international consumption risk sharing this paper formally examines the implications of international consumption risk sharing for a panel of industrialized countries we theoretically derive the international consumption insurance proposition in a simple setup and show how to modify it in more complicated models we analyze the implications of the theory for pairs of countries and find that aggregate domestic consumption is almost completely insured against idiosyncratic real demographic fiscal and monetary shocks over short cycles but that it covaries with these variables over medium and long cycles the cross equation restrictions imposed by the theory are rejected the policy implications are discussed

public insurance expansions and the health of immigrant and native children abstract the costs of public insurance expansions are ordinarily justified by the claim that increased eligibility causes gains in insurance coverage which translate into improved health care and health this paper studies dramatic changes in public health insurance eligibility for immigrant and native children from 1998 to 2009 and finds that children s nativity status is crucial to understanding the impacts of recent eligibility expansions i document a significantly higher degree of take up and less crowding out of private insurance among first and second generation immigrant children than among children of u s natives eligibility expansions increased immigrant children s use of preventive and ambulatory care and decreased emergency care in hospitals while estimated effects for children of natives are negligible my results also suggest improvements in some health measures that would be expected to respond to preventive and ambulatory care

how do fiscal and technology shocks affect real exchange rates new evidence for the united states abstract using vector autoregressions on u s time series relative to an aggregate of industrialized countries this paper provides new evidence on the dynamic effects of government spending and technology shocks on the real exchange rate and the terms of trade to achieve identification we derive robust restrictions on the sign of several impulse responses from a two country general equilibrium model we find that both the real exchange rate and the terms of trade whose responses are left unrestricted depreciate in response to expansionary government spending shocks and appreciate in response to positive technology shocks

equilibrium real exchange rates closed form theoretical solutions and some empirical evidence abstract this paper generates closed form theoretical solutions for the relationships among the real exchange rate relative per capita consumption and relative wealth in a stochastic dynamic general equilibrium model of two countries representative consumers the solutions offer insight into the robust cross sectional relationship between relative per capita gdps and relative national price levels established in kravis and lipsey 1983 1987 1988 in a manner consistent with equilibrium exchange rate theories and the productivity differentials model of balassa 1964 and samuelson 1964 application of panel data from summers and heston 1988 to the model s structural equations yields economically plausible estimates of the elasticity of intertemporal substitution the relative importance of nondashtradables in consumption and the rate of time preference in several oecd countries relative to that in the united states

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

the taylor principle fights back part ii abstract the existing literature holds that the taylor principle often leads to indeterminacy in new keynesian models that allow for capital accumulation and limited asset market participation this conclusion is special however to the case of continuous full employment when the assumption of perfect wage flexibility is relaxed very slightly so that the labor market clears quickly but not instantaneously determinacy is the norm the threat of indeterminacy is limited to a tiny irrelevant corner of the parameter space where the elasticity of labor supply is unusually high and real wage adjustment is unbelievably fast everywhere else the taylor principle guarantees a unique rational expectations equilibrium the dramatic difference in results reflects the sensitivity of the monetary transmission mechanism to the speed of adjustment in the labor market

on savings and investment dynamics in a small open economy abstract this paper constructs a stochastic overlapping generations two country model of savings and investment under conditions of perfect international capital mobility the focus of the analysis is on the relationship between savings and investment dynamics in a small open economy in response to stochastic variations in domestic and or foreign production technologies the model is simulated under alternative specifications of the stochastic distribution governing both technologies this provides insight into the very complicated nature and rich diversity of possible relationships between savings and investment dynamics

do country specific shocks matter evidence from australia and high income countries a stylized fact of global upward trend in domestic world output ratio for major small open economies is recognized in comparison with australia s dichotomous experience with the ratio this fact is used to shed light on the importance of country specific shocks for small open economies using a simple real business cycle model while it has been previously found that country specific shocks are more significant source of business cycle fluctuations than worldwide shocks for australia before the 1990s this article suggests that the country specific shocks may have become an important driver of output growth only in the early 1990s for australia

distributing the green cards permanent residency and personal income taxes after the immigration reform and control act of 1986 abstract we explore how permanent residency affects personal income tax participation and net personal income tax payments using variation from the immigration reform and control act of 1986 irca which authorized the largest u s amnesty to date we exploit the timing and geographic unevenness of irca s legalization programs alongside newly digitized data on personal income taxes in california home to the majority of applicants green cards induced the previously unauthorized to file state income tax returns at rates comparable to other california residents while the new returns generated little additional revenue through the end of the 1990s they did raise the incomes of families with children through new claims of the federal earned income tax credit

retrospectives the economics of leon hirsch keyserling the economics of leon h keyserling influenced the roosevelt era in terms of housing agriculture labor and antitrust legislation during the truman era discussed herein keyserling was influential as chair of the council of economic advisors stressing long term growth general and selective fiscal monetary and interest rate policies and the view that economic growth equity and welfare are tied together via a full employment goal thus he was a liberal keynesian and a pragmatist realizing that the keys to prosperity were consumption wages and investment profits

gender differences in the labor market impact of irca s amnesty provisions how to address the current record high number of unauthorized workers within our borders has been a hotly debated topic although a number of studies have examined the effect of employer sanctions bansak and raphael 2001 deborah a cobb clark clinton r shields and b lindsey lowell 1995 and border enforcement pia orrenius and madeline zavodny 2003 only a handful have examined the impact of amnesty on newly legalized immigrants sherrie a kossoudji and deborah a cobb clark 2002 neeraj kaushal 2006 while amnesty is being considered a current solution to immigration concerns the impact of past amnesty programs on the labor market outcomes and economic well being of immigrants has not been documented widely and the analysis has been limited largely to men in this paper we examine whether amnesty a provision of the 1986 immigration reform and control act irca affected the labor market outcomes and wages of the legalized population the analysis is carried out by gender to address male and female differences in labor supply and earnings legalization was intended to bring undocumented workers out of the shadows which may have affected their well being by reducing workplace vulnerabilities increasing job mobility and improving working conditions sherrie a kossoudji and cobb clark 2002 using data from the legalized population survey lps and a comparison sample from the 1979 national longitudinal survey of youth nlys79 we develop a quasi experimental framework to assess the impact of irca s amnesty provisions on the legalized population gender differences in the labor market impact of irca s amnesty provisions

monopolistic competition increasing returns to scale and the importance of productivity shocks abstract the neoclassical growth model is extended to incorporate monopolistic competition and increasing returns to scale implications for the measurement of productivity change through the solow residual are studied it is found that for this extension productivity fluctuations continue to account for a substantial fraction of output volatility the model cannot account for volatility of employment

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

policy watch government analysis of the benefits and costs of regulation recently congress has shown a greater interest in assessing the economic impact of regulation this interest was driven in part by estimates that federal regulation costs several hundred billion dollars annually in 1996 congress required the director of the office of management and budget to provide estimates of the total annual benefits and costs of individual regulations this essay reviews the increasing use of economic analysis in regulatory decisionmaking critically assesses the first 0mb report and considers how the use of economic analysis can help inform regulatory decisionmaking it argues that policymakers need to address a growing body of evidence that casts doubt on the effectiveness and efficiency of much regulation

the role of energy in real business cycle models abstract this paper modifies hansen s 1985 analysis of a real business cycle mode with indivisible labor by explicitly including energy as a productive input and modelling the relative price of energy as an exogenous random process one goal is to determine the extent to which the introduction of energy price shocks reduces the reliance of the real business cycle model on unobserved technology shocks the other goal following christiano and eichenbaum 1991 is to compare the correlation between real wages and hours predicted by the energy inclusive model to that predicted by hansen s model

by force of demand explaining cyclical fluctuations of international trade and government spending abstract this paper explores the role of demand shocks as an alternative to productivity shocks in driving both domestic and international business cycles within the international real business cycle irbc framework in addition to those well documented domestic business cycle fluctuations e g the volatility and cyclicality of output consumption investment labor hours and labor productivity and international business cycle properties e g the countercyclical net export and the comovement puzzle this paper focuses on two additional stylized facts in the industrialized countries the procyclical trade openness the gdp fraction of trade volume and the countercyclical government size the gdp fraction of government spending using a parsimonious dynamic stochastic general equilibrium model we show that the model s predictions under productivity shocks are not consistent with these facts instead a demand shock driven model replicates the above facts while matching other domestic and international business cycle properties an estimated version of the model confirms the quantitatively important impacts of demand shocks

effects of immigrant legalization on crime in the late 1970s rates of undocumented immigration into the united states began to increase dramatically fearing negative labor market and social effects congress passed the 1986 immigration reform and control act irca the primary purpose of the bill was to enhance the controls on the hiring of undocumented immigrants making it illegal to hire or recruit undocumented immigrants however the legislation also represented a near universal legalization of immigrants in the united states a group comprising almost three million people about 1 percent of the nation s population this paper examines the effects that the irca had on the commission of crime in the united states i provide estimates of the total effect of this legalization exploiting the large amount of variation in both the geographical distribution and the quasi random timing of the legalizations i find persistent decreases in crime of 3 percent to 5 percent primarily driven by a drop in property crimes this fall in crime is equivalent to 120 000 180 000 fewer violent and property crimes committed each year across the nation due to legalization moreover the declines in crime cannot be explained by existing trends economic conditions declines in drug crimes changes to police forces and prison populations or other common explanations of changes in crime rates during this period

the effects of dacamentation the impact of deferred action for childhood arrivals on unauthorized immigrants abstract as the largest immigration policy in 25 years deferred action for childhood arrivals daca made deportation relief and work authorization available to 1 7 million unauthorized immigrants this paper looks at how daca affects daca eligible immigrants labor market outcomes i use a difference in differences design for unauthorized immigrants near the criteria cutoffs for daca eligibility i find daca increases the likelihood of working by increasing labor force participation and decreasing the unemployment rate for daca eligible immigrants i also find daca increases the income of unauthorized immigrants in the bottom of the income distribution i find little evidence that daca affects the likelihood of attending school using these estimates daca moved 50 000 to 75 000 unauthorized immigrants into employment if the effects of deferred action for parents of americans and lawful permanent residents dapa are similar to daca then dapa could potentially move over 250 000 unauthorized immigrants into employment

international business cycles in theory and in practice this paper investigates whether multi country international business models can account for international comovements in the oecd there are substantial positive comovements between many output components between levels of employment and between total factor productivities the standard international business cycle model is not consistent with these comovements except for consumption levels the model implies either negative or very low comovements this is a robust feature of the theoretical models independently of specific parameter values one interesting finding is that a more general specification of the technology shock processes lead to substantial comovements but at the cost of another deficiency

effects of enforcement on illegal markets evidence from migrant smuggling along the southwestern border abstract the paper analyzes the effects of tighter border control on the illegal crossing market between mexico and the united states combining panel data on illegal migrants with enforcement statistics the effects of enforcement are found to be moderate prices of border smugglers coyotes increased by only 17 while the demand for smugglers has remained unchanged enforcement has however shifted illegal migrants to remote crossing places border crossing is now more time intensive with higher prices for coyotes and risk of death this geographic substitution raised migration costs by 140 more than twice the effect of enforcement on smuggling prices

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

does the number of countries in international business cycle models matter until the 1980s standard models with two large open economies i e the united states and europe provided plausible representations of the world economy however with the emergence of many developing countries since the 1990s this approach no longer seems reasonable in line with this change to the global economic environment cross country output correlations between the united states and other countries have risen this paper extends the standard two country model to many countries to show that doing so produces closer cross country correlations to the data in particular based on analytical investigation with a simple model and quantitative analysis with a more general model i show that the cross country output correlation rises and the cross country consumption correlation falls as the number of countries in the two models increases jel f40 f41 f44

saving investment associations and capital mobility on the evidence from japanese regional data abstract the paper examines the magnitude of the saving retention coefficient b in a setting of known near perfect capital mobility japanese regions first we find that on total regional saving and investment rate data inclusive of regional government saving and investment the estimate of b is negative this negative relationship in the total rates across japanese regions appears to arise from the strong negative association in the government saving and investment rates second on private regional investment and saving rate data b is insignificantly different from zero this is evidence consistent with the hypothesis of feldstein and horioka economic journal 1980 that in a financially integrated economy b would be close to zero

determinants of the current account balance in the united states this article studies the role of public and private imbalances in the behaviour of the current account balance in the united states in the context of an intertemporal model the estimation evaluates the effects of public and private imbalances on the dynamics of the current account correlation coefficients support the ricardian equivalence higher budget deficit correlates with a reduction in private consumption and an increase in private savings government saving does not vary significantly with macroeconomic variables in the short or in the long run in contrast fluctuations in government investment vary significantly with a number of economic variables in the long and in the short run accordingly fluctuations in the budget deficit are likely to be driven by fluctuations in public investment in contrast to government savings private savings vary significantly with macro variables in the long and in the short run fluctuations in private investment appear less evident compared to that in privat

technology growth and the business cycle using a partial equilibrium model that allows for factor hoarding i construct series on input utilization rates for ten oecd countries these series are used in growth accounting computations of total factor productivity which filter out cyclical variations in input utilization rates the main findings are as follows i adjusted solow residuals grow consistently faster than standard measures ii the variability of the adjusted solow residual is in some cases smaller than the standard residual s iii adjusted solow residuals are less procyclical than standard residuals and fare better at usual exogeneity tests iv supply shocks are no more synchronized between european countries than elsewhere and v observed increased output synchronization in europe is due to demand factors

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

international capital mobility in oecd countries the feldstein horioka puzzle revisited abstract we utilise the most recent time series techniques of dynamic ols and examine international capital mobility across 23 oecd countries we adopt the saving investment approach where the endogeneity problem is confronted our findings show that capital has been remarkably mobile in most countries over the last three decades

country specific effect in the feldstein horioka paradox a panel data analysis abstract using panel data methods this study leads to a new interpretation of the feldstein horioka paradox a high estimated saving investment coefficient may be due less to low capital mobility than to the existence of specific individual country effects

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

twin deficits openness and the business cycle in this paper we study the co movement of the government budget balance and the trade balance at business cycle frequencies in a sample of 10 oecd countries we find that the correlation of the two time series is negative but less so in more open economies moreover for the us the cross correlation function is s shaped we show that a standard business cycle model featuring government spending and technology shocks is able to replicate these empirical regularities the model predicts that conditional on spending shocks the correlation of the budget balance and the trade balance is close to perfect consistent with the twin deficit hypothesis despite this high correlation however the economic effect of spending shocks on the trade balance is contained if the economies are not very open to trade

should the personal computer be considered a technological revolution evidence from u s metropolitan areas the introduction and diffusion of personal computers are widely viewed as a technological revolution using u s metropolitan area level panel data this paper asks whether links between pc adoption educational attainment and the return to skill conform to a model of technological revolutions in which the speed and extent of adoption are endogenous the model implies that cities will adjust differently to the arrival of a more skill intensive means of production with the returns to skill increasing most where skill is abundant and its return is low we show that the cross city data fit many of the predictions of the model during the period 1980 2000 the pc diffusion era

international business cycles the quantitative role of transportation costs we evaluate the quantitative effects of introducing costs of transportation into an international trade model we model these costs through the introduction of international transportation services sector costs of transportation have substantial long run effects on welfare and may impact the pattern of trade however the business cycle effects on relative price movements and on international comovements are less pertinent since decreased trade volatility counteract the effects of transportation cost variations nevertheless it is also shown that costs of transportation combined with delivery lags go a long way towards resolving in particular the international comovement puzzle

illegal immigration border enforcement and relative wages evidence from apprehensions at the u s mexico border we examine illegal immigration in the united states from mexico over the period 1976 1995 one challenge is that we do not observe the number of individuals that attempt to enter the united states illegally we only observe the number of individuals apprehended attempting to cross the u s mexico border illegally based on a simple migration model we postulate the existence of an apprehensions function which expresses apprehensions at the border as a function of illegal attempts to cross the border and u s border enforcement effort we find that a 10 decrease in the mexican real wage leads to a 7 5 to 8 8 increase in apprehensions at the border excerpt

does trade integration cause convergence abstract using a business cycle model we analyse the conditions for trade integration to produce economic convergence we find large stable economies with integrated structures are likely to diverge but smaller more volatile or less well integrated economies will converge the symmetry of shocks is unimportant

using differences in knowledge across neighborhoods to uncover the impacts of the eitc on earnings we develop a new method of estimating the impacts of tax policies that uses areas with little knowledge about the policy s marginal incentives as counterfactuals for behavior in the absence of the policy we apply this method to characterize the impacts of the earned income tax credit eitc on earnings using administrative tax records covering all eitc eligible lers from 19962009 we begin by developing a proxy for local knowledge about the eitc schedule the degree of sharp bunching at the exact income level that maximizes eitc refunds by individuals who report self employment income the degree of self employed sharp bunching varies signi cantly

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

international business cycles with complete markets abstract kehoe and perri 2002 show that a two country business cycle model with endogenously incomplete markets helps to resolve the international comovement puzzle baxter 1995 and the quantity anomaly backus et al 1992 backus et al 1995 we claim that a similar performance can be achieved without resorting to market incompleteness we show that a model with complete markets driven by productivity shocks alone can account for the international comovement puzzle our model features time nonseparable preferences that allow arbitrarily small wealth effects on labor supply it matches the data by predicting i positive cross country correlations of investment and hours worked ii realistic cross country correlations of consumption it reduces the gap between international correlations of output and consumption but fails to change their order unlike models with restricted international markets ours show little sensitivity to the parameterization of the forcing process

international capital mobility in the long run and the short run can we still learn from saving investment data the idea to learn about international capital mobility from saving and investment data remains appealing our approach is based on var methods and overcomes some of the problems associated with saving investment regressions when the data are non stationary we propose a new measure of long run capital mobility that can be easily calculated as a by product of the estimation procedure of a cointegrated var in an application to historical us and british data we find long run capital mobility to have been remarkably stable over the century whereas variations in the mobility of capital primarily seem to have affected short run capital flows

unemployment insurance and short time compensation the effects on layoffs hours per worker and wages we analyze two unemployment insurance systems in one unemployed workers receive benefits while those on reduced hours do not as in north america at least until recently in the other short time compensation is paid to workers on reduced hours as in europe the first system causes inefficient temporary layoffs for some parameters the latter does not but implies inefficient hours per worker some evidence is presented regarding these effects despite policymakers recent enthusiasm for short time compensation the clear implication of this project is that changes should come on the tax not benefit side of the system

saving and investment in an open economy with non traded goods the authors examine a model of a small open economy in which there is free international mobility of financial capital investment in capital goods and a nontraded good such an environment is rich enough to explain several phenomena that are inexplicable in other models the authors explain why a high saving country may nonetheless borrow from abroad to finance investment they suggest an explanation of why saving and investment may be correlated even with no restrictions on trade in assets the authors also provide an optimizing model of stages in the balance of payments copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

growth and risk sharing with private information abstract we examine the impact of incomplete risk sharing on growth and welfare the source of market incompleteness in our economy is private information a household s idiosyncratic productivity shock is not observable by others risk sharing between households occurs through long term contracts with intermediaries we find that incomplete risk sharing tends to reduce the rate of growth relative to the complete risk sharing benchmark numerical examples indicate that the welfare cost and the growth effect of private information are small

amnesty programs and the labor market outcomes of undocumented workers i investigate the effect of the 1997 nicaraguan adjustment and central american relief act nacara on employment and earnings of undocumented foreign born men from nicaragua cuba guatemala and el salvador who were eligible for amnesty under the act i find that nacara had a modest effect on the employment of these men raised their real wage by 3 percent and weekly earnings by 4 percent estimates show that nacara raised the wage of the target group without a high school degree by a statistically insignificant 1 percent and of those with high school or higher education by a statistically significant 5 percent

weakly nonseparable preferences and distortionary taxes in a small open economy this paper examines the dynamic effects of distortionary taxes in a small open economy the employed utility function implies both endogenous rates of time preference and a tractable form of weak nonseparability between consumption and leisure weak nonseparability induces novel long run welfare and wealth effects of taxes and generates very different current account movements endogenous rates of time preference facilitate the examination of a tax on international borrowing and lending copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

can exchange rate variations or trade policy alter the equilibrium current account abstract paul krugman has pointed out that much work needs to be done before the intertemporal open economy model can replace the open economy is lm model as a guide to policy making the objective here is to take a step in this direction by examining if an exogenous increase in world demand for home goods as via trade policy can improve the equilibrium current account within an open economy intertemporal model in the process the paper explores the theoretical issue as to whether a variation in the real exchange rate can alter the difference between saving and investment the key idea is that uncovered interest parity plus some degree of mean reversion in the real exchange rate imply that a modern version of the laursen metzler harberger effect is operative the result is that a policy induced increase in the trade balance will alter the real exchange rate which in turn increases the difference between home saving and investment and thereby improves the equilibrium current account

understanding the persistence properties of international macroeconomic aggregates in this paper the ability of a two country model of growth and cycles is evaluated to explain the persistence properties of output and consumption across countries simulated output and consumption levels replicate the observed appearance of noncointegration across countries simulated output growth rates however do not explain the observed positive serial correlation of output growth rates the reallocation of resources in response to technology shocks generates a negative serial correlation for output growth rates

domestic saving and international capital movements in the long run and the short run the evidence and analysis in this paper support the earlier findings of feldstein and horioka 1980 that sustained increases in domestic savings rates induce approximately equal increases in domestic rates of investment new estimates for the post opec period 1974 79 imply that each extra dollar of domestic saving increases domestic investment by approximately 85 cents in a sample of 17 oecd countries an explicit analysis of the problems of identification and simultaneous equations bias suggests that the regression estimates are more relevant as a guide to the long run response of international capital flows than to their short run behavior coefficient estimates based on annual variations in savings and investment are subject to potentially severe simultaneous equations bias that is not present when annual observations are averaged over a decade or more and the regression is estimated with a cross country sample of these averages a portfolio model of international capital allocation that is presented in the paper indicates that the short run change in the rate of net foreign investment in response to a sustained increase in domestic saving is likely to be substantially greater than the ultimate steady state response this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

structural factors associated with primary fiscal balances in developing countries the study explores the conditions under which a government in a developing country is likely to run a balanced or surplus budget we contend that primary fiscal deficits are likely to persist where the economy is too saving constrained to raise private sector investment to conduct the investigation a logit model is applied to a sample of developing countries to see whether the saving constraints are associated with the fiscal stance of governments accordingly income level growth external current account balance and foreign direct investment are used as indicators of the saving constraint with the exception of economic growth positive developments in these variables turned out to be significant to the likelihood of the government adopting a surplus budget

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

what can explain the apparent lack of international consumption risk sharing recent research in international business cycles finds that international consumption comovements do not match the risk sharing predictions of standard complete markets models in this paper i ask whether two different types of explanations can help explain this result 1 nonseparabilities between tradables and nontradable leisure or goods and 2 the effects of capital market restrictions on consumption risk sharing i find that risk sharing cannot be resolved by either explanation alone however when i allow for both nonseparabilities and certain market restrictions risk sharing among unrestricted countries cannot be rejected this evidence suggests that a combination of these two effects may be necessary to explain consumption risk sharing across countries

stylized facts of investment in canada although fixed business investment accounts for a large and growing share of uptput in canada surprisingly little is known about it some stylized facts of investment in canada are set forth and the ability of some of the standard price variables to explain canadian data are briefly reviewed the behavior of aggregate investment and its components are analysed in both the time domain and in the frequency domain it is founjd that there is only a weak relationship between expenditure on non residential structures and on machinery and equipment and also that at the industry level there has been a great deal of variation of patterns in investment by industry in one example investment in the commercial services indusry is found to lead investment in the manufacturing sector it is also noted that investment and output in the united states lead investment and output in canada with the lead in investment being less strong thatn the lead in output in keeping with the patterns observed in expirical models

estimating saving investment correlations evidence for oecd countries based on an error correction model abstract saving investment correlations are important stylized facts in open economy macroeconomics and indicators of capital mobility they are best estimated by an error correction model ecm because an ecm is consistent with intertemporal general equilibrium models the ecm is a synthesis of previous approaches applying the ecm to the oecd countries we find that in general saving and investment are cointegrated the ecm is more powerful in detecting cointegration than the two step engle granger procedure estimates of the saving investment correlation are robust with respect to overdifferencing we find evidence of a large country effect and an increase in capital mobility within the oecd area

common and country specific fluctuations in productivity investment and the current account abstract dynamic factor analysis and kalman filtering are used to construct a measure of common economic activity for the g7 countries we find that the common fluctuations are strongly associated with movements in us investment common fluctuations have substantial impact on fluctuations in both productivity and investment in these countries but very little impact on the current account country specific investment fluctuations have a significant negative impact on the current account while country specific productivity movements have little independent effect these findings are shown to be generally consistent with the predictions of a multi country dynamic model calibrated to the empirical decomposition of productivity shocks

the output employment and interest rate effects of government consumption abstract we study the impact on aggregate variables of changes in government consumption using the neoclassical stochastic growth model we show theoretically that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary change we also show that in principle there can be an analog to the keynesian multiplier in the neoclassical growth model finally in an empirically plausible version of the model we show that the interest rate impact of a persistent government consumption shock exceeds that of a temporary one our results provide counterexamples to existing claims in the literature

taxes and the labor market participation of married couples the earned income tax credit a distinguishing feature of recent changes to the us system of public assistance is its increasing focus on working families and reliance on the tax system to transfer dollars to needy families after a decade in near total obscurity the earned income tax credit eitc was expanded to become the largest cash transfer program for lower income families with children advocates of the eitc argue that unlike traditional welfare the credit helps promote both the values of family and work indeed empirical evidence consistent with economic theory suggests that the eitc promotes employment among eligible unmarried women with children to target benefits to lower income families however the eitc is based on family income leading to traditional welfare type disincentives for most eligible secondary earners in fact the eitc is likely to reduce overall family labor supply among married couples this paper examines the labor force participation response of married couples to eitc expansions between 1984 and 1996 the effect of the credit is estimated using both quasiexperimental and traditional reduced form labor supply models results from both models show the same qualitative conclusion that the eitc expansions reduced total family labor supply of married couples in all cases we find a decline in labor force participation by married women that more than offsets any rise in participation by their spouses while the labor force participation rate of married men increased by about 0 2 percentage points that of married women decreased by just over a full percentage point these aggregate effects mask substantial heterogeneity in the population women facing the strongest disincentives were more than 2 percentage points less likely to work after the expansions these findings imply that the eitc is effectively subsidizing married mothers to stay home and therefore have implications for the design of the program d 2003 elsevier b v all rights reserved

immigration reform and the earnings of latino workers do employer sanctions cause discrimination this paper investigates whether employer sanctions for hiring undocumented workers introduced by the 1986 immigration reform and control act irca adversely affected the hourly earnings of latino workers in the southwestern u s we exploit the staggering of the sanctions and employee verification requirements across sectors to estimate this effect in particular irca s employer sanctions provisions were not extended to agricultural employers until two years after their imposition on non agricultural employers hence latino agricultural workers provide a control group against which to compare changes in the wages of latinos in non agricultural employment we find substantial pre post irca declines in the hourly earnings of latino non agricultural workers relative to latinos in agriculture this pattern however is considerably stronger for latino men than latina women we do not observe similar inter sectoral shifts in relative wages among non latino white workers in fact the relative wage changes for non latino white workers are of the opposite sign finally the pre post irca relative decline in latino non agricultural wages reverses the pre irca trend where we observe the relative earnings of latino non agricultural workers increasing

clicking on heaven s door the effect of immigrant legalization on crime we estimate the eect of legalization on the crime rate of immigrants by exploiting the italian policy framework as an ideal regression discontinuity design xed quotas of residence permits are available each year applications must be submitted electronically on specic click days and they are processed on a rst come rst served basis until the available quotas are exhausted by matching data on applicants including the timing of applications in milliseconds with restricted use criminal records for the year before and after click days we show that obtaining legal status reduces the probability of being reported for having committed a serious crime by 0 6 percentage points on average on a baseline crime rate of 1 percent this eect is driven by applicants that are allegedly employed by other immigrants as domestic workers but are most likely unemployed who exhibit the highest crime rate in the year before click days as well as the greatest reduction in crime after obtaining legal status by contrast applicants sponsored by rms exhibit a very low crime rate both before and after click days we conclude that undocumented immigrants confronting worse labor market opportunities are at a higher risk of committing crimes while they are also more responsive to legalization

cointegration of long span saving and investment abstract we find that saving and investment cointegrate in all or most countries in maddison s research memorandum no 443 1991 long span data set by a variety of time series and panel data tests we interpret our results as reflecting current account solvency and not capital immobility

a quantitative assessment of the decline in the u s current account low frequency changes in the u s current account can be understood in terms of the influence of differences in productivity growth rates across time and across countries using standard growth theory in particular the secular decline is primarily driven by the increase in the u s tfp growth rate relative to its trading partners differences in population growth rates or fiscal policy have no significant effects on the low frequency changes in the u s current account

immigration reform the effects of employer sanctions and legalization on wages the immigration reform and control act of 1986 irca represents an attempt to use labor market regulation to control illegal migration into the united states by imposing fines on employers who hire unauthorized workers sanctions lower wages directly because they act as a tax on hiring additional workers in addition irca legalized many longtime illegal aliens legalization affects wages by changing the relative supply of authorized and unauthorized workers this study estimates irca s impact on wages of manufacturing production workers in metropolitan areas and finds small but statistically significant effects sanctions lower wages while legalization raises them

methodological and empirical issues in real business cycle theory abstract in this paper we argue that the major impact of the rbc literature has been to propose a new methodology for macroeconomics this methodology is distinguished first by the importance it attributes to the empirical description of the phenomena to be explained and second by the use of this description in conjunction with quantitative theorizing i e the construction of computable general equilibrium models whose characteristic statistics match those of the data in accordance with this approach we first report on the current state of knowledge concerning business cycle regularities and conclude that additional empirical effort is called for in order to arrive at the appropriate basis for theorizing we then examine the performance of existing models and evaluate the case for integrating monetary factors and demand shocks into them lastly we review the recent efforts to explain the employment variability puzzle and argue that the search for a solution naturally leads to the incorporation of significant non walrasian features into the rbc framework

can world real interest rates explain business cycles in a small open economy abstract while the world real interest rate is potentially an important mechanism for transmitting international shocks to small open economies much of the recent quantitative research that studies this mechanism concludes that it has little effect on output investment and net exports we re examine the importance of world real interest rate shocks using an approach that reverses the standard real business cycle methodology we begin with a small open economy business cycle model but rather than specifying the stochastic processes for the shocks and then solving and simulating the model to evaluate how well these shocks explain business cycles we use the model to back out the shocks that are consistent with the model s observable endogenous variables then we use variance decompositions to examine the importance of each shock we apply this methodology to canada and find that world real interest rate shocks can play an important role in explaining the cyclical variation in a small open economy in particular they can explain up to one third of the fluctuations in output and more than half of the fluctuations in net exports and net foreign assets

a multi country real business cycle model with heterogeneous agents a multicountry real business cycle model is developed capturing two important aspects of heterogeneity found in household survey data only a small fraction of the population holds stock and a significant fraction of nonstockholders are borrowing constrained the model is applied to data for twenty oecd countries it generates cross country consumption correlations consistent with those observed in the data potential welfare gains from international portfolio diversification by stockholders are large leaving the observed home bias as a significant puzzle the model can also account for the finding in u s data that consumption of stockholders is more volatile than that of nonstockholders copyright 1996 by the editors of the scandinavian journal of economics

coming out of the shadows learning about legal status and wages from the legalized population the 1986 immigration reform and control act irca granted amnesty to approximately 1 7 million long term unauthorized workers in an effort to bring them out of the shadows and improve their labor market opportunities an analysis of wages using panel data for a sample of legalized men provides evidence that wage determinants are structurally different after amnesty for them but not for the comparison group as measured during the same time periods the wage penalty for being unauthorized is estimated to range from 14 to 24 the wage benefit of legalization under irca was approximately 6

adjustment costs in investment time preferences and the current account abstract this paper studies the effects of supply and demand shocks on the optimal investment and savings decisions of economic agents in a small open economy the two building blocks of the setup are adjustment costs in investment and a recursive time preference structure it is shown that the model can mimic certain stylized facts

an endogenous growth model with expanding ranges of consumer goods and producer durables this paper constructs a growth model with the feature that the range of differentiated consumption goods and the range of specialized producer durables are both endogenously determined the author shows that this feature allows the domestic investment rate to be closely associated with the domestic saving rate even when international financial markets are integrated he also argues that this feature is important in explaining the observed cross country diversity in growth performance and saving behavior copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on the international transmission of technology shocks abstract using vector autoregressions on u s time series and an aggregate of industrialized countries we find that technology shocks appreciate the terms of trade and lower the trade balance they induce an s shaped cross correlation function for both variables the s curve in calibrating a prototypical international business cycle model under complete and incomplete financial markets we find two distinct sets of parameter values while both model specifications deliver the s curve the underlying transmission mechanism of technology shocks is fundamentally different most importantly only in the incomplete markets economy the terms of trade appreciate and thus amplify the relative wealth effects of technology shocks as suggested by the evidence

do differences in presidential economic advisers matter using data on members on the council of economic advisors as well as us treasury secretaries and omb directors from 1952 through 2005 i investigate the effect of economic advisors educational and employment backgrounds on the time series performance of several policy variables ivy league advisors appear to raise non defense government spending although the size of the impact differs by president while voter preferences appear to matter for a wider variety of policy variables changes in federal regulation and marginal tax rates the share of ivy league advisors is at least as important as voter preferences in explaining non defense spending

the long term impact of the earned income tax credit on children s education and employment outcomes using 4 decades of variation in the federal and state earned income tax credit eitc we estimate the impact of exposure to eitc expansions in childhood on education and employment outcomes in adu

a successful accident recollections and speculations about the cea as originally conceived the president s council of economic advisers would have a unique relation with the president using keynesian analysis to advise him on maintaining full employment after fifty years the council has evolved into being a useful cog in a large decision making apparatus dealing with the whole range of federal problems of economic policy and bringing to bear whatever economics has to say the initial keynesian predisposition has faded the council has participated in some mistakes but it has made a valuable contribution primarily by persistent representation of the value of the free market

capital mobility and the relationship between saving and investment rates in oecd countries abstract this paper considers tests that use data on saving and investment rates to determine the degree of international capital mobility two types of evidence are presented to show that a high correlation between saving and investment rates across oecd countries can be consistent with a high degree of capital mobility this evidence qualifies the conclusions of previous studies and casts doubt on the usefulness of testing hypotheses about capital mobility with data on saving and investment rates

an intertemporal model of saving and investment this paper characterizes a market economy with infinitely long lived consumers and value maximizing firms which face costs of adjustment for capital the temporary equilibrium of this economy is similar to the short run equilibrium of standard macroeconomic models consumption is a function of wealth investment is related to the value of firms equilibrium between aggregate demand and aggregate supply is achieved by the endogenous adjustment of the sequence of current and future interest rates the dynamic behavior of output consumption and investment in this economy is the same as in an optimal growth model with adjustment costs the paper shows this equivalence and then uses it together with the equivalence of taxes to technological shocks to study the dynamic effects of fiscal policy

liquidity and real activity in a simple open economy model abstract this paper analyzes the ability of an open economy version of lucas s 1990 liquidity model to account for properties of international data the focus is on the model s ability to account for exchange rate dynamics and measured effects of monetary policy shocks on exchange rates interest rates and real activities across countries the model generates a prediction that a positive domestic monetary innovation is associated with nominal and real currency depreciations however the model s predictions with respect to nominal and real exchange rate volatilities are low

the cost of business cycles under endogenous growth robert e lucas jr argued that the welfare gains from reducing aggregate consumption volatility are negligible subsequent work that revisited his calculation continued to find small welfare benefits further reinforcing the perception that business cycles do not matter this paper argues instead that fluctuations can affect welfare by affecting the growth rate of consumption i show that fluctuations can reduce growth starting from a given initial consumption which can imply substantial welfare effects as lucas himself observed empirical evidence suggests the welfare effects are likely to be substantial about two orders of magnitude greater than lucas original estimates

how do u s visa policies affect unauthorized immigration abstract how would increasing the number of visas available to potential migrants affect unauthorized immigration from mexico to the u s current u s policy bans people who are deported from receiving legal status for a period of time this policy aims to serve as an additional deterrent to unauthorized immigration but may be ineffective given that most potential mexican migrants have an extremely low probability of ever being able to legally move to the u s we develop a dynamic discrete location choice model which we estimate using data from the mexican migration project and consider various counterfactual policies that vary the intensity of enforcement and access to work visas we find that legal entry bans for deported individuals are ineffective at current rates of legal immigration but that increased legalization rates would amplify the deterrent effects of deportation we also show that a temporary work visa program would yield similar deterrent effects as an increase in permanent legalization without resulting in very large increases in the total stock of migrants residing in the u s these findings have important implications for structuring future immigration reforms

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

the impact of family income on child achievement evidence from the earned income tax credit using an instrumental variables strategy we estimate the causal effect of income on children s math and reading achievement our identification derives from the large nonlinear changes in the earned income tax credit the largest of these changes increased family income by as much as 20 percent or approximately 2 100 between 1993 and 1997 our baseline estimates imply that a 1 000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications jel h24 h31 i21 i38 j13