and imprudent commitments have induced a crisis in public pension programmes in oecd countries will present and prospective cutbacks lead to greater private saving either in the form of private pension provision or in other forms of saving the paper surveys existing evidence and provides new results on three questions do individuals substitute private for public provision of savings when public pension programmes are cut back voluntarily do individuals respond to incentives to join sponsored or tax subsidised arrangements if encouraged by the government and if individuals are prepared to make such arrangements and where saving is voluntary do they save enough to replace previous prospective public pension flows

risk pooling and intermediate trading agents this paper argues that intermediate trading agents itas besides providing services like the service of availability and information economizing activity serve another important role which is to provide producing firms with a vehicle to shift forward their retailing risks of unsold products the gains from trade from intermediation as risk bearers need not beg arbitrary assumptions that itas compared to firms must have better information regarding consumer demands or less costly retailing technologies neither does it necessarily rely on the assumption that itas are inherently less risk averse rather risk pooling via product diversification by itas under plausible conditions is sufficient to provide the profit incentive for intermediation for such insurance service producing firms pay risk premia embedded in price discounts which increase or decrease with bulk orders of itas depending on whether firms have increasing or decreasing returns to scale production technologies respectively la mise en commun des risques et les intermediaires commerciaux ce memoire sugg re que les interm6diaires commerciaux en plus de produire des services de disponibilite et une activite qui reduit les coats de l information peuvent aussi constituer un moyen pour les entreprises productrices de transferer les risques de produits invendus vers leur client le ou leurs agents pour que les intermediaires commerciaux jouent ce role et que des gains soient engendr6s par cette activite d interm6diation il n est pas n6cessaire de postuler que les intermediaires ont des renseignements plus clairs quant a la demande des consommateurs ou qu ils ont acc s a des technologies de mise en march6 moins cofiteuses ou que ces intermediaires ont moins de repugnance pour le risque il suffit que les intermediaires puissent esperer faire des profits par ces operations d intermediation en mettant en commun certains risques par une diversification de leurs activit6s pour obtenir cette sorte de service d assurance les entreprises productrices vont etre pretes h consentir des escomptes de prix qui vont croitre ou d6croitre a proportion que les commandes des intermediaires commerciaux prennent des dimensions plus importantes selon que les entreprises productrices ont des technologies dont les rendements h l echelle sont croissants ou decroissants the author is grateful to joel fried and john palmer for useful comments and discussions many thanks are also due to keizo nagatani and the anonymous referees for helpful suggestions to improve on an earlier version canadian journal of economics revue canadienne d economique xiv no 2 may mai 1981 printed in canada imprime au canada 0008 4085 81 0000 0261 01 50 1981 canadian economics association this content downloaded from 157 55 39 208 on fri 29 jul 2016 04 21 50 utc all use subject to http about jstor org terms

democracy foreign direct investment and natural resources abstract empirical studies that examine the impact of democracy on foreign direct investment fdi assume that the relationship between democracy and fdi is the same for resource exporting and non resource exporting countries this paper examines whether natural resources in host countries alter this relationship we estimate a linear dynamic panel data model using data from 112 developing countries over the period 1982 2007 we find that democracy promotes fdi if and only if the value of the share of minerals and oil in total exports is less than some critical value we identify 90 countries where an expansion of democracy may enhance fdi and 22 countries where an increase in democratization may reduce fdi we also find that the effect of democracy on fdi depends on the size and not the type of natural resources

how much is transfer and how much is insurance in a pay as you go system the german case pay as you go pension systems provide insurance against longevity related old age poverty and related risks they are commonly also used as instruments for redistribution this paper provides several estimates of the insurance and transfer share of the german public pension system estimating these shares is important because they are indicative of taxation related deadweight losses and influence public acceptance of the pension system we also disentangle intragenerational from intergenerational transfers although our estimate of intragenerational transfers is smaller than recent semi official estimations such transfers create substantial deadweight losses intergenerational transfers are much larger thereby contributing to strong negative participation incentives for the younger generation jel classification h55 j26

cash flow management and manufacturing firm financial performance a longitudinal perspective abstract a firm s cash flow policies which manage working capital in the form of cash receivables from customers inventory holdings and cash payments to suppliers are inexorably linked to the firm s operations building on earlier research this study i extends prior studies by examining the relationships between changes in cash flow measures and changes in firm financial performance using a longitudinal sample of firm data and ii investigates the direction of the relationship between quarterly changes in cash flow positions and firm financial performance this study is conducted using the generalized estimating equations gee methodology to analyze a longitudinal sample of eight quarters of cash flow and financial performance data from 1233 manufacturing firms the analyses find that changes in the widely used cash conversion cycle ccc metric do not relate to changes in firm performance however changes in the less used operating cash cycle occ metric are found to be significantly associated with changes in tobin s q this examination of how changes in specific cash flow measures relate to changes in tobin s q shows that both reductions in accounts receivables measured as days of sales outstanding dso and reductions in inventory measured as days of inventory outstanding dio relate to firm financial performance improvements that persist for several quarters endogeneity tests of whether a firm s cash flow management strategy leads to changes in firm performance or if the cash flow strategy is a byproduct of firm performance suggest that reductions in dso lead to improved firm financial performance

the gains from pension reform we classify social security pension systems in three dimensions actuarial versus non actuarial funded versus unfunded and defined benefit versus defined contribution systems recent pension reforms are discussed in terms of these dimensions shifting to a more actuarial system reduces labor market distortions although limiting the scope for redistribution shifting to a funded system may increase saving redistribute income to future generations and distort contermporary labor supply a partial shift to a funded system helps individuals diversify their pension assets a shift from a defined benefit to a defined contribution system means that income risk will be shifted from workers to pensioners

immigration to the land of redistribution negative perceptions about migrants in europe are driven by concerns that foreigners abuse welfare paradoxically instruments of social inclusion are becoming weapons of mass exclusion we compare evidence on welfare access and the net fiscal position of migrants with perceptions based on a largely unexploited database eu silc we find no evidence that legal migrants notably skilled migrants are net recipients of transfers from the state however there is evidence of residual dependency on non contributory transfers and self selection of unskilled migrants in the countries with the most generous welfare states alternative strategies to unbundle migration from welfare access are discussed

information and competitive advantage the rise of general motors during the mid 1920s alfred p sloan instituted a number of innovations designed to provide the operating divisions at general motors with more accurate and more timely information regarding final consumer demand these innovations have not received much attention in attempts to explain general motors remarkable rise to dominance of the u s domestic automobile industry the present article reviews these events and provides statistical tests affirming the success of these innovations at the same time as general motors increases in profitability and market share

a model of the natural rate of unemployment since the publication of edmund phelps volume the new macroeconomics has treated the labor market as a dynamic process of rational search by unemployed workers for available vacancies wages are viewed as at least potentially flexible though free contracting between workers and firms may lead to fixed wages in the short run imperfect information is a crucial element of the theory for it implies both a need for contracting and a need for rational search rather than simple market clearing in each period a positive rate of frictional unemployment may exist in equilibrium denoted as the natural rate this unemployment is due to the frictions in the search process and imperfections in information rather than to any deficiency in aggregate demand milton friedman defined the natural rate as the level that would be ground out by the walrasian system of general equilibrium equations provided there is embedded in them the actual structural characteristics of the labor and commodity markets including market imperfections stochastic variability in demands and supplies the cost of gathering information about job vacancies and labor availabilities the costs of mobility and so on p 8 this paper reexamines the micro foundations of the natural rate in a model of labor market equilibrium in which turnover flows and imperfect information are explicitly considered workers may quit their current jobs to enter the unemployment pool in order to search among available vacancies for a more preferred position firms economize on turnover by an appropriate wage policy

factor proportions and relative wages the supply side determinants of wage inequality supply side factors may contribute to rising wage inequality first certain changes in the supply of skills allegedly exacerbate wage inequality women s increased labor force participation and increased immigration are the leading candidates both allegedly reduce the wages of less skilled men however immigration s impact on wage inequality has been minor and the effects of women s participation is inconclusive second in evaluating the likelihood that human capital investment will mitigate future inequality evidence suggests that rising returns to education have increased the proportion of young people attending college limiting the growth of inequality among high wage workers

alleviating unemployment the case for green tax reforms abstract it has been argued recently that imposing taxes on pollution produces additional tax revenues which can be used to replace labour taxes and thus reap a double dividend in the form of improving environmental quality and alleviating unemployment this paper analyses the employment effects of revenue neutral green tax reforms by focusing on the revenue recycling effect our model contains three features which are important when looking at the employment effects of green tax reforms first there is unemployment in equilibrium second wages are determined endogenously third various institutional arrangements for taxing unemployment benefits for the price indexation of unemployment benefits and the personal tax exemption are considered it is shown that these institutional arrangements are crucial for the effectiveness of green tax reforms a revenue neutral green tax reform will boost employment if unemployment benefits are nominally fixed and taxed at a lower rate than labour income employment actually falls if unemployment benefits are price indexed and taxed at the same rate a revenue neutral green tax reform which increases the personal tax credit will never increase employment

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1