compensating wage differentials in stable job matching equilibrium abstract this paper studies implicit pricing of non wage job characteristics in the labor market using a two sided matching model it departs from the previous literature by allowing worker heterogeneity in productivity which gives rise to a double transaction problem in a hedonic model deriving sufficient conditions under which assortative matching is the unique stable job worker matching we show that observed wage differentials between jobs reflect not only compensating wage differentials but also worker productivity gaps between the jobs we find that the job worker matching pattern determines the extent to which compensating wage differentials are confounded with the worker productivity gap effect

monetary policy and aggregate volatility abstract discretionary conduct of monetary stabilization policy can increase real and nominal aggregate volatility by arbitrary amounts when firms pay limited attention to aggregate shocks a conservative central banker with stronger preference for price stability eliminates the commitment problem thereby reduces output and price volatility and gives rise to a policy induced great moderation increased focus on price stability facilitates firms information processing and aligns their expectations better with policy decisions this coordination effect reduces aggregate real and nominal volatility consistent with empirical evidence the moderation manifests itself through reduced residual variance in vector autoregressions vars involving macroeconomic variables

estate and gift taxes and incentives for inter vivos giving in the us abstract this paper describes the current estate and gift tax rules that apply to intergenerational transfers in the us it summarizes the incentives for inter vivos giving gifts from a donor to a recipient while the donor is alive as a strategy for reducing estate tax liability it shows that the current level of intergenerational transfers is much lower than the level that would be implied by simple models of dynastic utility maximization moreover even among elderly households with net worth in excess of 2 5 million roughly four times the net worth at which us households became liable for estate tax in 1995 only about 45 take advantage of the opportunity for tax free inter vivos giving cross sectional regressions using the 1995 survey of consumer finances suggest that transfers rise with household net worth possibly reflecting the impact of progressive estate taxes households with a preponderance of their net worth in illiquid forms such as a private business are less likely to make transfers than their equally wealthy counterparts with more liquid wealth those with substantial unrealized capital gains for whom the benefits of basis step up at death under the income tax are greatest are less likely to make large inter vivos transfers than similarly wealthy households with higher basis assets

intergenerational transfers and liquidity constraints a growing body of evidence indicates that liquidity constraints could affect a substantial proportion of u s consumers but little is known about why these constraints might exist an important but little explored issue is the relationship between inter vivos intergenerational transfers and liquidity constraints these transfers can ease borrowing constraints empirical transfer patterns match those predicted from a model in which transfers are allocated to liquidity constrained consumers in particular the distinction between current and permanent incomes of potential recipients is a key aspect of private transfer behavior the findings have important implications for our understanding of consumer behavior

monetary policy for rationally inattentive economies with staggered price setting the paper examines the optimal monetary policy when firms are constrained by information processing capability and infrequent price adjustments firms information processing limit gives rise to imperfect knowledge about macroeconomic aggregates and endogenous information learning contingent on the monetary policy staggered price setting introduces the observed price duration and additional policy tradeoffs resulting from the interactions between nominal rigidities and imperfect information processing the integrated model implies an optimal policy that commits to complete price stabilization in response to natural rate shocks but not in response to markup shocks in the presence of markup shocks it is optimal for the central bank to focus on price stabilization in the initial periods following markup shocks and shifts the emphasis to output gap stabilization later moreover larger information capacity stronger complementarities and more persistent shocks require more aggressive price stabilization in the short run

evaluating unemployment policies what do the underlying theories tell us the paper surveys unemployment policies for advanced market economies and evaluates them by examining the predictions of the underlying macroeconomic theories the basic idea is that for the most part different unemployment policy prescriptions rest on different macroeconomic theories and our confidence in the prescriptions should depend at least in part on theories ability to predict some salient stylized facts about unemployment behavior the paper considers four types of policies laissez faire demand management policies supply side policies and structural policies copyright 1995 by oxford university press

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

estimating the general equilibrium benefits of large changes in spatially delineated public goods the purpose of this article is to report a new approach for measuring the general equilibrium willingness to pay for large changes in spatially delineated public goods such as air quality we estimate the parameters of a locational equilibrium model and compute equilibria for alternative scenarios characterizing the availability of public goods within a system of communities welfare measures take into consideration the adjustments of households in equilibrium to nonmarginal changes in public goods the framework is used to analyze willingness to pay for reductions in ozone concentrations in southern california between 1990 and 1995

the demand for residence site characteristics the analysis of residential site choice is the primary concern in urban economics research on this problem is deficient in that rigorous theoretical models concentrate almost exclusively on access to the central business district cbd in this decision process while empirical models have been specified in a manner that is inconsistent with standard demand theory although these models possess the power of simplicity they are unable to explain the non monotonic location patterns which characterize urban areas without resorting to ad hoc theorizing this article develops and tests a model which is consistent with demand theory and is also capable of explaining non monotonic location patterns the hedonic rent function is seen as an intermediate step in the analysis of location which allows one to construct the complete data matrix necessary for the estimation of a set of demand functions for location specific traits the analytical importance of the functional form of this hedonic function is briefly noted finally the empirical analysis notes the importance of children in determining residential preferences with special attention being directed to the endogeneity of children with respect to the process of residential choice the traditional location model is generally tested by regressing some transformation of the annual rental payments or alternatively property value r on access or lack of access to the city center acc a vector of other locational traits z income i and a race variable mc

distributional effects of social security reforms the case of france this paper uses a calibrated dynamic life cycle model to quantify the long run distributional impact of two opposite social security reforms modifying the parameters of a defined benefit db plan such as in france with ayrault s reform or switching to a notional defined contribution ndc plan such as in italy both reforms yield an inequal distribution of welfare losses low skilled workers are the main losers of the reforms this is so for different reasons in each reform in the case of ayrault s reform low skilled individuals delay retirement by 2 years up to age 62 in switching to a ndc scheme low skilled workers pensions fall substantially in ndc schemes inequalities along the working life are directly translated into inequalities in pension levels the switch from a db plan to the italian reform yields substantial welfare losses pensions drastically fall and individuals save more since low skilled workers do not save as much as middle or high skilled workers the switch to ndc schemes leads to a more unequal society in terms of asset distribution

on welfare measurement in cities this paper extends project evaluation in a spatial urban economy to consider the more general case of distortionary public finances if a local public improvement is financed at least in part by a distortionary property tax we show that residential land prices do not accurately measure the value of land improvements even when households are identical and the improvement is infinitesimally small the magnitude and direction of the measurement error will depend on the second order effects on aggregate demand via changes in population density at each location and on overall city size

behavioral responses to inheritance tax evidence from notches in france abstract for the first time we exploit quasi experimental variation to investigate the impact of inheritance taxation on wealth accumulation using bunching and difference in differences methods we directly estimate several behavioral responses during lifetime rather than relying solely on observations at death our empirical findings shed new light upon wealth accumulation and bequest motives taken together the small responses to inheritance tax estimated cannot be supported by the desire to retain control over wealth

hedonic methods for baskets of goods a b s t r a c t existing hedonic methods cannot be easily adapted to estimate willingness to pay for product character istics when willingness to pay depends on a very large basket of goods we show how to marry these methods with revealed preference arguments to estimate bounds on willingness to pay using data on purchases of seemingly impossibly high dimensional baskets of goods this allows us to use observed purchase prices and quantities on a large basket of products to learn about individual household s will ingness to pay for characteristics while maintaining a high degree of flexibility and also avoiding the biases that arise from inappropriate aggregation we illustrate the approach using scanner data on food purchases to estimate bounds on willingness to pay for the organic characteristic

measuring the social value of local public goods an empirical analysis within paris metropolitan area a non linear hedonic model is used to estimate the implicit marginal prices of 17 local public goods in a paris suburban area on an original data set of some 8200 housing units the results reveal a robust effect of local public school quality measured both by the fraction of junior high school students that are at least two years behind grade level and the student teacher ratio on house prices it is observed that housing owners marginal willingness to pay for reducing commuting time is roughly similar for public transportation than for car transportation another noticeable result is the complete capitalization of local taxes at a discount rate of 3 5 an illustration of the potential usefulness of the results for cost benefit analysis is also provided

hedonic prices and the benefits of public projects s scotchmer has shown that even if the population is homogeneous hedonic prices do not correctly measure long run benefit s of a large public project this paper examines the direction of err ors and shows that the use of cross sectional land rent differentials leads to overestimation of the benefits the short run benefits with fixed lot size are also considered copyright 1988 by the econometric society

inter vivos transfers and intended bequests abstract empirical work on intergenerational transfers has focused on distinguishing between altruistic and exchange motivated behavior however these two models are unable to explain the strong tendency for inter vivos transfers to be negatively related to the income of the recipient while bequests bear no relationship to income this paper presents a new framework for analyzing transfers from parents to children that is more consistent with observed behavior than are the altruistic and exchange models alone in particular the model developed here predicts differing behavior with respect to inter vivos transfers and bequests due to liquidity constraints and uncertainty about the recipient s permanent income the empirical work uses data from the health and retirement study and the asset and health dynamics study the patterns observed in these data are consistent with earlier findings that inter vivos transfers go disproportionately to less well off children while bequests are divided equally across children further the results support the predictions of the model in that differences in inter vivos transfers arise from differences in current income while differences in bequests result when indicators of the children s permanent incomes differ

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

selection and monetary non neutrality in time dependent pricing models for a given frequency of price adjustment monetary non neutrality is smaller if older prices are disproportionately more likely to change selection for the age of prices provides a complete characterization of price setting frictions in time dependent models selection for older prices is weaker and non neutralities are larger if the hazard function of price adjustment is less strongly increasing selection is weaker if there is heterogeneity in price stickiness finally selection is weaker if durations of price spells are more variable in particular the taylor 1979 model exhibits maximal selection for older prices whereas the calvo 1983 model exhibits no selection

tax avoidance and intra family transfers to what extent do people avoid taxes on intra family transfers be quests and gifts and how would integration unification of the dif ferent transfers taxes affect tax avoidance these issues are important for families and their welfare as well as for governments and their pos sibilities of raising revenue from transfer taxes in this paper we study the effects of transfer taxes on altruistic parents transfers to their chil dren using a theoretical model we find that altruistic parents do not necessarily tax minimize however in some cases when they do there is an infinitely large excess burden of a transfer tax we also find that integration of transfer taxes reduces tax avoidance all tax avoidance is eliminated with complete integration

monetary policy for inattentive economies we offer a contribution to the analysis of optimal monetary policy we begin with a critical assessment of the existing literature arguing that most work is based on implausible models of inflation output dynamics we then suggest that this problem may be solved with some recent behavioral models which assume that price setters are slow to incorporate macroeconomic information into the prices they set a specific such model is developed and used to derive optimal policy in response to shocks to productivity and aggregate demand optimal policy is price level targeting base drift in the price level which is implicit in the inflation targeting regimes currently used in many central banks is not desirable in this model when shocks to desired markups are added optimal policy is flexible targeting of the price level that is the central bank should allow the price level to deviate from its target for a while in response to these supply shocks but it should eventually return the price level to its target path optimal policy can also be described as an elastic price standard the central bank allows the price level to deviate from its target when output is expected to deviate from its natural rate

exogenous information endogenous information and optimal monetary policy most of the analysis of optimal monetary policy is conducted with the calvo model this paper studies optimal monetary policy when the slow adjustment of the price level is due to imperfect information by decision makers in firms we consider two models a model with exogenous dispersed information and a rational inattention model in the model with exogenous dispersed information complete stabilization of the price level is optimal after aggregate productivity shocks but not after markup shocks by contrast in the rational inattention model complete stabilization of the price level is optimal both after aggregate productivity shocks and after markup shocks moreover in the model with exogenous dispersed information there is no value from commitment to a future monetary policy by contrast in the rational inattention model there is value from commitment to a future monetary policy because then the private sector can trust the central bank that not paying attention to certain variables is optimal

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

risk management and wealth accumulation behavior in france abstract recent theoretical saving models have placed greater emphasis on studying prudent behavior in the face of an uncertain future and have shown the influences of background risks on precautionary savings a prudent household exposed to a high future income risk will increase its savings empirical tests on recent french data insee patrimoine 97 show the relevance of subjective earnings variance to explain wealth accumulation but its contribution is not very large around 5

optimal monetary policy with imperfect common knowledge we study optimal nominal demand policy in a flexible price economy with monopolistic competition where firms have imperfect common knowledge about the shocks hitting the economy information imperfections emerge endogenously because firms are assumed to have finite shannon capacity to process information we then ask how policy that minimizes a quadratic objective in output and prices depends on firms processing capacity when price setting decisions of firms are strategic complements we find that policy should nominally accommodate white noise mark up shocks for a large range of capacity values this fi nding is robust to the policy maker observing shocks imperfectly or being uncertain about firms processing capacity when mark up shocks are persistent accommodation may even have to increase in the medium term but has to decrease in the long run thereby generating a hump shaped price response and a slow reduction in output instead when prices are strategic substitutes policy tends to react with nominal demand contractions to mark up shocks in addition there might exist discontinuities between common knowledge equilibria and equilibria with small amounts of imperfect common knowledge

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

the cost of equality unequal bequests and tax avoidance abstract for altruistic parents desiring to bequeath their wealth to their children estate taxes can be costly in utility terms the most straightforward way to reduce the tax burden is through inter vivos transfers taking full advantage of potential tax free giving often requires that parents differentiate between children in the amounts transferred this unequal giving contrasts sharply with the presumed desire to make equal bequests this paper examines the extent to which wealthy parents take advantage of tax free giving and whether the desire to spend down an estate is sufficient to induce unequal giving i find that while wealthy parents do appear to make early bequests they rarely do so to the extent permitted by law and thus forego a substantial amount of tax savings

does the law of one price hold in a high inflation environment a tale of two cities in turkey this study addresses the price convergence in two cities in turkey istanbul and ankara using annual data over the three quarters of the twentieth century 1922 1998 characterized by prevailing high inflation rates for most of the period in contrast to the rest of the literature addressing convergence in price levels with a typical result of extremely slow convergence rates at best we argue that convergence is much easier detected in growth rates rather than levels of prices we suggest using the bounds testing procedure of pesaran et al 2001 for this purpose we find a clear cut evidence on the existence of a common driving force behind inflation dynamics in istanbul and ankara a finding that is in contrast with the results typically reported in related literature

optimal taxation of bequests in a model with initial wealth we formulate an optimal taxation model where parents leave bequests to their descendants for altruistic reasons in contrast to the standard model individuals differ not only in earning abilities but also in initial inherited wealth in this model a redistributive motive for an inheritance tax which is equivalent to a uniform tax on all expenditures arises given that initial wealth increases with earning abilities the introduction of the inheritance tax either increases intertemporal social welfare or has an ambiguous effect depending on whether the external effect related to altruism is accounted for in the social objective

general equilibrium benefits for environmental improvements projected ozone reductions under epa s prospective analysis for the los angeles air basin abstract this research demonstrates how locational equilibrium models can be used for benefit measurement with the detail required to match epa s benefit analysis for the first prospective analysis using the projected changes in ozone concentrations for 2000 and 2010 together with the sieg et al int econ rev forthcoming estimates for household preferences for housing education and air quality this paper measures general equilibrium willingness to pay for the policy scenarios developed for the prospective study as they relate to households in the los angeles area benefits are evaluated taking account at the household level of initial air quality conditions relocation based on changes in ozone and price changes the framework generalizes the partial equilibrium general equilibrium comparisons available with conventional computable general equilibrium and property capitalization models estimated general equilibrium gains from the policy range from 33 to 2400 annually at a household level in 1990 dollars

the short run and long run benefits of environmental improvement abstract the social value of a nonmarginal improvement to amentities is not related to hedonic prices in a simple way furthermore hedonic price data do not completely reveal preferences in order to evaluate short run benefits of an improvement the rate of change of the hedonic price function must be normalized by a ratio of population densities to calculate long run benefits of the improvement one must calculate the responsiveness of population densities to the nonmarginal improvement a technique to do so is suggested

quantifying the laffer curve on the continued activity tax in a dynastic framework it is argued that the tax on continued activity should be removed by implementing actuarially fair schemes however these schemes cannot fund the expected social security ss deficit this article proposes to give individuals a fraction of the actuarially fair incentives in the case of postponed retirement ss faces a trade off between giving enough incentives to make individuals delay retirement and giving little increase in pensions in order to help finance its expected deficit this trade off is captured by a laffer curve finally when the ss system aims to maximize welfare the optimal tax on postponed retirement is still strictly positive erratum vol 49 issue 4 1539

inertial inflation indexation and price stickiness evidence from brazil abstract this paper evaluates the inertial inflation hypothesis for brazil the hypothesis posits that indexation created a feedback mechanism such that one time supply shocks were fully transmitted into permanent changes in inflation a theoretical model is used to show that this outcome is based on the assumption of perfect price flexibility however with price stickiness indexation does not produce inertial inflation the degree of inertia is then compared for two periods one without indexation 1945 1963 and one with indexation 1969 1985 finally vector autoregressive representations are estimated for the latter period allowing for price stickiness the empirical results do not support the hypothesis

price adjustments in a general model of state dependent pricing we study the distribution of retail price adjustments under the assumption that firms are more likely to adjust their prices when doing so is more valuable our setup nests calvo 1983 at one extreme and a fixed menu cost model at the other all parameterizations are ranked by a measure of state dependence high state dependence implies counterfactually that there are no small price changes and that the variance of price changes falls sharply with trend inflation the parameterization that best fits microdata has low state dependence implying a phillips curve coefficient 60 as large as that of the calvo model but is nonetheless well behaved at high inflation rates

monetary targets real exchange rates and macroeconomic stability abstract in this paper i develop a model to determine the optimal degree of flexibility in attaining monetary targets in an economy that is affected by shocks in the labor and financial markets i then simulate the model to assess the optimal degree of monetary policy flexibility in spain a country that has adopted monetary targets rigidly since 1978 i show that the model supports the policy choice of that country i also show that the monetary authorities should attribute more importance to real exchange rate movements in choosing their policies if the spanish economy becomes more open to international trade or if the labor market becomes more flexible

services inflation dynamics and persistence puzzle in brazil a time varying parameter approach this article analyses services inflation dynamics in brazil focusing on the services inflation persistence puzzle for monthly data from january 2004 to february 2016 we apply a time varying para

the return of the liquidity effect a study of the short run relation between money growth and interest rates in this article i use band pass filters to investigate the short run relationship between money growth and interest rates i find a negative correlation between short run movements in money growth and interest rates which i interpret as evidence that the liquidity effect dominates the anticipated inflation effect

monetary policy endogenous inattention and the volatility trade off this paper addresses the output price volatility puzzle by studying the interaction of optimal monetary policy and agents beliefs we assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs endogenous inattention is a nash equilibrium in the information processing rate although a decline of policy activism directly increases output volatility it indirectly anchors expectations which decreases output volatility if the indirect effect dominates then the usual trade off between output and price volatility breaks down this provides a potential explanation for the great moderation that began in the 1980 s

price wage dynamics and inflation in socialist economies empirical models for hungary and poland this article analyzes the determinants of open inflation in transitional socialist economies with reference to recent experience in hungary and poland a simple inflation model is centered on the transmission process and on the short run dynamics of inflation further incorporating a number of features specific to socialist economies and working with quarterly data dynamic price and wage equations are estimated the estimated equations allow satisfactory exploration of the role and weight of foreign prices and domestic factors in propagating inflation foreign prices matter but developments on the cost side are critical in relating exogenous policy driven adjustments to the price level to increases in the rate of inflation the absence of conventional market based equilibrating mechanisms requires that nominal anchors particularly wage restraints feature prominently in any stabilization program adopted by reforming socialist economies copyright 1992 by oxford university press

social welfare and income inequality in a system of cities abstract this paper develops a general equilibrium model of a system of core periphery cities to examine the main determinants of intra and inter regional income disparities the economy is populated by a continuum of homogeneous unskilled and heterogeneous skilled workers unskilled workers whose wages are determined competitively specialize in food production in local cities skilled workers whose wages are determined according to a nash bargain manufacture a high tech commodity in the metropolis we establish conditions under which this core periphery equilibrium spatial configuration emerges we show that both intra and inter regional income disparities are present the determinants of each type of disparity and the social welfare implications are fully investigated our results suggest that public policy programs that improve income equality may not be necessarily welfare enhancing

trend inflation wage and price rigidities and productivity growth abstract what are the steady state implications of inflation in a general equilibrium model with real per capita output growth and staggered nominal price and wage contracts surprisingly a benchmark calibration implies an optimal inflation rate of 1 9 percent the analysis also shows that trend inflation has important effects on the economy when combined with nominal contracts and real output growth steady state output and welfare losses are quantitatively important even for low values of trend inflation further nominal wage contracting is found to be quantitatively more important than nominal price contracting in generating the results this conclusion does not arise from price dispersion per se but from an effect of nominal output growth on the optimal markup of monopolistically competitive labour suppliers finally accounting for productivity growth is found to be important for calculating the welfare costs of inflation indeed the presence of 2 percent productivity growth increases the welfare costs of inflation in the benchmark specification by a factor of four relative to the no growth case

motives for private income transfers private income transfers are becoming increasingly recognized as a key aspect of the u s economy the majority of private income transfers occur inter vivos i e between living persons but very little is known about this type of transfer behavior this paper tests alternative hypotheses concerning motivation for inter vivos transfers two motives are considered altruism and exchange evidence presented here casts doubt on the altruistic model of transfer behavior observed patterns for inter vivos transfers are more consistent with exchange related motives this finding has important implications for the effects of public transfer programs on the distribution of economic well being

the family inheritance and the intergenerational transmission of inequality unequal inheritance of material wealth is commonly considered a major cause of inequality in consumption however theoretical models of the intergenerational transmission of inequality by becker blinder and ishikawa imply that unequal inheritance may either increase or reduce consumption inequality differences in inherited wealth resulting from unequal parental incomes increase inequality in recipients consumption however unequal bequests caused by differences among families in the endowed ability of children or the costs of producing human capital are equalizing empirical results confirm these predictions the inheritance received by children is inversely related to both children s income and parental education thus bequests are compensatory in that ceteris paribus low income children inherit more than their advantaged contemporaries

output persistence from monetary shocks with staggered prices or wages under a taylor rule we analytically examine output persistence from monetary shocks in a dsge model with staggered prices or wages under a taylor rule surprisingly while taylor style staggering never yields persistence calvo style staggering of wages does generate persistence under decreasing returns to labour c 2009 elsevier b v all rights reserved

nonlinear budget constraints and consumer demand an application to public programs for residential housing abstract this study presents a methodology for exploiting the nonlinear hedonic nature of housing prices to estimate the compensated demands of households for particular housing attributes the methodology is employed to provide hicksian benefit measures of a particular housing subsidy program typical of those undertaken recently in developing countries

parental altruism and inter vivos transfers theory and evidence this paper uses psid data on the extended family to test whether inter vivos transfers from parents to children are motivated by altruism specifically the paper tests whether an increase by one dollar in the income of parents actively making transfers to a child coupled with a one dollar reduction in that child s income results in the parents increasing their transfer to the child by one dollar this restriction on parental and child transfer income derivatives is derived for the standard altruism model augmented to include uncertainty and liquidity constraints these additional elements pin down the timing of inter vivos transfers the method used to estimate income transfer derivatives takes into account unobserved heterogeneity across families in the degree of altruism the findings strongly reject the altruism hypothesis redistributing one dollar from a recipient child to donor parents leads to less than a 13 cent increase in the parents transfer to the child far less than the one dollar increas

staggering the optimal monetary rule and persistence abstract the purpose of this paper is to show that persistence is not an attribute that derives from the characteristics of wage and price setting alone the structure of demand the monetary rule and the welfare loss function are also crucial determinants of the time series characteristics of the model

imperfect common knowledge staggered price setting and the effects of monetary policy this paper studies the consequences of a lack of common knowledge in the transmission of monetary policy by integrating the woodford 2003a imperfect common knowledge model with taylor calvo staggered price setting models the average price set by monopolistically competitive firms depends on their higher order expectations about not only the current state of the economy but also about the states in the future periods in which prices are to be fixed this integrated model provides a plausible explanation for the observed effects of monetary policy it shows analytically how price adjustments are delayed and how the response of output to monetary disturbances is amplified

dynamic pricing and imperfect common knowledge abstract introducing private information into the dynamic pricing decision of firms by adding an idiosyncratic component to marginal cost can help explain two stylised facts about price changes aggregate inflation responds gradually and with inertia to shocks at the same time as individual price changes can be large the inertial behaviour of inflation is driven by privately informed firms strategically herding on the public information contained in the observations of lagged aggregate variables the model also matches the average duration between price changes found in the data and it nests the standard new keynesian phillips curve as a special case to solve the model the paper derives an algorithm for solving a class of dynamic models with higher order expectations

on the continuum approach of spatial and some local public goods or product differentiation models some problems abstract models with a continuum of consumers and locations such that each consumer can purchase goods in only one location are examined such models are common in the literature of the new urban economics an approximation by economies with a finite number of consumers is shown to fail in the first two examples the continuum economy equilibrium exists and is unique but the finite economy has many equilibria example 1 or none at all example 2 in example 3 the continuum economy has no equilibrium but the finite economy has one these three examples employ location dependent utilities the fourth example illustrates the conceptual difficulties that arise in approximation when transportation cost is introduced even with location independent utilities the results are related to the literatures concerning product differentiation and spatial economies

surprise party estimating the consequences of unexpected presidential election results alesina s quarterly journal of economics 102 651 678 1987 influential model of presidential elections with ideologically motivated parties attributes higher growth and lower unemployment under democratic presidents to the surprise inflation a democratic victory entails in contrast to the published literature we test this hypothesis using calcula tions of presidential election surprises consistent with the assumption of rational economic actors we confront the econometric complications attending a time series approach tak ing into account economic growth dynamics we ultimately fail to confirm the hypothesis that the level of uncertainty associated with presidential election results has an effect on economic outcomes

hedonic prices and cost benefit analysis abstract hedonic prices have been used to evaluate the willingness to pay for attributes we reformulate the notion of hedonic price from a composite price on housing to a unit price on traded quantities in conformity with long run competitive equilibrium theory this formulation was suggested but not developed by rosen j polit econ 82 no 1 1974 34 35 by first characterizing an efficient allocation of consumers to space we show that hedonic unit prices can be understood as a bid rent function which supports the efficient allocation this is despite the fact that the lots over which consumers bid are themselves endogenous we show that unit hedonic prices reveal preferences in a manner different from composite hedonic expenditures

taxation and wealth transmission in france abstract this paper studies inter vivos transfers and bequests in france and their relation to the french inheritance law and taxation using administrative records and a national households survey transmission behavior is highly responsive to changes in the fiscal system inter vivos gifts increased after a 1992 law made them partly tax free moreover the probability of giving to children is greater ceteris paribus if parents wealth is taxable for children the probability of receiving a gift over the life cycle increases with their permanent income the amount received increases with current income it increases or bears no relation to permanent income depending on the specification thus we find no direct support for the altruistic nor for the exchange motive these results are compatible with a model where parents transfer to the best endowed child

existence of a spatial equilibrium we prove the existence of a competitive equilibrium in a simple canonical model of spatial economics we emphasize the single difficulty introduced by the use of a continuum of agents to convexify the fundamental locational nonconvexity individual consumption bundles are not bounded above by the aggregate boundedness of initial resources

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting