credentials and wage discrimination the subject is wage discrimination among workers with differing privately known reservation wages and costs of obtaining credentials that can be observed by a monopsonist firm numerical examples are studied in which workers are equally productive and in the population their reservation wages and credentialing costs have a normal distribution with negative correlation according to these examples wage discrimination is unprofitable

endogenous discounting the world saving glut and the u s current account abstract we study the evolution of the u s current account in a two country dynamic stochastic endowment model in which a single non state contingent bond is the only internationally traded asset the paper focuses on the world saving glut as the primary cause of continual deterioration in the current account and departs from the standard framework by introducing a three parameter model of the subjective discount factor that depends on societal per capita variables that are external to household choices when agents in the model are presented with u s and rest of world endowment data as the realization of the exogenous state vector endogenously driven short run international differences in subjective discounting that display increasing relative u s impatience create saving and current account imbalances that matches patterns observed in the data

computation of the beveridge nelson decomposition for multivariate economic time series abstract this note shows how the result of newbold 1990 newbold p 1990 precise and efficient computation of the beveridge nelson decomposition of economic time series journal of monetary economics 26 453 457 can be extended to the computation of the beveridge nelson decomposition in the multivariate case where series are generated by vector arima models a separate treatment is provided for the cointegrated case

current account dynamics and expected future budget deficits some international evidence abstract this paper addresses the question of whether current account deficits are linked to expected future budget deficits we use an optimizing general equilibrium model to show the theoretical relationship between the two deficits we then estimate the econometric equation based on the forward looking expectations model for oecd countries thus extending earlier research based on more conventional analysis from the empirical investigation evidence is obtained that strongly supports the view that current account deficits have been associated with expected future budget deficits during the 1970 1997 period

a direct mechanism characterization of sequential bargaining with one sided incomplete information we characterize the sequential equilibria of a class of infinite horizon bargaining games with one sided incomplete information when the seller the uninformed party makes all the offers we prove a folk theorem every incentive compatible individually rational direct bargaining mechanism is implementable by sequential equilibria introducing buyer counteroffers eliminates outcomes which are unfavorable to that party as the proportion of buyer offers increases the set of implementable mechanisms shrinks continuously when the proportion reaches one only the single outcome most favorable to the buyer remains thus depending on the offer structure sequentiality may or may not impose restrictions beyond static incentive compatibility

the beveridge nelson decomposition of economic time series a quick computational method this note describes a much simpler computational method for carrying out the beveridge and nelson decomposition of economic time series into permanent and cyclical components

unions and strikes with asymmetric information strikes seem to be a pareto inefficient outcome of bargaining between a union and a firm however this paper shows that strikes can be the outcome of rational behavior by both agents if the firm has more information than the union concerning the state of nature the union can use strikes as a way of gaining information the paper uses an asymmetric information model where the firm has information about the state i e profitability that the union does not know the schedule of wage offers by the union then depends on the probability that a given state will occur

strike incidence and the business cycle in ireland strike incidence equations are estimated for manufacturing strikes in ireland from 1960 to 1989 using both poisson and negative binomial regression models a number of alternative business cycle measures are specified the pro cyclicity of strikes is confirmed in all cases and is invariant to the measurement of the cyclical component the numerical size of the cyclical effect on strike activity is however quite small

real business cycles under test abstract according to the theory of real business cycles exogenous technological productivity shocks are the primary source of economic fluctuations following the lines of the multisectoral long and plosser 1983 model the paper shows that such a view of business cycles leads to an inherent sectoral ordering in which non consumer sectors are exogenous on the contrary empirical evidence based on var testing and cross spectral methods reveals that consumer goods sectors precede this result can be explained by a simple extension of the dynamic long and plosser innovation process in which significant stochastic demand disturbances are taken into account in particular these demand shocks have to dominate inverse supply innovations such issues of real business cycle theory suggest that only a more explicit modelling of demand influences will reconcile theory with observation

economics of farmer early retirement policy we estimate the structural effects costs and potential efficiency gains that might arise from the introduction of an early retirement scheme for farmers in northern ireland using data from the farm business survey and a separate survey of 350 farmers aged between 50 and 65 modelling results suggest that farm scale is a significant determinant of profit per hectare but that the age of the operator is not the economic gains from releasing land through a scheme were conditional on transfers bringing about significant farm expansion and changes in land use when these conditions were satisfied pensions payments of only about one third the statutory maximum could be justified survey responses indicated that participation in the scheme would bring forward farmers retirement age by an average of 4 years moreover deadweight payments would equate to about 23 of potential total expenditure overall the economic case for the introduction of an early retirement scheme to northern ireland is judged to be weak

cross country evidence on the relation between stock prices and the current account this article explores the relation between stock prices and the current account for 17 organization for economic co operation and development oecd countries in 1980 2007 a panel vector autoregressive var model is used to compare the effects of stock price shocks to those originating from monetary policy and exchange rates while monetary policy shocks have little effects shocks to stock prices and exchange rates have sizeable effects a 10 contraction in stock prices improves the current account by 0 3 after 2 years hence a channel in addition to the traditional exchange rate channel is found through which external balance for an oecd country with a current account imbalance can be restored

why farmers quit a county level analysis we identify the effects of alternative explanatory variables on the propensity of u s farmers to cease farming with a particular emphasis on understanding the roles of off farm employment and federal farm program payments conventional ordinary least squares analysis using all counties suggests that off farm employment has no statistical effect on the net number of farmers quitting between 1987 and 1997 ceteris paribus a more refined analysis which separates counties losing farmers from those that gained farmers reveals subtle and less clear cut effects of off farm employment and federal program payments on farm exits copyright 2001 oxford university press

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

are business cycles asymmetric some european evidence economic thought has often regarded business cycles as asymmetric this study examines the existence of asymmetries over the business cycle in seven european countries france germany ireland italy luxembourg the netherlands and the united kingdom to analyse this issue industrial production in these countries from 1957 to 1998 is examined and quarterly contractions and expansions in this variable are compared the results obtained with both parametric and non parametric methods allow the existence of asymmetries in these countries to be questioned

bargaining and strikes strikes are generally regarded as an important economic phenomenon and yet good theoretical explanations of them are hard to come by the difficulty is to understand why rational parties should resort to a wasteful mechanism as a way of distributing the gains from trade why could not both parties be made better off by moving to the final distribution of surplus immediately or if it is uncertain to its certainty equivalent and sharing the benefits from increased production

the effects of public policy on strike duration hazard function estimates are utilized to analyze the effect of numerous public policy variables on strike duration based on 7 546 strikes in canada between 1967 and 1985 we find that only the mandatory strike vote substantially reduced conditional duration however the policy variables generally had a more favorable effect on reducing strike incidence so that on net they tended to reduce unconditional duration incidence times conditional duration specifically reduced unconditional duration was associated with the existence of conciliation and the requirement of a mandatory strike vote but the prohibition on replacement workers had a perverse effect

perspectives on the u s current account deficit and sustainability this essay considers the underpinnings of the large u s current account deficit it then tackles the question of whether the u s current account deficit is sustainable a current account deficit is sustainable at a point in time if neither it nor the associated foreign capital inflows nor the negative net international investment position are large enough to induce significant changes in economic variables such as consumption or investment or interest rates or exchange rates even if the current account deficit is sustainable by this definition today its trajectory could still be creating future risks for the u s and global economy

the eu budget battle assessing the trade and welfare impacts of cap budgetary reform abstract there is a paucity of quantitative impact assessments of the sectorial and macroeconomic impacts of cap budget reform for eu member states to fill this gap the current study employs a sophisticated agricultural variant of the gtap model to evaluate the recently agreed cap spending limits for the financial period 2014 2020 as well as a more radical 50 cut to the cap budget proposed by the uk government the study incorporates methodological innovation in terms of the modelling of cap budgetary mechanisms furthermore official eu auditing statistics are employed to i greatly improve the existing representation of agricultural support payments in the gtap benchmark data and ii implement a detailed contemporary cap baseline for member states to capture both the decoupled coupled split of support payments and the distribution of support across both pillars in general cap expenditure cuts have muted impacts on eu and world agricultural markets whereas changes in net transfer payments have implications for real income and macro trade balances in eu member states this observation is particularly pertinent when assessing conciliatory reductions in the uk rebate in exchange for deeper cap budget cuts

precise and efficient computation of the beveridge nelson decomposition of economic time series abstract this note shows how the beveridge nelson decomposition of economic time series can be precisely computed without the necessity for truncating infinite sums the algorithm includes those of beveridge and nelson 1981 and miller 1988 as special cases for particular models correcting an error in the latter

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

temporary and permanent government spending in an open economy some evidence for the united kingdom abstract this paper investigates the effects of government spending changes on a small open economy in an intertemporal substitution framework if agents internalize the government s budget constraint temporary and permanent spending have different implications for wealth and consequently different effects on output and the balance of trade estimation of these effects isolates the different channels through which government spending can influence economic activity main findings for the united kingdom are that government spending i crowds out private spending ii is directly productive and iii when rising permanently leads to a negative wealth effect which induces a large rise in work effort

asset prices news shocks and the trade balance we analyze the relationship between asset prices and the trade balance estimating a bayesian var for a broad set of 38 industrialized and emerging market countries to derive model based identifying restrictions we model asset price shocks as news shocks about future productivity in a two country dynamic stochastic general equilibrium model such shocks are found to exert sizable effects on the trade balance moreover the effects are highly heterogeneous across countries for instance following a news shock that implies on impact a 10 increase in domestic equity prices relative to the rest of the world the u s trade balance will worsen by up to 1 0 percentage points but much less so for most other economies we find that this heterogeneity appears to be linked to the financial market depth and equity home bias of countries moreover the channels via wealth effects and via the real exchange rate are important for understanding the heterogeneity in the transmission

productivity shocks budget deficits and the current account abstract productivity shocks and budget deficits are considered to be two key determinants of the current account in order to assess formally the role of both factors in driving current account movements the present paper extends the standard intertemporal model of the current account to allow for non ricardian household behavior testable cross equation restrictions for the current account and investment are derived by drawing on the distinction between country specific and global innovations to productivity as well as to the government budget we test the restrictions of the model against time series data for 21 oecd countries and find evidence in support of the model

logit estimates of strike incidence from canadian contract data logit estimates of strike incidence are made based on a unique and comprehensive data set of 2 437 collective agreements the appropriate level of aggregation since that is where bargaining occurs the results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes such functions of strikes are to generate information elicit truth telling establish reputations provide catharsis and solve intraorganizational conflict

capital flows and saving in latin america and asia a reinterpretation abstract both theory and the empirical evidence for a broad range of countries have identified a negative relationship between domestic and foreign saving still based on the experience of the 1990s a popular view has emerged that domestic and foreign saving are positively related in asia and negatively related in latin america we argue that this popular discussion does not discriminate between trends in domestic saving which are very different in the two regions and the cyclical component of saving which is linked to capital flows we show that when trend and cyclical components of domestic saving and capital flows are properly taken into account the two regions do not differ in the short run response of domestic saving to capital inflows we conclude that the main differences pertain to the long run behavior of saving rates which are driven by trends in demographic factors per capita gdp and other factors that have little to do with fluctuations in capital flows

international business cycles and the dynamics of the current account abstract this paper analyzes the transmission of productivity shocks across countries and how the responses of investment and the current account differ depending on the degree of propagation of shocks we explore both issues by estimating a structural model for japan the us and europe we postulate as an identifying assumption that the propagation of shocks is proportional to trade we find that there is a strong asymmetry in that shocks to the us propagate quickly to the other two economies while european and japanese shocks have little impact in other countries productivity when we explore the responses of investment and the current account we find that productivity increases lead to domestic investment booms and current account deficits investment in other countries tends to react positively to productivity shocks even when the shock is purely national this second result contradicts the predictions of a standard open economy model with perfect capital mobility where in response to country specific shocks domestic and foreign investment should move in opposite directions we also find quantitative differences among the three countries in the response of the current account these differences are not related to the global or idiosyncratic nature of the shocks

cyclical fluctuations in strike durations canadian data on strikes between 1946 and 1983 are used to estimate linear regression models for the logarithm of completed duration a thorough investigation of the influence of the business cycle reveals strong support for the hypothesis that strike durations are countercyclical the cyclical effect is shown to be robust to both the choice of cyclical variable and the econometric specification and the magnitude of the effect is quite substantial experimentation with different representations of the cycle reveals that it is difficult to improve on a simple formulation involving a single continuous variable

us trade balance dynamics the role of fiscal policy and productivity shocks and of financial market linkages abstract this paper examines whether domestic and foreign productivity and fiscal policy changes can account for the wide swings in us net exports during the period 1975 1991 a two country real business cycle model is used for that purpose the model is simulated using data on productivity government purchases and taxes for the g7 countries a version of the model with incomplete asset markets in which only bonds can be used for international capital flows tracks the us trade balance fairly closely provided permanent country specific productivity shifts are assumed the simulations suggest that us productivity changes were the main source of fluctuations in us net exports

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

dissecting the dynamics of the us trade balance in an estimated equilibrium model in an estimated two country dsge model we find that efficiency shocks specific to investment account for more than half of the forecast variance of cyclical fluctuations in the us trade balance both domestic and foreign investment specific shocks have a substantial impact on the variability of the imbalance total factor productivity shocks do not matter for the variance and even lead to procyclicality in the trade balance

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

short and long run credit constraints in french agriculture a directional distance function framework using expenditure constrained profit functions this empirical application investigates the eventual presence of credit constraints using a panel of french farmers the credit constrained profit maximization model proposed by fare grosskopf and lee is extended in three ways first we rephrase the model in terms of directional distance functions to allow duality with the profit function second we model credit constraints in the short run and investment constraints in the long run using short and long run profit functions third we lag the expenditure constraint one year to account for the separation between planning and production we find empirical evidence of credit and investment constraints financially unconstrained farmers are larger perform better and seem to benefit from a virtuous circle where access to financial markets allows better productive choices

the effects of changes in capital gains taxes on land sales empirical evidence from finland we estimate the landowner response to and fiscal effects of a temporary reduction in capital gains taxes imposed on land sales the underlying normative decision rules are first derived and solved numerically using stochastic dynamic programming the landowner preferences and willingness to sell land are then estimated in the reduced form using survey data from finland the results suggest that the timing of land sales and land sales quantities respond significantly to tax incentives certain temporary tax waiver programs could maintain the current tax revenues with fewer trade distorting effects on the land market

wage contract settlements in u s manufacturing a bstruactusing a large scale longitudinal micro data base this paper tests for the determinants of union wage settlements in manufacturing alternative specifications of wage change relationships were tested in data covering the years 1957 to 1980 among the most important determinants of union wage changes were the expected inflation rate inflationary surprises in indexed agreements incomes policy dummy variables and spillovers from key national agreements catch up effects from lagged inflationary surprises were not important in determining the size of new settlements

do tax cuts generate twin deficits a multi country analysis we study the eects of tax shocks on the budget and external deficits for 16 industrialized countries over the post 1975 period our structural approach is based on a tractable small open economy model where a tax cut generates a budget deficit in turn the budget deficit aects the external deficit by two distinct channels the demographic channel works through the overlapping generation structure of the model the forecasting channel works through the dynamic structure of the model our empirical analysis documents that tax shocks generate significant positive comovements between the budget and external deficits we also find that both the demographic and forecasting channels are important to explain the comovements

reputation in repeated second price auctions abstract a model in which two bidders take part in a series of second price comon value auctions is examined the question of an optimal auction from an auctioneer s standpoint in a repeated auction setting is partially addressed it is shown that the results from single auction models do not carry over to repeated auctions when one of the bidders is endowed with a reputation for bidding aggressively second price auctions with two bidders are highly susceptible to manipulative behaviour by an aggressive bidder and yield much lower revenues to the auctioneer

common agricultural policy effects on dynamic labour use in agriculture abstract the aim of this study is to investigate the effects of direct payments and rural development measures of the eu s common agricultural policy cap on employment in agriculture we work with a dynamic labour demand equation augmented by the full set of policy instruments of the cap which is estimated on a panel dataset of 69 east german regions we present results for four estimators which differ in how they eliminate the fixed effects and how they address the endogeneity of the lagged dependent variable the results suggest that there were few desirable effects on job maintenance in agriculture while there is some indication that investment subsidies have halted labour shedding on farms a rise in the general wage level reduced labour use in agriculture changes in direct payments had no employment effects generally labour adjustment exhibits a strong path dependency

computation of the beveridge nelson decomposition in the case of cointegrated systems with i 0 variables abstract this paper shows how the result of arino and newbold economics letters 61 1998 37 for the multivariate bn decomposition in the cointegrated case can be extended when i 0 variables are considered in the vec model an application of the extended procedure to the spanish peseta french franc real exchange rate is also provided

the beveridge nelson decomposition of economic time series another economical computational method abstract this note describes a simple and an economical computational procedure for generating the permanent cyclical decomposition of economic time series proposed by beveridge and nelson 1981 our procedure is a more complete alternative than the method suggested by cuddington and winters 1987

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

jobs and agricultural policy impact of the common agricultural policy on eu agricultural employment abstract this paper investigates the relationship between eu agricultural subsidies and the outflow of labor from agriculture we use more representative subsidy indicators and a wider coverage panel data from 210 eu regions over the period 2004 2014 than has been used before the data allow to better correct for sample selection bias than previous empirical studies we find that on average cap subsidies reduce the outflow of labor from agriculture but the effect is almost entirely due to decoupled pillar i payments coupled pillar i payments have no impact on reducing labor outflow from agriculture i e on preserving jobs in agriculture the impact of pillar ii is mixed our estimates predict that an increase of 10 percent of the cap budget would prevent an extra 16 000 people from leaving the eu agriculture sector each year a 10 percent decoupling would save 13 000 agricultural jobs each year however the budgetary costs are large the estimated cost is more than 300 000 per year or more than 25 000 per month per job saved in agriculture

rural population decline in the 1980s impacts of farm structure and federal farm programs federal farm program benefits accrue disproportionately to large scale farm operators and continue largely because of the political influence of their beneficiaries some writers argue that these payments stem the movement of labor out of agriculture ultimately reducing the pace of rural depopulation here a theoretical model linking farm program payments to population loss is presented and empirically estimated for the years 1980 90 larger farm program payments as a share of total cash marketing receipts were associated with greater population losses from rural counties this result holds after controlling for other economic variables affecting population migration from rural areas

a bargaining model with incomplete information about time preferences etude d un jeu de negociation strategique sequentiel avec information incomplete caracterisation d une classe d equilibres sequentiels appeles equilibres sequentiels de negociation et demonstration de l unicite de cet equilibre

targeting the real exchange rate theory and evidence abstract this paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate an intertemporal optimizing model suggests that in the absence of changes in fiscal policy a more depreciated level of the real exchange rate can only be attained temporarily this can be achieved by means of higher inflation and or higher real interest rates depending on the degree of capital mobility evidence for brazil chile and colombia supports the model s prediction that undervalued real exchange rates are associated with higher inflation

the savers spenders theory of fiscal policy the macroeconomic analysis of fiscal policy is usually based on one of two canonical models the barro ramsey model of infinitely lived families or the diamond samuelson model of overlapping generations this paper argues that neither model is satisfactory and suggests an alternative in the proposed model some consumers plan ahead for themselves and their descendants while others live paycheck to paycheck this model is easier to reconcile with the essential facts about consumer behavior and wealth accumulation and it yields some new and surprising conclusions about fiscal policy

collateral constraints and the current account theory and evidence we investigate the impact of domestic financial frictions on the current account dynamics in asian countries before and after the asian financial crisis in 1997 1998 by introducing collateral constraints into the intertemporal current account approach we examine six asian countries before the crisis collateral constraints significantly impact the current account in korea malaysia the philippines and thailand but after the crisis they do not our study shows that the impact of domestic financial frictions on the current account changes before and after a financial crisis jel f32 f41

business cycles and the exchange rate system some international evidence this paper investigates the differences in time series behavior of key economic aggregates under alternative exchange rate systems we use a postwar sample of 49 countries to compare the behavior of output consumption trade flows government consumption spending and real exchange rates under alternative exchange rate systems pegged floating and cooperative systems such as the ems we then examine evidence from two particular episodes involving canada and ireland of changes in the exchange rate system aside from greater variability of real exchange rates under flexible than under pegged nominal exchange rate systems we find little evidence of systematic differences in the behavior of macroeconomic aggregates or international trade flows under alternative exchange rate systems these results are of interest because a large class of theoretical models implies that the nominal exchange rate system has important effects on a number of macroeconomic quantities

bargaining with common values this paper examines a bargaining model with asymmetric information in which the private valuations of the two bargaining agents are correlated it shows that equilibria in such models typically exhibit a significant probability of a significant delay to agreement the paper characterizes the unique perfect bayesian equilibrium to the game in which an uninformed buyer makes offers to a privately informed seller it also shows by example that in this framework bargainers may rationally break off negotiations even in the presence of commonly known gains from trade

on the intersectoral migration of agricultural labor labor is the single most important factor in determining national income as economies grow agricultural labor declines as a share of total labor and converges to a level of 2 or 3 percent off farm migration facilitates the development of nonagriculture but historically the process spans decades the authors argue that the pace of the process is a fundamental outcome of a dynamic equilibrium based on expectations of lifetime earnings and the cost of migration the authors present an empirical model of the determinants of intersectoral migration one fundamental determinant is income differences across sectors as such migration should stop when income differences reach a certain level the authors provide a method of measuring the level at which intersectoral migration will cease while there are credible reasons for a permanent difference to exist between sectoral incomes the authors find no empirical evidence of a permanent wedge

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

what drives the german current account and how does it affect other eu member states we estimate a three country model using 1995 2013 data for germany the rest of the euro area rea and the rest of the world row to analyse the determinants of germany s current account ca surplus after the launch of the euro our results suggest that the german surplus reflects a succession of distinct shocks mono causal explanations of the surplus are thus insufficient the most important factors driving the german surplus were positive shocks to the german saving rate and to row demand for german exports as well as german labour market reforms and other positive german aggregate supply shocks the key shocks that drove the rise in the german ca tended to worsen the rea trade balance but had a weak effect on rea real activity our analysis suggests these driving factors are likely to be slowly eroded leading to a very gradual reduction of the german ca surplus an expansion in german government consumption and investment would raise german gdp and reduce the ca surplus but the effects on the surplus would be weak

transition and agricultural labor reforms have strongly affected agricultural employment in transition countries but in remarkably different ways we present a theoretical model and an empirical analysis to explain differences in labor adjustment during transition we show that the differences are due to a combination of variations in initial conditions and differences in reform policies and effects the removal of price distortions and subsidies caused wage and price adjustments during transition and a reduction in labor demand in agriculture surplus labor outflow from agriculture was further stimulated by the privatization of the farm assets as they improve incentives and remove constraints for optimal factor allocation and structural adjustment the shift to individual farms which was especially strong in labor intensive production systems with low labor productivity in agriculture has reduced the outflow of labor from agriculture by improving farm governance and labor efficiency although this effect was mitigated by losses in scale economies due to disruptions and market imperfections in transition in general labor outflow was considerably lower on individual farms than on corporate farms due to a combination of factors related to human capital access to finance and physical capital in the last section of the article we present a general framework for understanding labor adjustments in transition countries specifically we show that there are several patterns of labor transition in one pattern followed by e g the czech republic and hungary there is initially a strong survival of the restructured large scale corporate farms that have laid off many workers in the second phase of transition gradually the importance of individual farms increases in other countries such as romania the opposite has happened in these countries there is an immediate strong shift to individual farms while labor use increases on average in agriculture after this initial phase the shift to individual farms continues albeit more slowly and labor use in agriculture starts to decline finally our analysis shows that in countries such as russia and ukraine much of the surplus labor is still employed by little reformed former collective and state farms major adjustments await more progress in agricultural and general reforms

understanding the dynamic effects of government spending on foreign trade abstract using vector autoregressions on u s time series the present paper documents the effects of fiscal policy on foreign trade an increase in government spending significantly depreciates the nominal exchange rate appreciates the terms of trade and increases net exports exposed to the same spending shock a new keynesian general equilibrium model is shown to match qualitatively the response of relative prices the response of net exports in contrast depends on the intra and intertemporal elasticities of substitution and the degree of home bias in private spending an accommodating monetary policy dampens but does not alter the response of net exports

an empirical test of an asymmetric information model of strikes recent developments in the theory of strategic bargaining demonstrate how informational asymmetries can lead to prolonged and costly bargaining these models can be applied to contract negotiations yielding an economic theory of strikes to date however few empirical tests of these models have been carried out in this paper a set of predictions concerning the incidence and unconditional duration of strikes is derived from a simple bargaining model in which the union is uncertain about the firm s future profitability these predictions are then tested on a micro data set of major u s contract negotiations that took place from 1973 to 1977

sovereign default risk and state dependent twin deficits abstract this paper analyzes the impact of the government debt to gdp ratio on the correlation of the fiscal balance and the current account above a government debt to gdp ratio of 90 percent the correlation of the two balances decreases by 0 16 in a sample of 12 euro area countries and by 0 17 for greece ireland portugal and spain this paper develops a small open economy model with defaultable government debt and riskless international capital markets to explain the empirical evidence of a state dependent change in the correlation in the model high public debt to gdp ratios raise sovereign risk premia as the default probability increases leading to higher uncertainty about future taxes in this case precautionary savings of households increase and partially compensate current account deficits that result from fiscal deficits the increase in households saving reduces the correlation of the two balances by the same magnitude as documented in the data the model calibrated to greece matches further business cycle moments and the empirical default frequency

growth of milk production in german dairy farms an empirical study based on event history analysis this article investigates determinants of growth of milk production in german dairy farms with the use of event history analysis this methodology enables the analysts to consider time as a proxy for not measurable effects on growth the likelihood of a farm s moving from a nongrowth episode into a growth episode is estimated and the impact of various covariates on that likelihood is assessed the analysis is based upon a balanced panel of annual farm accounts from 616 specialized dairy farms in germany covering the financial years 1995 1996 2008 2009 the results from event history analyses are presented for low and high growth rates for both groups it was found that the probability of entering a growth episode defined as the event to be analyzed increases over time e g as a consequence of an increasing need to improve competitiveness moreover several covariates such as the share of subsidies in returns farmer s age and milk price had a significant impact on growth in a farm s milk production the analysis revealed however that the effect direction of some explanatory variables differed between the two groups

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

land market imperfections and agricultural policy impacts in the new eu member states a partial equilibrium analysis this article analyses how transaction costs and imperfect competition in the land market affect the welfare effects of agricultural subsidies in the new eastern member states of the european union benefits of land subsidies end up with landowners in new eastern member states also with imperfections in the new eastern member states land markets with unequal access to subsidies small tenant farmers may even lose out from the subsidies decoupling of payments shifts policy rents to farmers but constrains productivity enhancing restructuring using reserve entitlements to mitigate this effect reduces the intended benefits on distortions and target efficiency

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

budget deficit persistence and the twin deficits hypothesis abstract this paper gauges the twin deficits hypothesis i e a positive causal relationship between the external and budget deficits this relationship is measured by the responses of the external deficit to changes in the budget deficit induced by blanchard s model these responses are positively affected by the birth rate and by the degree of persistence of the budget deficit empirical results for the canadian and us economies reveal that although the relevant birth rates are small the great persistence of the budget deficits yields responses that are numerically large and statistically positive this contrasts with previous tests of the twin deficits hypothesis which have never formally taken into account the stochastic properties of the budget deficit

twin deficit or twin divergence fiscal policy current account and real exchange rate in the u s abstract in spite of concerns about twin deficits fiscal and the current account deficits for the united states economy empirical evidence suggests that twin divergence is a more usual feature of the historical data i e when fiscal accounts worsen the current account improves and vice versa this paper empirically studies the effects of fiscal policy government budget deficit shocks on the current account and the real exchange rate during the flexible exchange rate regime period based on var vector auto regression models we identified exogenous fiscal policy shocks after controlling for business cycle effects on fiscal balances in contrast to the predictions of most theoretical models the u s results suggest that an expansionary fiscal policy shock or a government budget deficit shock improve the current account and depreciate the real exchange rate increases in private savings and declines in investment contribute to the current account improvement while a nominal exchange rate depreciation as opposed to a relative price level change is mainly responsible for the real exchange rate depreciation the twin divergence of fiscal balances and current account balances is also explained by the prevalence of output shocks i e output shocks more than fiscal shocks appear to drive the co movements of the current account and the fiscal balance

the determinants of the migration of labor out of agriculture in the united states 1940 85 the flow of labor out of production agriculture is analyzed using a two sector model of occupational choice a migration equation is specified and tested empirically using aggregate data for the united states the economic determinants of the migration of all farm workers and farm operators are established farm labor is found to be responsive to changes in the returns to agricultural labor relative to nonfarm labor returns given this responsiveness policies intended to increase farm income will affect the level of agricultural employment

an investigation into the determinants of u s strike activity this paper outlines the steps involved in constructing a new panel dataset of u s contract negotiations and strike activity this data set has a much broader coverage of firms and unions than micro data sets analyzed to date key findings include the discovery that the variability and not the level of firm profitability affects the probability of a strike personal characteristics of the union workforce also emerge as key determinants of strike activity finally strikes are found to be more likely when the local labor market is tight but less likely when the industry labor market is tight copyright 1986 by american economic association

credit market imperfections and the distribution of policy rents this article shows that credit market imperfections have important implications for the distribution of policy rents in a model with land as fixed factor and credit market imperfections when an area payment is given land rents go up by more than the subsidy on aggregate farms may lose from the subsidy the results depend on the extent to which subsidies have direct and indirect effects on the credit constraints on whether farms rent or own land and on farm heterogeneity

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

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

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

promoting structural adjustment in agriculture the economics of new entrant schemes for farmers we examine the efficacy of incentives for new entrants to farming as an alternative to early retirement schemes for farmers we briefly review previous studies on the effectiveness of farmer early retirement schemes in promoting structural adjustment in agriculture and conclude that the economic case for these schemes seems weak we then employ a dynamic farm optimisation model incorporating a realistic specification of farmer decision making on an original northern irish dataset to analyse ex ante the possible impacts of new entrant schemes we find a more positive potential impact from these schemes particularly the option of an interest rate subsidy on farm development loans this is attributed to the dynamic effects of the farm investments associated with such schemes a likely reflection of the long term effects of differences in age related lifecycle goals younger farmers have a longer planning horizon and tend to invest more heavily in business growth than comparable older age groups

twin deficits squaring theory evidence and common sense in this paper we reconsider the twin deficit hypothesis that fiscal shocks generating budget deficits also worsen external trade both from a theoretical point of view and by analyzing data for australia canada the uk and the us first we assess the joint dynamics of budget and trade deficits along the business cycle uncovering a strikingly recurrent s shaped relation between the two the correlation is actually negative suggesting twin divergence this observation however cannot rule out the possibility that government spending expansions and or tax cuts may cause trade deficits as the overall correlation is likely to be dominated by cyclical factors second we reconsider the transmission of government spending in a standard two country two good model we find that openness and the persistence of fiscal shocks are major determinants of the magnitude or even sign of the response of the trade balance to fiscal shocks for a given persistence of the fiscal shock the closer an economy the larger the crowding out effect on investment the lower the deterioration of the trade balance third we take this insight to the data investigating the transmission of fiscal shocks in a var framework in the four countries in our sample our empirical findings tend to support our view in the us and australia which are relatively less open than canada and the uk and where government spending shocks are less persistent we find that the external impact of fiscal policy is rather limited instead private investment responds substantially the reverse is true for canada and the uk these findings confirm and put into perspective earlier results whereas fiscal expansions in the us are found to have on average a negligible effect on the country s trade balance however we emphasize that these results are consistent with a call for a us fiscal retrenchment to address global imbalances the impact of budget cuts on the us external trade is muted by their positive effect on domestic investment strengthening the us ability to generate resources against future interest and debt repayment

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small

fiscal deficits and current account deficits abstract recent fiscal stimulus packages depend for their effectiveness on the assumption of non ricardian savings behavior we show that under the same assumption higher fiscal deficits can have problematic implications if they turn out to be permanent first if they occur in large countries they significantly raise the world real interest rate second they cause a short run current account deterioration equal to around 50 of the fiscal deficit deterioration third the longer run current account deterioration equals almost 75 for a large economy such as the united states and almost 100 for a small open economy