convergence to efficiency in a simple market with incomplete information a model of trade with m buyers and m sellers is considered in which price is set to equate revealed demand and supply in a bayesian nash equilibrium each trader acts not as a price taker but instead misrepresents his true demand supply to influence price in his favor this causes inefficiency we show that in any equilibrium the amount by which a trader misreports is o 1 m and the corresponding inefficiency is o 1 m2 the indeterminacy and the inefficiency that is caused by the traders bargaining behavior in small markets thus rapidly vanishes as the market increases in size

the determinants of growth the growth theories of the 1950s and 1960s emphasized capital accumulation and technical progress as explanations of growth more recently theoretical attention has focused on the understanding of progress in terms of learning human capital in the tradition of k arrow and investment in research following h uzawa these newer developments have made some but only limited progress the experience of developing countries suggests that the agenda should be broadened to include the efficiency of factor use infrastructure broadly interpreted and sectoral allocation these aspects together with the kaldorian concern for dynamic increasing returns provide substantial promise for future research copyright 1991 by royal economic society

was the new deal contractionary can government policies that increase the monopoly power of firms and the militancy of unions increase output this paper shows that the answer is yes under certain emergency conditions these emergency conditions zero interest rates and deflation were satisfied during the great depression in the united states the new deal which facilitated monopolies and union militancy was therefore expansionary in the model presented this conclusion is contrary to a large previous literature the main reason for this divergence is that this paper incorporates rigid prices and the zero bound on the short term interest rate jel e23 e32 e52 e62 j51 n12 n42

rationing rules and european central bank auctions abstract theoretical analyses of multi unit auctions tend to side step the importance of rationing rules by assuming strictly decreasing aggregate demand however under european central bank rules bidders are allowed to submit no more than ten price quantity pairs so even if the underlying demand is strictly decreasing it is likely that several bidders may submit a market clearing bid if at the market clearing bid excess demand exists it is necessary to ration how much each bidder receives the effect on bidding behavior and equilibrium revenues under two distinct rationing rules is explored in this paper

how successful was the new deal the microeconomic impact of new deal spending and lending policies in the 1930s the new deal during the 1930s was arguably the largest peace time expansion in federal government activity in american history until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of new deal programs over the past decade scholars have developed new panel databases for counties cities and states and then used panel data methods on them to examine the impact of new deal spending and lending policies for the major new deal programs in most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy many of the studies also use instrumental variable methods to control for endogeneity the studies find that public works and relief spending had state income multipliers of around one increased consumption activity attracted internal migration reduced crime rates and lowered several types of mortality the farm programs typically aided large farm owners but eliminated opportunities for share croppers tenants and farm workers the home owners loan corporation s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers the reconstruction finance corporation s loans to banks and railroads appear to have had little positive impact although the banks were aided when the rfc took ownership stakes

tax cuts for whom heterogeneous effects of income tax changes on growth and employment this paper investigates how tax changes for different income groups affect aggregate economic activity i construct a measure of who received or paid for tax changes in the postwar period using t

auctions with a stochastic number of bidders abstract auction theory is generalized by allowing the number of bidders to be stochastic in a first price sealed bid auction with bidders having constant absolute risk aversion the expected selling price is higher when the bidders do not know how many other bidders there are than when they do know this thus the seller should conceal the number of bidders if he can moreover a bidder s ex ante expected utility is the same whether or not there is a policy of concealing the number of bidders concealment therefore pareto dominates announcement with risk neutral bidders the optimal auction is the same whether or not the bidders know who their competitors are

consumer response to tax rebates many households received income tax rebates in 2001 of 300 or 600 these rebates represented advance payments of the tax cut from the new 10 percent tax bracket based on a survey of a representative sample of households this paper finds that only 22 percent of households receiving the rebate would spent it instead they would either save it or use it to pay off debt this very low rate of spending represents a striking break with past behavior which would have suggested a much higher rate of spending the low spending rate implies that the tax rebate provided a very limited stimulus to aggregate demand this abstract was borrowed from another version of this item

avoiding default the role of credit in the consumption collapse of 1930 high consumer indebtedness threatens future consumption spending if default is expensive consumer spending collapsed in 1930 turning a minor recession into the great depression households were shouldering an unprecedented burden of installment debt down payments were large contracts were short equity in durable goods was therefore acquired quickly missed installment payments triggered repossession reducing consumer wealth in 1930 because households lost all acquired equity cutting consumption was the only viable strategy in 1930 for avoiding default institutional changes lowered the cost of default by 1938 when recession began again indebted households chose to default rather than reduce consumption

fiscal policy and economic recovery the case of the 1936 veterans bonus conventional wisdom has it that in the 1930s scal policy did not work because it was not tried this paper shows that scal policy though inadvertent was tried in 1936 and a variety of evidence suggests that it worked a decit nanced veterans bonus provided 3 2 million world war i veterans with cash and bond payments totaling 2 percent of gdp the typical veteran received a payment equal to annual per capita personal income this paper uses time series and cross sectional data to identify the eects of the bonus i exploit four sources of quantitative evidence a detailed household consumption survey cross state and cross city regressions aggregate time series and a previously unused american legion survey of veterans the evidence paints a consistent picture in which veterans quickly spent the majority of their bonus spending was concentrated on cars and housing in particular narrative accounts support these quantitative results a simple calculation suggests that the bonus added 2 5 to 3 percentage points to 1936 gdp growth

consumer spending and the economic stimulus payments of 2008 abstract we measure the change in household spending caused by receipt of the economic stimulus payments of 2008 using questions added to the consumer expenditure survey and variation from the ran

multi unit pay your bid auctions with variable awards abstract multi unit auctions in which bidders can win a variable number of units differ significantly from multi unit auctions in which bidders can only win one unit in an independent private values pay your bid auction where bidders may win up to two units we show that first order conditions imply separating and pooling of bids must both occur with positive probability this behavior is not found in multi unit uniform price auctions it also contrasts with asymmetric first price auctions of a single good whose first order conditions are superficially similar a uniform distribution example is analyzed numerically journal of economic literature classification numbers d44 d82 c72

the relevance of a choice of auction format in a competitive environment we examine the relevance of an auction format in a competitive environment by comparing uniform and discriminatory price auctions with many bidders in a private values setting we show that if the number of objects for sale is small relative to the number of bidders then all equilibria of both auctions are approximately efficient and lead to approximately the same revenue when the number of objects for sale is proportional to the number of bidders then the particulars of the auction format matter all equilibria of the uniform auction are efficient while all of the equilibria of the discriminatory auction are inefficient the relative revenue rankings of the auction formats can go in either direction depending on the specifics of the environment these conclusions regarding the efficiency and revenue ranking are in contrast to the previous literature which focused on the case of independent information across agents

household expenditure and the income tax rebates of 2001 using questions expressly added to the consumer expenditure survey we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis we exploit the unique randomized timing of rebate receipt across households households spent 20 to 40 percent of their rebates on nondurable goods during the three month period in which their rebates arrived and roughly two thirds of their rebates cumulatively during this period and the subsequent three month period the implied effects on aggregate consumption demand are substantial consistent with liquidity constraints responses are larger for households with low liquid wealth or low income

great expectations and the end of the depression what ended the great depression in the united states this paper suggests that the recovery was driven by a shift in expectations this shift was triggered by president franklin delano roosevelt s fdr policy actions on the monetary policy side roosevelt abolished the gold standard and announced an explicit policy objective of inflating the price level to pre depression levels on the fiscal policy side roosevelt expanded real and deficit spending which helped make his policy objective credible the key to the recovery was the successful management of expecta tions about future policy roosevelt s rise to power is modeled as a policy regime change as in thomas sargent 1983 and peter temin and barry wigmore 1990 this paper formalizes temin and wigmore s argu ment in a repeated game setting using a dynamic stochastic general equilibrium dsge model and argues that the regime change can account for the recovery in the model a regime change means the elimination of certain policy dogmas that constrain the actions of the government the regime change generates an endogenous shift in expectations due to a coordination of mon etary and fiscal policy this coordination ended the great depression by engineering a shift in expectations from contractionary i e the private sector expected future economic contrac tion and deflation to expansionary i e the public expected future economic expansion and inflation the expectation of higher future inflation lowered real interest rates thus stimulating demand while the expectation of higher future income stimulated demand by raising permanent income

did the 2008 tax rebates stimulate spending in an effort to bolster economic performance in light of a looming downturn in economic activity on february 13 2008 president george w bush signed the economic stimulus act of 2008 more than two thirds of the 152 billion bill consisted of economic stimulus payments to be sent beginning in may to approximately 130 million households to qualify recipients had to have a valid social security number an income tax liability or at least 3 000 of qualifying income that included earned income and some benefits from social security veterans affairs or railroad retirement and have filed a 2007 federal tax return for the most part those who filed as single individuals received between 300 and 600 while those who filed jointly received between 600 and 1 200 additionally parents with children under 17 who were eligible for a child tax credit and had a social security number received an extra 300 per child the tax rebate phased out at higher levels of income as the payment was reduced by 5 percent of the amount of adjusted gross income over 75 000 for singles or over 150 000 for married couples the treasury remitted payments either by direct deposit mainly in the first half of may or by mail mainly from mid may through mid july the effect of these stimulus payments depends on how much was spent this paper reports new survey evidence on the propensity of consumers to spend the 2008 rebate it also relates the survey evidence to aggregate data and to evidence about spending from the 2001 tax rebate

aggregate inventory behavior in large european economies abstract inventory fluctuations are known to be an important propagation mechanism for u s business cycles this paper compares the significance of inventory fluctuations in the u s with four other major industrial economies in europe a general model of aggregate inventory demand is specified which seeks to encompass the models presented in recent studies of inventory behavior this model is estimated for the large european economies united kingdom west germany france and italy the preferred models that result from this analysis are compared with the empirical evidence for the u s

from great depression to great credit crisis similarities differences and lessons the great depression of the 1930s and the great credit crisis of the 2000s had similar causes but elicited strikingly different policy responses while it remains too early to assess the effectiveness of current policy it is possible to analyse monetary and fiscal responses in the 1930s as a natural experiment or counterfactual capable of shedding light on the impact of current policies we employ vector autoregressions instrumental variables and qualitative evidence for 27 countries in the period 1925 39 the results suggest that monetary and fiscal stimulus was effective that where it did not make a difference it was not tried they shed light on the debate over fiscal multipliers in episodes of financial crisis they are consistent with multipliers at the higher end of those estimated in the recent literature and with the argument that the impact of fiscal stimulus will be greater when banking systems are dysfunctional and monetary policy is constrained by the zero bound miguel almunia agustin benetrix barry eichengreen kevin h o rourke and gisela rua

unemployment inflation and wages in the american depression are there lessons for europe in this paper we consider whether there are lessons to be drawn from the experience of the american economy during the 1930 s for the current european situation the comparison reveals some important differences in particular the persistence of american unemployment in the 1930 s reflected to a much greater degree a sequence of large destabilizing shocks and much less a low level equilibrium trap than does modern european unemployment the self correcting tendencies of the 1930 s u s economy were probably much stronger than is generally acknowledged however the experience of the depression era confirms the modern observation that the level of unemployment does not much affect the rate of inflation an observation that we argue is consistent with macro theory the depression experience also supports the impression that political factors are important in real wage determination this abstract was borrowed from another version of this item

the loser s curse and information aggregation in common value auctions we consider an auction in which k identical objects of unknown value are auctioned off to n bidders the k highest bidders get an object and pay the k 1st bid bidders receive a signal that provides information about the value of the object we characterize the unique symmetric equilibrium of this auction we then consider a sequence of auctions a r with n r bidders and k r objects we show that price converges in probability to the true value of the object if and only if both k r and n r k r i e both the number of objects and the number of bidders who do not receive an object go to infinity

overbidding and inefficiencies in multi unit vickrey auctions for normal goods abstract i examine bid behavior in uniform price auctions and multi unit vickrey auctions without the standard quasilinearity restriction on bidder preferences instead of assuming quasilinearity i assume that bidders have weakly positive wealth effects i e the goods are normal goods my setting nests quasilinearity but also allows for budget constraints financial constraints and risk aversion i show that without the quasilinearity restriction truthful reporting is not a dominant strategy in the vickrey auction instead bidders truthfully demand for their first unit and weakly overreport their demand for later units the incentive to overreport demand means that the vickrey auction is generally inefficient this mirrors the well known demand reduction results in uniform price auctions moreover the efficiency ranking of the two auctions is ambiguous in fact there are cases where the uniform price auction is pareto efficient and the vickrey auction is pareto inefficient even if only one bidder has non quasilinear preferences

efficiency of large private value auctions we consider discriminatory and uniform price auctions for multiple identical units of a good players have private values possibly asymmetrically distributed and for multiple units our setting allows for aggregate uncertainty about demand and supply in this setting equlibria generally will be inefficient despite this we show that such auctions become arbitrarily close to efficient if they are large and use this to derive an asymptotic characterization of revenue and bidding behavior

do consumers react to anticipated income changes evidence from the alaska permanent fund a central implication of the life cycle permanentincome hypothesis lc pih is that consumers should not respond to predictable changes in their income to test this hypothesis a number of recent papers have exploited natural experiments to identify anticipated income changes in particular recent work by parker 1999 uses the change in after tax income due to the cap on earnings subject to the social security tax and a related paper by souleles 1999 examines the response of consumption to income tax refunds surprisingly parker and souleles find that even when income is expected to change within the year expenditure is excessively sensitive to the timing of the income change while their results can be interpreted as evidence that our canonical model of consumption is inadequate an alternative explanation is that the anticipated income changes they exploit are small and irregular and that households will not bother to change their consumption paths when the computational costs involved are large relative to the utility gains in support of this interpretation browning and collado 2001 find that the seasonal consumption patterns of spanish households that work in sectors that provide regular bonus payments do not differ from those of households that do not receive bonus payments this paper adds to this evidence by exploiting a natural experiment provided by annual payments from the state of alaska s permanent fund to every resident in the state of alaska that should yield an unusually powerful test of the lc pih these payments are large and clearly anticipated by alaskan residents using the variation in the size of the payments over time and in the amount received by families of different sizes to identify the response of consumption to payments from the permanent fund i find no evidence that the consumption of alaskan households reacts to these payments in addition i find no evidence that the seasonal pattern of consumption in alaska differs from that in the other 49 states or that households in alaska are subject to fewer liquidity constraints engage in less buffer stock saving or spend a smaller fraction of their income on semidurable goods than households in the rest of the united states however although households in alaska do not overreact to payments from the permanent fund i find that the consumption of the very same households is excessively sensitive to their income tax refunds this evidence suggest that households will take anticipated income changes into account in their consumption decisions when the income changes are large regular and easy to predict but will not do so when they are small and irregular the paper proceeds as follows the next section of the paper presents details on the department of economics princeton university princeton nj 08544 and national bureau of economic research e mail chsieh princeton edu i am very grateful to the bureau of labor statistics bls for providing access to the data from the consumer expenditure survey and to its staff particularly steven henderson walter vandeheide and wolf weber for their generous assistance during my visits to the bls i also thank nanci jones for providing data and patiently answering questions on the operation of the alaska permanent fund anne case angus deaton jonathan parker and two referees provided useful comments the views expressed in this paper are personal and should not be attributed to the bls 1 i refer to the certainty equivalent version of the lc pih or one in which the expected variance of consumption is constant as is well known without these assumptions the lc pih only implies smoothing of marginal utility not necessarily of consumption 2 see christina h paxson 1992 john shea 1995 jonathan a parker 1999 nicholas s souleles 1999 martin browning and m dolores collado 2001 also see ronald a bodkin 1959 for an early example of the use of a natural experiment to test for excess sensitivity for comprehensive reviews of the large literature on empirical tests of the lc pih see angus deaton 1992 browning and annamaria lusardi 1996 and browning and thomas f crossley 2001 3 in 1998 for example the permanent fund paid 1 541 to every resident of the state of alaska

numerical analysis of asymmetric first price auctions abstract we propose numerical algorithms for solving first price auction problems where bidders draw independent valuations from heterogeneous distributions the heterogeneity analyzed in this work is what might naturally emerge when subsets of distributionally homogeneous bidders collude bid functions and expected revenues are calculated for two special cases extensions to more general asymmetric first price auctions are discussed journal of economic literature classification numbers d44 c63 c72 d82

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

automobiles and the national industrial recovery act evidence on industry complementarities this paper investigates the automobile industry code negotiated in 1933 and modified in 1935 under the national industrial recovery act the amended code contained a provision calling for automobile producers to alter the timing of new model introductions and the annual automobile show as a means of regularizing employment in the industry our analysis of this period provides evidence against the hypothesis that changes in fundamentals led to the dramatic changes in the seasonal pattern of production and sales starting in 1935 instead it appears that the national industrial recovery act succeeded in coordinating activity on an alternative nash equilibrium

the reaction of consumer spending and debt to tax rebates evidence from consumer credit data we use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates we estimate the monthly response of credit card payments spending and debt exploiting the unique randomized timing of the rebate disbursement we find that on average consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt but soon afterward their spending increased counter to the permanent income model spending rose most for consumers who were initially most likely to be liquidity constrained whereas debt declined most so saving rose most for unconstrained consumers

consumption dynamics during recessions when will durable expenditures respond strongly to economic stimulus we build from micro evidence and show that in a heterogeneous agent business cycle model with xed costs of durable adjustment responsiveness is substantially dampened during recessions our model estimates imply that during the great recession durable expenditures were half as responsive to additional stimulus as during the boom in the 1990s this procyclical responsiveness is driven by changes in the distribution of households desired durable holdings over the cycle we directly test our model by estimating this distribution empirically using psid micro data and nd that the distribution in the data moves cyclically as predicted in addition to this micro evidence we also provide support for our model s procyclical responsiveness using aggregate time series data and we show this time series evidence is inconsistent with simpler models featuring smooth adjustment costs

the resurgence of inventory research what have we learned abstract recent empirical and theoretical research on business inventories is surveyed and critically evaluated while most inventory research has had macroeconomic motivations we focus on its microtheoretic basis and on potential conflicts between theory and evidence the paper asks two principal questions first how can inventories which are allegedly used by firms to stabilize production nonetheless be a destabilizing factor at the macroeconomic level second why if firms are following the production smoothing model is production more variable than sales in many industries we suggest that the so called s s model may help answer both questions

the behavioral life cycle hypothesis self control mental accounting and framing are incorporated in a behavioral enrichment of the life cycle theory of saving called the behavioral life cycle blc hypothesis the key assumption of the blc theory is that households treat components of their wealth as nonfungible even in the absence of credit rationing specifically wealth is assumed to be divided into three mental accounts current income current assets and future income the temptation to spend is assumed to be greatest for current income and least for future income considerable empirical support for the blc theory is presented primarily drawn from published econometric studies

the effectiveness of english auctions abstract we study the performance of the english auction under different assumptions about the seller s degree of bayesian sophistication we define the effectiveness of an auction as the ratio between the expected revenue it generates for the seller and the expected valuation of the object to the bidder with the highest valuation total surplus we identify tight lower bounds on the effectiveness of the english auction for general private values environments and for private values environments where bidders valuations are non negatively correlated for example when the seller faces 12 bidders who the seller believes have non negatively correlated valuations whose expectations are at least as high as 60 of the maximal possible valuation an english auction with no reserve price generates an expected price that is more than 80 of the value of the object to the bidder with the highest valuation

supply side policies in the depression evidence from france the effects of supply side policies in depressed economies are controversial we shed light on this debate using evidence from france in the 1930s in 1936 france departed from the gold standard and implemented mandatory wage increases and hours restrictions deflation ended but output stagnated we present time series and cross sectional evidence that these supply side policies in particular the 40 hour law contributed to french stagflation these results are inconsistent both with the standard one sector new keynesian model and with a medium scale multisector model calibrated to match our cross sectional estimates we conclude that the new keynesian model is a poor guide to the effects of supply side shocks in depressed economies

the mainspring of economic growth lecture to the memory of alfred nobel april 27 1973 this abstract was borrowed from another version of this item

can government purchases stimulate the economy this essay briefly reviews the state of knowledge about the government spending multiplier drawing on theoretical work aggregate empirical estimates from the united states as well as cross locality estimates i assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate a temporary deficit financed increase in government purchases i conclude that the multiplier for this type of spending is probably between 0 8 and 1 5 jel e23 e62 h50

an ss model with adverse selection we present a model of the market for a used durable in which agents face fixed costs of adjustment the magnitude of which depends on the degree of adverse selection in the secondary market we find that unlike typical models the ss bands in our model contract as the variance of the shock increases we also analyze a dynamic version of the model in which agents are allowed to make decisions that are conditional on the age of the durable we find that as the durable ages the lemons problem tends to decline in importance and the ss bands contract

auctions of divisible goods with endogenous supply abstract uniform price auctions are studied in which the seller may cancel part of the supply after observing the bids this feature eliminates many of the collusive seeming equilibria of the auction in equilibrium the seller always sells the full quantity

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

the life cycle model of consumption and saving a central implication of life cycle models is that agents smooth consumption we review the empirical evidence on smoothing at frequencies from within the year up to across a lifetime we find that life cycle models particular those which incorporate realistic features of markets and goods have more empirical successes than failures we also show that some apparent deviations from theoretical predictions imply very small welfare losses for agents finally we emphasize that the coherence of life cycle models imposes an important discipline when incorporating new features into models

asymptotic efficiency for discriminatory private value auctions we consider discriminatory auctions for multiple identical units of a good players have private values possibly for multiple units none of the usual assumptions about symmetry of players distributions over values or symmetry of equilibrium play are made because of this equilibria will typically involve inefficient allocations equilibria also become very difficult to solve for using an approach which does not depend on explicit equilibrium calculations we show that such auctions become arbitrarily close to efficient as the number of players and possibly the number of objects grows large and provide a simple characterization of limit equilibria

permanent income current income and consumption evidence from two panel data sets in this article i estimate euler equations that is the first order conditions of the consumers maximization problem using data from two data sets consumption data are taken from the consumer expenditure survey income data are taken from the panel study of income dynamics because the data for the estimation come from two samples i use a generalization of the instrumental variables estimator the two sample instrumental variables estimator i find evidence that consumption is excessively sensitive to predictable income growth the estimates of the coefficient of excess sensitivity for three consumption measures range from 2 to 5

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

balladurette and juppette a discrete analysis of scrapping subsidies this paper studies the effects of subsidies on durable goods markets in particular we focus on a recent policy in france in which the governments of balladur and juppe subsidized the replacement of old cars with new ones to study this policy we construct a dynamic stochastic discrete choice model of car ownership at the household level the resulting decision rules and equilibrium conditions are used to estimate the underlying parameters of the model using aggregate data these policy functions are used to evaluate the short and long run effects of the french policies we find that these policies do stimulate the automobile sector in the short run but through the induced changes in the cross sectional distribution of car ages create the basis for subsequent low activity further while these policies increase government revenues in the short run revenues in the long run are lower relative to a baseline without intervention

nonlinear effects of fiscal policy over the business cycle abstract is fiscal policy more effective measured by the government spending multiplier or the tax multiplier when the economy is weak than when it is strong results in the empirical literature have been mixed using local projection techniques i estimate the impulse responses of real output and real government spending to a shock to military spending i also estimate the responses of real output and real tax revenues to a shock in taxes in both cases i allow for nonlinearity in the effects according to whether the unemployment rate is above or below a given threshold value i find that raising the threshold unemployment rate incrementally leads to a higher multiplier on government purchases in the bad state of the world though it is not significantly greater than 1 the results for tax changes are even less precisely estimated due to lower instrument relevance of the exogenous tax shocks

a two stage sequential auction with multi unit demands abstract working within the independent private values paradigm i examine a sequence of two second price auctions where individual bidders have diminishing marginal valuations equilibria are characterized for complete and incomplete informational settings when information is complete allocations can be inefficient and price sequences are constant or decreasing however when information is incomplete and symmetric equilibrium behavior produces efficient outcomes and an expectation of increasing prices these divergent findings are reconciled using an argument based on ex ante bidder asymmetry that can also explain the declining price anomaly finally comparisons to other auctions are made in terms efficiency and revenue generation journal of economic literatureclassification number d44

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

revenue equivalence in multi object auctions abstract the theory of auctions suggests that under certain conditions seemingly different methods for auctioning a single object will result in the same expected price this result extends quite easily to the case of more than one object

the classical classical fallacy a flagrant error dogged james steuart adam smith david ricardo john barton john stuart mill karl marx and classical writers generally modern commentators on classicism are enough tempted by the fallacy to generally overlook it as a vital flaw in the earlier writers this fallay can be called classically classical not in the sense of being the greatest error in the classical paradigm an award that would be hard even to define but in the sense that modern scholars ignorant of pre 1900 literature would be little tempted by it i do not denigrate or patronize a great writer of the past such as david ricardo when i objectively delineate his hits and misses the fallacy can be simply put fixed capitals are prejudicial to wages and the demand for labor circulating capitals wage fund items that represent wage outlays paid to workers at the beginning of a period of production which are not recouped until the end of that period of production and which of course bear an interest or profit rate during the transition are allegedly favorable to the real wage rate and to the demand for labor fixed capitals are durable produced inputs that render their services over a number of different production periods circulating capitals are produced inputs used up within one period of production they are relatable to but distinguishable from wage fund advances paid to workers at the beginning of a period of production to be recouped at its end along with an interest or profit return in the minds of heterodox economists and the lay public generally a technological change that made machinery newly viable was supposedly the kind of invention that could put people out of work temporarily reduce market clearing wage rates and in long run equilibrium at an unchanged subsistence wage rate call for a significantly reduced population by contrast therefore a new invention that displaced machinery in favor of various raw materials as inputs would supposedly raise the short run real wage and increase the demand for labor so powerful was the grip of what i shall dub the classical fallacy that it was being reminded of it in 1819 21 that appears to have enabled ricardo to recant in his famous third edition chapter on machinery his previous boner that every viable invention can be expected to raise every factor s return from today s wisdomor indeed the wisdom of 1900 that previous position of ricardo was nonsense there is no invisible hand that seeks out machines or new techniques only if they benefit everyone i

intergenerational transfers and the accumulation of wealth h t ouseholds acquire wealth from two sources they save out of income they have earned and they receive transfers from other people the first method of wealth accumulation goes under the name of life cycle saving in which people save during their working lives and dissave after retirement the second involves either an inter vivos transfer that is a transfer between living people or a bequest a transfer that occurs at the death of the donor while inter vivos transfers and bequests will arise in dynastic models where preferences include a taste for the well being of one s descendents few empirical life cycle models reflect these concerns indeed a sharp debate has arisen over the ability of the simple life cycle model to explain observed wealth accumulation understanding the relative sizes of these sources of wealth accumulation affects a variety of issues for example the effects of government debt social insurance public transfer programs estate taxes and incentives for charitable giving depend to some extent on the magnitude and nature of private saving and transfers of wealth analyses of the inequality of wealth may depend on whether most of wealth is earned or received as transfers appropriate policies for encouraging private saving may look rather different depending on whether most saving is to be consumed later in life or passed along to the next generation finally evidence on transfer patterns relates to more fundamental

investment fact and fancy in yugoslavia this paper examines the roles of capacity and finance in yugoslav investment gross investment in producer durables is treated individually for industry other nonagriculture social agriculture and private agriculture along stock adjustment or alternatively flow adjustment lines inventory investment reflects sales and hoarding considerations each specification includes two types of finance namely intended credit and consonant with the firm s soft budget contraint unintended credit tested on newly complied data the functions indicate by statistical significance that capacity and finance matter in industry and other while capacity not finance matters in agriculture and inventory implications for development policy conclude the discussion alice did not like shaiking hands with either of them first for fear of hurting the other one s feelings so as the best way out of the difficulty she took hold of both hands at once the next moment they were dancing round in a ring lewis carroll throug

efficiency of large double auctions we consider large double auctions with private values values need be neither symmetric nor independent multiple units may be owned or desired participation may be stochastic we introduce a very mild notion of a little independence we prove that all nontrivial equilibria of auctions that satisfy this notion are asymptotically efficient for any alpha 0 inefficiency disappears at rate 1 n 2 alpha