occupation and the political economy of trade job routineness offshorability and protectionist sentiment the recent backlash against globalization in many advanced economies raises questions about the source of this protectionist sentiment traditional accounts generally attribute the welfare consequences of trade to skill level or industry characteristics or instead emphasize the nonmaterial determinants of support for openness consequently we know little about how a major labor market characteristic occupation shapes both the distributional consequences of and preferences toward trade openness we propose and test a new theory of trade policy preferences based on occupation characteristics drawing from the tasks literature in economics we argue that occupation characteristics are a key determinant of how trade affects workers and thus individuals trade preferences our theory suggests that in advanced economies individuals in routine task intensive occupations will be negatively affected by trade and thus more protectionist this relationship will increase in the degree to which occupation job tasks can be provided from a distance i e offshorable we find support for our theory using data from the 2003 and 2013 international social survey programme in high income democracies our results suggest that the occupational characteristics of routineness and offshorability are important determinants of trade preferences offering additional understanding of the sources of protectionist sentiment even after controlling for labor market characteristics suggested by conventional wisdom

a class of tractable incomplete market models for studying asset returns and risk exposure abstract we present a class of tractable incomplete market models where agents face both aggregate risk and limited participation in financial markets tractability relies on the assumptions of small asset volumes and of a period utility function that is linear beyond a threshold in line with fishburn s 1977 contribution in decision theory we prove the existence of an equilibrium and derive theoretical results regarding asset prices and consumption choices this small trade model is able to reproduce a low safe return and a high equity premium together with a realistic representation of household exposure to both idiosyncratic and aggregate risks

what have we learned from empirical studies of unemployment and turnover unemployment reminds economists that we have a lot to be modest about twenty years ago robert hall 1972 asked why is the unemployment rate so high at full employment at the time hall wrote male unemployment in the united states had risen to 3 5 percent and it would peak at 4 4 percent in the recession of 1971 since then every cyclical low of unemployment has exceeded the one before it the end of the 1980 s expansion reduced unemployment to about 4 5 percent and unemployment peaked at 7 4 percent of the labor force in the recession that just ended the natural rate of unemployment has evidently risen through time which led lawrence summers 1986 to place a modifier in hall s question why is the unemployment rate so very high in what follows i pose three questions about the causes and consequences of rising joblessness first who are the unemployed i will show that unemployment and nonparticipation are heavily concentrated among the least skilled and more importantly that virtually all of the long term increase in joblessness occurs among low wage men unemployment and nonparticipation among highly skilled men are unchanged since the 1960 s second what factors have caused jobless time to rise there are many theories including changes in labor force demographics social programs that discourage employment and changes in the amount of frictional unemployment caused by sectoral shifts none of these is consistent with the evidence which points instead to a secular decline in the demand for lessskilled workers the data also cast doubt on nonmarket clearing models of rising unemployment wages are demonstrably flexible in the long run and they have fallen dramatically among the unskilled whose jobless rates have risen third what happens to the unemployed in contrast to the view that unemployment spells cause transitory reductions in income recent evidence indicates that job losses have substantial and permanent effects on earning power many of the unskilled who are unemployed or out of the labor force appear to have been high wage workers whose specialized skills have become obsolete

building a bric stock market opening and investment finance in india since liberalization portfolio equity inflows have been a feature of india s improved growth performance in recent years this study examines a possible connection through the equity financing of capital formation by manufacturing firms emphasis is placed on the funding preferences of owner controlled enterprises with the empirical results connecting equity issues to the management of gearing and the availability of internal funds this context suggests strongly that equity and debt are complementary choices although two channels of influence macroeconomic and allocative combine to encourage investment spending with pro cyclical implications

costs of business cycles for unskilled workers abstract unskilled workers are subject to a much larger risk of unemployment during recessions than are skilled workers moreover unskilled workers earn less income which limits their ability to self insure we examine how this heterogeneity in unemployment risk and income across different skill groups translates into heterogeneity in the cost of business cycles we find that the welfare cost of business cycles for unskilled workers is substantially higher than the welfare cost for skilled workers

the impact of job security on job satisfaction in economic contractions versus expansions job security often measured using the perceived risk of job loss in the near future is a significant determinant of job satisfaction we posit that the impact job security has on job satisfaction is not only a function of how likely it is that a worker loses a job but also how likely it is that a worker could find another the effect this has on worker job satisfaction then is different depending on whether perceived job loss occurs or not when job openings are scarce or when job openings are plentiful we use difference in differences analysis of the 1997 and 2008 waves from the national study of the changing workforce to show that three measures of job security increase private sector worker job satisfaction and reduce worker incentives to quit more when job openings are relatively scarce during contractions than when job openings are relatively plentiful during expansions we find that our results are strongest among less educated workers

wealth distribution with random discount factors abstract to explain the pareto tail behavior empirically observed in wealth distributions the quantitative macro literature has occasionally assumed that agents have random discount factors this paper formally proves that the stationary wealth distribution in a simple huggett model with random discounting has power law tails and characterizes the pareto exponents analytically i find that in general there is no clear relationship between the return on wealth and inequality and that the pareto exponent is highly sensitive to the persistence of the discount factor process i also provide a practical guidance for how to characterize the pareto exponents in richer models

structure behavior and voter turnout in the united states electoral participation in the united states is examined to provide a clearer account of the effect of the registration requirement on individual voting behavior pooling nes data from 1980 1984 and 1988 i first model with traditional and selection bias techniques the full electorate to distinguish among three groups nonregistrants registered nonvoters and voters analyses limited to recent movers then reported to understand more fully the forces associated with the actual decision calculi of registering and voting the influences of many factors commonly accepted as important determinants of voting are disentangled and their effect at each stage is ascertained factors yielding inconsistent effects in previ research or believed to be unimportant such as race gender attitudes toward the candidates and trust government are shown to deserve closer scrutiny by electoral scholars

separations sorting and cyclical unemployment abstract this paper establishes a new fact about the compositional changes in the pool of unemployed over the us business cycle using microdata from the current population survey for the years 1962 2012 it documents that in recessions the pool of unemployed shifts toward workers with high wages in their previous job and that these shifts are driven by the high cyclicality of separations for high wage workers the paper finds that standard theories of wage setting and unemployment have difficulty in explaining these patterns and evaluates a number of alternative theories that do better in accounting for the new fact jel e24 e32 j31 j63 j64

globalization and its challenges rudi was born and grew up in krefeld germany he was an undergraduate at the university of geneva and completed his ph d at the university of chicago in 1971 which is where we met he was a student of robert mundell and both the subject matter the development of the mundell fleming model and the elegance and insights of his early work reflected mundell s influence he taught at the university of rochester and at the university of chicago before accepting an offer from mit in 1975

financial crisis gender and power an analytical framework abstract this paper begins to remedy the neglect of gender aspects of financial crises by exploring a suggestive microfoundational model of unequal gender power and cost bearing in a borrower household this model shows that financial market liberalization can assess women s access to formal sector employment and encourage the growth of household credit both for a household enterprise and for the acquisition of labor saving household assets the price of these gains however is greater household risk because of greater cash flow dependence and financial fragility a financial crisis can force the household to bear heavier adjustment costs than would otherwise be felt and these costs may well be borne disproportionately by women who become more economically vulnerable as a result

labor market matching with precautionary savings and aggregate fluctuations we analyze a bewley huggett aiyagari incomplete markets model with labor market frictions consumers are subject to idiosyncratic employment shocks against which they cannot insure directly the labor market has a diamond mortensen pissarides structure firms enter by posting vacancies and match with workers bilaterally with match probabilities given by an aggregate matching function wages are determined through nash bargaining we also consider aggregate productivity shocks and a complete set of contingent claims conditional on this risk we use the model to evaluate a tax financed unemployment insurance scheme higher insurance is beneficial for consumption smoothing but because it raises workers outside option value it discourages firm entry we find that the latter effect is more potent for welfare outcomes we tabulate the effects quantitatively for different kinds of consumers we also demonstrate that productivity changes in the model in steady state as well as stochastic ones generate rather limited unemployment effects unless workers are close to indifferent between working and not working thus recent findings are corroborated in our more general setting

financial repression and firm self financing of investment empirical evidence from brazil analysis of 86 brazilian manufacturing firms operating during a period marked by some degree of financial repression demonstrates that investment spending influences the liquid asset holdings of firms this self finance motive is weaker than the transactions motive but in general remains statistically significant across a variety of model specifications small firms are more likely than large firms to finance investment spending through accumulation of liquid assets contrary to the complementarity hypothesis however there is some evidence that firms treat liquid assets and capital as substitutes specification tests comparing the shaw hypothesis with the mckinnon hypothesis weakly favour the complementarity model

a critical appraisal of mckinnon s complementarity hypothesis does the real rate of return on money matter for investment in developing countries this is the post print version of the final paper published in world development the published article is available from the link below changes resulting from the publishing process such as peer review editing corrections structural formatting and other quality control mechanisms may not be reflected in this document changes may have been made to this work since it was submitted for publication copyright 2009 elsevier b v

from the peaks to the valleys cross state evidence on income volatility over the business cycle abstract countercyclical variation in individuals idiosyncratic labor income risk could generate substantial welfare costs following past research we infer income volatility the variance of permanent income shocks a standard proxy for income risk from the rate at which cross sectional variances of income rise over the life cycle for a given cohort our novelty lies in exploiting cross state variation in state economic conditions or state sensitivity to national economic conditions we find that income volatility is higher in good state times than bad during good national times we find volatility is higher in states that are more sensitive to national conditions

the impact of growth energy and financial development on the environment in china a cointegration analysis this article aims to investigate the impact of financial development economic growth and energy consumption on environmental pollution in china from 1953 to 2006 using the autoregressive distributed lag ardl bounds testing procedure the main objective is to examine the long run equilibrium relationship between financial development and environmental pollution the results of the analysis reveal a negative sign for the coefficient of financial development suggesting that financial development in china has not taken place at the expense of environmental pollution on the contrary it is found that financial development has led to a decrease in environmental pollution it is concluded that carbon emissions are mainly determined by income energy consumption and trade openness in the long run moreover the findings confirm the existence of an environmental kuznets curve in the case of china

financial development and poverty reduction can there be a benefit without a cost abstract this article investigates how financial development helps to reduce poverty directly through a distributional effect beyond its indirect effect through economic growth the results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities through the mckinnon conduit effect but to some extent fail to reap the benefit from greater availability of credit moreover financial development is accompanied by financial instability which is particularly detrimental to the poor nevertheless the benefits of financial development for the poor outweigh the cost

public sector banking efficiency and economic growth in india abstract this paper develops a framework that integrates harrod domar growth model and mckinnon shaw hypothesis via molho s dynamic adjustment mechanism the model is used to determine the impact of bank nationalization through aggressive bank branch expansion programs and priority sector credit allocation on india s financial savings investment productivity and gdp the empirical findings indicate that the bank nationalization policy has been a mixed blessing the aggressive bank branch program since 1969 resulted in an increased in savings investment productivity of capital and gdp however the priority sector credit allocation policy did not fully achieve its desired goals

financial development and economic growth evidence from panel unit root and cointegration tests abstract in this paper we investigate the long run relationship between financial depth and economic growth trying to utilize the data in the most efficient manner via panel unit root tests and panel cointegration analysis in addition we use threshold cointegration tests and dynamic panel data estimation for a panel based vector error correction model the long run relationship is estimated using fully modified ols for 10 developing countries the empirical results provide clear support for the hypothesis that there is a single equilibrium relation between financial depth growth and ancillary variables and that the only cointegrating relation implies unidirectional causality from financial depth to growth

financial liberalization in india and a new test of the complementarity hypothesis abstract this article reappraises the financial repression hypothesis for india in light of the partial liberalization of the financial sector in the early 1990s using for the first time state of the art multivariate cointegration and vector error correction models vecm from this more robust testing procedure we find that for the indian economy over the sample period 1951 99 money and capital are complementary suggesting that higher real interest rates will further raise the demand for money and lead to higher levels of investment furthermore testing for a structural break in the early 1990s to coincide with the liberalization of the financial sector in india suggests that these reforms have not significantly changed the complementary relationship between money and capital the policy implication is that further financial liberalization maybe required in india to enhance investment and economic growth

asset bubbles and the cost of economic fluctuations lucas 1987 2003 estimates that the cost of economic fluctuations is low a social planner would pay no more than 0 1 of permanent consumption to eliminate all future business cycle fluctuations the current paper extends lucas calculations by studying the costs of fluctuations arising from asset bubbles we estimate two classes of costs consumption volatility due to asset bubbles in a representative agent economy and consumption volatility that arises because households have heterogeneous exposure to the bubble assets we show that the magnitude of welfare costs is primarily driven by the existence of heterogeneity our benchmark calibration implies that the asset bubbles of the last decade generated a social welfare cost equal to a permanent 3 reduction in the level of national consumption if assets are held proportionately across the population these welfare costs fall by an order of magnitude our calculations are sensitive to the details of the calibration including the degree of balance sheet and trading heterogeneity the coefficient of relative risk aversion and the magnitude of the asset bubble our preferred specifications generate welfare costs ranging from 1 to 10 of permanent national consumption

why do some countries get better wto accession terms than others the process by which countries accede to the world trade organization wto has become the subject of considerable debate this article takes a closer look at what determines the concessions the institution requires of an entrant in other words who gets a good deal and who does not i argue that given the institutional design of accession proceedings and the resulting suspension of reciprocity accession terms are driven by the domestic export interests of existing members as a result relatively greater liberalization will be imposed on those entrants that have more valuable market access to offer upon accession something that appears to be in opposition to expectations during multilateral trade rounds where market access functions as a bargaining chit the empirical evidence supports these assertions looking at eighteen recent entrants at the six digit product level i find that controlling for a host of country specific variables as well as the applied protection rates on a given product prior to accession the more a country has to offer the more it is required to give moreover i show how more democratic countries in spite of their greater overall depth of integration exhibit greater resistance to adjustment in key industries than do nondemocracies finally i demonstrate that wealth exhibits a curvilinear effect on the one hand institutionalized norms lead members to exercise observable restraint vis a vis the poorest countries on the other hand the richest countries have the greatest bargaining expertise and thus obtain better terms the outcome as i show using a semi parametric analysis is that middle income countries end up with the most stringent terms and have to make the greatest relative adjustments to their trade regimes

the role of unemployment insurance in an economy with liquidity constraints and moral hazard the potential welfare benefits of unemployment insurance along with the optimal replacement ratio are studied using a quantitative dynamic general equilibrium model to provide a role for unemployment insurance agents in our economy face exogenous idiosyncratic employment shocks and are unable to borrow or insure themselves through private markets in the absence of moral hazard replacement ratios as high as 65 are optimal and the welfare benefits of unemployment insurance are quite large however if there is moral hazard and the replacement ratio is not set optimally but is instead set to an empirically plausible value the economy can be much worse off than it would be without unemployment insurance

evaluating risky consumption paths the role of intertemporal substitutability abstract in dynamic stochastic welfare comparisons a failure clearly to distinguish between risk aversion and intertemporal substitutability can result in misleading assessments of the impact of risk aversion on the welfare costs of consumption risk changes the problem arises in any setting in which uncertainty is propagated over time notably but not exclusively in economies with stochastic consumption trends regardless of the preference setup adopted an increase in risk aversion amplifies the per period costs of risks the weights consumers use to cumulate the per period costs of risks with persistent effects should however depend on intertemporal substitutability as well as on risk aversion under time separable expected utility preferences an increase in the period utility function s curvature therefore alters the welfare effect of risk for reasons that are in part unrelated to risk aversion to illustrate these points i reconsider lucas s estimate of the cost of consumption instability for the postwar united states

geography international trade and political mobilization in u s industries posed industries geographic concentration strongly increases a the formation of common trade policy preferences among workers b employees contributions to political campaigns and c voter turnout this activism traces not to the behavior of political elites but rather to the increased possibility for collective action that spatial proximity affords individuals in trade exposed industries es eography is everywhere in vogue from studies of silicon valley effects and industrial agglomeration audretsch 1998 dyer 1994 to the pricing practices of monopolies from corporate alliances to regional economic development porter 1998 the spatial proximity of firms is shedding new light on some of the most enduring puzzles in business and economics yet despite this interest in industrial clusters few studies have asked and fewer still have empirically assessed how spatial proximity conditions an industry s political behavior this link is particularly important for sectors exposed to international trade given the longstanding debate over how geographic concentration affects an industry s ability to secure import relief recent studies busch and reinhardt 1999 mcgiliivray 1997 find that spatially proximate industries are indeed more successful in gaining protection although the mechanisms by which they exert greater political influence remain little understood we seek to explain how geographic concentration facilitates political mobilization on the part of trade exposed industries geographic concentration bolsters an industry s capacity for collective action in particular as a wide variety of literatures insists spatial proximity facilitates greater face to face communication aids in the diffusion of specialized political knowledge provides the basis for denser social networks and enables more effective monitoring and sanctioning of those who might free ride on the political contributions of others in short individuals in geographically concentrated groups are more likely to recognize and act upon their collective interests yet spatial proximity alone is not sufficient to motivate political mobilization underlying common interests must exist as well looking at manufacturing industries we hypothesize

financial market development and trade openness evidence from emerging economies international trade is said to be the engine of economic growth despite an enormous effort to explain this phenomenon the relationship between financial market development and trade openness and integration into the world economy is still an enigma this article investigates the relationship between financial market development and trade openness to do this we develop a long run and short run model a bounds testing approach to cointegration for 18 emerging economies over the period 1980 to 2011 estimates from all models show that financial market development including both the stock market and the banking sector has significant effect on trade openness in both short run and long run phenomena in the majority of countries despite many similarities among emerging economies additional evidence suggests that the link between either stock market development or banking sector development with trade openness works via each country s specific structure

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

ambiguity aversion asset prices and the welfare costs of aggregate fluctuations under the hypothesis that aggregate u s consumption is random and more importantly viewed as ambiguous by consumers we examine the implications for asset prices and for how consumption uctuations in uence consumer welfare first considering a simple mehra prescott style endowment economy with a representative agent facing consumption uctuations calibrated to match u s data we study to what extent ambiguity aversion can deliver asset prices that are consistent with data a high return on equity and a low return on riskfree bonds for some conflgurations of preference parameters a discount factor a degree of relative risk aversion and a measure of ambiguity aversion we flnd that it can we then use these parameter conflgurations to investigate how much consumers would be willing to pay to reduce endowment uctuations to zero thus delivering a lucas style welfare cost of uctuations these costs turn out to be very large consumers can be willing to pay over 10 of consumption in permanent terms

barter in the us economy a macroeconomic analysis in this paper a statistical model is developed to examine the determinants of the growing level of barter transactions in the us although a barter system is believed to be pareto inferior to a money system recent statistics of the estimated level of barter transactions in the us show a rapidly growing interest by large corporations as well as individuals in this type of trade the primary obstacle in empirical research in this area is the difficulty of measuring the size of barter transactions here data from barter exchange organizations are used to test the significance of several variables the ordinary least squares and cointegration and error correction models are employed as two alternative empirical techniques to analyse the data the results support the counter cyclical arguments as well as the inflation factor however the notion of tax evasion as a motive in organized barter receives only a partial support

production function with electricity consumption and policy implications in portugal using a sample of quarterly data we investigate the effect of electricity consumption capital formation and financial development on economic growth in portugal a positive negative shock of electricity consumption is estimated to have increased decreased economic growth economic growth is positively affected by positive shock stems in capital a positive negative shock in financial development declines increases economic growth these findings reveal that a portugal is still an energy dependent economy b energy is one of the major inputs for economic growth and development c a conservation energy policy should not be implemented because energy is an important driver of growth d economic growth enhances capital formation and not the opposite hence it appears more relevant to boost economic growth before enhancing capital formation e financial development does not appear to be an important catalyst for economic growth findings also highlight f the relevance of the recent energy policy implemented in portugal and g the need to limit energy imports by means of producing electricity through renewable energy to reduce the external debt level in portugal especially after the 2008 crisis

internal funds and corporate investment in india abstract several economists have argued that capital markets in less developed countries are fragmented fragmented capital markets retard the efficient allocation of resources and force business firms to rely on internal sources of funds using firm level data the authors examine the importance of the accelerator internal funds and depreciation for investment by manufacturing firms in india the results indicate that internal funds and depreciation have significant explanatory power in a sales accelerator model of investment and that there exists heterogeneity among firms in the link between internal funds and investment in particular internal funds are relatively more important for large firms and firms that produce luxury goods

the financial repression liberalization debate taking stock looking for a synthesis financial repression and liberalization became the object of fierce debates between academics and policy makers since the early 1970s as of the late 1980s financial liberalization became also part of the structural adjustment programs sponsored by the international monetary fund and the world bank however the literature on financial repression and liberalization remains controversial on its theoretical conclusions and policy implications given its importance for both the theory and policy of economic development and growth this paper looks for a possible synthesis after reviewing the theoretical contributions and empirical studies under the headings of the mckinnon shaw and new structuralists models the survey concludes that a new synthesis might be found in the post keynesian attempt to take an institutional perspective within a globalised financial and economic environment

international capital mobility and unemployment dynamics empirical evidence from oecd countries we use a panel of 20 oecd countries over a 30 year period to estimate the implications of international capital mobility for unemployment we nd that the increase in capital ows since the mid 1980s has contributed to an ampli cation of the impulse response of unemployment to country speci c shocks and to a fall in the persistence of unemployment in response to the same shocks

structural estimates of the intergenerational education correlation using a structural dynamic programming model we investigate the relative importance of family background variables and individual specific abilities in explaining cross sectional differences in schooling attainments and wages each type of ability is the sum of one component correlated with family background variables and a residual orthogonal component which is purely individual specific household background variables especially parents education account for 68 of the explained cross sectional variations in schooling attainments while ability correlated with background variables accounts for 17 and pure individual specific ability accounts for 15 interestingly individual differences in wages are mostly explained by pure individual specific abilities as they account for as much as 73 of the explained variations in wages family background variables account for only 19 while ability endowments correlated with family background account for 8 copyright 2003 john wiley sons ltd

environmental policy in majoritarian systems abstract this paper sheds new light on the determination of environmental tax policies in majoritarian federal electoral systems such as the u s and derives implications for the environmental federalism debate on whether the national or local government should have authority over environmental taxes in the absence of majority bias the socially preferred policy would be federal district level taxation which accounts both for cross boundary pollution and differences in industry concentration across districts in majoritarian systems however where the legislature consists of geographically distinct electoral districts the majority party at the national or state level favors home districts depending on the location of polluting industries and the associated damages the majority party may therefore impose sub optimally high or low pollution taxes due to a majority bias majority bias can influence the social welfare ranking of alternative environmental tax policies in some cases majority bias may make decentralized or federal uniform taxation the preferred solution

an analysis of the demand for cash balances by the manufacturing firms in a developing economy abstract using cross section data this paper presents the results of an evaluation of the role of cash balances as a factor input in india s manufacturing industries by using a three factor translog cost function for each of the major industries along with duality theory it was possible to estimate the allen partial elasticities of substitution and the own price elasticities of demand for each factor input three significant conclusions are drawn a cash balances and labor are predominantly substitutes and cash balances and capital are by and large complementary implications of this for choice of techniques is analyzed b the interest elasticity of demand for cash varies with industry from 0 0013 to 0 4756 c separability tests indicate that omitting cash balances from the production function would involve a misspecification of the latter

the effect of barter on the demand for money an empirical analysis abstract the impact of barter on the m2 money demand for the u s is explored the results show that in addition to the traditional explanatory variables the level of barter must be included in the estimates of the demand for money

cost of business cycles with indivisibilities and liquidity constraints it is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk in this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles two versions of incomplete insurance markets are considered and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy

the determinants of industry political activity 1978 1986 c ampaign contributions made by corporate political action committees pacs are increasingly important and controversial in u s elections influence purchasing is often alleged by pundits and campaign finance reform is continually debated in congress in the academy social scientists have analyzed the allocation of interest group monies and have looked for possible impacts on legislation few however have tried to explain the total contributions of economic interest groups we shall analyze variations in contributions across industries and over time with an empirical model based on organizationally constrained profit maximizing behavior we assume that corporate pac contributions in an industry are raised to enhance industry profits subject to the constraints of organization costs and freeriding incentives our empirical work covers 124 industries over five election cycles from 1978 through 1986 both the costs and benefits of political activity vary across industries we argue that the benefits of political action are determined by direct contact with the government as a regulator or purchaser of industry output by government s ability to ameliorate adverse market conditions and by the industry s ability to solve collective action problems without government assistance the costs of industry political action arise mainly from collective action problems because effective political activity often requires concerted action by the constituent firms in each industry we also make a methodological contribution previous studies use statistical techniques that suffer from sample selectivity bias or else force the probability of acting politically to be explained by the same set of coefficients as is the amount of action taken we explain and employ a technique that accounts for both problems the results are consistent with the theses that industries follow investment oriented goals in deciding the amount of political action to undertake and that collective action problems are important constraints on industry political activity we can explain between 60 and 80 of the variation in contributions in our sample first we review existing work on corporate political activity particularly papers examining patterns of aggregate pac spending by industry then we present an organization cost constrained industryprofit maximizing model based on a comparison between an idealized zero organization cost industry and the more realistic case where organizing collective action is difficult the independent variables used in the analysis are also discussed and defined next we discuss the dependent variable and total industry contributions and explain our statistical method then the results are presented followed by a discussion of industry structure and political activity to make clear how our results can explain different contribution patterns we give examples using five actual industries

the demand for liquid assets a firm level analysis analysts have exerted considerable effort attempting to demonstrate that the firm demand for liquid assets or money conforms to microeconomic theory the theory itself is splintered along three lines of inquiry a keynesian version stressing the transaction and asset motives 28 33 35 an essentially quantity theory approach 19 6 and an approach which incorporates money into the firm s production function 22 31 7 29 the empirical work used to test these theoretical approaches has a common element a measure of the firm s scale is included usually sales or business receipts and generally a common flaw the use of aggregated data most studies have used industry level data because it is more readily available this forces the analyst to assume that firms within an industry are homogeneous while firms across industries are heterogeneous the authors can then use the typical firm as the unit of analysis the typical firm is a hypothetical construct whose characteristics are statistical means of all firms aggregated within the industrial category while this is a useful assumption the aggregation may hide the influence of the distribution of firms within the industry these distributional impacts may be significant if there are substantial economies of scale or if firm size influences such things as cash management practices and access to financial markets katsimbris and miller 15 have warned that the size distribution of firms within an industry may alter money demand the greater the inequality in sales the lower the industry s demand for money they find no support for the assumption of identical structural specification across industries these observations have been echoed by hunter 12 and by other work of katsimbris and miller 13 14 under such circumstances the use of industry average data may yield misleading conclusions on the firm demand for money any study of firm behavior in this area should at the very least control for industry some time ago vogel and maddala 33 called for empirical studies using firm level data a call which has gone largely unanswered this study attempts to fill this void by using a comprehensive set of firm level data over a five year period but we also attempt to answer several other questions does the presence of foreign ownership alter the firm s demand for liquid assets

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

financial development financial structure and domestic investment international evidence does it matter for domestic investment whether a country s financial system is bank based or stock market based this paper posits that financial intermediation affects domestic investment notably by alleviating financing constraints allowing firms to increase investment in response to increased demand for output the key result is that the structure of the financial system has no independent effect on investment in the sense that it does not enhance the response of investment to changes in output while financial development makes investment more responsive to output growth consequently rather than promoting a particular type of financial structure countries should implement policies that reduce transactions costs in financial intermediation and enforce creditor and investor rights this will facilitate the development of banks and stock markets which will stimulate domestic investment

monetization financial liberalization and economic development barter sector in 1954 55 the monetized sector contributed 69 to the net national product of india the share of the monetized sector increased to 78 6 of the net national product by 1974 75 during this period the explicit objective of monetary policy in india was to help accelerate the pace of economic development in an environment of reasonable price stability there are several versions of the financial liberalization hypothesis but the one put forward by ronald mckinnon is chosen here because of its succinctness and easy amenability to empirical verification 2 mckinnon s theory in essence deals with the effect of financial liberalization on the accumulation of capital through a policy of high real interest rates this formulation has been made operational by estimating the response of real demand for money balances and private investment to alternative rates of return under the implicit assumption that these are the only two alternative forms of assets held by the private sector 3 all this is predicated on the assumption that the effective limitation on the rate of real capital formation is the supply of real savings and not the inadequate willingness to invest most underdeveloped countries have a significant barter sector a reduction in the share of the barter sector can help to further accelerate the accumulation of capital in a barter system a good share of the factors of production is tied up in distribution away from production to achieve the double coincidence required in such a system with the

support for free trade self interest sociotropic politics and out group anxiety although it is widely acknowledged that an understanding of mass attitudes about trade is crucial to the political economy of foreign commerce only a handful of studies have addressed this topic these studies have focused largely on testing two models both of which emphasize that trade preferences are shaped by how trade affects an individual s income the factor endowments or heckscher ohlin model posits that these preferences are affected primarily by a person s skills the specific factors or ricardo viner model posits that trade preferences depend on the industry in which a person works we find little support for either of these models using two representative national surveys of americans the only potential exception involves the effects of education initial tests indicate that educational attainment and support for open trade are directly related which is often interpreted as support for the heckscher ohlin model however further analysis reveals that education s effects are less representative of skill than of individuals anxieties about involvement with out groups in their own country and beyond furthermore we find strong evidence that trade attitudes are guided less by material self interest than by perceptions of how the u s economy as a whole is affected by trade

the implications of changes in hours fluctuations on welfare costs of business cycles abstract hours volatility has changed non monotonically across skill groups since the mid 1980s the welfare cost of business cycles of mid skilled workers became similar to that of high skilled workers while the relative welfare cost of low to high skilled workers remains very high

international capital flows identifying the gender dimension abstract this paper explores the main issues involved in examining the gender impact of international capital flows to developing countries it argues that at the macroeconomic level women lose more than men from slow and or unstable economic growth financial crises and meltdowns and even more so the longer and deeper the economic downturn because without a social security system the family and women have many additional burdens women should formulate an agenda of their own with respect to international monetary reform and some proposals are outlined in this respect including those involving capital controls