using genuine savings for climate policy evaluation with an integrated assessment model there has been a recent increase in efforts to develop broader models to assess the impact of climate change and climate change policies both in terms of impact measures beyond gdp and in terms of modelling complexity beyond dice rice models climate policies aimed at reducing co2 emissions can have impacts in multiple sectors of the economy and can change consumption levels over time we show how the sustainability indicator genuine savings can be endogenised within a general equilibrium model and used as a criterion for judging the impacts of such policies in terms of future well being differences in genuine savings rates between co2 emission reduction scenarios are discussed we show how a broader genuine savings based assessment of climate change can result in a re evaluation of the consequences and costs of inaction in terms of various climate change related policies and how multiple environmental and well being outcomes can be analysed within a unified modelling framework

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

testing genuine savings as a forward looking indicator of future well being over the very long run genuine savings gs have been much used in recent years as an indicator of a country s sustainability according to some theorists e g arrow et al 2012 under certain conditions a country with a positive level of gs should experience non declining future utility given the assumption of unlimited substitutability among all forms of capital sometimes called weak sustainability this paper reports the first very long run tests of gs also called comprehensive investment or adjusted net savings as a forward looking indicator of future well being we assemble data for british capital back to 1765 and construct several net investment measures which are used as indicators of two alternative measures of future well being consumption per capita and real wages an allowance for a value of time due to exogenous technological progress is included in some gs measures and we demonstrate the importance of this measure and the choice of discount rate over the very long run on the whole our results do not reject the postulated relationship between gs and future well being and show gs can be a forward looking indicator of future well being for periods of up to 100 years

strikes and holdouts in wage bargaining theory and data we develop a private information model of union contract negotiations in which disputes signal a firm s willingness to pay previous models have assumed that all labor disputes take the form of a strike yet a prominent feature of u s collective bargaining is the holdout negotiations often continue without a strike after the contract has expired production continues with workers paid according to the expired contract we analyze the union s decision to strike or hold out and highlight its importance to strike activity strikes are more likely to occur after a drop in the real wage or a decline in unemployment

long run trends in energy related external costs this paper considers how energy related external costs change through time it focuses on one of the key periods in the history of energy after a period of declining coal prices and soaring consumption which fuelled the second industrial revolution the nineteenth century british economy was externalising the social costs of energy production and consumption on a massive scale rising from 25 in the 1820s an estimated 60 70 of the average social costs of coal were externalised in the 1880s imposing damages close to 20 of gdp the eventual decline in air pollution concentration around 1900 occurred fifty years later than was broadly socially optimal this experience highlights the evolution of the demand for and supply of environmental quality in the context of economic growth and the nature of related market and government failures implying the necessity for adaptation rather than encouraging mitigation this experience may offer lessons for climate analysis and policy making

the concept of natural capital the natural environment is now commonly viewed as a form of capital asset or natural capital also included are ecosystems that provide important goods and services to the economy managing natural capital has consequences for sustainable development however there are contrasting weak versus strong sustainability views which in turn have implications for green accounting natural resource based sovereign wealth funds have emerged as key financial instruments for compensating resource depreciation with greater economy wide investments recent scientific evidence recommends demarcating safe operating spaces to limit exploitation of critical global biophysical subsystems or processes these challenges suggest that the concept of natural capital is pivotal to sound policy

cyclical fluctuations in strike activity using a set of data on contracts and strikes for the period 1970 81 the author distinguishes among the roles of aggregate business conditions labor market conditions and product market conditions in the determination of strike incidence and duration strike incidence is found to be highest in industries that are depressed relative to the rest of the economy but in regions with low unemployment this finding is consistent with the theory that the cost of a strike to a firm increases with the demand for its product and the cost of a strike to the union increases with unemployment another finding however is that strikes are longest in industries that are booming relative to the rest of the economy

historical wealth accounts for britain progress and puzzles in measuring the sustainability of economic growth we thank the leverhulme trust for funding this research under the project history and the future

unions and strikes with asymmetric information strikes seem to be a pareto inefficient outcome of bargaining between a union and a firm however this paper shows that strikes can be the outcome of rational behavior by both agents if the firm has more information than the union concerning the state of nature the union can use strikes as a way of gaining information the paper uses an asymmetric information model where the firm has information about the state i e profitability that the union does not know the schedule of wage offers by the union then depends on the probability that a given state will occur

cliometrics and time series econometrics some theory and applications the paper discusses a range of modern time series methods that have become popular in the past 20 years and considers their usefulness for cliometrics research both in theory and via a range of applications issues such as spurious regression unit roots cointegration persistence causality structural time series methods including time varying parameter models are introduced as are the estimation and testing implications that they involve applications include a discussion of the timing and potential causes of the british industrial revolution income convergence and the long run behaviour of english real wages 1264 1913 finally some new and potentially useful developments are discussed including the mildly explosive processes graphical modelling and long memory

contracts and strikes in canada 1952 1988 between 1952 and 1979 labour canada collected data on something in excess of 5300 contracts an earlier subset of these data covering 19531973 was used in work by inter alia riddell 1979 1980 but in recent years they have not been widely studied the reason is perhaps that in the early 1960s while labour canada was still assembling what is usually referred to as the wage chronologies file work also began on the collection of contract data for what is known as the wage file this data collection which continues to the present day has generated what many view as an unparalleled source of detail about wage agreements and most analyses of canadian contracts focus on the wage file alone this short paper briefly describes some aspects of the preparation of both data sets for analysis including the incorporation of information on strikes when they occurred a longer version of this paper that is available from the author dwells in considerably more detail on these issues the other main focus of this paper is on some preliminary evidence from a combination of the two samples covering contracts from 1952 to 1988 specifically the combined sample reveals several insights into changes over time in strike behaviour and contract length in future papers it is planned to use an extended version of the data beyond 1988 to explore these and other issues for a period of over 40 years the paper is organized as follows section ii describes the two sets of contract data paying particular attention to the use of labour canada s work stoppage file to supplement the information on those contracts that were settled only after a strike section iii outlines one way of combining the contract data sets and reports on the changes over time in strike behaviour and contract duration thus revealed

labor hoarding superior information and business cycle dynamics abstract in this paper we test whether a labor hoarding environment with basic and augmented laws of motion provide an adequate explanation for observed business cycle dynamics the basic law of motion assumes that the information set used by economic agents to forecast future forcing variables includes only the history of forcing variables augmented laws of motion assume that the information set is superior and include both forcing and hidden exogenous variables we show that the labor hoarding environment with the basic law of motion fails to replicate observed business cycle facts while the environment with augmented laws of motion successfully matches these facts

the estimation of surprise models and the surprise consumption function in the first part of the paper we outline a method for estimating a class of models in which news or surprises appear and expectations are formed rationally the method is an extension of the errors in variables method of mccallum and wickens as a by product some of pagan s results on the circumstances under which the commonly used two step method of estimating surprise models is efficient are shown to be a consequence of well known theorems on the efficiency of sub system estimation when a subset of equations are exactly identified in the second part of the paper the method is applied to hall s random walk model of consumption which is extended to allow for stochastic interest rates and for leisure and government spending to be substitutes for private spending the extended formulation is a great deal more successful at capturing the salient features of the data we also derive approximate restrictions across the parameters of the model due to the rational expectations hypothesis but find that they are marginally rejected by the data finally we evaluate the ability of the life cycle with rational expectations model to encompass alternative models

habit formation in consumer preferences evidence from panel data this paper tests for the presence of habit formation using household data a simple model of habit formation implies a condition relating the strength of habits to the evolution of consumption over time when the condition is estimated with food consumption data from the panel study on income dynamics the results yield no evidence of habit formation at the annual frequency this finding is robust to a number of changes in the specification it also holds for several proxies for nondurables and services consumption created by combining psid variables with weights estimated from consumer expenditure survey data

aggregate employment real business cycles and superior information abstract we test whether dynamic stochastic general equilibrium artificial economies associated with several labor market structures provide an adequate characterization of aggregate employment volatility and dynamics our test is robust to possible misspecifications about the information set used by economic agents to forecast future events accounting for agents superior information we find that the divisible labor indivisible labor labor adjustment costs and labor hoarding structures replicate employment volatility in contrast to the nominal wage contracts structure also the labor hoarding structure provides a substantially better account of employment dynamics

wage bargaining with time varying threats we study wage bargaining in which the union is uncertain about the firm s willingness to pay and threat payoffs vary over time strike payoffs change as replacement workers are hired as strikers find temporary jobs and as inventories or strike funds run out we find that bargaining outcomes are substantially altered if threat payoffs vary if dispute costs increase in the long run then dispute durations are longer settlement rates are lower and wages decline more slowly during the short run and may even increase the settlement wage is largely determined from the long run threat rather than the short run threat

is strike behavior cyclical we examine cyclicality of strike frequency and incidence using canadian data on strikes and contracts total strike frequency exhibits significant procyclicality to which within contract strikes contribute appreciably evidence is weaker for procyclical behavior of contract expiry strikes both in total and disaggregated by issue strike incidence is also procyclical particularly in manufacturing though the procyclicality here is confined to strikes over nonwage issues these results mirror those obtained by analyzing the frequency of strikes in the contract data industry specific cyclical variables positively affect strike incidence in manufacturing but region specific variables have no effect

money and the business cycle with one period nominal contracts a modified version of the nominal contract developed by j a gray 1976 and s fischer 1977 is introduced in a general equilibrium model with money which has been used in the real business cycle literature money is introduced in the model through cash in advance constraint two kinds of contracts are examined namely a nominal wage contract and a nominal price contract the nominal wage contract improves the fit of the model in many respects the nominal price contract increases the output volatility enormously but it has some unrealistic features

sustainability and technical progress a rigorous model connects together the following three basic concepts 1 sustainability meaning the generalized future power of an economy to consume over time 2 green nnp meaning a current measure of national income that subtracts off from gnp not just depreciation of capital but also more generally depletion of environmental assets evaluated at current efficiency prices 3 technological progress meaning a projection onto the future of the so called solow residual a simple general formula is derived some crude calculations suggest a possibly strong effect of the residual which hints that our best present estimates of long term sustainability may be largely driven by predictions of future technological progress

the empirical relations between employers striker replacement strategies and strike duration this analysis of general accounting office survey data on strikes in 1985 and 1989 shows that employers permanent replacement of striking workers was associated with longer strikes than would otherwise have occurred furthermore the authors find that simply announcing the intent to replace strikers was also associated with longer strikes finally when employers permanently replaced strikers the probability of settlement fell approximately 30 these findings are consistent with models focusing on the joint costs of a strike and on private information in the bargaining process t o the firm that seeks to operate during a strike a major obstacle is securing a work force to do the work normally performed by members of the striking bargaining unit of the four possible strategies for securing such a work force reassigning struck work to non bargaining unit employees utilizing members of the bargaining unit who return to work during the strike hiring temporary replacement employees and hiring permanent replacement employees the strategy of hiring permanent replacements for strikers has become the most controversial before the passage of new deal labor legislation u s employers regularly exercised their common law right to replace striking workers the wagner act of 1935 protected employees right to strike but did not explicitly grant employers the right to replace strikers the supreme court however upheld the legality of permanently replacing strikers in its 1938 decision nlrb v mackay radio

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

strike incidence in british manufacturing in the 1980s in british manufacturing during the 1980s about one in forty wage settlements involved a strike using data provided by the confederation of british industry the authors analyze the incidence of

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

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

a theory of holdouts in wage bargaining holdouts the continuation of negotiations beyond the contract expiry date are the most common form of disputes in labor contract negotiations the authors model holdouts as a delaying tactic employed by unions to obtain information about other bargaining outcomes in their industry novel implications of their model include a positive association between holdout duration and the number of bargaining pairs negotiating contracts simultaneously bunching of holdout durations within these negotiating groups and fewer strikes among holdouts which end later in groups using a large panel of contract negotiations in canadian manufacturing the authors find considerable support for these predictions copyright 1998 by american economic association

one sided sustainability tests with amenities and changes in technology trade and population abstract if an economy with multiple consumption goods including environmental amenities uniquely maximises present value with constant discounting it is unsustainable at some time if either of two measures augmented net investment or the change in augmented green net national product are zero or negative then augmented denotes that time is treated as a productive stock which includes in each measure the value of future exogenous changes in technology or terms of trade adjustments are found to make each measure a test for individual sustainability when population grows exogenously the practical and philosophical rationale for testing sustainability in a present value maximising and therefore fully prescribed development path is discussed

multicointegration in us consumption data the present study tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the usa in doing so the study exploits the fact that the flows of disposable income and consumption expenditure on the one hand and the stock of consumers wealth which can be considered as cumulative past discrepancies between the flows of income and expenditure on the other hand can be thought of as a stock flow model in which multicointegration is likely to occur recently developed i 2 techniques are applied for testing for multicointegrating relations and find supporting evidence for the existence of multicointegration in us consumption data

cyclical fluctuations in strike durations canadian data on strikes between 1946 and 1983 are used to estimate linear regression models for the logarithm of completed duration a thorough investigation of the influence of the business cycle reveals strong support for the hypothesis that strike durations are countercyclical the cyclical effect is shown to be robust to both the choice of cyclical variable and the econometric specification and the magnitude of the effect is quite substantial experimentation with different representations of the cycle reveals that it is difficult to improve on a simple formulation involving a single continuous variable

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

weak support for weak sustainability genuine savings and long term wellbeing in sweden 1850 2000 we study genuine savings as an indicator of long term welfare for sweden for the period 1850 to 2000 sweden has developed long series of comprehensive green national accounts for this entire per

factor hoarding and the propagation of business cycles shocks this paper analyzes the role of variable capital utilization rates in propagating shocks over the business cycle to this end we formulate and estimate an equilibrium business cycle model in which cyclical capital utilization rates are viewed as a form of factor hoarding we find that variable capital utilization rates substantially magnify and propagate the impact of shocks to agents environments the strength of these propagation effects is evident in the dynamic response functions of various economy wide aggregates to shocks in agents environments in the statistics that we construct to summarize the strength of the propagation mechanisms in the model and in the volatility of exogenous technology shocks needed to explain the observed variability in aggregate u s output other authors have argued that standard real business cycle rbc models fail to account for certain features of the data because they do not embody quantitatively important propagation mechanisms these features include the observed positive serial correlation in the growth rate of output the shape of the spectrum of the growth rate of real output and the correlation between the forecastable component of real output and various other economic aggregates allowing for variable capital utilization rates substantially improves the ability of the model to account for these features of the data

why is consumption so smooth for thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income this paper considers the evidence for the contrary position that permanent income is in fact less smooth than measured income so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory the paper argues that in postwar u s quarterly data consumption is smooth because it responds with a lag to changes in income

do tax cuts generate twin deficits a multi country analysis we study the eects of tax shocks on the budget and external deficits for 16 industrialized countries over the post 1975 period our structural approach is based on a tractable small open economy model where a tax cut generates a budget deficit in turn the budget deficit aects the external deficit by two distinct channels the demographic channel works through the overlapping generation structure of the model the forecasting channel works through the dynamic structure of the model our empirical analysis documents that tax shocks generate significant positive comovements between the budget and external deficits we also find that both the demographic and forecasting channels are important to explain the comovements

explaining business cycles a multiple shock approach abstract aiyagari 1992 and prescott 1986 1991 claim that a large fraction of the variance of united states quarterly detrended real gnp is attributable to an unobservable shock to total factor productivity this paper argues that the importance of a productivity shock in explaining the variance of output is fundamentally indeterminate any model that is in accord with the several time series that make up united states macroeconomic data must feature multiple shocks that are correlated at all leads and lags sorting out the separate effects of these various shocks on a single variable such as real gnp is impossible we illustrate this argument using a multiple shock version of the king plosser rebelo 1988 benchmark real business cycle model

econometric issues in macroeconomic models with generated regressors the paper critically reviews the literature on the econometric issues raised by the use of generated regressors gr in empirical models the economic rationale for the use of gr is considered with examples being drawn from several macroeconomic examples including new classical macroeconomic ncm models which postulate monetary neutrality various estimation methods are discussed for models which include surprise or unexpected terms and the strengths and weaknesses of each approach are investigated drawing upon the work of mcaleer and mckenzie 1991 situations where the typically inefficient two step estimation 2se method will be efficient are highlighted problems of model misspecification and measurement errors are also investigated an empirical section highlights some of the dangers of using uncorrected 2se estimation results through a careful consideration of many recent attempts to test the ncm monetary neutrality hypothesis copyright 1993 by blackwell publishers ltd

comprehensive wealth and future consumption accounting for population growth economic theory predicts that the current change in national wealth broadly defined to include natural and human capital as well as produced capital genuine savings determines whether the present value of future changes in consumption is positive or negative theoretical research has focused on the effects of population growth on this relation but no rigorous empirical investigation has been conducted panel data for 64 developing countries during 1970 82 are used to test the effects of three adjustments for population growth including one that controls for omitted wealth although the adjustments have substantial impacts on estimates of genuine savings they lead to only limited improvements in the relation between those estimates and subsequent consumption changes even without adjustments for population growth adjustments for natural resource depletion improve the relation significantly policymakers and economists can interpret published estimates of genuine savings as signals of future consumption paths if and only if the estimates include adjustments for natural resource depletion but better estimates of capital stocks are needed before it can be confidently said that adjustments for population growth significantly improve the accuracy of those signals

employment corporate investment and cash flow risk we highlight the role of cash flow uncertainty on corporate employment and investment we find that a 1 increase in cash flow uncertainty leads to a 0 62 decrease in tangible investment a 1 39 decrease in intangible investment and a 3 67 decrease in corporate employment growth our results are statistically and economically significant we further find that these relationships are stronger during economic recessions our findings have significant policy implications to wit if policy makers would like corporations to increase their employment and investment they should focus on policies that decrease corporate cash flow uncertainty

comparing augmented sustainability measures for scotland is there a mismatch we estimate and compare two empirical measures of the weak sustainability of an economy for the first time the change in augmented green net national product gnnp and the interest on augmented genuine savings gs yearly calculations are given for each measure for scotland during 1992 1999 augmentation means including using projections to 2020 changed production possibilities enabled by exogenous technical progress or changing oil prices the change in augmented gnnp and the interest on augmented gs are both always positive showing no sustainability problem for scotland then according to the assumptions underlying our weak sustainability calculations however the former greatly exceeds the latter even when macroeconomic fluctuations are taken into account this is a mismatch which poses an unresolved problem with the theory resolving it may require respecifying the utility functions used in mainstream growth theory

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

augmenting the world bank s estimates ireland s genuine savings through boom and bust abstract the world bank computes estimates of genuine savings gs a leading indicator of sustainable development for most countries a well established literature has called for methodological enhancement this paper presents augmented estimates of irish gs throughout a period of unprecedented economic expansion and decline 1990 2016 a time series constructed predominantly from national sources includes the most comprehensive coverage of pollutants in the literature surveyed we apply a novel method to aid the property rights designation assessment required for transboundary pollutant accounting in sharp contrast to the world bank s estimates our findings suggest that a modern developed economy can exhibit signs of unsustainability furthermore extended environmental damages drive these results suggesting expanded country specific gs may diverge considerably from the world bank s estimates we find rapid economic development and rapid declines in environmental damages can occur concurrently and on the transition away from an unsustainable path

labor hoarding and the business cycle this paper investigates the sensitivity of solow residual based measures of technology shocks to labor hoarding behavior using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption we estimate the fraction of the variability of the solow residual that is due to technology shocks our results support the view that a significant proportion of movements in the solow residual are artifacts of labor hoarding behavior specifically we estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models in addition our results suggest that existing real business cycle studies substantially overstate the extent to which technology shocks account for the variability of postwar aggregate u s output

external and budget deficits in some developing countries abstract this paper documents and explains the positive comovement between the external and budget deficits of developing countries for which post 1960 time series data are available first the estimates indicate that the empirical covariance between these deficits is always positive and is statistically significant for many cases second the empirical covariance is close to that predicted from a tractable small open economy overlapping generation model with heterogeneous goods capturing the joint behavior of the external and budget deficits also the predicted covariance is induced by shocks which are closely related to internal conditions such as domestic resources and fiscal policies and to a much lesser extent to external conditions such as the world interest rate real exchange rate and terms of trade

identifying the new keynesian phillips curve phillips curves are central to discussions of inflation dynamics and monetary policy the hybrid new keynesian phillips curve nkpc describes how past inflation expected future inflation and a measure of real aggregate demand drive the current inflation rate this paper studies the potential weak identification of the nkpc under generalized method of moments and traces this syndrome to a lack of higher order dynamics in exogenous variables we employ analytic methods to understand the economics of the nkpc identification problem in the canonical three equation new keynesian model we revisit the empirical evidence for the usa the uk and canada by constructing tests and confidence intervals based on the anderson and rubin 1949 statistic which is robust to weak identification we also apply the guggenberger and smith 2008 lm test to the underlying nkpc pricing parameters both tests yield little evidence of forward looking inflation dynamics copyright 2008 john wiley sons ltd

genuine savings leading indicator of sustainable development abstract the world bank recently began publishing estimates of countries genuine savings a comprehensive measure of net investment across all forms of capital natural and human as well as produced this article presents the first empirical investigation of the consistency of the bank s estimates with the hypothesis that net investment should equal the difference between a country s average future consumption and its current consumption results show that the bank s estimates are consistent only with weak versions of this hypothesis and then only for developing countries moreover a simple autoregressive integrated moving average arima model outperforms any net investment measure comprehensive or conventional as a predictor of the difference between current and future consumption in sum the bank s net investment estimates tend to move in the same direction as the difference between current and average future consumption in developing countries but they have little value for predicting the mag

productivity shocks and real business cycles abstract productivity shocks play a central role in real business cycles as an exogenous impulse to macroeconomic activity however measured solow prescott residuals do not behave as an exogenous impulse rather econometric evidence provided in this paper indicates that 1 money interest rates and government spending granger cause these impulses and 2 a substantial component of the variance of these impulses between one quarter and one half is attributable to variations in aggregate demand these results are robust to a number of econometric issues including measurement errors specification of the production function and certain forms of omitted real variables

what do residuals from first order conditions reveal about dge models the first order condition foc associated with labour in many dynamic general equilibrium models involves only current period variables residuals constructed from this foc are inconsistent with aggregate us data in that they are very large and highly persistent the persistence suggests that models which introduce dynamic terms in the labour foc may be more consistent with the data three such models one with learning by doing one with habit formation and one with labour adjustment costs confirm that they can reduce the persistence in the residuals making the models more consistent with the joint dynamics of consumption output and hours

measuringincome and measuring sustainability we examine what interpretation can be given to inclusive income understood to be consumption plus the value of the net increase in all relevant capital stocks we introduce the concept of instantaneously constant value income defined as the maximum amount the economy can consume at a moment of time and keep the expected present value of utility of current and future generations constant we argue that this income concept captures some of the concerns underlying sustainability our main result is that inclusive income equals instantaneously constant value income we show that this result holds in a very general setting and in particular carries over to models incorporating technological progress when such progress can be captured by augmented stocks of knowledge an important implication of our main result is that it provides a very simple method for deriving inclusive income which does not involve any linearization of the hamiltonian

instrumental variables procedures for estimating linear rational expectations models abstract this paper illustrates how to use instrumental variables procedures to estimate the parameters of a linear rational expectations model these procedures are appropriate when disturbances are serially correlated and the instrumental variables are not exogenous we compare our procedures to some alternative estimators that estimate free parameters from restrictions implied by the euler equations the procedures are applicable to a variety of linear rational expectations models several examples of which we cite

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

consumption and portfolio choice under internal multiplicative habit formation this paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit we obtain closed form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint this enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock bond investments we also show that in a setting that combines habit formation with epstein zin utility consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease

budget deficit persistence and the twin deficits hypothesis abstract this paper gauges the twin deficits hypothesis i e a positive causal relationship between the external and budget deficits this relationship is measured by the responses of the external deficit to changes in the budget deficit induced by blanchard s model these responses are positively affected by the birth rate and by the degree of persistence of the budget deficit empirical results for the canadian and us economies reveal that although the relevant birth rates are small the great persistence of the budget deficits yields responses that are numerically large and statistically positive this contrasts with previous tests of the twin deficits hypothesis which have never formally taken into account the stochastic properties of the budget deficit

the excess smoothness of consumption identification and interpretation deaton s observation that consumption appears to be too smooth is easily reconciled with the notion that consumption exhibits excess sensitivity to current income the reconciliation invokes the plausible assumption that households forecast on the basis of a larger information set than the econometrician the empirical case for excess smoothness is strengthened by showing that the innovations in permanent income can be inferred from an autoregression of income and saving not only under the permanent income hypothesis but also under the excess sensitivity model empirically parameter restrictions imposed on the bivariate autoregression by the excess sensitivity model are not rejected

market competition and strike activity we develop a model of wage bargaining with private information in a duopoly we investigate how product differentiation and market competition bertrand vs cournot competition affect wages and strikes if bargaining takes place at the industry level then both the wage outcome and the strike activity do not depend on the degree of product differentiation whatever the type of market competition however if bargaining takes place at the firm level then wages and strikes are increasing with the degree of product differentiation and the strike activity is smaller under bertrand than under cournot competition

strikes and wages a test of an asymmetric information model this paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the profitability of the firm the model posits the existence of a negatively sloped resistance curve between wages and strike duration in addition it offer a series of predictions relating wage and strike outcomes to changes in the expected profitability of the firm and changes in the alternative opportunities of striking workers these implications are tested using data on wage outcomes strike probabilities and strike durations for a large sample of collective bargaining agreements

empirical testing of genuine savings as an indicator of weak sustainability a three country analysis of long run trends genuine savings has emerged as a widely used indicator of sustainable development this approach to conceptualising what sustainability is about has strong links to work published by anil markandya and colleagues over 20 years ago in this paper we use long term data stretching back to 1870 to undertake empirical tests of the relationship between genuine savings gs and future well being for three countries britain the usa and germany our tests are based on an underlying theoretical relationship between gs and changes in the present value of future consumption based on both single country and panel results we find evidence supporting the existence of a cointegrating long run equilibrium relationship between gs and future well being and fail to reject the basic theoretical result on the relationship between these two macroeconomic variables this provides some support for the gs measure of weak sustainability

international evidence on the persistence of economic fluctuations abstract this paper presents new evidence on the persistence of fluctuations in real gnp we estimate two measures of persistence nonparametrically using post war quarterly data from canada france germany italy japan the united kingdom and the united states we compare these estimates with monte carlo results from various ar 2 processes for six out of seven countries the point estimates indicate that a 1 shock to output should change the long run unvariate forecast of output by well over 1 low order arma models yield similar conclusions finally we examine the persistence in relative outputs of different countries

an investigation into the determinants of u s strike activity this paper outlines the steps involved in constructing a new panel dataset of u s contract negotiations and strike activity this data set has a much broader coverage of firms and unions than micro data sets analyzed to date key findings include the discovery that the variability and not the level of firm profitability affects the probability of a strike personal characteristics of the union workforce also emerge as key determinants of strike activity finally strikes are found to be more likely when the local labor market is tight but less likely when the industry labor market is tight copyright 1986 by american economic association

genuine saving and positional externalities much evidence suggests that people are concerned with their relative consumption yet positional externalities have so far been ignored in savings based indicators of sustainable development this

wood and industrialization evidence and hypotheses from the case of spain 1860 1935 abstract the aim of this paper is to study wood consumption during the industrial expansion which took place in the western world in the second half of the nineteenth and the first decades of the twentieth century through the analysis of the case of spain for this purpose we present the series of spanish wood consumption both as a raw material wrm and as firewood fw between 1860 and 1935 and we carry out two exercises with these series the first calculates the intensity of use iou which relates wood consumption in physical terms with the evolution of the gdp the second more complex exercise estimates a standard consumption function that allows us to know the elasticity of wrm with respect to the gdp the spanish price of wood and the spanish price of a substitute material like iron based on our results we discuss the lower dependence of the spanish industrial economy on wood the liberation of forest areas that may have occurred in spain as a result of industrialization and to what extent the trends observed for the spanish case can be extrapolated internationally the main conclusion is that industrialization transformed the uses of wood and though the importance of this resource per unit of gdp decreased its overall consumption increased generating greater pressure on forests at an international level

the deaton paradox in a long memory context with structural breaks this article contributes to the permanent income hypothesis pih and excess consumption smoothness debate in the context of fractional integration we show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work in fact the i 1 hypothesis is rejected for the income process with monthly data in favour of a fractional integration order lower than 1 moreover if a structural break is taken into account we observe a substantial reduction in the degree of consumption smoothness especially after the break found in 1975

investing exhaustible resource rents and the path of consumption we set out dollar valued net national product for an economy with a wasting essential stock oil deposit we take up maintaining capital intact and locally unchan ging consumption the percentage change in net investment or genuine savings relative to the market rate of interest denotes whether current consumption is rising

a procedure to evaluate cyclical fluctuations under superior information this article presents and assesses a procedure to evaluate conventional moments characterizing fluctuations at the business cycle frequency when the economic agents information set is superior to the econometrician s one first we derive the theoretical conditions under which the econometrician obtains valid statistics for the moments from laws of motion for forcing variables that fully recover the agents superior information second we use a new keynesian monetary model to document the numerical properties of the statistics when the laws of motion are possibly misspecified and to assess the ability of certain information criteria to detect the presence of superior information

learning in sequential wage negotiations theory and evidence when union firm pairs bargain sequentially and when unobserved components of firms abilities to pay are subject to correlated shocks unions that bargain later in a sequence can acquire valuable information by observing previous bargaining outcomes in their industry we derive the implications of this kind of learning in an asymmetric information model of wage negotiations and argue that the most robust implication is a lower incidence of strikes among followers than leaders in wage negotiations considerable empirical support for this implication is found in a long panel of canadian contract negotiations

the effects of public policy on strike duration hazard function estimates are utilized to analyze the effect of numerous public policy variables on strike duration based on 7 546 strikes in canada between 1967 and 1985 we find that only the mandatory strike vote substantially reduced conditional duration however the policy variables generally had a more favorable effect on reducing strike incidence so that on net they tended to reduce unconditional duration incidence times conditional duration specifically reduced unconditional duration was associated with the existence of conciliation and the requirement of a mandatory strike vote but the prohibition on replacement workers had a perverse effect

winners and losers in the commodity lottery the impact of terms of trade growth and volatility in the periphery 1870 1939 abstract most countries in the periphery specialized in the export of just a handful of primary products for most of their history some of these commodities have been more price volatile than others and those with more volatility have grown much more slowly relative to the industrial leaders and to other primary product exporters this fact helps explain the growth puzzle noted by easterly kremer pritchett and summers more than a decade ago that the contending fundamental determinants of growth institutions geography and culture exhibit far more persistence than do the growth rates they are supposed to explain using a new panel database for 35 countries this paper estimates the impact of terms of trade volatility and secular change on country performance between 1870 and 1939 volatility was much more important for growth than was secular change and accounts for a substantial degree of the divergence in incomes within the sample of small commodity dependent periphery nations as well as under performance of the periphery as a whole relative to such nations as the us and western europe or core one channel of impact seems to be the adverse effect of volatility on foreign investment it appears that the terms of trade effects were asymmetric between core and periphery