tax policy asset prices and growth a general equilibrium analysis abstract this paper presents a computable general equilibrium tax policy model that combines a consideration of disaggregate industry effects with an integrated treatment of short and long run adjustments to policy initiatives the model s explicit consideration of forward looking investment decisions and adjustment dynamics permits assessments of short run effects of tax policy on asset values as well as long term impacts on capital accumulation simulations reveal that effects on asset values and investment depend critically on whether policies are oriented toward new or old capital investment tax credits yield significant increases in investment without conferring windfall gains to corporate shareholders corporate tax cuts with the same revenue cost on the other hand yield large windfalls to shareholders while providing only a modest investment stimulus incidence and growth effects differ considerably across sectors particularly between business and housing

external shocks adjustment policies and investment in a developing economy illustrations from a forward looking cge model of the philippines abstract the rapid increase in investment and external debt of middle income countries like the philippines during the 1970s was perfectly rational given existing policies however these countries could have done better with an appropriate mix of adjustment policies using a dynamic general equilibrium framework the paper examines the sensitivity of investment and growth to external shocks and adjustment policies it highlights the intertemporal trade offs of tariff reform a policy often recommended in the 1980s emphasizing the need for complementary measures to ease macro imbalances and short term dislocations of the protected sector

2018 klein lecture individual and aggregate labor supply in heterogeneous agent economies with intensive and extensive margins we study business cycle fluctuations in heterogeneous agent general equilibrium models featuring intensive and extensive margins of labor supply a nonlinear mapping from time devoted to work to labor services generates operative extensive and intensive margins our model captures the salient features of the empirical distribution of hours worked including how individuals transit within this distribution we study how various specifications influence labor supply responses to aggregate technology shocks and find that abstracting from intensive margin adjustment can have large effects on the volatility of aggregate hours even if fluctuations along the intensive margin are small

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

wage dispersion and search behavior the importance of non wage job values we use a rich new body of data on the experiences of unemployed job seekers to determine the sources of wage dispersion and to create a search model consistent with the acceptance decisions the job

government spending and the optimal rates of consumption and capital accumulation this paper investigates the effects of a temporary change in government expendit ure on private consumption and investment the model employed is one of a closed economy populated by infinitely lived utility maximizing individuals the analysis focuses on the implications of alternative assumptions concerning the relationship between public and private c onsumption in the household s utility function a temporary increase in government expenditure is found to reduce investment if public and private goods are edgeworth complements or independent however if they are substitutes there exists the possibility of an increase in investment

towards a micro founded theory of aggregate labour supply we build a heterogeneous agents life cycle model that captures a large number of salient features of individual male labour supply over the life cycle by education both along the intensive and extensive margins the model provides an aggregation theory of individual labour supply firmly grounded on individual level micro evidence and is used to study the aggregate labour supply responses to changes in the economic environment we find that the aggregate labour supply elasticity to a transitory wage shock is 1 75 with the extensive margin accounting for 62 of the response furthermore we find that the aggregate labour supply elasticity to a permanent compensated wage change is 0 44

trade off between uos charge and investment cost for new distribution network users this letter investigates the situation that high use of system charge uosc might appear for new network users and studies the potential of network investment to avoid the high charge it proposes a method to strike the trade off between uosc and investment cost in the form of connection charge cc it determines the utilization level where uosc and cc reach equilibrium beyond this level it is more economical to conduct network investment for new users to avoid high uosc the trade off between the two type charges provides effective signals for new network users to manage their connecting size and location the concept is illustrated on a two busbar system

government spending endogenous labor and capital accumulation following turnovsky and fisher 1995 journal of economic dynamics and control 19 747 786 we reexamine the dynamic responses of the capital stock to an unanticipated temporary increase in government consumption and infrastructure expenditures the key factors determining capital accumulation are endogenous labor the duration of policy expansion and the relationship between private decisions and the composition of public expenditure given that private decisions and public consumption are edgeworth independent if employment is variable investment increases with the duration of fiscal expansion following a temporary public infrastructure expansion there always exists the possibility of a decrease in investment before the fiscal reversion under fixed employment however a temporary public infrastructure expansion under variable employment leads to a likely increase in investment before the fiscal reversion

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

the dutch disease in a developing country oil reserves in cameroon abstract noting that most of the literature on the dutch disease refers to developed countries this paper looks at the impact of an oil boom on a developing country when certain features of developing countries particularly the imperfect substitutability between domestic and imported goods are incorporated one of the standard dutch disease results can be reversed not all the traded goods sectors will contract a simulation with a computable general equilibrium model of cameroon reveals that the agricultural sector is most likely to be hurt whereas some of the manufacturing sectors will benefit this suggests possible areas for government intervention should it be warranted and may explain the differential performance between the agricultural and industrial sectors of oil exporting countries in the post 1973 period

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

budget rules and resource booms and busts a dynamic stochastic general equilibrium analysis this paper develops a dynamic stochastic general equilibrium model to analyze and derive simple budget rules in the face of volatile public revenue from natural resources in a low income country like niger the simulation results suggest three policy lessons or rules of thumb when a resource price change is positive and temporary the best strategy is to save the revenue windfall in a sovereign fund and use the interest income from the fund to raise citizens consumptionover time this strategy is preferred to investing in public capital domestically even when private investment benefits from an enhanced public capital stock domestic investment raises the prices of domestic goods leaving less money for government to transfer to households public investment is not 100 percent effective in raising output in the presence of a negative temporary resource price change however the best strategy is to cut public investment this strategy dominates other methods such as trimming government transfers to households which reduces consumption directly or borrowing which incurs an interest premium as debt rises in the presence of persistent positive and negative shocks the best strategy is a mix of public investment and saving abroad in a balanced regime that provides a natural insurance against both types of price shocks the combination of interest income from the sovereign fund transfers tohouseholds and output growth brought about by public investment provides the best protective mechanism to smooth consumption over time in response to changing resource prices

effects of macroeconomic policies on sectoral prices the effect of macroeconomic policies on the relative prices of internationally traded and domestic goods has been the subject of extensive study analysis of the way in which these policies then affect prices at the sectoral level is complicated by the beterogeneity of sectoral production even the prices of single products usually are determined by both domestic and traded components we present a framework which first traces the influence of macropolicy on the relative prices of exports imports and home goods it then accounts for each sector s degree of tradability which is based on the importance of trade in sectoral income and the influence of macroeconomic policy on sectoral prices to illustrate the use of this approach it is applied to a simulation of trade liberalization in argentina our results suggest that economywide policies had substantial negative effects on both the real exchange rate and the incentives to agricultural exports in an open economy the prices of tradable products are determined by world prices nominal exchange rates and taxes the prices of products which are not tradable are determined by domestic supply and demand which are themselves influenced by the actions and policies of the government some very important economic decisions depend on the price of tradables relative to that of nontradables the real exchange rate we examine here the way in which broader government policies affect the real exchange rate and through it prices at the sectoral level

deterioration of the terms of trade and capital accumulation a reexamination of the laursen metzler effect abstract this paper analyzes the effect of both a permanent and a temporary deterioration in the terms of trade on a small open economy the model based on intertemporal optimization emphasizes the labor leisure choice and the role of capital accumulation the transitional dynamics is shown to depend upon the long run response of the capital stock to the terms of trade shock this consists of a negative substitution effect together with a positive income effect whether or not the laursen metzler effect holds depends upon whether the income effect dominates the substitution effect

long run incremental cost pricing based on unused capacity this paper proposes a novel approach for providing long run incremental cost lric pricing in network charges the proposed approach makes use of the unused capacity of an exiting network to reflect the cost of advancing or deferring future investment consequent upon the addition of generation or load at each study node on a distribution network compared with existing approaches to lric pricing the proposed approach produces forward looking charges that reflect both the extent of the network needed to service the generation or load and the degree to which that network is utilized the efficacy of the proposed lric approach has been validated by a comparison with the established investment cost related pricing icrp method used for deriving transmission charges in great brain gb this paper draws on work undertaken in projects for western power distribution and ofgem office of gas and electricity markets u k however the views expressed in this paper are those of the authors

individual and aggregate labor supply in heterogeneous agent economies with intensive and extensive margins we develop a heterogeneous agent general equilibrium model that incorporates both intensive and extensive margins of labor supply a nonconvexity in the mapping between time devoted to work and labor services distinguishes between extensive and intensive margins we consider calibrated versions of this model that dier in the value of a key preference parameter for labor supply and the extent of heterogeneity the model is able to capture the salient features of the empirical distribution of hours worked including how individuals transit within this distribution we then study how the various specications inuence labor supply responses to aggregate technology shocks we nd that abstracting from intensive margin adjustment has large eects on the volatility of aggregate hours even if intensive margin uctuates relatively little

individual versus aggregate income elasticities for heterogeneous populations summary this paper deals with different concepts of income elasticities of demand for a heterogeneous population and the relationship between individual and aggregate elasticities in general the aggregate elasticity is not equal to the mean of individual elasticities the difference depends on the heterogeneity of the population and is quantified by a covariance term sign and magnitude of this term are determined by an empirical analysis based on the uk family expenditure survey it is shown that the relevant quantities can be identified from cross sectional data and without imposing restrictive structural assumptions can be estimated by nonparametric techniques it turns out that the aggregate elasticity significantly overestimates the mean of individual elasticities for many commodity groups copyright 2011 john wiley sons ltd

product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies this paper examines the treatment of exports and imports and external closure rules adopted in recent single country computable general equilibrium models of small economies the paper presents a simple one sector analytic model which captures the major features of the multi sector counterpart used in applied models the paper derives graphical and algebraic solutions to the model and shows that unlike some earlier external closures this one gives rise to a well behaved price taking economy the model is also useful to illustrate the role of elasticities in popular trade theoretic models that include traded and non traded goods

price and monetary convergence in currency unions the franc and rand zones abstract theory suggests that a currency union will impose significant macroeconomic disciplines on its members the law of one price for example should lead to convergence of price levels at least for what may be regarded as tradeable goods likewise arbitrage would imply convergence of interest rates this paper looks at the two main surviving currency unions the franc and rand zones in africa to see whether and to what extent these generally accepted propositions find confirmation in the data each of the african currency unions has a dominant or core member france in the case of the franc zone and the republic of south africa rsa in the case of the rand zone our focus is on the small members in the periphery and for them there is the additional presumption that inflation and interest rates will be imported from the core despite some rather wide short run divergences and although convergence is slow we find that in the long run consumer price inflation is largely determined in the core the limited evidence available suggests that uncontrolled interest rates also converge to core country levels jel f31

regulation and investment use newly assembled data on regulation in several sectors of many oecd countries to provide evidence that regulatory reform of product markets is associated with an increase in investment a component of reform that plays a very important role is entry liberalization but privatization also has a substantial effect on investment sensitivity analysis suggests that our results are robust jel e22 l5

aggregation and labor supply elasticities aggregation and labor supply elasticities the aggregate frisch elasticity of labor supply has played a key role in business cycle analysis this paper develops a statistical aggregation procedure which allows for worker heterogeneity in observables and unobservables and is applicable to an individual labor supply function with non employment as a possible outcome performing a thought experiment in which all offered or paid wages are subject to an unanticipated temporary change we can derive an analytical expression for the aggregate frisch elasticity and illustrate its main components i the intensive and extensive adjustment of hours worked ii the extensive adjustment of wages and iii the aggregate employment rate we use individual specific data from the german socio economic panel soep for males at working age in order to quantify each component this data base provides indirect evidence on non employed workers reservation wages we use this variable in conjunction with a twostep conditional density estimator to retrieve the extensive adjustment of hours worked and wages paid the intensive hours adjustment follows from estimating a conventional panel data model of individual hours worked our estimated aggregate frisch elasticity varies between 63 and 70 these results are sensitive to the assumed nature of wage changes jel classification c51 e10 j22

historic paths and future expectations the macroeconomic impacts of the offshore wind technologies in the uk abstract offshore wind power osw plays a key role within the uk strategy for a transition towards a low carbon economy offering vast potential for establishing a high tech manufacturing industry previous experiences in the onshore sector owp suggest the uk might fail in fully capturing these macroeconomic benefits in this work we investigate the history of uk renewable policies comparing its national strategy to those of other major osw export countries through the use of a numerical general equilibrium model we quantify the macroeconomic impacts under three scenarios a baseline which relies on previous estimates and foresee limited local content a contamination scenario where the uk content reaches the same levels of owp and a non myopic scenario where investors expect governmental support to decrease or disappear replicating a common path of past renewable policies we identify the uk as a fdi oriented country our results suggest that increasing the share of locally sourced capital goods in osp to owp level could generate larger income and employment effects in the uk economy we find that under forward looking investors the economic benefits are significantly lower than the case of myopic agents our results show an inherent conflict with stated purposes of uk policy for osw

long run marginal cost pricing based on analytical method for revenue reconciliation incremental and marginal approaches are two different types of methods to price the use of networks the major difference between them is in the way they evaluate the costs imposed by network users the former calculates network charges through simulation and the latter derives charges with a sensitivity based analytical approach both charging models aim to send cost reflective economic signals to customers providing an economic climate for the cost effective development of networks in this paper a novel long run marginal cost lrmc pricing methodology based on analytical method is proposed to reflect the impacts on the long run costs imposed by a nodal injection through sensitivity analysis the sensitivity analysis consists of three partial differentiations 1 the sensitivity of circuit power flow with respect to nodal power increment 2 the sensitivity of the time to reinforce network with respect to changes in circuit power flows and 3 the sensitivity of present value of future reinforcement with respect to changes in time to reinforce two test systems are employed to illustrate the principles and implementation of the proposed method results from incremental and marginal approaches under different system conditions are compared and contrasted in terms of charges and tariffs the proposed method as demonstrated in the test systems can produce forward looking charges that reflect the extent of network utilization levels in addition to the distance that power must travel from points of generation to points of consumption furthermore the proposed method is able to provide further insights into factors influencing network charges

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

anticipated and unanticipated wage changes wage risk and intertemporal labor supply in this article i estimate how labor supply responds to anticipated wage growth unanticipated wage growth and wage risk using the 1989 93 panel section of the bank of italy survey of households income and wealth shiw which collects individual expectations of future wages the use of subjective expectations has several advantages first they provide information on the evolution and riskiness of future wages that the econometrician may never hope to observe moreover this avoids the need for specifying instruments for the growth rate of wages finally forecast errors can be directly controlled for thus avoiding inconsistency in short panels

assessing alternative options for allocating oil revenue in iran abstract the present paper focuses on medium term effects of alternative windfall management strategies for a resource abundant country where the resource revenues are expected to last over a prolonged period in particular the trade off between spending and saving is analyzed within the framework of a recursive dynamic computable general equilibrium model the model is further validated against historical data available for 2001 2010 the total factor productivity is calculated endogenously in the model based on a function that reflects the changes in factor productivity the results suggest that saving oil revenues whether in an oil fund or through physical investment in domestic sectors leads to a higher economic growth however physical investment is superior in the short to medium term based on the resultant gdp while creating an oil fund might be more beneficial in the post oil era

evaluation of the incentive structure a survey and application to cameroon abstract this article uses a simple general equilibrium framework to evaluate the incentive structure of a country pursuing a mixed import substitution export promotion strategy it illustrates how features of general equilibrium analysis can be incorporated into the traditional balassa corden effective protection framework which is supplemented by the evaluation of the incidence of protection on firms importing and exporting households consumers and taxpayers and the government its application to a less developed country ldc cameroon shows that the burden of tariff protection is shifted 25 in the short run and 64 in the long run on to the unprotected sectors especially exports as a result average nominal protection 58 8 is much higher than protection actually provided to the protected sectors the welfare effect of protection is ambiguous households viewed only as final consumers lose when they are viewed as taxpayers protection may become beneficial in the long run taking substitution possibilities into account when measuring protection has an impact on the ranking of firms according to their nominal and effective protection

can a water market avert the double whammy of trade reform and lead to a win win outcome abstract this paper focuses on the linkages between water and trade policies using morocco as a case this country is typical of many in that policy protects its import competing agricultural and industrial sectors while water in irrigated agriculture is priced below its marginal value product changing water policy without correcting for these other distortions leads to a more inefficient allocation of water on the other hand reforming trade policy alone can make farmers growing crops protected pre reform worse off using an intertemporal applied general equilibrium model we find that trade reform actually creates an opportunity to pursue water policy reform creating a water user rights market post trade reform not only compensates for the decline in farmers profits caused by the trade reform but also raises the efficiency of water allocation and hence benefits the economy as a whole

fiscal policy in the new neoclassical synthesis we analytically derive the cyclical effects of fiscal policy shocks in a new neoclassical synthesis model price stickiness has the consequence that a rise in government demand affects labor demand while at the same time the usual wealth effect boosts labor supply the strength of the demand effect depends on the response of the real interest rate governed by the monetary policy regime when the central bank controls money growth fiscal expansions are deflationary and might even be contractionary whereas output wages and inflation can increase when the rise in the real interest rate is dampened by an interest rate rule however price stickiness alone is not sufficient to explain a rise in consumption as predicted by keynesian theory

international oil price uncertainty and corporate investment evidence from china s emerging and transition economy we develop and estimate a dynamic model of investment to investigate the impact of international oil price uncertainty on corporate investment expenditures in china s emerging and transition economy we further examine whether state ownership affects the relationship between oil price uncertainty and corporate investment consistent with the model s prediction the main finding is that oil price uncertainty exerts a negative impact on corporate investment expenditures in addition compared with state owned listed companies the negative influence of oil price uncertainty on corporate investment is more significant for non state owned listed companies our further analysis using the market oriented reform of refined oil pricing in 2008 as a quasi natural event shows the variation between the low degree marketization period and the high degree one in terms of the relationship between international oil price uncertainty state ownership and corporate investment expenditures

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

external shocks purchasing power parity and the equilibrium real exchange rate two approaches are commonly used to determine the equilibrium real exchange rate in a country after external shocks purchasing power parity ppp calculations and the salter swan tradables nontradables model there are theoretical and empirical problems with both approaches and tensions between them in this article the authors resolve these theoretical and empirical difficulties by presenting a model which is a generalization of the salter swan model and which incorporates imperfect substitutes for both imports and exports within the framework of this model the definition of the real exchange rate is consistent both with that of the ppp approach and with that of the salter swan model suitably extended the model however is capable of capturing a richer set of phenomena including terms of trade shocks and changes in foreign capital inflows it also provides a practical way to estimate changes in the equilibrium real exchange rate requiring little more information than is required to do ppp calculations the results are consistent with those of multisector computable general equilibrum models which generalize the trade specification of the small model

adjustment with a fixed exchange rate cameroon cote d ivoire and senegal as members of the cfa franc zone cameroom cote d ivoire and senegal cannot use the nominal exchange rate as a tool of macroeconomic adjustment this article considers these countries responses to the commodity and oil price shocks of the 1970s in light of this and other institutional constraints using a two sector model it shows that there exist instruments that in principle permit the real exchange rate depreciation necessary for adjusting to macroeconomic imbalances the authors interpret the very different adjustment experiences of the three countries despite their common economic structure and institutional setting in terms of different uses of these instruments alternative assumptions about the labour market leave the qualitative nature of the results unaltered statistical analysis of data from the three countries confirms the model s linking of the current account and real exchange rate with the instruments of adjustment

short run and long run in trade models a note abstract this paper aims to capture key features of the ricardo viner rv and heckscher ohlin ho theories in a single dynamic general equilibrium framework we use a simple 2 sector 2 factor model with adjustment costs associated with the movement of capital across sectors we analyze the economy s response to exogenous changes in factor endowments and output prices our model reproduces the predictions of the rv theory in the short run moment immediately after a parameter change and the predictions of the ho model in the long run steady state implied by a new set of parameters numerical examples of transition paths are also provided

measuring exchange rate misalignment inflation differentials and domestic relative prices abstract empirical studies of exchange rate misalignment generally use crosscountry differences in overall inflation as proxy measures for a country s real exchange rate rer this paper shows that using such differential inflation proxies introduces two systematic biases in model results understatement of rer movements and a spurious trend towards depreciation these biases can be corrected only with disaggregated data on domestic relative prices of tradable and nontradable products using a standard model with disaggregated data for zimbabwe it is found that proxy based results understate misalignment by almost 25 and exaggerate depreciation by 4 per year

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

aggregate behavior and microdata abstract it is shown how one can effectively use microdata in modelling the change over time in an aggregate e g mean consumption expenditure of a large and heterogeneous population the starting point of our aggregation analysis is a specification of explanatory variables on the micro level typically some of these explanatory variables are observable and others are unobservable based on certain hypotheses on the evolution over time of the joint distributions across the population of these explanatory variables we derive a decomposition of the change in the aggregate which allows a partial analysis to isolate and to quantify the effect of a change in the observable explanatory variables this analysis does not require an explicit treatment of the unobservable variables

aid and the supply side public investment export performance and dutch disease in low income countries contemporary policy debates on the macroeconomics of aid often concentrate on short run dutch disease effects ignoring the possible supply side impact of aid financed public expenditure in the simple model of aid and public expenditure presented here public infrastructure generates an inter temporal productivity spillover which may exhibit a sector specific bias the model also provides for a learning by doing externality through which total factor productivity in the tradable sector is an increasing function of past export volumes an extended computable version of this model is used to simulate the effect of a step increase in net aid flows the simulations show that beyond the short run when conventional demand side dutch disease effects are present the relationship between enhanced aid flows and real exchange rates output growth and welfare is less straightforward than simple models of aid suggest public infrastructure investment that generates a productivity bias in favor of non tradable production delivers the largest aggregate return to aid but at the cost of deterioration in the income distribution income gains accrue predominantly to skilled and unskilled urban households leaving the rural poor relatively worse off under plausible parameterizations of the model the rural poor may also be worse off in absolute terms