ants rationality and recruitment this paper offers an explanation of behavior that puzzled entomologists and economists ants faced with two identical food sources were observed to concentrate more on one of these but after a period they would turn their attention to the other the same phenomenon has been observed in humans choosing between restaurants after discussing the nature of foraging and recruitment behavior in ants a simple model of stochastic recruitment is suggested this explains the herding and epidemics described in the literature on financial markets as corresponding to the equilibrium distribution of a stochastic process rather than to switching between multiple equilibria

global ethics of collective internet governance intrinsic motivation and open source software the ethical governance of the global internet is an accelerating global phenomenon a key paradox of the global internet is that it allows individual and collective decision making to co exist with each other open source software oss communities are a globally accelerating phenomenon oss refers to groups of programs that allow the free use of the software and further the code sharing to the general and corporate users of the software the combination of private provision and public knowledge and software and the seeming paradox of economic versus social motivations have stimulated a wide debate between researchers and policymakers in this article we analyze oss communities from the viewpoint of intrinsic motivation knowledge creation and collective internet governance we believe that the growth of global oss has fundamental implications for business ethics and the governance of the global internet in the twenty first century

factor demand models with nonlinear short run fluctuations abstract this paper considers asymmetric costs of adjustment that propagate nonlinear shortrun fluctuations in stochastic factor demand systems the model endogenously generates asymmetric cyclical demand for capital and labour between peaks and troughs of the business cycle the empirical analysis of the model is based on quarterly time series data of the dutch manufacturing sector for the period 1971 i 1984 iv and annual time series data of the u k manufacturing sector for the period 1955 1986 i find important differences of adjustment speed of capital and labour inputs between expansionary and contractionary phases of the business cycle

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

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

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

the impact of foreign direct investment on uk manufacturing is there a profit squeeze in domestic firms this paper examines the extent to which foreign direct investment fdi in selected uk manufacturing sectors has an impact on reported profits in domestic firms foreign manufacturing firms are characterized by relatively high labour productivity and low wage shares entry by foreign firms not only impacts on domestic market shares but also on domestic cost conditions as a result profitability in the indigenous sector may be reduced there are a number of policy implications of this analysis which are explored

foreign and domestic investment regional development or crowding out driffield n and hughes d 2003 foreign and domestic investment regional development or crowding out reg studies 37 277 288 this paper tests at the regional and industry level the extent to which domestic investment is stimulated or crowded out by inward foreign direct investment the paper develops a model of domestic investment based on standard models drawn from macroeconomics and industrial economics the paper then goes on to show that at a general level the development or agglomeration hypothesis is confirmed that domestic investment is indeed stimulated by inward investment however there is also evidence that in certain regions inward investment has crowded out domestic investment the implications of this from the perspective of regional policy are briefly discussed driffield n et hughes d 2003 l investissement direct e tranger et l investissement interieur une question d ame nagement du territoire ou un effet d evincement reg studies 37 277 288 cet article cherche

money politics and the post war business cycle abstract the political economy literature has enshrined as stylized fact the view that lower inflation and temporarily lower growth follow the election of republican presidents and has emphasized political manipulation of monetary policy as an explanation support for the monetary explanation comes in econometric work that largely ignores identification issues that dominate the literature on measuring the effects of monetary policy we generalize a standard vector autoregression framework to accommodate discrete political party variables we find almost no support for the view that political effects on the macroeconomy operate through monetary policy and only weak evidence that political effects are significant at all

detrending and turning points this paper examines the sensitivity of turning points classification to different detrending methods and the ability of each method to replicate nber dating we use two different turning point rules and a variety of detrending methods to compute the cyclical component of output we show that while differences are minor with the first rule the results are extremely sensitive to detrending with the second rule many detrending procedures generate false alarms and many miss several commonly classified turning points the output series detrended with the hodrick and prescott filter and with a frequency domain masking of the low frequency components of the series reproduce all nber turning points with at most two quarters lead or lag regardless of the dating rule used

reconciling the wage curve and the phillips curve the wage curve is the negative relationship that links wage levels to the unemployment rate it fits accurately with modern non competitive labour market models but goes against a phillips curve modelling because the latter ties wage growth to the unemployment rate in this article we present a comprehensive review of these non competitive models highlighting recent contributions that try to eliminate the possible gap that exists between the concepts of the wage curve on the one hand and the phillips curve on the other copyright blackwell publishers ltd 2005

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

household production and the excess sensitivity of consumption to current income empirical research on the permanent income hypothesis pih has found that consumption growth is excessively sensitive to predictable changes in income this finding is interpreted as strong evidence against the pih we propose an explanation for apparent excess sensitivity that is based on a quantitative equilibrium model of household production in which permanent income consumers respond to shifts in sectoral wages and prices by substituting work effort and consumption across home and market sectors although the pih is true this mechanism generates apparent excess sensitivity because market consumption responds to predictable income growth

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

branch plants and the evolving spatial division of labour a study of material linkage change in the northern region of england phelps n a 1993 branch plants and the evolving spatial division of labour a study of material linkage change in the northern region of england reg studies 27 87 101 recent literature has suggested that manufacturing industry including that in peripheral regions is becoming more locally embedded as a result of processes of externalization and localized linkage formation this paper explores the hypothesis that branch plants have in terms of spatial patterns of material linkages become more locally embedded as a result of recent industrial restructuring evidence from a survey of manufacturing establishments in the northern region of england is used to explore hypotheses regarding the contribution of new greenfield investments and in situ restructuring to aggregate changes in spatial patterns of linkages the results suggests that despite processes of externalization northern region branch plants continue to be poorly integrated into the regional economy consequently it is argued that the cont

libre software turning fads into institutions the article presents an economic analysis of libre software and of its sustainability as a new economic model for software we underline the role of libre software development communities and analyze incentives for both kernel and obscure developers we emphasize the role of the so called public licenses to provide an appropriate institutional framework we show that several features of libre software also allow it to improve faster than proprietary software and therefore to achieve strong market performance when competing against existing standards even when proprietary software producers react we illustrate our point using a simple local and global interaction model to study the technological competition between linux and windows on the server operating system os market we finally argue that if sufficient initial momentum could be created through public intervention libre software could turn from a fad into an efficient economic institution to correct inefficiencies due to network externalities

rational partisan theory empirical evidence for the united states this paper presents two tests of the rational partisan theory rpt of business cycles first i develop and test an rpt model in which wage contracts are staggered and overlapping bureau of labor statistics bls data on the density and duration of wage contracts and estimates of the incumbent party s election win probability are employed to calibrate partisan intervention variables entered in output growth regressions next i perform a more flexible test of the rpt by comparing partisan output growth differences after elections in which the outcome was relatively surprising with partisan output growth differences after elections in which the outcome was widely anticipated the two approaches produce the same conclusion the rpt is not supported by the data

counterinflationary policy in a unionised economy with nonsynchronised wage setting a model of the determination of wages and employment in a unionised economy with nonsynchronised wage setting is presented in this paper it is shown that a monetary deflation can lead to prolonged unemployment even though the unions act rationally and with full information about the change in policy the model generates a statistical phillips curve in which the rate of change of money wages depends on the anticipated growth rate of the money supply and on disequilibrium unemployment conventional incomes policies are shown to have desirable social effects but run counter to the perceived self interest of the trade unions and are therefore likely to be resisted taxes on wage increases have desirable long run effects but do not appear able to reduce the transitional unemployment costs of monetary deflation

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

political parties and the business cycle in the united states 1948 1984 this paper tests the existence and the extent of a politically induced business cycle in the u s in the post world war ii period the cycle described in this paper is different from the traditional political business cycle of nordhaus it is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts from an explicit optimization problem we derive a system of equations for output and money growth then we successfully test the non linear restriction imposed by the theory on the parameters of the system of equations we cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations

the unemployment rate consequences of partisan monetary policies economists and political scientists have identified several ways in which political motivations and institutional arrangements can affect macroeconomic policymaking one way is described by the political business cycle model 42 37 in which vote seeking politicians manipulate the path of the economy to secure unsustainably favorable conditions at election times variants of this model have been widely tested with limited success a second channel for political impacts comes through partisan policy changes brought about by electoral turnover the pathbreaking work in this literature includes the contributions of hibbs 30 31 32 33 and beck 11 these works have focused on the empirical issue of how unemployment rates vary under democratic and republican presidents in the u s and have found strong support for the proposition that unemployment rates decline under democratic administrations a third phenomenon has been studied primarily by economists and concerns the credibility problem faced by a central bank selecting money growth rates models of the credibility problem 8 21 describe a setting in which the central bank and the public interact by respectively choosing actual and expected money growth rates in a variant of the prisoners dilemma this interaction can result in excessive inflation

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

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

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

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

technology transfer and spillovers does local participation with multinationals matter this paper examines the effects on technology transfer and spillovers deriving from ownership sharing of foreign multinational affiliates more specifically we try to answer two questions using unpublished indonesian micro data firstly do establishments with minority and majority ownership differ in terms of productivity levels secondly does the degree of spillover differ with the degree of ownership in the fdi our results show that foreign establishments have comparable high levels of labor productivity and that domestic establishments benefit from spillovers however the degree of foreign ownership does neither affect the level of labor productivity in foreign establishments nor the degree of spillovers

unemployment as excess supply of labor implications for wage and price inflation abstract the introduction of both market clearing wages and nominal rigidities on wage setting can be used to rationalize unemployment as excess supply of labor in the new keynesian model as a result wage inflation dynamics are forward looking and depend negatively on the rate of unemployment moreover both price inflation and wage inflation evolve as indicated by equations equivalent to those obtained in erceg et al 2000 though with different slope coefficients in an equal volatility comparison the model with unemployment conveys less price stickiness and more wage stickiness

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

is the political business cycle for real abstract this paper constructs and examines a macroeconomic model which combines features from both real and political business cycle models we augment a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities first that on average the economy expands early under democratic presidents and contracts early under republican presidents second that presidents whose parties successfully retain the presidency have stronger than average growth in the second half of their terms the model generates both of these features that conform to u s post world war ii data

a model of corporate donations to open source under hardware software complementarity in recent years there has been an increasing diffusion of open source projects as well as an increasing interest among scholars on the topic open source software oss is developed by communities of programmers and users usually sponsored by private firms is available in the public domain and redistributed for free we present a model of open and closed source software competition in a differentiated oligopoly of hardware software bundles hardware and software are complement goods and oss is financed by hardware firms results are several hardware firms contribute to the development of open source although the level of contribution is not socially optimal oss availability has a positive impact on hardware firms profits and prices whereas the closed source producer is harmed by oss competition furthermore we analyze under what circumstances hardware firms have incentives in investing in os projects the model can explain the increasing participation in os projects of several embedded device producers and server producers although we focus on hardware this model can be generalized to a wide range of complementary goods and services such as it training web hosting and information and communication technology ict consultancy services

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

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

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

open knowledge disclosure an overview of the evidence and economic motivations abstract this paper reviews current literature on open knowledge disclosure strategies used by firms it is usually acknowledged that for an innovative firm that does not benefit from a natural protection such as lead time advance the best strategy is to keep an innovation secret as long as possible or to protect it through an exclusive patent however in apparent contrast to this traditional view many studies suggest that firms often disclose important parts of their knowledge through scientific publications conferences the internet etc this paper aims to provide an overview first of the evidence supporting the existence of open knowledge disclosure and second of the economic motivations that encourage rational profit seeking firms to adopt these behaviours

the dynamic implications of increasing returns technological change and path dependent inefficiency this paper addresses the issue of path dependent selection and inefficiency counterfactual methods and the empirical evidence employed in this research trajectory the general message is basically that the theoretical argument to prove path dependent inefficiency is relatively straightforward while empirical demonstrations as well as the analysis of welfare implications are much more difficult in the first section we briefly state the basic argument explaining how localized learning leads to an incomplete exploration of the variety distribution of a technology we then synthesize the most interesting historical studies which get potential regret results and ask whether these results suggest a large welfare loss to try to answer this question we start from the critical arguments of liebowitz and margolis to discuss the theoretical and empirical difficulties of establishing path dependent inefficiency