residential spatial growth with perfect foresight and multiple income groups abstract this paper presents explicit solutions for expanding monocentric cities with two or more income groups housing is durable but deteriorates over time and redevelopment cannot take place landlords have perfect foresight the utility function and housing technology are cobb douglas population per capita income and transportation costs per mile change at constant percentage rates the model is solved analytically using an infinite time horizon as development proceeds outward a constant fraction of land is developed with high income housing and the remaining land is reserved for future low income development at any time housing is constructed at one distance for high income consumers and at a lesser distance for low income consumers high income housing is first occupied by high income consumers then filters to low income consumers and is ultimately abandoned low income housing is first occupied by low income households and ultimately abandoned

rules communication and collusion narrative evidence from the sugar institute case detailed notes on weekly meetings of the sugar refining cartel show how communication helps firms collude and so highlight the deficiencies in the current formal theory of collusion the sugar institute did not fix prices or output prices were increased by homogenizing business practices to make price cutting more transparent meetings were used to interpret and adapt the agreement coordinate on jointly profitable actions ensure unilateral actions were not misconstrued as cheating and determine whether cheating had occurred in contrast to established theories cheating did occur but sparked only limited retaliation partly due to the contractual relations with selling agents jel l13 l41 this paper reexamines the cartel problem by studying the private discussions within one cartel while we find much that is in accord with george j stigler s 1964 basic insight that firms would structure an agreement conscious of their later incentive to cheat on it we also uncover puzzles for established theory and identify elements that a richer theory should encompass especially regarding the role of communication in collusion our window into the inner workings of a cartel is a remarkable series of notes on the weekly meetings of the sugar institute this trade association was formed in december 1927 in the wake of several years of falling margins and excess capacity by 14 firms comprising nearly all the cane sugar refining capacity in the united states it operated until 1936 when the supreme court ruled its practices illegal among the top executives in regular attendance at the meetings was louis v place vice president of mccahan a midsize refinery in philadelphia place who was in charge of all activities of the company except production and raw sugar purchases wrote over 500 pages of single spaced detailed

redevelopment decisions for commercial and industrial properties abstract the empirical work in this study serves as a test of the principle that redevelopment of a property will occur when the value of the existing bundle plus demolition costs is less than or equal to the price of vacant land the probability of a commercial or industrial property being redeveloped is predicted using the difference in the estimated value of a parcel in its redeveloped state and its current use correcting for sample selection bias the empirical results support the hypothesis that land is redeveloped when its value in the redeveloped state is high relative to its value in the current use

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

consumption smoothing and the current account evidence for france 1970 1996 abstract this paper estimates a simple consumption smoothing model of the french current account and examines its capacity to predict recent developments in france s external performance the model views the current account as a buffer through which private agents can smooth consumption over time in response to temporary disturbances to output investment and government expenditure the empirical results indicate that the model performs well overall and predicts correctly the sharp turnaround in france s external accounts observed in the past 3 years a feature of the data that conventional models of trade flows based on income and relative price variables appear unable to explain

adjustment costs durables and aggregate consumption abstract previous tests of the permanent income hypothesis pih have focused on either non durables or durables expenditures in isolation this paper studies consumer purchases of non durables and durables as the outcome of a single optimization problem it is shown that with non separability in utility the presence of adjustment costs of changing durables stocks may affect the time series properties of both components of expenditure an econometric test of the pih based on the model developed in the paper is both more efficient and less prone to bias than those in some previous studies however this test confirms earlier rejections of the pih in aggregate quarterly data

evolution of urban housing stocks a model applied to baltimore and houston abstract historical simulations of urban residential growth in baltimore and houston based on a model of the growth process which has two distinct components are presented the vintage component utilizes the growth of income and population and an assumption that housing is putty clay to predict the age distribution of the housing stock in each period the spatial component of the model determines where this housing construction will take place according to 1 housing is built on vacant land and 2 the pattern of construction obeys the rules of the standard monocentric models housing is demolished when economically obsolete the putty clay vintage aspect of the model produces fairly accurate city wide vintage distributions but there is much more mixing of vintages and income in baltimore by location than predicted even under monocentric assumptions most favorable to mixing

a dynamic model of housing production abstract this paper derives the optimal development strategy for a housing producer with perfect foresight in a steady state environment where dwellings deteriorate as they age under the assumption of zero demolition costs the optimal strategy is an infinite sequence of identical buildings building abandonment is shown to be possible with positive demolition costs a solution highlighting the model s spatial properties is computed using cobb douglas functions

habits and durability in consumption and the dynamics of the current account abstract a model in which consumption exhibits durability and habits develop over the flow of services provided by them is used to study current account dynamics durability leads to adjacent substitutability in consumption while habits are assumed to lead to adjacent complementarity the adjustment of the current account may be non monotonic if habit effects are dominant in the short run and durability effects in the long run then after a terms of trade deterioration we will have a current account deficit followed by a surplus the j curve in the opposite case a surplus will be followed by a deficit 1998 elsevier science b v

present value tests of the current account with durables consumption abstract the present value tests of the intertemporal model of the current account usually assume that all goods are traded and that aggregate consumption decisions can be closely approximated by a random walk process this paper extends these models by explicitly introducing durables and nontraded goods into an intertemporal model of the current account and tests the model using canadian data since aggregate consumption expenditures on durables do not exhibit random walk behavior even when the aggregate consumer has a quadratic utility function the model that includes durables makes predictions that differ from those of the basic approach when nontraded goods are also incorporated into the model the most appropriate income variable becomes output net of nontraded production these implications are examined using present value tests the results suggest that in the annual data introduction of both durables and nontraded goods improves upon the model with traded nondurables only this seems to be due to the combination of durables and nontraded goods as durables alone do not sufficiently refine the basic model

international capital mobility amongst the major industrialised countries too little or too much this paper examines capital flows among the major industrialized countries with a view to assessing m feldstein and c horioka s 1980 claim that international capital mobility is limited it argues that saving investment correlation tests are inherently flawed and proposes an alternative methodology for testing the degree of international capital mobility it finds that capital flows have been excessive in the sense that they are driven by speculative forces rather than by economic fundamentals copyright 1995 by royal economic society

residential investment and the current account abstract residential investment is an important driving force in the current account this paper first builds the model to show that residential investment for the empirically relevant case where demand for housing services has nonzero income elasticity is fundamentally different from nonresidential investment owing to this income effect the dynamics of housing are subject to the additional integral constraint as well as the standard stock adjustment and euler equations the model is used to examine the effects of changes in government purchases on the tradeable good housing subsidies and productivity shocks on the current account

macroeconomic uncertainty precautionary saving and the current account abstract the relationship between current account developments and changes in the macroeconomic environment is a key issue in open economy macroeconomics this paper extends the standard intertemporal model of the current account to incorporate the effects of macroeconomic uncertainty on external saving behavior it is shown that the greater the uncertainty in national cash flow defined as output less investment less government consumption the greater will be the incentive for precautionary saving and ceteris paribus the larger the current account surplus empirical support for the model is found using post war quarterly data for the united states japan and the united kingdom as well as a long time series 1919 1990 for the united states

what drives china s current account the paper offers an empirical taxonomy of the factors driving china s current account a simple present value model with non tradeable goods explains more than 70 percent of current account variability over the period 1982 2007 including the persistent surpluses since 2001 it also correctly predicts the decline of china s current account since 2008 expected increases in the prices of non tradeables e g housing and medical care and expected declines in net output gdp less investment and government spending are the main channels of external adjustment much of china s current account surplus seems driven by shocks that have global effects by persistently depressing the world real interest rate this is consistent with recent theoretical models that suggest that factors related to china s domestic financial development are key in understanding global imbalances

optimal spatial growth of employment and residences abstract this paper examines the location patterns of employment and residences in an urban area characterized by irreversible land use commitments and smoothly growing population it is assumed that all output is shipped to the center of the urban area and that workers have commuting costs of getting to work the optimal solution which is also the equilibrium solution minimizes the present discounted value of aggregate shipping costs plus commuting costs the residential area expands outward over time but a constant fraction of the land is always reserved for future employment development

spatial growth and redevelopment with perfect foresight and durable housing abstract in this paper i present a theoretical model of the spatial growth of an urban area with durable housing i combine several assumptions that typically complicate the analysis i housing developers have perfect foresight ii the initial development and many waves of redevelopment are considered in each developer s plan and iii the closed city assumption is made so that the time path of population is exogenous and that of consumer utility is endogenous i still obtain explicit solutions for the spatial pattern of urban growth and for the timing of the initial residential development and each successive redevelopment at each distance from the urban center i compare perfect foresight growth to growth with static expectations and i examine the comparative statics of both

underinvestment in a profitable technology the case of seasonal migration in bangladesh hunger during pre harvest lean seasons is widespread in the agrarian areas of asia and sub saharan africa we randomly assign an 8 50 incentive to households in rural bangladesh to temporarily out migrate during the lean season the incentive induces 22 of households to send a seasonal migrant their consumption at the origin increases significantly and treated households are 8 10 percentage points more likely to re migrate 1 and 3 years after the incentive is removed these facts can be explained qualitatively by a model in which migration is risky mitigating risk requires individual specific learning and some migrants are sufficiently close to subsistence that failed migration is very costly we document evidence consistent with this model using heterogeneity analysis and additional experimental variation but calibrations with forward looking households that can save up to migrate suggest that it is difficult for the model to quantitatively match the data we conclude with extensions to the model that could provide a better quantitative accounting of the behavior

further tests of static oligopoly models whiskey 1882 1898 using data from the turn of the century whiskey industry we conduct tests of the neio methodology similar to those conducted by genesove and mullin 1998 like genesove and mullin we find that the neio methodology appears to perform reasonably well for low levels of market power conduct is somewhat overestimated with estimates ranging from 0 17 to 0 35 as compared to direct estimates of 0 09 cost parameters are generally underestimated estimates of conduct and remaining cost parameters improve significantly however with additional information on cost estimates improve further if conduct is allowed to have two regimes which are identified based on historical evidence

capital mobility in the world economy an alternative test abstract this paper proposes a new measure and test of international capital mobility in order to investigate capital flows we utilize a small open economy version of campbell and mankiw s nber macroeconomic annual 1989 185 216 permanent income model our capital mobility measure focuses on the correlation between the country s consumption and net output instead of the correlation between domestic saving and domestic investment proposed by feldstein and horioka economic journal 90 1980 314 329 the model is estimated for 11 oecd countries the results suggest that the null hypothesis of perfect capital mobility cannot be rejected for more than a half of these countries on the other hand some kind of capital mobility constraints are detected for several countries including the united states and japan

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

cartel organization price discrimination and selection of transatlantic migrants 1899 1911 we study the effects of trans atlantic passenger shipping cartels on tourist business and migrant traffic collusion had a smaller effect on first and second class service relative to third class service its effects were proportionately stronger eastbound but less important in absolute numbers given smaller eastbound traffic collusion driven consumer substitution across classes was small but non negligible thus collusion affected migrant traffic far more than tourist business traffic we also confirm that collusion led to higher fares across all cabin classes especially for steerage we construct and calibrate an analytical model and show that the pattern of observed prices and volumes are consistent with a profit maximizing cartel thus buttressing the hypothesis that the collusion effects were causal finally we document that collusion led to positive selection of migrants as measured by literacy rates and financial resources

current accounts in the euro area an intertemporal approach abstract current accounts have diverged substantially among euro area countries since the creation of the euro this divergence has raised concerns about the sustainability of some member countries external indebtedness this paper uses an intertemporal model of the current account to analyze the fluctuations in current account balances experienced by euro area countries over the last three decades and to disentangle its determinants we find that the model is not rejected for six of the ten euro area countries examined belgium france italy netherlands portugal and spain although it tends to underestimate their current account volatility for these countries we derive the expectations about future income and relative prices which according to the model underlie their current account balances expectations about future growth increased in all southern european countries at the creation of the euro but they diverged considerably by 2005 while in portugal these expectations were below its historical mean by then in spain they were at an historical high

the intensity and timing of investment the case of land the authors model the decision to replace durable capital when intensity is variable decisions of this type include land redevelopment decisions where the density of residential or commercial development is a choice variable as well as capital replacement decisions where capacity is variable the authors provide a general yet simple formation of the problem using an optimal stopping framework they characterize the value of the project the timing of investment and the intensity of development the authors show that intensity interacts in important ways with timing taxes and project values the ability to vary intensity raises hurdle rents and delays development decisions copyright 1994 by american economic association

urban spatial development with durable but replaceable capital the theory of urban spatial development until recently has been primarily a static theory of economic equilibrium the models of alonso l mills 6 and muth 7 determine a complete spatial equilibrium between the supply and demand for urban land the study of growth or change in such models therefore has been limited exclusively to comparative statics wheaton 8 it should be clear that the central and in many respects unrealistic assumption of such models is that housing capital is neither physically nor economically durable without durability there is no opportunity cost to old capital no barrier to change and no history to an urban area within such a framework a common set of conclusions emerges regarding urban spatial structure residential density and the price per unit of land decline monotonically from the location of employment a greater population results in higher density at all locations while increases in income or decreases in the cost of travel create a more steeply sloped density and price gradient in the last few years there has been a growing awareness that the equilibrium portrayed by such models does not correctly reflect the process of urban development theoretical papers by anas 2 31 and brueckner 4 and an empirical model by harrison and kain 5 develop an alternative theory of urban spatial development in which the process of growth is explicitly modeled and in which capital is completely durable in their models the spatial development of cities occurs incrementally over time in successive rings from the center of employment outwards the development of each ring is done with myopic foresight and is therefore determined exclusively by market conditions at the time of development once built

what can explain the apparent lack of international consumption risk sharing recent research in international business cycles finds that international consumption comovements do not match the risk sharing predictions of standard complete markets models in this paper i ask whether two different types of explanations can help explain this result 1 nonseparabilities between tradables and nontradable leisure or goods and 2 the effects of capital market restrictions on consumption risk sharing i find that risk sharing cannot be resolved by either explanation alone however when i allow for both nonseparabilities and certain market restrictions risk sharing among unrestricted countries cannot be rejected this evidence suggests that a combination of these two effects may be necessary to explain consumption risk sharing across countries

a present value test of habits and the current account abstract forecasts derived from standard intertemporal current account ica models generally fail to match the volatility of actual current accounts this paper offers a solution to the excess volatility problem of standard ica models by incorporating consumption habits into the standard model the model as developed in the paper shows that significant habit formation implies increased current account volatility as sluggishness is introduced into the consumption adjustment process that follows income shocks a theory consistent measure of the degree of habit formation is estimated using gmm the estimated habit parameter is found to be statistically significant in six of eight quarterly samples

the dynamic effects of tax policies in a small open economy we develop an intertemporal optimizing model of a small open economy with both durable and nondurable consumption to address the implications of alternative tax policies an increase in lump sum taxes reduces the steady state level of consumption and improves the stock of foreign bonds consistent with empirical evidence durable consumption exhibits initial excess volatility though an increase in the tax on durables increases the demand for nondurables and improves the bond holdings in the steady state an increase in the tax on nondurables has insignificant effects on the stock of foreign bonds and the consumption of durables using quarterly data from the uk and estimating generalized impulse response functions we find empirical support we also calibrate the welfare implications of different tax policies

income maximization and the selection and sorting of international migrants abstract two prominent features of international labor movements are that the more educated are more likely to emigrate positive selection and more educated migrants are more likely to settle in destination countries with high rewards to skill positive sorting using data on emigrant stocks by schooling level and source country in oecd destinations we find that a simple model of income maximization can account for both phenomena results on selection show that migrants for a source destination pair are more educated relative to non migrants the larger is the absolute skill related difference in earnings between the destination country and the source results on sorting indicate that the relative stock of more educated migrants in a destination is increasing in the absolute earnings difference between high and low skilled workers we use our framework to compare alternative specifications of international migration estimate the magnitude of migration costs by source destination pair and assess the contribution of wage differences to how migrants sort themselves across destination countries

the stochastic city abstract this paper analyzes a simple model of an urban area with growth and uncertainty household income rents and prices for land follow stochastic processes even though investors are risk neutral uncertainty affects both land rents and land prices in equilibrium because the conversion of land from agricultural to urban use is irreversible growth on the other hand affects urban and agricultural land prices but not the level of rents we show that uncertainty i delays the conversion of land from agricultural to urban use ii imparts an option value to agricultural land iii causes land at the boundary to sell for more than its opportunity cost in other uses and iv reduces equilibrium city size

passenger shipping cartels and their effect on trans atlantic migration abstract we investigate the impact of passenger shipping cartels on trans atlantic migration during the early twentieth century we assemble from primary sources a detailed database of passenger flows and cartel operations and show that cartel operation reduced migratory flows by approximately 20 to 25 further we show that there was no strong intertemporal substitution in migration to north america at least in the short run and therefore that the effects of cartel operation were not undone by later migration lastly we find that cartel operation had no appreciable effect on the variability of migration flows providing evidence against the notion that unfettered competition was destabilizing to turn of the century transportation markets

current account dynamics under information rigidity and imperfect capital mobility abstract the current account in developed countries is highly persistent and volatile in comparison to their output growth the standard intertemporal current account model with rational expectations re fails to explain the observed current account and consumption dynamics the re model extended with imperfect capital mobility by shibata and shintani 1998 can account for the consumption dynamics but only at the cost of the explanatory power for the volatility of the current account this paper replaces re in the intertemporal current account model with sticky information si in which consumers are inattentive to shocks to their income the si model can better explain a persistent and volatile current account than the re model but it overpredicts the persistence of changes in consumption the si model extended with imperfect capital mobility explains both the current account and consumption provided that sufficiently high degrees of information rigidity and imperfect capital mobility are considered

consumption permanent income and financial wealth in canada empirical evidence on the intertemporal approach to the current account the intertemporal approach to the current account is rejected as a complete explanation of the canadian current account federal government fiscal policy plays an important role in the determination of the current account a private sector agent that treats its holdings of net liabilities of the federal government as net wealth accumulates the sum of these liabilities and the net liabilities of non residents as part of an intertemporally optimal plan this result indicates both fiscal policy and intertemporal considerations are important determinants of current account behaviour consommation revenu permanent et richesse financiere au canada resultats empiriques d une approche au compte courant mettant l accent sur la dimension intertemporelle cet article montre que l approche mettant l accent sur la dimension intertemporelle ne produit pas une explication complte du comportement du compte courant canadien i1 semble que la politique fiscale du gouvernement federal joue un r6le important dans la conformation du compte courant un agent economique prive composite qui traite son portefeuille de dettes nettes du gouvernement federal comme richesse nette va accumuler la somme de ces dettes et des dettes nettes des non residents dans le cadre de son plan intertemporel optimal les resultats montrent que la politique fiscale et des considerations intertemporelles sont des elements determinants du comportement du compte courant

spatial patterns of residential development abstract a simple dynamic model of residential development with durable housing where all households are identical and all developers have perfect foresight is studied it is shown that unlike the case of static models it is quite possible that house size decreases and thus population density increases with distance from the city center and that the house rent curve has positive gradient in certain area

housing quality maintenance and rehabilitation this paper investigates a representative landlord s profit maximization problem in a stationary economy the landlord must decide on the quality of his housing units at the time of construction maintenance expenditure over the life of the building and the time of demolition or rehabilitation the analysis can be applied to other problems with similar economic structure notably equipment and durable good maintenance overhaul and replacement

an alternative version of a vintage model of an urban housing market abstract the present paper intends to propose an alternative version of a housing market in order to better represent the urban dynamics involved in this paper we formulate the behavior of households in their demand for housing as a durable good by introducing the new concept of the over time bid rent and show that through the over time bid rent the households have an influence explicitly on the determination of the life span of housing units

inflation stabilisation and the consumption of durable goods exchange rate based stabilisations in chronic inflation countries have often been characterised by an initial consumption boom which is most evident in the behaviour of durable goods followed by a later contraction this paper provides an explanation for such a boom recession cycle based on the timing of purchases of durable goods the initial fall in inflation results in a wealth effect which induces many consumers to bring forward their purchases of durable goods thus generating an aggregate consumption boom since most consumers replenish their stock of durable goods at the beginning of the programme a later slowdown follows

testing a present value model of the current account evidence from us and canadian time series abstract this paper presents a simple model of current account determination based upon the permanent income hypothesis of private consumption behavior under rational expectations the model employs a representative national agent who is forward looking and can borrow and lend at a constant world interest rate a present value relationship for the current account is derived and its implications are tested on post war data for the united states and canada testing is done using the framework developed by campbell and shiller 1987 which allows the forcing variables in the model to be difference rather than trend stationary our empirical results indicate the most stringent restrictions of the present value model are strongly rejected by the us and canadian data however less formal procedures suggest the consumption smoothing model has some ability to track the dynamic behavior of the us current account jel f32

the terms of trade productivity growth and the current account abstract this paper extends the analytical framework provided by glick and rogoff 1995 journal of monetary economics 35 159 192 to an economy with traded and nontraded goods and it analyzes the impact of country specific and global productivity shocks on the current account and investment each of these disturbances have different implications for the current account and investment that are largely consistent with the empirical results first the current account responds more than investment to country specific traded productivity growth second global traded productivity and country specific nontraded productivity growth have no effect on the current account but they have a significant impact on investment third the global component of nontraded productivity is negligible and has no significant impact on either the current account or investment in addition the response of the current account and investment to relative prices the terms of trade and exchange rate are insignificant this paper also discusses the potential reasons for it

the timing of purchases and aggregate fluctuations we study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non durable goods are consumed and the durable good is lumpy at the microeconomic level the timing of durable goods purchases supplies some insulation for nondurable consumption over the cycle at the macroeconomic level the timing decisions tend to amplify and propagate wealth and income shocks our model also allows for endogenous price determination when the price of the durable changes due to inflexibility of workers between sectors the effect of adverse shocks is even stronger and longer copyright 2005 wiley blackwell

present value tests of an intertemporal model of the current account abstract this paper first demonstrates that in a simple intertemporal open economy model the current account is equal to the expected decline of the present discounted value of net output of a country net output is defined as gross domestic product less the sum of investment plus government spending it then uses econometric methods for present value models to analyze the current account for four countries in two of these countries the model does a satisfactory job of explaining the current account

cartel overcharges survey and meta analysis abstract the article presents a novel meta regression analysis of the size of cartel overcharges from a sample of more than 800 observations collected from a wide variety of published sources the analysis of a subsample of 395 cartel episodes finds that duration legal environment and organizational characteristics of cartels explain variation in overcharge rates to a greater extent than the type of publication or the method of calculation overcharges tend to be significantly higher for durable international cartels secular decline is observed as antitrust enforcement regimes have stiffened