inventories rational expectations and the business cycle abstract the simplest macroeconomic models in which markets clear instantaneously and expectations are rational preclude the existence of business cycles that is of serially correlated deviations of output from trend this paper studies one of several mechanisms that can be used to make these so called new classical models produce business cycles the mechanism is the gradual adjustment of inventory stocks two macroeconomic models of inventory holdings are formulated both imply first that current output should be a decreasing function of the stock of inventories and second that inventories once perturbed from equilibrium levels should adjust only gradually these two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational two principal conclusions are reached first disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend second if desired inventories are sensitive to the real interest rate then even fully anticipated changes in money can affect real variables

measuring technical efficiency abstract the theoretical consideration of technical efficiency has existed since koopmans koopmans t c 1951 an analysis of production as an efficient combination of activities in koopmans t c ed activity analysis of production and allocation cowles commission for research in economics monograph no 13 wiley new york defined it as production possibilities for which it is not possible to increase any output without simultaneously increasing any input ceteris paribus the non parametric approach to efficiency calculation known as data envelopment analysis is not based on this definition but rather on the radial index of farrell farrell m j 1957 the measurement of productive efficiency journal of the royal statistic society ser a 120 253 281 even after farrell efficiency is achieved there may exist additional slack in individual inputs and or outputs implying that farrell s index does not necessarily measure koopmans inefficiency various measures have been proposed to solve this problem this paper discusses shortcomings of these alternative measures and introduces a new relative measure of technical efficiency using simulated data it is shown that the new measure outperforms existing measures in the majority of cases

habits hysteresis and catastrophes in labor supply abstract this paper investigates the implications of a general model of locally unstable habit formation with respect to consumption household time and corporate time the model is shown to imply multiple long run equilibria exhibiting hysteresis and catastrophes dependent on rationings and the wage rate this can explain profound changes in labor supply preferences and behavior such as when long term unemployed become little motivated to get a new job or when former housewives develop a strong orientation towards paid work

married womens tastes and the decision to participate in the labour market results from a fixed effects model in the paper we report estimates from two logit models of women s labour force participation a model with out fixed effects estimated from cross sectional data indicates a significant postive relation between work experience and particiption we ask whether the relation is due to a causal influence extered by the former variable on the latter or to a common underlying variable taste for market attachement to answer this question we present results from a fixed effects model estimated from panel data in this model the estimated coefficients of experience are insignificant suggestion that a taste for market attachement underlies both experience and participation is the presence of preschool children

determination of employment with wage and price speculation the purpose of this paper is to investigate whether aggregate fluctuations in employment may be explained within a market clearing framework as intertemporal substitution in labor supply and demand an intertemporal substitution model for the firm is derived this model is estimated with a lucas rapping type supply equation empirical results with finnish data lend support to the intertemporal substitution model particularly concerning the demand function specification on the other hand the results for the supply equation are somewhat mixed being rather sensitive to the dynamic specification

real wages in the business cycle and the theory of income distribution an unresolved conflict between theory and facts in mainstream macroeconomics the focus of this article is the recurring tension between mainstream macroeconomics and observed facts in connection with the difficult task of providing explanations of the business cycle consistent both with the traditional theory of income distribution and with the empirical evidence concerning the co movements of real wages and employment over the cycle the attempts to reconcile facts and theory have led to the continuous introduction of specific and arguably ad hoc hypotheses in contrast with the search for greater theoretical rigour claimed by the various streams of macroeconomic modelling subsequent to the neo classical synthesis in addition the specific assumptions introduced in the models or their implications are in turn often contradicted or at best not confirmed by subsequent empirical research it is suggested in the conclusions that the difficulty of keeping together in a simple and consistent framework theory and facts reflects the flawed theoretical foundations of mainstream theory

the intertemporal substitution model of labour market fluctuations an empirical analysis the paper uses two approaches to study whether aggregate fluctuations in employment and unemployment may be explained within a market clearing framework as intertemporal substitution in labour supply first log linear equations for labour supply and unemployment are estimated using a forecasting model to measure wage and price expectations second a utility function is used to derive and estimate an equation for labour supply as a function of the current real wage and consumption the influence of expected future real wages and interest rates is captured by the consumption variable the empirical results do not support the intertemporal substitution model

labour force participation timing and persistence this paper examines the relative importance of timing and persistence elements in explaining cyclical fluctuations in labour supply data from the natural experiment provided by world war ii and cross sectional data on american local labour markets as well as aggregate time series data are used in the empirical work we find little evidence that timing effects play an important role in labour market dynamics the evidence suggests that views emphasizing persistence are more accurate and that previous employment tends to raise the probability of subsequent employment much of the development of applied economic theory within the past 25 years has emphasized the importance of viewing economic decisions in a life cycle context consumption decisions are today frequently viewed as being determined by wealth or permanent income the human capital revolution has brought life cycle considerations to the forefront of modern labour economics while the life cycle dynamics of labour force participation decisions have important implications for macroeconomic theory and policy they have received relatively little empirical attention with the notable exceptions of lucas and rapping 1969 and hall 1980 none of the large body of work on cyclical fluctuations in employment has explicitly relied on a dynamic model of labour supply this paper uses several types of data to examine two elements of participation dynamics the first is the aspect of timing which is implicit in the work of lucas and rapping and in mincer s 1966 early discussion of hidden unemployment the timing argument which is presented most explicitly in ghez and becker 1975 holds that leisure is easily substitutable across periods hence relatively small transitory movements in the perceived real wage or real rate of return can have large effects on the path of labour supply as individuals time their participation to coincide with periods of high transitory wages on the other hand permanent changes because they do not affect the timing decision are expected to have a much smaller effect on participation it is this view of labour supply which underlies new classical macroeconomic models the dependence is made explicit in lucas 1975 who claims that what we do know indicates that leisure in one period is an excellent substitute for leisure in other nearby periods the ability of classical macroeconomic models to explain fluctuations in employment depends on the presence of strong intertemporal substitution effects unless

gender and the consulting academic economist we surveyed academic economists on their experiences and perceptions of legal consulting nearly two thirds have consulting experience and 40 have consulted within the last 5 years base hourly rates average 244 with a median of 200 women are less likely than men to have served as consultants and charge lower rates than comparable men but there are few differences by gender in willingness to consult women report substantially more negative bias and are less likely to consult in complex cases or to have a high profile role in litigation jel j44 j71 k41

unstable bandwagon and habit effects on labor supply abstract this paper develops a dynamic labor supply model based on unstable bandwagon and habit effects it possesses multiple long run equilibria and exhibits hysteresis and transitions between home and market time dependent on the wage rate these properties are robust the model provides an explanation of the long run increase in labor supply by married women in the netherlands the usa and other oecd countries

labour market conditions and labour force participation the case of the netherlands we develop a model to explain the relationship between unemployment and labour force participation by males and females in the netherlands following recent advances in the literature a distinction is made between temporary and permanent unemployment our findings indicate that male labour force participation is significantly influenced by the temporary unemployment variable while permanent unemployment does not seem to play a significant part for females we find the opposite

part time participation over the life cycle among married women who work in the market reported here are the estimates from two logit models of married women s labour force employment a pooled unconditional logit that does not control for fixed effects and a conditional logit model incorporating fixed effects both sets of results indicate the presence of occupational segregation between part time and full time employment since the amount of part time experience a woman has obtained increases the probability of part time employment these results are in agreement with those reported in previous studies that the presence of preschool children differentially encourages part time employment

labour supply incentives and the taxation of family income taxing family income richard blundell and ian walker will lower marginal rates of income tax increase incentives to work the traditional theoretical argument ignores the fact that many individuals are members of households with more than one potential participant in paid employment the theory of optimal income tax is utilized to argue that the tax system should discriminate between individuals in the same household if their labour supply responses are different empirically the response of labour supply to changes in after tax wages is largest for secondary workers particularly married women hence the largest beneficial incentive effect is obtained if such individuals face lower tax rates since these individuals typically have below average pre tax earnings this suggests a simple way to implement our proposal establish a progressive income tax with individual earnings as the basis of assessment this might have additional advantages of fairness but its primary purpose would be to ensure that low earning but highly responsive individuals face low marginal tax rates while high earning but relatively unresponsive individuals face higher marginal tax rates contrary to popular wisdom a flat rate tax system would be less favourable for work incentives we illustrate this theoretical argument using an empirical model of labour supply embedded in a micro computer programme capable of simulating alternative tax systems

labor force participation and monetary policy in the wake of the great recession in this paper we provide compelling evidence that cyclical factors account for the bulk of the post 2007 decline in the u s labor force participation rate we then proceed to formulate a stylized new keynesian model in which labor force participation is essentially acyclical during normal times that is in response to small or transitory shocks but drops markedly in the wake of a large and persistent aggregate demand shock finally we show that these considerations can have potentially crucial implications for the design of monetary policy especially under circumstances in which adjustments to the short term interest rate are constrained by the zero lower bound

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

labor supply under real wage uncertainty a new look at the intertemporal substitution hypothesis the idea that timing may play a crucial role in labor supply decisions has existed in several forms since mincer s 12 seminal work on the labor force participation decisions of married women mincer suggested at that time that married women s labor supply decisions may be quite responsive to transitory variations in earnings lucas and rapping 11 generalized the notion of timing by suggesting that for any individual consumption of leisure and other goods in the current period is readily substitutable with consumption in other periods in this framework the laborer is viewed as a capitalist and the decision to transfer one s labor supply from one market period to another is recognized as an investment decision 11 729 this concept of intertemporal substitution has been controversial as it has proven quite difficult to substantiate empirically while the estimates obtained by lucas and rapping were favorable the recent and much more elaborate tests provided by altonji 1 and clark and summers 5 have failed to support the intertemporal substitution hypothesis these studies have used models in which individuals base their current labor supply decisions on the magnitudes of current and expected variables if current decisions can be shown to be responsive to expected levels of relevant variables then this indicates that individuals do in fact choose when to and when not to supply labor over the course of the business cycle and the notion of intertemporal substitution is supported the approach then has been to estimate the net present value of the expected levels of wages and prices at each point in time and to base tests of the intertemporal substitution hypothesis on the performance of these expectations variables implicitly these models assume that people live in an uncertain world and that they base their current decisions on what they judge to be the likely future values of important economic variables a key element which has been missing from previous studies is consideration of how the level of uncertainty associated with peoples expectations affects decisions made at each point in time this paper attempts to fill that gap by focusing upon the effects of real wage uncertainty on labor supply decisions

two birds with one stone female labor supply fertility and market childcare abstract the correlation between the female labor force participation rate fpr and the total fertility rate tfr has switched from negative to positive in some developed countries in this paper we show how increasing the substitutability between maternal time and market childcare can raise both fpr and tfr and provide an explanation for the change in the tfr fpr correlation simulations of a life cycle model of married women s work and fertility decisions indicate that the fpr increases whereas the tfr is u shaped with regard to substitutability the dynamic relationship depends on the relative strength of behavioral and composition effects greater substitutability allows working women to have more children but it also attracts less productive women to enter the labor force who trade childbirths for labor supply the findings imply that raising substitutability to a sufficiently high level can achieve the two seemingly conflicting goals increasing female labor force participation and fertility rates

on the robustness of alternative unemployment measures abstract the unemployment rate is one of the most important economic indices this article extends the work of feng and hu 2013 and examines the effects of potential misclassifications in labor force statuses on the different bureau of labor statistics bls unemployment measures compared to the official us unemployment rate u 3 the broader measure u 6 is more robust to such classification errors in the survey data that are used to calculate unemployment rates if one prefers the definitions of u 3 then we offer an approach to use reported unemployment measures to proxy for the unobserved true u 3

some empirical evidence on the discouraged worker effect abstract this note produces empirical evidence on the existence of a significant discouraged worker effect in us data namely on the tendency for groups of secondary workers to move in and out of the labor force with the business cycle looking for jobs when these are available while giving up job search during recessions by focusing on the behavior of the not in the labor force series as well as of two of its segments going to school and keeping house at the business cycle frequencies both in the aggregate and for a number of age sex groups the series display a clear counter cyclical pattern thus lending support to the discouraged worker notion

a structural explanation of recent changes in life cycle labor supply and fertility behavior of married women in the united states abstract this study documents and explains important changes in the life cycle labor supply and fertility behavior of married women in the united states from the 1950s to more recent cohorts the younger cohorts relative to the 1950s supply more labor at earlier stages of the life cycle delay motherhood to later stages without reducing the fertility rate and upon childbearing show a greater tendency to stay out of the labor force in a life cycle model for married couples in which a household makes decisions on fertility as well as labor supply consumption and savings all the behavioral changes are jointly and quantitatively explained by a combination of changes in various labor supply fertility determinants with the increased returns penalties to work non work experience being the dominant contributor the results survive a series of robustness tests including endogenizing education choice and assortative marriage