determinants of off farm work and its effects on farm performance the case of norwegian grain farmers limited attention has been given in the literature to the impact of off farm work on farm performance more knowledge about the determinants of part time farming and its effects on farm performance could help policymakers to introduce better targeted rural development policies the aim in this article is to fill part of the above mentioned gaps by analyzing factors that influence the choices of off farm work by either the farmer alone or jointly by both the farmer and partner and simultaneously examining how off farm work influences farm performance these analyses were based on an unbalanced panel data set from norwegian grain farms during 1991 to 2005 among the determinants of off farm work hours we found that in addition to demographic time trend and some regional effects there was a significant negative effect of farm output on farmers off farm work hours the production function results revealed that off farm work had a positive effect on farm output at first increasing but then decreasing with increase in hours spent in off farm work furthermore our analysis revealed no systematic effect of off farm work on farm technical efficiency

can financial ignorance be bliss financial illiteracy is widespread and leads to bad financial decisions individuals cannot answer basic questions about inflation compounding and diversification this article argues that financ

transaction costs in the theory of unemployment this paper addresses the problem of accounting theoretically for the persistence of large scale unemployment it briefly reviews some of the well known shortcomings of the keynesian account based upon sticky wages and prices and upon robert clower s 1965 concept of effective demand arguing that these shortcomings can be seen as a failure explicitly to integrate transaction costs into the theory of unemployment the main constructive contribution of the paper is an example of a simple macro model along the lines of robert barro and herschel grossman 1971 in which transaction costs are made explicit an essential part of this example is an externality of the sort suggested by peter diamond 1982 the example provides an account of persistent unemployment with many keynesian features yet without some of the keynesian shortcomings in particular it assumes perfect wage and price flexibility

trade and direct investment in producer services and the domestic market for expertise foreign producer services can provide substantial benefits for domestic firms we build on earlier monopolistic competition models of intermediate producer services in this paper results show that 1 while foreign services are partial equilibrium substitutes for domestic skilled labour they may be general equilibrium complements 2 service trade can provide crucial missing inputs that reverse comparative advantage in final goods 3 the optimal tax on imported services may be a subsidy and 4 in our dynamic formulation there may be earnings losses for immobile workers along a transition path that suggest potentially important equity consequences of reform jel classification f12 f16 f23 commerce international et investissement direct dans les services de production et le marche interieur de l expertise les services de production en provenance de l etranger peuvent engendrer des avantages substantiels pour les entreprises domestiques dans ce memoire les auteurs construisent sur la base de certains modeles anterieurs de concurrence monopolistique de services de production intermediaires les resultats montrent que 1 alors que les services de l etranger sont des substituts pour le travail domestique specialise en equilibre partiel en equilibre general ils peuvent etre des complements 2 le commerce de services peut fournir des intrants cruciaux qui manquent et ce faisant renverser les avantages comparatifs dans les produits finaux 3 la fiscalite optimale imposee sur les services importes peut etre une subvention et 4 dans la formulation dynamique du modele il peut y avoir perte de revenus pour les travailleurs immobiles le long du sentier de transition ce qui suggere qu il peut y avoir des consequences importantes au plan de l equite associees a certaines reformes

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

valuing lost home production of dual earner couples using a life cycle model in which women divide their time between home and market work we establish a link between retirement wealth and the value of forgone home production we use data from the health and retirement study to estimate the model s parameters and adjust the growth rate of gdp to reflect reductions in non market output we find that the value of forgone home production is modest about 25 percent of women s measured earnings

emerging market economies and the world interest rate abstract we use a factor augmented var model to estimate the dynamic responses of interest rates in emerging market economies to the world interest rate which we extract from a dynamic factor model of yields in industrialized countries our results provide evidence that many emerging market yields respond to world rate shocks at least gradually which is broadly consistent with capital market integration our findings also suggest that the world rate captures information about emerging market yields not contained in us rates which are typically used to proxy for the world rate

interfirm relationships and informal credit in vietnam trading relations in vietnam s emerging private sector are shaped by two market frictions the difficulty of locating trading partners and the absence of legal enforcement of contracts examining relational contracting we find that a firm trusts its customer enough to offer credit when the customer finds it hard to locate an alternative supplier a longer duration of trading relationship is associated with larger credit as is prior information gathering customers identified through business networks receive more credit these network effects are enduring suggesting that networks are used to sanction defaulting customers

liquidity profiles of poor mexican households summary buffer stock savings theories predict that more vulnerable households build up liquid savings in order to cope with income variability using data from 1801 marginalized mexican households this paper examines how household liquidity levels vary by income level and use of banking the paper finds strong evidence of buffer stock savings in poor and vulnerable households it also shows that membership in a financial cooperative is a determinant of higher household liquidity levels financial instruments are used more to confront idiosyncratic shocks than systemic shocks idiosyncratic shocks and remittances are important determinants of liquidity levels in unbanked households

the impact of macroeconomic variables demographic structure and compulsory superannuation on share prices the case of australia this paper investigates the impact of the population in the 40 64 age band on share prices using an annual time series data set for the period 1965 2002 and the impact of the superannuation fund on share prices using quarterly time series data for the period 1988 q1 to 2002 q4 in accordance with poterba s suggestion we have also used real gdp interest rates and inflation as control variables in both models using cointegration and the error correction mechanism we found that the specified models are robust the variables under study for both models are cointegrated and long run relationships exist between the variables we also found that the population in the 40 64 age band and the superannuation fund positively and significantly affect share prices separately in the long run

the determinants of private saving in india abstract this paper examines the determinants of private saving in the process of economic development in the light of the indian experience it is found that the saving rate rises with both the level and the rate of growth of disposable income the real interest rate on bank deposits has a significant positive impact but the magnitude of the impact is modest public saving seems to crowd out private saving but less than proportionately furthermore the spread of banking facilities in the economy and the inflation rate have a positive impact and changes in the external terms of trade a negative impact on private saving

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

bequest and wealth accumulation are some pieces of the puzzle missing the lively debate between laurence j kotlikoff and franco modigliani presented in the spring 1988 issue of this journal concerns an old question what is the main motivation for saving and therefore for the accumulation of wealth more specifically what are the respective contributions to aggregate wealth of 1 saving for retirement also known as hump saving 2 precautionary savings and unintended bequests due to uncertainty about the length of life and 3 planned bequests of course other wealth holding motives are possible but let us follow kotlikoff and modigliani in setting them aside for now if modigliani s life cycle hypothesis is to be viewed as a close to approximation of reality then the bulk of existing wealth should have resulted from some combination of hump and precautionary saving our comment on this dispute attempts to advance two issues first the controversy involves an enormous gap between empirical estimates of the share of inherited wealth in total accumulation even though the estimates are often based on the same data we hope to clarify why the estimates vary so widely second the kotlikoff modigliani dispute is presented as an american issue with little extension abroad we will present some results from other countries that bear on the controversy some of the estimates from kotlikofi s paper originated in a 1981 paper he wrote with lawrence summers which is why we sometimes refer to his position as the kotlikoff summers argument in this comment the problem of conceptualizing the contribution of bequest to aggregate savings can be summarized with a thought experiment assume all bequests were confiscated

determinants of private savings behaviour in turkey this study investigates the effects on private saving rates of a number of policy and non policy variables the analysis covers the period 1968 1994 the empirical private saving model for turkey is estimated the findings support the hypothesis that private saving rates have strong inertia the evidence indicates that government saving does not tend to crowd out private savings and the ricardian equivalence does not hold strictly income level has a positive impact on private saving rate and growth rate of income is not statistically significant from a policy point of view financial depth and development measures in turkey suggest that countries with deeper financial systems tend to have higher private saving rates private credit and real interest rates try to capture the severity of the borrowing constraints and the degree of financial repression for turkey moreover the negative impact of life expectancy rate lends support to the life cycle hypothesis the precautionary motive for saving is suppor

can high costs justify weak demand for the home equity conversion mortgage home equity conversion mortgages hecms implicitly bundle nondefaultable credit lines with put options that let borrowers or their heirs sell mortgaged homes for the credit line limit when borrowers move or die the put option s value net of closing costs bounds hecm s value to borrowers below older homeowners weak demand is commonly attributed to hecm s high costs and the government prices insurance intending to avoid subsidy however simulations indicate put value has often exceeded closing costs even ignoring other embedded options and using backward looking expectations near the recent price cycle peak these results make weak demand more puzzling

on the long run evolution of inheritance france 1820 2050 this paper attempts to document and account for the long run evolution of inheritance we find that in a country like france the annual flow of inheritance was about 20 25 of national income between 1820 and 1910 down to less than 5 in 1950 and back up to about 15 by 2010 a simple theoretical model of wealth accumulation growth and inheritance can fully account for the observed u shaped pattern and levels using this model we find that under plausible assumptions the annual bequest flow might reach about 20 25 of national income by 2050 this corresponds to a capitalized bequest share in total wealth accumulation well above 100 our findings illustrate the fact that when the growth rate g is small and when the rate of return to private wealth r is permanently and substantially larger than the growth rate say r 4 5 vs g 1 2 which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality contrarily to a widely spread view modern economic growth did not kill inheritance

tariffs and capacity utilization by monopolistically competitive firms abstract this paper examines the effect of a tariff imposed on a monopolistically competitive mc sector on firm output in a 2 2 2 model with nonhomothetic technology if the mc sector is capital intensive then a tariff will improve the terms of trade lower home firm demand elasticity but raise firm output relative to foreign firms if the mc sector is labor intensive then excess supply for firm output may be decreasing in price so the tariff may worsen the home country s terms of trade home firm demand elasticity falls but firm output rises relative to the partner country these results qualify conclusions based on single sector and single country models

recycling energy taxes impacts on a disaggregated labour market abstract this paper analyses the impacts of energy taxes whose revenue is recycled to reduce gross wages and increase employment the main novel feature of this paper is the attempt to assess the effectiveness of this fiscal reform by using a labour market model in which both skilled and unskilled workers are used in the production process this segmentation enables us to compare a policy which aims at reducing unskilled workers wages as in the original delors white book with a policy in which the environmental fiscal revenue is used to reduce the gross wage of all workers moreover two policy scenarios will be considered a non co operative one in which each country determines the optimal domestic energy tax to achieve a given employment target and a co operative one in which the energy taxes are harmonised to equalise marginal abatement costs in the eu and in which the employment target is set for the eu our results show that i an employment double dividend can be achieved in the short run only even if a trade off between environment and employment always exists ii the effect on employment is larger when the fiscal revenue is recycled into all workers gross wages rather than into unskilled workers only iii a co operative policy leads to even larger benefits in terms of employment provided that an adequate redistribution of fiscal revenues is adopted by eu countries

when less is more the benefits of limits on executive pay we derive conditions under which limits on executive compensation can enhance efficiency and benefit shareholders but not executives having its hands tied in the future allows a board of directors to credibly enter into relational contracts with executives that are more efficient than performance contingent contracts this has implications for the ideal composition of the board the analysis also offers insights into the political economy of executive compensation reform

scandinavian evidence on growth and age structure the age distribution is seldom taken into consideration in macroeconometric papers in spite of the fact that established economic theories predict that demographic factors will affect the aggregate economy this paper investigates empirically the influence of age variables on growth unlike recent papers on the subject the focus here is on investigating the relationship on annual data for individual scandinavian countries estimations of a typical growth specification augmented with age variables are run and the results indicate that economic growth is indeed affected by the age distribution where the demographic structure catches the mediumrun trend in the growth rate the robustness of this finding is first checked by instrumental variable regressions to control for the potential endogeneity of the economic variables and then by running ridge regressions to mitigate the collinearity between the age variables rarement les etudes macro economiques considerent la distribution de la population par ge

world real interest rates a global savings and investment perspective over the past 15 years long term interest rates have declined to levels not seen since the 1970s this article explores possible shifts in global savings and investment that have led to this fall in the world real interest rate there are several key findings first the authors identify the relative weakness in investment demand as more important than the relative increase in desired global savings to explain the decline in global interest rates second the results indicate that the key factors explaining movements in savings and investment are variables that evolve relatively slowly over time such as labour force growth and age structure the conclusions suggest that over the coming years world real interest rates are likely to continue to adjust slowly reflecting long term trends

the hazards of piecemeal reform british civil courts and the credit market in colonial india abstract the colonial experience of developing countries provides valuable evidence regarding the impact of legal and institutional innovations on economic growth however there has been little effort by economists to study colonial policies to gain theoretical insights into the process of institutional reform this paper considers the introduction of civil courts in colonial india and its impact on agricultural credit markets in the bombay deccan drawing on historical records and a formal analysis of the credit market the paper finds that the reform led to increased competition among lenders ex ante we expect that this would have raised farmers welfare but increased competition also reduced lenders incentives to subsidize farmers investments in times of crisis leaving them more vulnerable in bad times

optimal incentive contracts in the presence of career concerns theory and evidence this paper studies optimal incentive contracts when workers have career concerns concerns about the effects of current performance on future compensation we show that the optimal compensation contract optimizes total incentives the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract thus the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers we find empirical support for this prediction in the relation between chief executive compensation and stock market performance

life cycle savings bequest and a diminishing impact of scale on growth the present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models if the bequest motive dominates the scale effect is positive if the life cycle motive dominates the scale effect is ambiguous and may even be negative

unemployment and other measures of labor market inefficiency a comparison of u k and u s labor markets 1931 96 unemployment is probably the most widely feared phenomenon of our times it represents an enormous waste of human resources reflects an important degree of inefficiency in economic systems and causes a disturbing degree of social distress organisation for economic co operation and development oecd 1994 pp 4 6 i introduction unemployment is undoubtedly one of the most researched areas of economics determinants of the number of unemployed and duration of unemployment the role of unemployment on the depreciation of human capital and on general life satisfaction the interrelationship of unemployment and inflation and unemployment and output okun s law and policies to reduce or even eliminate unemployment are just a few of the areas of research on unemployment the underlying assumption in many studies on unemployment is that there is a very close correspondence between unemployment and labor market inefficiency as witnessed in the quote by the oecd just given although rarely if ever stated there is also the assumption that a given unemployment rate indicates similar levels of inefficiency either across time and or regions or countries unfortunately and somewhat surprisingly this assumption has not been tested thus far 1 given the importance of comparisons of unemployment on the direction of macroeconomic policy of governments it is very important to determine whether unemployment is indeed a good proxy for labor market inefficiency the goal of the article therefore is to examine this issue thus we pose the following key questions 1 to what degree do unemployment rates reflect labor market efficiencies 2 if the goal is to measure relative labor market inefficiency is it meaningful to compare unemployment rates over time and 3 to what degree do differences in unemployment rates across countries reflect differences in labor market inefficiencies basic economic theory shows that inefficiency in any market depends not only on the wedge between supply and demand but also on the elasticities of demand and supply the calculation of so called harberger triangles harberger 1954 of deadweight loss dwl which has a long history in the industrial organization and public finance literatures indicates that for a given wedge between supply and demand the dwl can be very different depending on the elasticities of supply and demand interestingly however studies examining the costs of unemployment do not focus on this basic view of welfare loss studies such as gordon 1973 ahsenfelter 1980 hurd 1980 clark and oswald 1994 murphy and topel 1997 and leslie and blackaby 1999 among others examine the costs of unemployment from an individual perspective but do not measure inefficiency from a market perspective which is the focus of the harberger triangles except for a publication by fortin and bernier 1988 2 we know of no other application of calculating harberger triangles to determine the level of inefficiency in the labor market therefore this article uses labor market data from 1931 to 1996 in the united states and united kingdom to calculate the dwl of unemployment and then compares the estimates of dwl to the unemployment rate to determine how closely related inefficiency and unemployment are 3 the following section investigates the theoretical relationships between unemployment labor supply and demand elasticities and dwl from this discussion we propose two alternative measures of inefficiency the first is the unemployment loss index dwl divided by gross domestic product gdp which indicates how large labor market inefficiency is relative to total output in the economy the second measure is dwl per unemployed person a measure of the potential average gains to employing an unemployed individual section iii outlines the data and methodology used to estimate the elasticities of labor supply and labor demand over time in the united states and united kingdom allowing for changes in the elasticities over time

aggregate consumption function and public social security the first time series study for a developing country turkey this article is the first attempt in the literature to investigate the effects of public social security on aggregate consumption in a time series setting for a developing country turkey that has one of the most generous social security systems in the organization for economic cooperation and development oecd region in order to quantify the social security variable this article uses the social security wealth ssw series calculated for turkey in a separate study this study indicates that ssw is the largest part of the household wealth in turkey and therefore should not be ignored in the aggregate consumption studies the results show that its effect on consumption is positive and robust

the effect of language on economic behavior evidence from savings rates health behaviors and retirement assets languages dier widely in the ways they encode time i test the hypothesis that languages that grammatically associate the future and the present foster future oriented behavior this prediction arises naturally when well documented eects of language structure are merged with models of intertemporal choice empirically i nd that speakers of such languages save more retire with more wealth smoke less practice safer sex and are less obese this holds both across countries and within countries when comparing demographically similar native households the evidence does not support the most obvious forms of common causation i discuss implications for theories of intertemporal choice

population age structure saving capital flows and the real exchange rate a survey of the literature this paper surveys the existing literature on the effects of population age structure on saving capital flows and the real exchange rate we build on previous surveys of age structure and saving behaviour by including extensive discussion of international linkages specifically the impact on capital flows and real exchange rates we also point to unresolved issues that need to be addressed given that population aging has serious policy implications in the developed economies these days

life cycle individual thrift and the wealth of nations this paper provides a review of the theory of the determinants of individual and national thrift that has come to be known as the life cycle hypothesis lch of saving applications to some current policy issues are also discussed part i deals with the state of the art on the eve of the formulation of the lch some 30 years ago part ii sets forth the theoretical foundations of the model in its original formulation and later amendment calling attention to various implications distinctive to it and sometimes counter intuitive it also includes a review of a number of crucial empirical tests both at the individual and the aggregate level part iii reviews some applications of lch to current policy issues though only in sketchy fashion as space constraints prevent fuller discussion this abstract was borrowed from another version of this item

family labor supply with taxes over the period 1960 1983 the proportion of federal tax revenue raised by taxation of labor supply has risen from 57 77 percent in this paper we specify and estimate a model of family labor supply which treats both federal and state taxation husbands and wives labor supply are treated jointly rather than in aseparate manner as in previous research a method to calculate the virtual wage for nonworking spouses is used within a utility maximizing framework to treat correctly the joint family labor supply decision joint family efforts are found to be important the efficiency cost deadweight loss of labor taxation is estimated to be 29 6 of tax revenue raised the effect of the new 10 deduction to ease the marriage tax for working spouses leads to a prediction of 3 8 increase in wives labor supply and a 9 decrease in husbands labor supply overall taxes paid are predicted to decrease by 3 4 this abstract was borrowed from another version of this item

optimal annuitization with stochastic mortality and correlated medical costs the conventional wisdom since yaari 1965 is that households without a bequest motive should fully annuitize their investments numerous frictions do not break this sharp result we modify the yaari framework by allowing a household s mortality risk itself to be stochastic due to health shocks a lifetime annuity still helps to hedge longevity risk but the annuity s remaining present value is correlated with medical costs such as those for nursing home care thereby reducing annuity demand even without ad hoc liquidity constraints we find that most households should not hold a positive level of annuities and many should hold negative amounts jel d14 d82 g23 i12 j14 j26

money credit constraints and economic activity when government expenditures exceed current tax revenues the resulting deficit must be financed either by issuing bonds which imply obligations to levy future taxes or by creating high powered money the choice between money and bonds is often thought to be of great moment for both real and nominal variables that is monetary policy matters there is by now a wide empirical consensus that monetary policy has effects on real variables like output and employment but there is far less agreement about why this is so the purpose of this paper is to take issue with some currently fashionable views of why money has real effects and to suggest a new theory or rather resurrect an old one the loanable funds theory and give it new improved microfoundations this abstract was borrowed from another version of this item

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

household labour supply with rationing in spain this paper provides new empirical evidence on household labour supply with rationing to that end we use the latest spanish data in order to estimate three flexible functional forms namely the nles the quadratic and the hausman ruud forms and calculate the income and wage elasticities we find that the number of dependants has a negative effect on the labour supply of the female moreover the north and the east spanish regions have a clearly positive effect on the labour supply of the female whilst the north has the same effect on that of the male the elasticities of three functional forms are very similar male labour supply is slightly decreasing with the wage whilst for the female it is increasing leisure is a normal good for both spouses as expected whilst the labour hours are net substitutes

are ceos really paid like bureaucrats a common view is that there is little correlation between firm performance and ceo pay using a new fifteen year panel data set of ceos in the largest publicly traded u s companies we document a strong relationship between firm performance and ceo compensation this relationship is generated almost entirely by changes in the value of ceo holdings of stock and stock options in addition we show that both the level of ceo compensation and the sensitivity of compensation to firm performance have risen dramatically since 1980 largely because of increases in stock option grants

the match between ceo and firm we investigate the role of job match heterogeneity in the ceo labor market we document a high percentage of ceo turnovers in the early years of tenure as illustrated by the hazard that increases until the fifth year of ceo tenure and then decreases evidence suggests that a good match is more likely if the new ceo performs better than the previous ceo the best matches tend to occur when inside outside ceos follow previous ceos who quit are dismissed evidence consistent with match theory in the ceo labor market suggests factors that influence the likelihood of observing a good match

do the rich save more a new view based on intergenerational transfers do richer people have higher saving rates the short run and long run consumption functions have different answers to this important question which results in an important consumption puzzle that was a focus of macroeconomic research in the 1950s and 1960s in a recent empirical contribution dynan skinner and zeldes 2004 revive this old question and make this consumption puzzle more intriguing by showing that the average propensity to consume decreases not only with current income but also with lifetime income this paper provides a model that helps resolve this puzzle from an intergenerational perspective

income taxes and the labor supply of married women in quebec in recent years a substantial literature has developed for the most part in the u s concerning labor supply behavior of particular interest is the labor force behavior of married women since this raises a set of interesting theoretical and empirical issues despite the extensive research in both the u s and the u k there has been relatively little empirical investigation in canada this is surprising given the increasing importance of women in the canadian labor force and the concern expressed by policy makers 2 this study presents some empirical results on the labor supply behavior of married women in quebec using data on 2439 husband wife families for 1979 in estimating labor supply responses of married women we take into account the effect of income taxes and address the question of tax perception 3 the impact of taxes on labor supply is particularly important in the quebec context since quebec marginal tax rates are the highest in canada and it appears in north america the study also compares the results of alternative methods of estimation married women s labor supply functions are estimated using standard ols techniques a procedure suggested by heckman 12 13 which corrects for selectivity bias a two stage gls technique which also corrects for selectivity bias and a gls method applied to a system of equations the conceptual framework of labor supply determination is briefly reviewed in section ii section iii describes the data the empirical specification and the estimation strategy

the impact of bad writing in economics we find significant style differences between articles written by economists for their professional journals and articles by the same economists in the wall street journal we find no evidence that style influences the professional success of economists which suggests that the private rewards to improving the quality of writing are low indeed each community of scholars has probably adopted a professionally correct writing style from which its members diverge little however scholars do alter their rhetorical style to communicate effectively with audiences other than the professional community this suggests that intra and inter group written communication by economists is efficient

endogenously chosen boards of directors and their monitoring of the ceo author s hermalin benjamin e abstract this paper develops a model in which the effectiveness of a board s monitoring of the ceo depends on the board s independence the independence of new directors is determined through negotiations implicit or explicit between the existing directors and the ceo the ceo s bargaining position and thus influence over the board selection process depends on an updated estimate of the ceo s ability based on prior performance many empirical findings about board structure and performance arise as equilibrium phenomena in this model we also explore the implications of this model for proposed regulations of corporate governance structures please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

a comparison of the labor force behavior of married women in the united states and canada with special attention to the impact of income taxes estimation results are presented for the probability of working the hourly wage rate and the annual hours of work for wives in seven different age groups in both the u s and canada federal and state or provincial taxes are incorporated into the analysis an iterative estimation method is employed to circumvent the statistical problems resulting from the dependence of the hours of work on the tax rate and the dependence of the tax rate on the hours of work authors

on the share of inheritance in aggregate wealth europe and the usa 1900 2010 this paper provides historical series on the evolution of the share of inherited wealth in aggregate private wealth in europe france the uk germany sweden and the usa over the 1900 2010 period until 1910 the inheritance share was very high in europe 70 80 it then fell abruptly following the 1914 45 shocks down to about 30 40 during the 1950 80 period and is back to 50 60 and rising since around 2010 the us pattern also appears to be u shaped albeit less marked and with significant uncertainty regarding recent trends due to data limitations we discuss possible interpretations for these long run patterns

social efficiency of bubbles in the grossman and helpman endogenous growth model abstract using a particular specification of the expectation process i show that a weak but permanent over evaluation of financial assets may exist in the grossman and helpman 1991 innovation and growth in the global economy mit press cambridge ma endogenous growth model with horizontal produce differentiation and that the resulting competitive equilibrium is socially optimal

heterogeneous beliefs and housing market boom bust cycles abstract this paper presents a business cycle model capturing the stylized features of housing market boom bust cycles in developed countries the model implies that over optimism of mortgage borrowers generates housing market boom bust cycles if mortgage borrowers are credit constrained and savers do not share their optimism this result holds without price stickiness if price stickiness is introduced into the model then the model replicates a low policy interest rate during a housing boom as an endogenous reaction to a low inflation rate given a taylor rule thus monetary easing observed during housing booms are consistent with the presence of over optimism causing boom bust cycles

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

the welfare cost of unemployment in quebec harberger s triangle meets okun s gap using duality theory under rationing the authors derive a measure of the aggr egate welfare cost of cyclical unemployment which takes into account the value of additional nonmarket activities promoted by unemploymen t this measure is then applied to the quebec economy using benchmar k general equilibrium data for 1980 comparisons are made between the results obtained from the author s welfare measure and from the redu ction in gnp as measured by okun gap according to their simulations the overestimating bias of the cost of cyclical unemployment in que bec as measured by okun gap varies between 3 and 20 percent depend ing on the assumptions used the bias is more important however whe n a permanent increase in the unemployment rate is simulated

intergenerational wealth mobility and the role of inheritance evidence from multiple generations this study estimates intergenerational correlations in mid life wealth across three generations and a young fourth generation and examines how much of the parent child association that can be explained by inheritances using a swedish data set we find parent child rank correlations of 0 3 0 4 and grandparents grandchild rank correlations of 0 1 0 2 conditional on parents wealth grandparents wealth is weakly positively associated with grandchild s wealth and the parent child correlation is basically unchanged if we control for grandparents wealth bequests and gifts strikingly account for at least 50 per cent of the parent child wealth correlation while earnings and education are only able to explain 25 per cent

anticipation and the valuation of delayed consumption this paper presents a model of intertemporal choice that incorporates savoring and dread i e utility from anticipat ion of delayed consumption the model explains why an individual with positive time preference may delay desirable outcomes or get unpleas ant outcomes over with quickly contrary to the prediction of convent ional formulations of intertemporal choice implications of savoring and dread for savings behavior empirical estimation of discount rate s and public policy efforts to combat myopic behavior are explored the model provides an explanation for common violations of the indepe ndence axiom as applied to intertemporal choice copyright 1987 by royal economic society

regional differences in personal savings regional data on consumers expenditure and disposable income are analysed using a conventional error correction specification in an attempt to explain regional disparities in the average propensity to save pooling time series and cross section data the model is quite successful though some degree of remaining ignorance is reflected in a few significant regional dummy variables arising out of the covariance model among the important determinants of saving and consumption are regional unemployment and housing wealth the latter gives limited support to the proposition that burgeoning house prices in the south east may be fuelling a consumption and import boom

perspectives on positive political economy this volume serves as an introduction to the field of positive political economy and the economic and political processes with which it is concerned this new research tradition is distinct from both normative and historical approaches to political economy grounded in the rational actor methodology of microeconomics positive political economy is the study of rational decisions in a context of political and economic institutions more analytical than traditional approaches it is concerned with the derivation of principles and propositions against which real world experience may be compared its focus is on empirical regularities and its goal is theoretical explanation the field has focused on three main areas of research models of collective action constraints on competitive market processes and the analysis of transaction costs developments in all of these areas are covered in the book the first part of the volume surveys the field while the second part displays positive political economy at work examining a variety of subjects the final part contains essays by leading political economists on the theoretical foundations of the field

enjoying the quiet life corporate governance and managerial preferences much of our understanding of corporations builds on the idea that managers when they are not closely monitored will pursue goals that are not in shareholders interests but what goals would managers pursue this paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences we use plant level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws we find that when managers are insulated from takeovers worker wages especially those of white collar workers rise the destruction of old plants falls but the creation of new plants also falls finally overall productivity and profitability decline in response to these laws our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life

long term real interest rates evidence on the global capital market the steady removal of capital controls and the consequent increase in international capital flows has led to a growing belief that there is now one global capital market with a single world real interest rate at its core we review the evidence on international real interest rate behaviour using alternative measures of real interest rates including those obtained from the growing set of inflation adjusted government bonds using a range of statistical tests we find that it is hard to argue that real interest rates are converging to single world rate though international factors are important moreover the large and persistent differences in real interest rates across countries cannot be explained in terms of real exchange rate expectations macroeconomic indicators from the countries concerned appear to play some role in accounting for these differences copyright 1999 by oxford university press

testing whether unemployment represents intertemporal labour supply behaviour in the lucas rapping 1969 model of the labour market fluctuations in unemployment represent individuals optimally adjusting their labour supply behaviour in response to fluctuations in wage rates over the business cycle in this paper i propose and implement a misspecification test of the lucas rapping treatment of unemployment as labour supply behaviour using panel data this test extends previous such work with micro data by simultaneously allowing for intertemporal substitution uncertainty and endogenous unemployment using the standard specification of intertemporal labour supply behaviour i find strong evidence against this interpretation of unemployment there are two possible interpretations of the test results the first is that it is necessary to turn to alternative models of the labour market in which unemployed workers are off a supply function the second is that the test results indicate the necessity of moving to more complex models of intertemporal substitution however given current econometric techniques and data sets these alternative models of intertemporal substitution will be extremely difficult to test

psychological characteristics and household savings behavior the importance of accounting for latent heterogeneity abstract we employ a finite mixture model with maximum likelihood ml estimation to analyze latent heterogeneity in the relationship between psychological characteristics and household savings behavior in a one step ml estimation approach we estimate a class membership model and a behavioral model of the classes jointly adopting this approach enables us to simultaneously assess how socio demographic characteristics affect class membership probabilities and estimate class specific regression coefficients to test whether psychological characteristics predict savings behavior differently across latent classes we apply this approach to a representative sample of uk households n 3382 and identify two different latent classes striving versus established households we find that the relationship between psychological characteristics and savings behavior differs across these two classes demonstrating the importance of accounting for latent heterogeneity when studying the drivers of savings behavior our results have implications for policymakers attempting to improve household savings behavior

credit rationing and capital accumulation with investment and consumption loans revisited abstract a simple model is developed to evaluate the roles of credit rationing and government policies of financial repression in the process of capital accumulation in the model credit rationing on both investment and consumption loans decreases as capital accumulates but increases as the government imposes policies of financial repression to a greater extent while a reduction in credit rationing on consumption loans impedes capital accumulation such a reduction on investment loans facilitates it we find that developing countries may be trapped at a low capital stock steady state while developed countries converge to a high capital stock steady state instead of adopting policies of financial liberalization interestingly this paper finds that policies of financial repression may enable developing countries to escape the development trap

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

the effects of competition on executive behavior economists presume that competition spurs a firm to be more efficient by forcing it to reduce its agency problems this article investigates this presumption it finds that the effects of competition on executive behavior can be decomposed into four effects each of which is of potentially ambiguous sign theory thus offers no definitive defense of this presumption this article also derives sets of conditions under which increased competition has the presumed effect of reducing agency problems in some sets important conditions are that increased competition reduce the executive s expected income and that agency goods e g shirking be normal goods for the executive the article shows that an increase in the shareholder bargaining strength can both reduce the agency problem and make it more sensitive to competition

explaining the wealth holdings of different cohorts productivity growth and social security in this paper we explore the reasons why different generations accumulate different amounts of wealth we use basic economic theory to propose two indicators of the economic conditions under which households accumulate wealth the first one represents productivity differences across cohorts the aggregate level of gross national product per capita around the time the head of the household entered the labor market the second measure summarizes the changes in social security during the head of household s working life using panel data from the dutch socio economic panel we show that productivity growth can explain all the cohort effects present in income data while productivity growth and the generosity of social security can explain all the cohort effects present in household net worth we also find a limited offset of social security on wealth holdings

crash and wait the impact of the great recession on the retirement plans of older americans this study uses data from pre and post crash surveys from the cognitive economics study to examine the impact of recent stock and labor market wealth losses on the planned retirement ages of older americans regression estimates imply that the average wealth loss between july 2008 and may june 2009 is associated with an increase in planned retirement age of approximately 2 5 months furthermore pessimism about future stock market returns is found to amplify the impact of wealth losses on retirement timing