two sample nonparametric estimation of intergenerational income mobility in the united states and sweden we estimate intergenerational income mobility in the us and sweden using a new nonparametric approach the approach addresses several empirical issues raised in the literature and applies when other estimators are infeasible we argue that previous estimates of income mobility conceal the heterogeneous nature of the transmission mechanism by keeping mobility constant across families the striking differences we find between mobility patterns across family backgrounds captured by father s education lead us to question the conventional result that intergenerational transmission of earnings is weaker in sweden than in the united states for important parts of the population

the intergenerational earnings and income mobility of canadian men evidence from longitudinal income tax data our objective is to obtain an accurate estimate of the degree of intergenerational income mobility in canada we use income tax information on about 400 000 father son pairs and find intergenerational earnings elasticities to be about 0 2 earnings mobility tends to be slightly greater than income mobility but nonparametric techniques uncover significant nonlinearities in both of these relationships intergenerational earnings mobility is greater at the lower end of the income distribution than at the upper end and displays an inverted v shape elsewhere intergenerational income mobility follows roughly the same pattern but is much lower at the very top of the income distribution

self enforcing exchange among generations implications for consumption and mobility abstract a three generation olg model with one directional altruism and two directional intra family transfers is presented adults invest in their children s education and make transfers to their elderly parents however due to lack of altruism adults with high earnings do not share consumption equally with their elderly parents but spend a larger share of their earnings on own consumption and on their children s education this allows the model to be consistent with three empirical observations that are difficult to reconcile with traditional altruistic frameworks of intergenerational social interactions and mobility i consumption is not perfectly shared between members of an extended family ii consumption is not equally persistent over the lifecycle as across generations and iii the intergenerational persistence of earnings is particularly high at the top end of the earnings distribution

cyclical productivity in a model of labor hoarding abstract this paper develops a dynamic model of labor hoarding to explain two empirical facts the cyclical behavior of total factor productivity and the dynamic correlations of sectoral productivity with aggregate variables the model features convex costs of adjusting the labor force which induce firms to vary the intensity of labor utilization over the cycle in particular cyclical variations in labor effort take place as a response to expected future changes in industry conditions i test the restrictions imposed by the model for several two digit manufacturing industries under different assumptions about market structure and returns to scale then using the assumption that aggregate variables carry information about future changes in industry conditions i simulate the model s dynamic response of hours and productivity to aggregate innovations and compare them to those estimated from the data

trends in market power and productivity growth rates in us and japanese manufacturing abstract trends were estimated for market power measured by the price marginal cost ratio and the total factor productivity growth rate for us and japanese manufacturing both trends are negative in both countries but japan s are significant and much steeper

an alternative measure of intergenerational income mobility based on a random coefficient model summary we propose an alternative measure of the degree to which income status is transmitted from one generation to another our indicator of intergenerational income mobility is based on a random coefficient model which allows for variation in intergenerational mobility across families due to multiplicative unobserved family specific characteristics this alternative measure suggests that intergenerational income persistence is typically stronger than when intergenerational income mobility is measured using the standard elasticity of sons income with respect to fathers income copyright 2011 john wiley sons ltd

comparing four models of aggregate fluctuations due to self fulfilling expectations abstract this paper compares four equilibrium business cycle models with increasing returns to scale production technologies that allow for aggregate fluctuations due to self fulfilling expectations necessary and sufficient conditions for the existence of stationary sunspot equilibria are derived numerical examples demonstrate that the degree of increasing returns necessary for the existence of stationary sunspot equilibria lies in the upper range of available empirical estimates the paper also shows that persistent fluctuations are not a necessary property of these four models when the only source of fluctuations is changes in people s expectations about the future path of the economy journal of economic literature classification numbers e32 d43

average cost pricing some evidence and implications we present new survey evidence on pricing behavior for more than 14 000 european firms and study its macroeconomic implications among firms that are price setters roughly 75 respond that their prices are set as a markup on total costs a business practice termed full cost pricing only 25 set prices as markups over variable or marginal costs moreover using industry data for the u s we find that the correlation between changes in output prices and changes in variable input prices is significantly lower when fixed costs are likely to be more important since our results are similar to the findings in the classic and controversial paper of hall and hitch 1939 and subsequent survey evidence we believe it worth studying the implications of full cost pricing for macroeconomics we first propose a problem for the firm where full cost pricing can arise as optimizing behavior we embed this problem featuring an occasionally binding constraint into a simple general equilibrium model we show that when the model is hit by a shock that makes the constraint binding the response of endogenous variables is amplified significantly more than it would be under the unconstrained regime

money new keynesian macroeconomics and the business cycle abstract we show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype a monopolistic competition model with price adjustment costs affected by technological and monetary shocks better mimics the economic fluctuations in two countries with very different cyclical properties namely france and the united states in our model monetary shocks are necessary to reproduce the standard deviation of output the money output correlation the labour productivity worked hours relative standard deviation the labour productivity worked hours correlation and the mark up output correlation with two independent shocks one real more specifically defined than the solow residual and one nominal the model gives an answer to some empirical puzzles which were left unexplained by traditional rbc models

the extensive margin and monetary policy abstract the creation of new firms referred to as the extensive margin is a significant but overlooked dimension of monetary policy a monetary var documents that monetary policy has significant effects on firm creation an analytically tractable model combining sticky prices and firm entry shows that entry alters the transmission of monetary policy innovations acting much like a type of investment in more standard models monetary policy rules that offset the uncertainty of productivity shocks can raise the mean level of entry and thereby welfare suggesting a new motivation for stabilization policy

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

distinguishing the source of market power structural models used to measure market power though widely employed continue to be criticized we compare alternative market power tests including nonparametric and solow residual based srb tests we develop srb methods that permit nested testing for both monopolistic and monopsonistic market power by the same firm these tests and a set of nonparametric tests are implemented to examine market power exertion by u s cigarette manufacturers from 1977 to 1993 all tests indicate that cigarette manufacturers exerted monopsonistic power in the upstream tobacco market they are mixed on whether monopolistic power exertion was exerted in the downstream market

monopolistic competition increasing returns to scale and the welfare costs of inflation abstract this paper introduces monopolistic competition and increasing returns to scale into a monetary real business cycle rbc model to re estimate the welfare costs of inflation we first calibrate the model and show that it is capable of generating the observed aggregate fluctuations even when there are no shocks to the fundamentals in particular we demonstrate that this model matches the stylized u s business cycles facts as well as two more standard models then we find that in this model the scale parameters and the intensity of competition significantly affects the welfare cost of inflation specifically the cost is considerably higher than that in a standard rbc model with competitive markets and constant returns moreover the stronger the increasing returns and the less intense the competition the higher the welfare costs these results are confirmed in a number of model specifications

staggered price setting translog preferences and endogenous persistence abstract this paper generates persistent real effects of a monetary disturbance in the context of staggered price setters the model combines two related and reinforcing features a translog demand structure and a particular input output production structure these features offer a rationale why a firm when computing its own optimal contract price is influenced by the prices set in other overlapping contracts practically the two features interact in a positive manner and provide a way to generate significant endogenous persistence

real wages in the business cycle and the theory of income distribution an unresolved conflict between theory and facts in mainstream macroeconomics the focus of this article is the recurring tension between mainstream macroeconomics and observed facts in connection with the difficult task of providing explanations of the business cycle consistent both with the traditional theory of income distribution and with the empirical evidence concerning the co movements of real wages and employment over the cycle the attempts to reconcile facts and theory have led to the continuous introduction of specific and arguably ad hoc hypotheses in contrast with the search for greater theoretical rigour claimed by the various streams of macroeconomic modelling subsequent to the neo classical synthesis in addition the specific assumptions introduced in the models or their implications are in turn often contradicted or at best not confirmed by subsequent empirical research it is suggested in the conclusions that the difficulty of keeping together in a simple and consistent framework theory and facts reflects the flawed theoretical foundations of mainstream theory

market power productivity and the eu single market program evidence from a panel of italian firms abstract this paper provides empirical evidence on the impact the eu single market program has exerted on market power and total factor productivity in a large sample of italian firms both market power and total factor productivity are estimated by applying several extensions of the methodology developed by hall main findings can be summarised as follows firstly for the sample of 1992 most sensitive firms market power decreases by 50 in the smp implementation period compared to previous years whereas no clear pattern emerges for the other sub samples of firms secondly and less conclusively only for the sub sample of 1992 most sensitive firms a positive transitory shock to productivity growth rates is observed immediately after the announcement of the reform project overall these results are consistent with the long standing view that economic integration reduces firms market power and increases productivity via the removal of non tariff barriers

nonlinearities in intergenerational earnings mobility consequences for cross country comparisons we show that the patterns of intergenerational earnings mobility in denmark finland and norway unlike those for the us and the uk are highly nonlinear the nordic relationship between log earnings of sons and fathers is flat in the lower segments of the fathers earnings distribution sons growing up in the poorest households have the same adult earnings prospects as sons in moderately poor households and is increasingly positive in middle and upper segments this convex pattern contrasts sharply with our findings for the us and the uk where the relationship is much closer to being linear as a result cross country comparisons of intergenerational earnings elasticities may be misleading with respect to transmission mechanisms in the central parts of the earnings distribution and uninformative in the tails of the distribution it is now a stylised fact that intergenerational earnings mobility is higher in the nordic welfare state economies than in more market oriented economies such as the us see

declining share of small firms in u s output causes and consequences jang ting guo i introduction according to the small business administration s sba calculations as shown in table 1 the contribution of small firms to u s national income was 58 in 1958 which then declined steadily to 51 in 1982 and stabilized around this value until 1992 the latest year for which the figures are available 1 this decline is quite puzzling in light of recent changes in technological factors market competition and government policies that were supposed to benefit small businesses 2 in this article we construct a dynamic general equilibrium model with two production sectors representing large and small firms to examine possible causes and welfare implications of this declining trend of small firms output contribution in the u s economy moreover this study brings into focus the role of government policies such as the justice department s anti trust efforts and the tiering programs whereby many regulations impose lighter requirements on smaller firms in order to maintain their viability 3 recently there have been several developments that can be considered beneficial towards the emergence of small firms shephard 1982 has estimated that since 1958 government deregulatory efforts have raised the level of competition in the u s economy by eliminating entry barriers and lowering transaction costs these factors in turn have contributed to the viability of small firms in the marketplace furthermore the emergence of new computer based technologies in the last two decades has improved the quality and flexibility of small scale production relative to standardized mass production techniques since they reduce the fixed capital or fixed cost requirements see shephard 1982 piore and sable 1984 carlsson 1989b and carlsson audretsch and acs 1994 4 another factor that improves the viability of small firms is their higher innovation rate as documented by acs and audretsch 1990 the shift of consumers taste from standardized mass produced goods towards stylized and personalized prod ucts also promotes small firm growth given their flexible production structure small firms have become important suppliers for these new goods and services see carlsson 1989a in light of these favorable developments one would expect to observe the number of small firms as well as their share in national income to rise in the u s economy however this has not been borne out by the data regarding small firms output share this article examines this issue in a dynamic general equilibrium framework extending romer s 1987 model of specialization we develop an infinite horizon representative agent model with two production sectors that are made up of large and small firms respectively the two sectors differ from each other with respect to the level of fixed set up costs and returns to scale parameters of their production functions each sector has an intermediate good segment in which monopolistically competitive firms operate using fully mobile capital and labor inputs the number of these intermediate firms is determined endogenously from the condition of free entry and exit a final good is produced in each sector from the set of available intermediate goods in a perfec tly competitive environment these two final goods are then aggregated into a single output gdp that can be consumed or invested by the representative household in a symmetric perfect foresight equilibrium these features result in an unequal number of large and small firms which can then be used to analyze the effects of technological changes and government policies the sectoral structure of our model in which gdp is produced by combining outputs of large and small firms is different from a typical two sector model with distinct consumption and investment goods in fact our two sector economy with identical factor intensities behaves exactly like a standard one sector model in which the representative household allocates resources across the two sectors to equate marginal products to factor prices

the cyclical behavior of mark ups in u s manufacturing and trade new empirical evidence based on a model of optimal storage abstract an euler condition for optimal inventory accumulation is used to obtain information on the behavior of mark ups of price over marginal cost in u s manufacturing and trade data at the two digit sic level are used mark ups appear to be procyclical in most of the two digit sic sectors

sales and monetary policy this paper analyses the efiect of monetary policy in a model where sales occur in equilibrium some consumers are loyal to a particular brand of a good others are bargain hunters as a result producers flnd it optimal to sell their goods at a normal price through some retailers and at a sale price through others the margin of adjusting the amount sold on sale is potentially very important if producers can adjust the fraction sold on sale with sticky prices and wages money is approximately neutral if we ignore the reasons behind sales but that result changes dramatically when we consider that producers optimally choose to sell some of their goods on sale owing to strategic substitutabilities in the sales decision money has strong procyclical efiects

the intergenerational persistence of lifetime earnings abstract this paper proposes a new method for estimating the intergenerational persistence of lifetime earnings from data that contain only short sections of individual earnings histories the approach infers lifetime earnings persistence from the persistence of short earnings averages together with information about the stochastic process governing individual earnings i find that lifetime earnings are substantially more persistent than previous estimates based on short panel data suggest about 54 of lifetime earnings differences between fathers persist into their sons generation this persistence estimate exceeds previous estimates based on five year earnings averages by one third these findings are robust against alternative assumptions about the data generating process for earnings

externalities endogenous productivity and poverty traps abstract we present a version of the neoclassical model with an endogenous industry structure we construct a distribution of firms productivity that implies multiple steady state equilibria even with an arbitrarily small degree of increasing returns to scale while the most productive firms operate across all the steady states in a poverty trap less productive firms operate as well this results in lower average firm productivity and total factor productivity the distributions of employment by firm size across steady states are consistent with the empirical observation that poor countries have a higher fraction of employment in small firms than rich countries differences in output and total factor productivity across steady states are increasing in the degree of returns to scale the capital share and the frisch elasticity of labor supply

imperfect competition and business cycles an empirical investigation imperfect competition and business cycles an empirical investigation does imperfect competition increase the magnitude of business cycles if so the variability of an industry s employment and output should be positively related to the market power of firms in that industry this paper demonstrates that the opposite is true u s manufacturing industries with high price cost margins display less employment variability than do low markup industries these high markup industries display less price variability as well highly concentrated industries however do display more employment variability to some degree markups may reflect labor hoarding rather than market power this may account for part but not all of the negative correlation between markups and variability i introduction recent research has investigated whether deviations from perfect competition either in goods or labor markets help explain the existence and magnitude of business cycles in particular both theoretical and empirical evidence suggests that imperfectly competitive firms hold prices more rigid in the face of demand shocks than do more competitive firms 1 this finding raises the question of whether imperfectly competitive industries also exhibit larger fluctuations in output and employment this paper examines employment and output data for 446 u s manufacturing industries over the years 1958 to 1984 if employment and output fluctuations have been smaller in more competitive industries this would suggest that imperfect competition may indeed lead to larger business cycle fluctuations in fact my results suggest the opposite industries with larger price marginal cost margins display less variability in employment and output although the output results are not robust the finding for employment is remarkably robust to a wide range of specifications in particular it holds for two different methods of estimating the price marginal cost margin in contrast i find that highly concentrated industries as opposed to those with high price marginal cost margins do display more variability in output and employment than do less concentrated industries in addition i confirm the finding of previous studies that industries with high price cost margins display less price variability thus it appears that imperfect competition may reduce variability in both prices and quantities the paper proceeds as follows section ii outlines the theoretical literature and surveys previous empirical work in this area section iii describes the methodology of the paper and section iv describes the estimation of the price marginal cost margin section v presents the results and section vi discusses possible explanations section vii concludes ii theoretical literature and previous work many theoretical models suggest that imperfectly competitive industries ought to display more cyclical variability of output than perfectly competitive industries the common thread in all these theories is real price rigidity 2 some reason is offered why an imperfectly competitive firm does not adjust its relative price in response to a demand shock as much as would a perfectly competitive firm the less prices adjust the more output and employment must adjust therefore the argument goes imperfect competition may exacerbate the size of business cycle fluctuations 3 this basic argument dates back to means 1935 prices may be relatively acyclical or even countercyclical in industries with market power for one of two reasons either marginal cost is relatively flat or markups are relatively countercyclical the following theories of real price rigidity may be classified as falling into one of these two categories firms with market power are assumed to maintain excess capacity perhaps as a barrier to entry by new firms

the limits to discretionary fiscal stabilization policy the use of discretionary fiscal policy as a counter cyclical tool has declined in popularity over the last 30 years this paper examines the extent to which this decline is justified in terms of developments in macroeconomic theory over this period both a small calibrated model and a larger econometric model suggest that the intertemporal consumer will smooth away most of the impact of temporary tax changes even when additional discounting and credit constraints are allowed for however this analysis suggests a more powerful role for other forms of fiscal policy such as government objections to the use of discretionary fiscal stabilization policy and makes a tentative suggestion as to how these might be overcome copyright 2000 by oxford university press

public support to innovation and imitation in a non scale growth model abstract this paper studies technology policy within a version of jones s 1995 r d based models of economic growth journal of political economy 103 759 784 non scale r d based growth framework that incorporates imitation of foreign techniques in the model imitation is the most important source of productivity growth at the beginning of the convergence process whereas innovation dominates later on in addition the transitional dynamics of the model can account for well known empirical regularities regarding the relationship between the level of economic development and public support to technology innovation and imitation the paper shows as well that even though policy in jones type non scale models has no long run growth effects level effects can be substantial

input contracts market structure and the empirical specification of price cost margins abstract we examine the implications for the empirical specification of the margins concentration relationship of different forms of contracting for intermediate inputs we offer an alternative explanation why the results of profit margin regressions depend on whether the margin is deflated by gross output or net output 1997 elsevier science s a

market structure and cyclical fluctuations in u s manufacturing the relevance of imperfect competition for models of economic fluctuations has received increased attention from researchers in both macroeconomics and industrial organization the authors outline a new methodology for estimating industry markups of price over marginal cost and the influence of market structure on cyclical movements in total factor productivity measures of industry concentration import competition and unionization are important for explaining markups in some industry groups much of the estimated markup of price over marginal cost is accounted for by noncapital fixed costs finally the authors show that their estimated margins fluctuate substantially over the cycle in particular markups are countercyclical especially in concentrated durable goods industries copyright 1988 by mit press

aggregate fiscal policy under the labour government 1997 2010 this paper explores the labour government s fiscal policy performance at the macroeco nomic level this analysis is in two halves the first covers the period up until the great recession which involved a single policy regime subject to two simple fiscal rules after discussing the theoreti cal and practical issues raised by these rules i examine the extent to which they were followed by the government and whether subsequent developments highlighted shortcomings of these rules to what extent was the eventual failure of these rules down to over optimistic forecasts or unforeseeable events the second half involves the response to the great recession and the abandonment of the fiscal rules

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

economic and mechanical models of intergenerational transmission the author critically examines gary beckers attempt to integrate the theory of income distribution intragenerational differences with the theory of mobility intergenerational differences in an economic model of the family he assesses beckers claims of distinctiveness integration explanatory power and surprise and arrives at a rather skeptical view of the contribution that the core of microeconomics has made to this study of the family a reply by becker is included pp 514 8 excerpt

transitional dynamics in an r d based growth model with imitation comparing its predictions to the data abstract employing cross country data this paper evaluates the transitional dynamics predictions of a non scale growth model of endogenous technology innovation and imitation we show that unlike the neoclassical growth framework the transitional dynamics of the rd 1995 quartely journal of economics 110 641 680 with the importance of technology transfer

variety pass through an examination of the ready to eat breakfast cereal market abstract we examine variety pass through effects that occur when multiproduct retailers adjust the length of their product lines in response to changes in wholesale prices studying variety pass through is essential to understanding how wholesale price changes transmit into retail prices when variety is endogenous using data from the ready to eat breakfast cereal category we find that retailers jointly adjust retail prices and the length of their product lines in response to changes in wholesale prices we show the importance of controlling for the endogeneity of retailers product line decisions when calculating price pass through rates

optimal price adjustment under imperfect information abstract variations in cost and demand do not have symmetrical impact on the optimal price of the imperfectly competitive firm this asymmetry is not so important as long as information regarding both cost and demand is sufficient however it becomes crucially important in case of incomplete information usually firms have more complete or harder information on cost than on demand this difference in information status on the cost and on the demand side can explain both cost based pricing and slow price adjustment to demand in an optimizing framework with bayesian learning about changed demand conditions

galton versus the human capital approach to inheritance a century ago francis galton proposed a simple yet powerful model of inheritance gary backer s human capital model is often used to analyze important empirical and policy questions but does it dominate galton s from a positive point of view i derive nine implicatiions of the human capital approach that are distinct from galton s evidence from the pis scf and nlsy micro data sets as well as results reported in previous literatures suggest that four of the unique implications are refuted two implications are verified and mixed results are obtained for three others some extensions of economics recently developed by becker and others when applied to inheritance may improve economics predictions

empirical evidence on a special interest group perspective to antitrust while the antitrust laws claim to serve the public interest they are as susceptible to the influence of special interest groups as are any public policies this paper extends the empirical literature regarding the special interest theory of antitrust our additional empirical evidence addresses some of the shortcomings in previous approaches in particular we conduct a more rigorous statistical examination this paper separates two crucial issues first what happened to prices and output from 1880 to 1900 prior to and following passage of the sherman act in 1890 second what do these empirical results mean for the origin history and development of antitrust

the international transmission of economic fluctuations abstract this paper suggests that for a wide class of international real business cycle models including models with imperfect competition the traditional channels of international transmission of business cycles through world interest rate and terms of trade variations cannot explain the cyclical response of the canadian economy to innovations in u s output empirically testable quantitative models of the effects on canadian economic activity of shocks to the u s economy are developed and their empirical relevance is tested by comparing impulse responses estimated from vector autoregressions to the quantitative predictions of the theoretical models

search in the product market and the real business cycle empirical evidence suggests that most firms operate in imperfectly competitivemarkets we develop a search matching model between wholesalers and retailers firms face search costs and form long term relationships price bargain results in both wholesaler and retailer markups depending on firms relative bargaining power we simulate the model to explore the role of product market search frictions in business cycles we show that the way search costs are modelled is crucial to provide a realistic picture of firms business environment and improve the cyclical properties of an otherwise standard real business cycle model

the assessment emu four years on this paper reviews the functioning of the economic and monetary union over the first 4 years of its existence monetary policy is viewed as having been of the inflation targeting type but with a tendency towards delay and conservatism in adjustment which may also reflect over optimistic output growth forecasts the resulting pressure on the stability and growth pact sgp illustrates the weakness in the consensus view of the harmonious interaction of monetary fiscal and supply side policies which requires policy in all three areas to be correct in discussing reform of the sgp a looser but still constraining form of fiscal agreement is advocated the supply side and balance of payments issues involved in inter country adjustment also interact importantly with the sgp and are identified as key areas of difficulty in a still immature monetary union with separate labour market structures here the mechanisms for coordination are more or less absent copyright 2003 oxford university press

endogenous markups intensity of competition and persistence of business cycles in order to study the propagation mechanism of business cycles in particular to investigate how the intensity of competition affects market structure and output persistence over business cycles this paper presents a real business cycle model with imperfect competition and increasing returns to scale this analysis considers the markups of price over cost to be endogenous with endogenous markups two standard forms of oligopolistic competition bertrand and cournot are considered results show that 1 the propagation mechanism in the sense of output persistence is greater under cournot 2 the propagation mechanism is unequivocally greater with imperfect competition regardless of whether markups are endogenous or not and 3 under imperfect competition the propagation mechanism is greater with endogenous markups than with exogenous markups overall these results suggest that more intense competition produces lower persistence in output growth and thus a weaker propagation mechanism in a calibration exercise these differences were also found to be quantitatively important

parental wealth and adult children s welfare in marriage abstract many studies find that parental resources importantly determine children s human capital schooling returns and earnings the collective household approach suggests that in addition parental resources of marital partners may importantly affect resource distributions within marriage this paper presents empirical results consistent with this framework they suggest that parental wealth continues to play roles in augmenting welfare of children into adulthood beyond provision of human capital in early life cycle stages or direct financial aid during adulthood and that actual transfers from parents to adult children do not fully measure influences of parental wealth on behaviors and welfare of adult children

macroeconomic policy in light of the credit crunch the return of counter cyclical fiscal policy this paper begins by arguing that the 2007 8 credit crunch does not require a fundamental reevaluation of monetary policy the crunch occurred because regulation was too lax and we need to develop new and more effective tools of regulatory control to focus on current account imbalances or mistakes in setting interest rates as a prime cause of the credit crunch is unconvincing and has the danger of diverting attention away from the need to increase financial regulation the current recession does require a re evaluation of the role fiscal policy can play when interest rates hit a zero bound an expansionary fiscal policy is required because monetary policy makers are reluctant to promise higher future inflation and the impact of quantitative easing is likely to be small although rising debt may place a limit on how much conventional fiscal policy can do not all expansionary fiscal measures require additional borrowing there are two important lessons for the future first although monetary policy should remain the primary tool to stabilize the business cycle the combination of fiscal implementation lags and uncertainty means that some precautionary fiscal action may be appropriate during the early phase of some economic downturns second to play this backstop stabilization role effectively a policy that results in the government debt to gdp ratio declining albeit gradually and erratically in normal times seems appropriate

economic fluctuations market power and returns to scale evidence from firm level data recent research on aggregate fluctuations coupled with ongoing work in industrial organization has renewed interest in the existence magnitude and cyclical pattern of market power and the extent of increasing returns to scale by exploiting restrictions from dynamic theory and information from financial markets we present a framework for generating quantitative evidence on market power and returns to scale tailoring the econometric model to firm level panel data we calculate the percentage differential between price and marginal cost the lerner index in terms of the parameters from the econometric system results for firms in eleven industries indicate that there is a great deal of heterogeneity in the extent of market power industries with significantly positive lerner indices tend to have substantial increasing returns in the production technology we find that there is only a modest relation between our estimated lerner indices and traditional measures of market power and that when market power varies temporally it is usually procyclical thus variations in the markup of price over marginal cost may help dampen aggregate economic fluctuations

non performing loans prospective bailouts and japan s slowdown abstract the delay in the government bailout of the financial sector played a key role in japan s slowdown during the 1990s and early 2000s this argument is articulated in a general equilibrium model in which the government provides deposit insurance to the financial sector the existence of non performing loans combined with a delay in the bailout leads to a persistent decline in economic activity consistent with japan s experience the decline in output is caused not only by a fall in investment but also by a decline in labor and total factor productivity

market structure and the effectiveness of monetary policy a cross industry study empirical rejections of the strong form of the new classical macroeconomics at the aggregate economy level leave open the extent to which it is the rational expectations or short run market clearin

measuring productivity in an imperfect world most measures of multifactor productivity mfp assume constant returns to scale and perfect competition using a general aggregate production function together with duality theory and allowing for the possibilities of disequilibrium markups and economies of scale the study derives a more generalized mfp measure the model was used to assess the economic performance in us manufacturing for the 1949 to 1988 period the results suggest that scale and markups have substantial power in explaining mfp growth for all periods and that half of the measured mfp growth as measured within the conventional framework comes from biases due to scale economies market power and interaction effects

patterns of intergenerational mobility in income and earnings this paper characterizes the patterns of intergenerational mobility in the united states using data for matched parent child pairs from the national longitudinal surveys in general what is found is far from the extremes of either perfect mobility or perfect immobility parents log income explains only about 9 percent to 11 percent of the variation in children s log incomes earnings exhibit more mobility than does total income and the difference is most striking for daughters the paper also identifies the influence of family background characteristics on mobility the addition of these background variables adds another 3 to 5 percent age points to the r2 in the intergenerational earnings and income regressions copyright 1992 by mit press

a mixed industrial structure magnifies the importance of menu costs new keynesian literature assumes symmetric industrial structure when analysing explanations of money non neutrality this paper analyses the impact of modifying this assumption by allowing for a mixed industrial structure some industries are characterized by monopolistic competition others by perfect competition the mixed industrial structure implies misallocation of labour between the different industries which may contribute to explanations of non neutrality of money following a 5 money increase the menu costs needed for non neutrality may be 40 times smaller and ratio of welfare gain over private loss more than 100 times larger than in the corresponding model with a symmetric structure

improving fiscal policy in the eu the case for independent forecasts are official output forecasts biased we point out that official forecasts of output dynamics are crucial to the assessment of cyclically adjusted budget balances and provide evidence that in some euro area countries biased forecasts have played a thus far neglected role in generating excessive deficits we suggest that the forecast bias may be politically motivated and that forecasts produced by an independent authority would be better than in house ministry of finance forecasts for the purpose of monitoring budget formation and budget outcomes lars jonung and martin larch

a sectoral analysis of price setting behavior in us manufacturing industries abstract in this paper we estimate new keynesian phillips curves nkpc for u s manufacturing industries defined at the sic two digit level over the period 1959 to 1996 this enables us to measure the extent of nominal inertia across industrial sectors a key innovation in this research is the use of intermediate goods costs rather than labor costs as a measure of marginal costs intermediate goods costs are a more significant element of costs for the firms populating our sample and are not subject to the criticism that wage rates are nonallocative we find that there is statistically significant variability in estimates of price stickiness ranging from eight months to two years we also find that estimates of backward looking price setting behavior vary with some industries characterized by 81 of pricing decisions made in a purely forward looking manner while in others only 52 of pricing decisions are made that way market concentration as captured by the herfindahl hirschman index appears to be

decomposing economic mobility transition matrices the intergenerational mobility literature has consistently found that the distribution of adult economic outcomes differ markedly depending on parental economic status yet much remains to be understood about the drivers or determinants of this relationship existing literature on potential drivers focuses primarily on mean effects to help provide a more complete picture of the potential forces driving economic persistence we propose a method to decompose transition matrices and related indices specifically we decompose differences between an estimated transition matrix and a benchmark transition matrix into portions attributable to differences in characteristics between individuals from different households a composition effect and portions attributable to differing returns to these characteristics between individuals from different households a structure effect we also incorporate a detailed decomposition based on copula theory that decomposes the composition effect into portions attributable to specific covariates and their interactions we illustrate our method using data on white men from the 1979 national longitudinal survey of youth estimation is based on an extended mincer equation that includes cognitive and non cognitive measures to address the potential endogeneity of education we implement an iv strategy that allows us to estimate causal effects and investigate the role of unobserved ability

monetary rules for small open emerging economies abstract this paper develops a variant of the imf s global economic model suitable to analyze macroeconomic dynamics in open economies and uses it to assess the effectiveness of taylor rules and inflation forecast based ifb rules in stabilizing variability in output and inflation our findings suggest that a simple ifb rule that does not rely upon any direct estimates of the equilibrium real interest rate and places a relatively high weight on the inflation forecast may perform better in small open economies than conventional taylor rules

intergenerational income mobility among daughters new evidence on daughters intergenerational mobility in a framework that encompasses women not in the labor force using broader measures of economic status than just the women s own earnings is presented and the role of husbands earnings is highlighted a parallel analysis of sons mobility is performed intergenerational transmission of income status may be weaker for daughters than for sons but is still quite substantial assortative mating is an important element in the intergenerational transmission process

competitive pressure and economic integration an illustration for spain 1983 1996 abstract this paper estimates sectoral mark ups in the spanish economy during the period 1983 1996 the data consists of a large firm level data set that encompasses all sectors of economic activity apart from financial institutions the time period considered is well suited to assess the pro competitive effect of economic integration as spain s economy became fully integrated in the eu which was itself embarking on a massive liberalisation exercise i find that sectors most exposed to international competition witnessed a significant drop in margins while those more sheltered from competitive pressures did not finally comparing estimated mark ups to accounting margins indicates that the latter are a reasonable proxy for margins obtained econometrically

markups in u s and japanese manufacturing a short run econometric analysis in this article a production theory based model of firms markup behavior is constructed the theoretical structure is based on variants of generalized leontief cost and expenditure functions this framework yields a specification of behavior from which the impacts of both supply and demand shocks on firms markup behavior can be assessed through elasticities adjustment costs on both labor and capital and economies of scale are incorporated estimation is carried out using manufacturing data for the united states and japan from 1960 through 1981 the empirical results suggest that markups for manufacturing firms in both the united states and japan have increased over time but have somewhat different cyclical characteristics stemming primarily from differential investment behavior in addition capacity utilization and especially returns to scale tend to counteract the short run profit potential from markup behavior so that markups measured assuming constant returns are typically biased downward finally

procyclical multifactor productivity tests of the current theories this paper conducts various tests of four hypotheses to account for procycical multifactor productivity the hypotheses include imperfect competition increasing returns to scale labor hoarding and thick market externalities the test results provide strong evidence for imperfect competition and increasing returns and weak evidence for labor hoarding and thick market externalities however the markup and returns to scale parameter estimates are much smaller than those noted in previous research this difference results from the use here of gross output and intermediate inputs as opposed to the use in previous research of value added and primary inputs

productivity and imperfect competition abstract this paper investigates the determinants of labor productivity from a large panel of italian firms in 1973 1981 this is a period characterized by the accelerated opening of the european market and the reduction in the level of vertical integration of industry a model of productivity with imperfect competition is derived and tested the evidence in favor of imperfectly competitive markets is strong and some patterns of change in market structure are detectable the model confirms the important decline of labor cost flexibility in italian manufacturing at the end of the seventies

monetary and fiscal policy interaction the current consensus assignment in the light of recent developments in the last few years papers have begun to analyse optimal monetary and fiscal policy in models incorporating nominal rigidities where social welfare is derived from the utility of agents this article examines whether this analysis provides support for the consensus assignment where monetary policy controls demand and inflation and fiscal policy controls government debt we argue that the basic structure of new keynesian models implies that monetary policy dominates fiscal policy as a means of controlling inflation no similar dominance appears to operate for fiscal policy and debt if debt has to return to its initial level after shocks

input choices under price uncertainty theory shows that depending on risk preferences and technological parameters price uncertainty may alter firms choice of capital intensity this paper presents an empirical analysis of the effect of price uncertainty on firms choices of capital and labor stocks empirical results from a cross section of manufacturing industries as well as within industries over time show that greater price uncertainty increases an industry s capital labor ratio it appears that risk aversion does not dominate firms decision making these empirical findings have implications for the analysis of factor demand and productivity and capacity utilization rates

government spending entry and the consumption crowding in puzzle this article documents empirically that net firm entry robustly rises after a u s government spending expansion we use this new finding to test the empirical validity of various model features that have been proposed to generate consumption crowding in after positive expenditure shocks endogenous entry models typically fail to generate the observed joint increase in consumption and entry model features that dampen the wealth effect such as rule of thumb households or complementarity between labor and consumption in preferences tend to reduce entry we show that utility or productivity enhancing public spending can reconcile the model with our documented fact and performs well empirically

productive and financial performance in u s manufacturing industries an integrated structural approach in the last few years macroeconomists and industrial organization researchers have reexamined relationships among scale economies markups economic profitability and productivity growth paul romer 14 has emphasized the importance of increasing returns for productivity growth at the aggregate industry or economy level empirical evidence supporting this at the industry level has been presented by robert hall 4 5 who reported both significant increasing returns and markups of price over marginal cost in various u s manufacturing sectors related evidence on the cyclical nature of markups in these industries suggesting some procyclicality of markup behavior has been presented by domowitz hubbard and petersen 3 analysis of the cyclical characteristics of robert solow s 16 productivity residual provided the basis for these empirical studies the resulting framework is limited however by its dependence on a number of restrictive assumptions which severely hamper analysis of interactions among these characteristics the purpose of this paper is to extend this type of analysis to consider profit maximizing markups economic profitability scale economies capacity utilization and productivity growth within an integrated theoretical structural model and to assess their interactions empirically for two digit u s manufacturing data more specifically using the new industrial economics approach outlined by timothy bresnahan 2 in which marginal cost and therefore markups are unobserved but estimated econometrically i specify an integrated cost and demand structure for each industry the structure is quite general in that i markups and returns to scale are permitted to vary over time they are not constant parameters ii shortand long run impacts are distinguished by explicit recognition of adjustment costs iii quasi fixity of both capital and labor is incorporated to accommodate labor hoarding as well as slow adjustment of capital iv input substitution is not constrained a priori a generalized leontief restricted cost function based on gross output is employed v nonstatic expectations are allowed for through an instrumental variable estimation procedure and vi the effects of cost and demand shocks are directly represented by specifying and estimating industry specific cost output demand and input demand functions

time to enter and business cycles abstract this paper examines a model in which market entry forms a business cycle propagation mechanism during expansionary periods new firms enter previously monopolized markets creating efficiency gains that amplify the effect of technology and fiscal policy shocks on employment market entry is delayed creating a dynamic pattern to output growth closer to that observed in the us economy than the standard rbc model