explaining cross cohort differences in life cycle earnings abstract college educated workers entering the labor market in 1940 experienced a 4 fold increase in their labor earnings between the ages of 25 and 55 in contrast the increase was 2 6 fold for those entering the market in 1980 for workers without a college education these figures are 3 6 fold and 1 5 fold respectively why are earnings profiles flatter for recent cohorts we build a parsimonious model of schooling and human capital accumulation on the job and calibrate it to earnings statistics of workers from the 1940 cohort the model accounts for 99 of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts 52 for workers without a college education the flattening in our model results from a single exogenous factor the increasing price of skills the higher skill price induces i higher college enrollment for recent cohorts and thus a change in the educational composition of workers and ii higher human capital at the start of work life for college educated workers in the recent cohorts which implies lower earnings growth over the life cycle

financial development economic growth and banking sector controls evidence from india this paper uses newly collected data from the reserve bank of india to examine the effects of various types of banking sector controls on the process of financial deepening with the exception of a lending rate ceiling these controls are found to influence financial deepening negatively independently of the well known effect of the real interest rate exogeneity tests suggest that financial deepening and economic growth are jointly determined thus policies which affect financial deepening may also have an influence on economic growth the role of banking sector controls in the process of economic development has received considerable attention in the literature the traditional approach due to mckinnon i973 and shaw i973 postulates that government intervention in the pricing and allocation of loanable funds dubbed financial repression inhibits financial development by depressing real interest rates see

alternative estimators of cointegrating parameters in models with nonstationary data an application to us export demand this article presents monte carlo simulations which compare the empirical performance of two alternative single equation estimators of the equilibrium parameters in a dynamic relationship the estimators considered are stock and watson s dynamic ordinary least squares dols estimator and bewley s transformation of the general autoregressive distributed lag model the results indicate that the bewley transformation produces a lower mean square error as well as superior serial correlation properties even with lower truncation lags for the lagged variables included in the estimation equation an application is then provided which examines the nature of the equilibrium relationship between aggregate us exports world trade and the us real exchange rate this confirms that estimation of the equilibrium parameters of this relationship by the bewley transformation produces results which are superior to estimation by dols

sources of lifetime inequality is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime we answer this question within a model that features idiosyncratic shocks to human capital estimated directly from data as well as heterogeneity in ability to learn initial human capital and initial wealth we find that as of age 23 differences in initial conditions account for more of the variation in lifetime earnings lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime jel d31 d91 j24 j31 to what degree is lifetime inequality due to differences across people established early in life as opposed to differences in luck experienced over the working lifetime among the individual differences established early in life which ones are the most important a convincing answer to these questions is of fundamental importance first and most simply an answer serves to contrast the potential importance of the myriad policies directed at modifying or at providing insurance for initial conditions e g public education against those directed at shocks over the working lifetime e g unemployment insurance second a discussion of lifetime inequality cannot go too far before discussing which specific type of initial condition is the most critical for determining how one fares in life third a useful framework for answering these questions should also be central in the analysis of a wide range of policies considered in macroeconomics public finance and labor economics we view lifetime inequality through the lens of a risky human capital model agents differ in terms of three initial conditions initial human capital learning ability and financial wealth initial human capital can be viewed as controlling the intercept of an agent s mean earnings profile whereas learning ability acts to rotate

on the intergenerational transmission of economic status we present a model in which human capital investments occur over the life cycle and across generations a la becker and tomes the human capital technology features multiple stages of childhood investments college and life cycle accumulation the model can explain a wide range of intergenerational relationships while remaining empirically consistent with cross sectional inequality much of the latter is determined by early investments in children so that borrowing constraints faced by young parents are important for understanding the persistence of economic status across generations education subsidies especially early on can significantly reduce the intergenerational persistence of economic status

terms of trade dynamics in asia an analysis of national saving and domestic investment responses to terms of trade changes in 14 asian ldcs abstract i estimate a three equation model of savings investment and growth on pooled time series data for 14 asian developing countries to explore terms of trade dynamic effects on the current account a terms of trade deterioration lowers aggregate saving and raises investment in the current year it also exerts a positive lagged effect on investment due to the unanticipated temporary nature of the terms of trade change the current account oscillates before returning gradually to its steady state level the model explains 65 per cent of the variance in the sample countries current accounts over the period 1962 1983

the interest elasticity of savings in developing countries the existing evidence abstract this paper presents a critical analysis of some of the most recent empirical work on the interest elasticity of savings in developing economies supported by a set of empirical results the paper argues that a the real interest elasticity of savings is not easily detected using the existing empirical models which generally yield insignificant interest rate parameters in the seventies b the existing models suffer from serious defects that make if very difficult to interpret the estimated parameters

are ideas getting harder to find in many growth models economic growth arises from people creating ideas and the long run growth rate is the product of two terms the effective number of researchers and their research productivity we present a wide range of evidence from various industries products and firms showing that research effort is rising substantially while research productivity is declining sharply a good example is moore s law the number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s across a broad range of case studies at various levels of dis aggregation we find that ideas and in particular the exponential growth they imply are getting harder and harder to find exponential growth results from the large increases in research effort that offset its declining productivity

the effect of financial liberalization on the efficiency of credit allocation some evidence from korea abstract this paper examines korea s recent experience with financial liberalization to find empirical evidence for the mckinnon shaw hypothesis regarding the effect of financial liberalization on the allocative efficiency of credit this involves analyzing changes in the variation of average borrowing costs across different sectors and industries using consolidated balance sheets and income statements from firms it demonstrates that there has been a substantial improvement in the efficiency of credit allocation since 1980 when the korean government started to implement various financial liberalization reforms

the role of intergenerational transfers and life cycle saving in the accumulation of wealth he purpose of this paper is to review what economists know at present about the following question how large a portion of the existing wealth is the result of a bequest motive that is of accumulation for the specific purpose of leaving bequests i will also endeavor to clarify why an answer to this question is of interest in the early keynesian period when the study of national saving first attracted wide interest relatively little attention was paid to what led people to save though it was generally understood that the main systematic reason was to leave bequests j m keynes in the famous chapter 9 of the general theory of employment interest and money 1936 had listed seven distinct motives for saving besides the leaving of bequests but five of these which include to increase one s future income or to insure one s independence and power implied that all or nearly all the accumulation would finally wind up as bequeathed wealth this in turn meant that most private wealth originated through bequests that is it either had been received through bequests or was destined to be bequeathed and indeed how else could society accumulate wealth however keynes 1936 p 107 also mentioned two further motives precaution that is to build up a reserve against unforeseen contingencies and foresight that is to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present as for example in relation to old age family education or the maintenance of dependents these motives in contrast to most of the previous ones have the

binding constraint on economic growth under export oriented industrialization and globalization the two gap model of economic growth implies that different constraints on economic growth namely the savings and the foreign exchange availability are binding at different times this article estimates these varying binding constraints in 16 countries in east and southeast asia and latin america and explores their differences across countries regions and periods i show that the east and southeast asian countries which are recognized to be successful in export oriented industrialization are less constrained by the foreign exchange availability with reinforced export capacity than the latin american countries which had carried some inertia of import substituting industrialization policy until the 1980s in addition the economic growth turns out to be more constrained by the domestic savings in recent years which can be a reflection of capital account liberalization policies typically implemented in the late 1980s and 1990s and or a diminishing return to export led growth in either case this mi

the gift of the dying the tragedy of aids and the welfare of future african generations this paper simulates the impact of the aids epidemic on future living standards in south africa i emphasize two competing effects on the one hand the epidemic is likely to have a detrimental impact on the human capital accumulation of orphaned children on the other hand widespread community infection lowers fertility both directly through a reduction in the willingness to engage in unprotected sexual activity and indirectly by increasing the scarcity of labor and the value of a woman s time i find that even with the most pessimistic assumptions concerning reductions in educational attainment the fertility effect dominates the aids epidemic on net enhances the future per capita consumption possibilities of the south african economy

household behavior and the marriage market abstract there is some controversy in the field of household economics regarding the efficiency of household decisions we make the point that a flexible specification of spousal preferences and the household production technology precludes the possibility of using revealed preference data on household time allocations to determine the manner in which spouses interact efficiently or inefficiently under strong but standard assumptions regarding marriage market equilibria marital sorting patterns can be used essentially as out of sample information that allows us to assess whether household behavior is efficient or not we develop a new likelihood based metric to compare marriage market fits under the two alternative behavioral assumptions we use a sample of households drawn from a recent wave of the panel study of income dynamics and find strong evidence supporting the view that household behavior is constrained efficient

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

who marries whom and why this paper proposes and estimates a static transferable utility model of the marriage market the model generates a nonparametric marriage matching function with spillover effects it rationalizes the standard interpretation of marriage rate regressions and points out its limitations the model was used to estimate u s marital behavior in 1971 72 and 1981 82 the marriage matching function estimates show that the gains to marriage for young adults fell substantially over the decade unlike contradictory marriage rate regression results the marriage matching function estimates showed that the legalization of abortion had a significant quantitative impact on the fall in the gains to marriage for young men and women

human capital and the wealth of nations we reevaluate the role of human capital in determining the wealth of nations we use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries our model can explain differences in schooling and earnings profiles and consequently estimates of mincerian rates of return across countries we find that effective human capital per worker varies substantially across countries cross country differences in total factor productivity tfp are significantly smaller than found in previous studies our model implies that output per worker is highly responsive to changes in tfp and demographic variables jel e23 i25 j24 j31 o47 no question has perhaps attracted as much attention in the economics literature as why are some countries richer than others much of the current work traces back to the classic work of solow 1956 solow s seminal paper suggested that differ ences in the rates at which capital is accumulated could account for differences in output per capita more recently following the work of lucas 1988 human capital disparities were given a central role in the analysis of growth and development however the best recent work on the topic reaches the opposite conclusion klenow and rodriguez clare 1997 hall and jones 1999 parente and prescott 2000 and bils and klenow 2000 argue that most of the cross country differences in output per worker are not driven by differences in human capital or physical capital rather they are due to differences in a residual total factor productivity tfp in this paper we revisit the development problem in line with the earlier view we find that factor accumulation is more important than tfp in accounting for relative incomes across countries the key difference between our work and previous analyses is in the measurement of human capital the standard approach largely inspired by the work of mincer 1974 takes estimates of the rate of return to schooling as building blocks to directly measure a country s stock of human capital implicitly this method assumes that the marginal contribution to output of one additional year

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

investment spending and interest rate policy the case of financial liberalisation in turkey the purpose of the present study is to analyse the impact of interest rate policy on investment spending in turkey over a period which covers years of both financial repression and financial liberalisation the model presented suggests that investment will be positively correlated with below equilibrium interest rates and negatively correlated with above equilibrium rates the model is tested using a switching regime model with an unknown equilibrium rate of interest the results suggest that setting interest rates too high may be as detrimental to economic health as setting them too low moreover there is evidence of an autonomous downward shift in the investment function during the liberalisation period which may have resulted from heightened uncertainty during the period

the relation between savings and growth cointegration and causality evidence from asia the direction of causality between savings and growth remains unclear even though it is of critical importance for development policy in this paper granger causality analysis is undertaken for seven asian countries using the vecm engle and granger and var procedures we find that in most cases the direction of causality runs primarily from growth or income to savings although in some countries there is also evidence of a feedback effect from savings to income and growth thus development policy should focus less on promoting high savings rates and more on promoting high growth rates estimation of the savings functions are presented using engle and granger s static ols and stock and watson s dynamic ols dols procedures where appropriate the high savings rates in asia are found to be due to the high rate of growth of income per capita declining shares of dependent population and some special institutional features such as the high central provident fund rates in singapore interest rates ar

the dynamic relationship between the prices of adrs and their underlying stocks evidence from the threshold vector error correction model this paper sets out to estimate the dynamic relationship that exists between the prices of adrs and their underlying stocks in both the short run and the long run using a number of recent developments of the threshold cointegration framework the empirical results support the notion of nonlinear mean reversion of the prices of adrs and their underlying stocks

does financial liberalization really improve private investment in developing countries assuming that liquidity constraints exist in most developing countries the majority of analysts believe that increasing real interest rates will raise the volume of lending and hence private investment the author focusing on the demand for capital goods argues that the positive effect on the domestic credit market may be offset by the negative effect of a portfolio shift from capital goods and public bonds into monetary assets the author also demonstrates that a policy of financial liberalization could increase the public sector s demand for domestic credit thus limiting the funds available to the private sector this crowding out does not result from a change in the government s behavior but from a shift in the portfolio of private agents higher demand for bank deposits reduces the private sector s willingness to hold government bonds so the public sector must finance a given budget deficit with more domestic credit simulations for argentina for 1961 1982 suggest that the low response of private investors to changes in interest rate policy in those 20 years was attributable not to the low values of interest elasticities but to the interaction of the mechanisms allowed for in the model which tends to neutralize the impact of such policies the author concludes that the effect of changes in interest rate policy on the demand for capital goods is weak in argentina and might affect the quality of private investment more than its quantity

the savings growth nexus for the malaysian economy a view through rolling sub samples the purpose of this study is to re investigate the savings growth nexus for the malaysian economy using bounds testing approach to cointegration and toda and yamamoto 1995 and dolado and lutkepohl 1996 tydl granger causality test this study covered the sample period from 1971 q1 to 2008 q4 the cointegration results suggest that the variables are moving together in the long run and the tydl granger causality results indicate that the relationship between savings and economic growth is bilateral in addition the rolling sub samples tydl granger causality test exhibited a relatively stable causal relationship running from savings to economic growth in malaysia particularly before the onset of asian financial crisis in 1997 1998

how does the marriage market clear an empirical framework the paper surveys the choo and siow 2006a cs marriage matching model and its extensions cs derives a behavioural marriage matching function the collective model of intra household allocations can be integrated into this framework spousal labour supplies respond to changing marriage market conditions marriage market tightness the ratio of unmarried type i men to unmarried type j women is a sufficient statistic for marriage market conditions for those types of individuals the hypothesis that spousal labour supplies vary to equilibrate the marriage market has overidentifying restrictions the framework extends to a dynamic marriage matching environment empirically this paper shows how the famine caused by the great leap forward in sichuan affected the marital behaviour of famine born cohorts marriage market tightness is shown to be a useful statistic for summarizing marriage market conditions in the united states marriage market conditions in the contemporary united states primarily affect spousal labour force participation rather than hours of work ce texte examine le modele de choo et siow et ses extensions ce modele derive une fonction comportemental d arrimage sur le marche du mariage le modele d allocation intra menage des t ches peut s integrer a ce cadre d analyse les offres de travail des epoux repondent aux conditions changeantes du marche du mariage un marche du mariage serre un ratio d hommes celibataires de type i par rapport a un nombre de femmes celibataires de type j constitue une statistique suffisante pour etablir les conditions de marche de ces types d individus l hypothese que les offres de travail des epoux varient pour equilibrer le marche du mariage engendre des restrictions de sur identification le cadre d analyse couvre le cas d un environnement dynamique d arrimage empiriquement ce memoire montre comment la famine causee par le grand saut en avant de sichuan a affecte le comportement de mariage des cohortes qui en sort sorties on montre aussi que le caractere serre du marche du mariage aux etats unis fournit une statistique utile pour prendre le pouls des conditions du marche du mariage ces conditions dans le monde contemporain aux etats unis ont un impact sur la participation des epoux au marche du travail plutot que sur les heures travaillees

the baby boomers and the productivity slowdown abstract the entry of baby boomers into the labor force in the late 1960s and 1970s slowed growth for physical and human capital per worker because young workers have little of both thus the baby boom could have contributed to the productivity slowdown i build and calibrate a model a la huggett et al 2011 with exogenous population growth life expectancy retirement and tfp to evaluate this theory the baby boom alone accounts for 53 of the slowdown in the period 1964 69 18 in 1970 74 and 6 in 1975 79

positive time preference the case for positive time preference is absolutely compelling unless there is an infinite time horizon with the expectation of unending technological advance combined with what we call drastically diminishing marginal utility this finding holds both in the positive and normative senses a corollary is that savings are interest elastic

human capital prices productivity and growth separate identification of the price and quantity of human capital has important implications for understanding key issues in labor economics and macroeconomics price and quantity series are derived and subjected to robustness checks the human capital price series associated with dierent education levels are highly correlated and exhibit a strong secular trend three result

two sex demographic models classical stable population theory the standard model of population age structure and growth is ill suited to addressing many issues that concern economists and demographers because it is a one sex theory this paper investigates the existence uniqueness and dynamic stability of equilibrium in the birth matrix mating rule bmmr model a new model of age structure and growth for two sex monogamously mating populations the paper shows by means of examples that the bmmr model can have multiple nontrivial equilibria and establishes sufficient conditions for uniqueness it generalizes a theorem of w brian arthur to nonlinear systems and uses it to establish sufficient conditions for local dynamic stability

human capital and earnings distribution dynamics abstract earnings heterogeneity plays a crucial role in modern macroeconomics we document that mean earnings and measures of earnings dispersion and skewness all increase in us data over most of the working life cycle for a typical cohort as the cohort ages we show that i a human capital model can replicate these properties from the right distribution of initial human capital and learning ability ii differences in learning ability are essential to produce an increase in earnings dispersion over the life cycle and iii differences in learning ability account for the bulk of the variation in the present value of earnings across agents these findings emphasize the need to further understand the role and origins of initial conditions

why are latin america s savings rates so low an international comparative analysis abstract this paper presents a theoretical and empirical assessment of the determinants of savings rates with special emphasis on latin american savings rates the study is based on international comparisons using data from 36 countries for 1970 1992 a distinction is made between private and public savings the later are endogenously determined by economic and political variables per capita income growth is the most important determinant of private and public savings public savings are lower in countries with higher political instability public savings crowd out private savings but less than proportionately low latin american savings are due to the magnitudes of their determinants rather than structural differences

macroeconomic issues for latin america abstract recent macroeconomic issues in latin america are reviewed with an emphasis on theory topics covered include multiple equilibria from hysteresis or increasing returns exchange rate management and the output and asset market effects of devaluation speculation interest rate management and financial reform government behavior income distribution and growth inertial inflation and heterodox policy shocks and disequilibrium theories

on some estimates of an asian savings function abstract recent empirical studies have led many economists to argue that a number of countries in asia could stimulate savings if they permitted higher rates of interest and accepted less foreign aid this paper critically examines the econometric basis of these claims for this purpose the model specifications found in past work are encompassed within a more general model so that they may be replicated and tested as restricted forms