competitive storage rational expectations and short run food price determination this paper demonstrates that lags between retail and wholesale food prices can be explained by inventory behavior of retailers theoretical considerations indicate that the markup model should be modified to include a jorgenson type user cost variable which depends on expected future wholesale price the rational expectations hypothesis is used to derive price expectations the retail price specification therefore depends on the stochastic process generating expected wholesale price the econometric methodology employing both causality testing and nonlinear estimation is illustrated by estimating monthly price relationships for beef the results are consistent with the theory and indicate rejection of the markup model

likely effects on obesity from proposed changes to the us food stamp program abstract some have suggested that the us food stamp program fsp should be revised with a view to combating obesity among the poor in this paper we assess the likely impacts of allowing fsp participants to purchase only healthy foods when using food stamps our results indicate that fsp participants would probably increase their consumption of healthy food but the implications for their purchases of unhealthy food are not clear market wide consequences are even less clear because changing what may be purchased using food stamps would lead to higher prices for healthy foods and lower prices for unhealthy foods and these price effects would feed back into consumer decisions with adverse effects on consumption patterns of both participants and non participants in the fsp in addition more restrictive rules on the use of food stamps would discourage participation in the fsp we conclude that while reforming the fsp may indeed to lead to better diets among participants it is likely to be an ineffective and inefficient instrument for bringing about desired nutritional outcomes unless accompanied by additional policy instruments

structural change in an open economy we study the importance of international trade in structural change our framework has both productivity and trade cost shocks and allows for non unitary income and substitution elasticities we calibrate our model to investigate south korea s structural change between 1971 and 2005 we nd that the shock processes propagated through the model s two main transmission mechanisms non homothetic preferences and the open economy explain virtually all of the evolution of agriculture and services labor shares and the rising part of the hump shape in manufacturing counterfactual exercises show that the role of the open economy is quantitatively important for explaining south korea s structural change

discrete equilibrium price dispersion an explicit solution of an equilibrium model with price setting firms and searching customers makes possible a number of comparativestatics predictions about how cost differences among firms search costs of customers and taxes will affect the mean and variance of the distribution of market prices another implication of the model is that a firm s demand depends on the difference between its price and the average price in the market

the past decade s natural rate and the dynamics of german unemployment a case against demand policy this paper attempts to highlight some recent cyclical and structural aspects of the german labor market moreover whenever possible the results of our analysis are compared with findings for the u s labor market finally policy implications which may be inferred from our study are discussed at some length research on unemployment may draw attention to at least two different but not mutually exclusive problems the cyclical movement of unemployment gives rise to concern about the amount of the unemployment rate that can be reduced by aggregate demand policy only at the cost of an accelerating inflation rate the relevant question is whether this unemployment rate has been constant during the last decade or whether it has been subject to exogenous shocks such as the oil price explosion and the productivity slowdown with this knowledge the policy maker can be advised as to what extent an expansive demand policy is an appropriate tool for achieving lower rates of unemployment without facing an accelerating inflation rate and moreover why the reduction of inflation in the seventies by restrictive demand management might cost more unemployment than in the sixties the latter query calls in question some economic policy measures in the seventies macroeconomic policy may not be able to make oil cheaper but can try to mitigate adverse secondary effects on aggregate output and employment but a recovery will not make the problem of unemployment simply disappear evenly for everyone the analysis of aggregate unemployment is silent about which group of the labor force shoulders the main burden of unemployment and is more likely to suffer from extreme low escape probabilities from unemployment if the notion of a hard core of unemployed

normal costs and demand effects in price setting a study of retailing the study aims at contributing to the debate whether there are demand effects in models that seek to explain prices as mark ups on costs for costs it considers actual costs normal costs and an intermediate model with a partial adjustment to the deviation of actual from normal costs for demand effects it considers an effect on the price level of a change of demand with an allowance for asymmetry between demand growth and demand decline tests and estimates are conducted on the basis of data from retailing

estimating the price of tradable permits for greenhouse gas emissions in 2008 12 abstract many attempts have been made recently to predict the prices of tradable permits for greenhouse gas ghg emissions in the first commitment period of the kyoto protocol 2008 12 in this paper we attempt to refine these price estimates based on i the results of economic models and identification of factors which influence prices but are not fully reflected in the models ii lessons from price forecasting experience in the us sulfur dioxide market and iii current price data from the nascent international market for ghg permits we expect ghg permit prices to be at the lower end of the broad spectrum of existing predictions this implies among other things that resource transfers to developing countries associated with emissions trading will be relatively low nevertheless even a modest price will have a significant influence on the decisions of consumers and investors in energy markets around the world

price smoothing and inventory this paper explains the phenomenon of price rigidity or price smoothing as the outcome of the optimal inventory policy of a multi period profit maximizing firm under demand and output uncertainties price smoothing may be manifested in two forms first price changes may be moderated with respect to those implied by the demand function and second the firm may choose to restrict price fluctuations by establishing upper and or lower bounds on prices we show that the extent of the asymmetry in price smoothing depends on the relationship between the inventory holding cost and the backlog penalty cost our model accommodates a wide range

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

labor market dynamics in the u s food sector a simultaneous equation model is estimated to explain labor market phenomena including wages employment and labor productivity and food prices at manufacturing and retail levels of the u s food industry dynamic simulation results show that endogenizing input costs in a fully specified markup pricing model leads to a complex long run pattern of food price determination wage determination is found to play a central role linking general price levels to food sector prices and labor market behavior energy price changes are shown to significantly affect food prices food sector labor productivity is found to decline in response to exogenous commodity price shocks

the impact of demand and price expectations on the behavior of prices the effects of demand and price expectations on price behavior are analyzed using data from the manufacturing sector and a model formulated to pinpoint the demand oriented factors affecting prices and to incorporate price expectations as a direct influence on price behavior the expected normal demand is seen to have a strong and systemic influence on price behavior the expected normal level of new orders is found to be an adequate measure with sector data in general although some industries require more specification the effects of inventories and unfilled orders on prices are sporadic and across sectors and industries demand oriented forces are concluded to perform as well statistically as cost push determinants expectations concerning the current normal industry price level have a significant and consistent impact on price behavior this supports the idea that firms setting prices take into account their estimates of competitor s prices future price expectations appear to have little effect on current price information 15 references

burden sharing in a greenhouse egalitarianism and sovereignty reconciled the allocation of emission entitlements across countries is the single most controversial issue in international climate policy extreme positions within the policy debate range from entitlements based on current emission patterns sovereignty to entitlements based on equal per capita allocations egalitarianism this paper shows that gradual convergence from sovereignty towards egalitarianism could provide a pragmatic solution to the equity debate when combined with international emissions trading the convergence approach stands out for offering the developing countries substantial incentives for participation in the international greenhouse gas abatement effort without imposing excessive burdens on the industrialized countries

on the distributional effects of reducing capital taxes this article asks whether household heterogeneity and market incompleteness have quantitatively important implications for the welfare effects of tax changes we compare a representative agent economy to an economy in which households face idiosyncratic uninsurable income risk the income process is consistent with empirical estimates and implies a realistic wealth distribution we find that capital tax cuts imply large welfare gains in the representative agent economy however when households are heterogeneous substantial redistribution during transition means that only a minority will support capital tax cuts whereas most households can expect large welfare losses

an evaluation of excess demand actual cost and normal cost pricing hypotheses using non nested tests this paper has emperically analyzed three versions zero lag geometric lag and almon lag of three price change hypotheses namely the excess demand actual cost and the normal cost hypothesis the goal being to select the hypothesis that describes the underlying price dynamics for manufactured goods the rival models are specified as non nested alternatives and each version is estimated by using an efficient estimator the traditional discrimination criteria which clearly reject the zero lag version are found to be impotent in discriminating between the dynamic versions of the models a sequential cross evaluation of the two dynamic versions using both pairwise and multiple non nested hypothesis tests proposed by davidson and mackinnon reveals a systematic domination by the almon version of normal cost pricing over both the excess demand and the actual cost pricing mechanisms in the canadian manufacturing sector during the period 1961 1 87 4 this result is robust under alternative specifications of th

adjustment lags economically rational expectations and price behavior source and the extent of lags in the response of prices to changes in various explanatory variables knowledge of the relevant lag patterns is of obvious importance for forecasting movements in prices and for formulating policies that are designed to reduce the rate of inflation in the recent empirical literature on prices the model most commonly used to specify price equations is the static neo classical model of price formation 1 this model presumes that the representative firm behaves as if it were a simple monopolist that faces competitive factor input markets the firm is assumed to set its price so as to maximize current profits the model yields the proposition that the firm s long run optimal price depends on expected normal factor input prices and variables e g expected real income that shift the firm s demand curve lags are introduced into the pricing process of this model in two ways some authors2 focus on expectation formation lags whereby normal factor input prices or variables that shift the firm s demand curve are related through distributed lags to past values of the variable being forecast often the distributed lag is assumed to be

industry level emission trading between power producers in the eu in this paper we investigate how restrictions for emission trading to the energy intensive power sector will affect the magnitude and distribution of abatement costs across eu countries vis a vis a comprehensive eu emission trading regime we find that emission trading between european power sectors allows the harvest of a major part of the efficiency gains provided by full trade as compared to strictly domestic action however trade restrictions may create a more unequal distribution of abatement costs across member states than is the case for a comprehensive trade regime the reason for this is that restricted permit trade enhances the secondary terms of trade benefits to eu member countries with low marginal abatement costs at the expense of the other eu member states

labor market consequences of poor attitude and low self esteem in youth in a recent national survey that asked employers to rank the importance of particular applicant traits for nonsupervisory and production positions applicant s attitude was the only trait that was reported to be very important in fact academic performance years of schooling completed teachers recommendations and industry based credentials certifying applicant skills all ranked lower bowles et al 2000 a second independent survey of employers in holzer and wissoker 2000 also suggests that more weight is placed on a good attitude than on basic skills among new hires of low skilled workers in this article i assess the role of pre labor market attitude and self esteem in explaining disparities observed in the labor market experiences of a sample of high school graduates the apparent importance employers ascribe to attitude and self esteem gives clear reason to expect that such a relationship exists i demonstrate that such survey responses are corroborated by real economic consequences for those with poor attitude and self esteem using longitudinal data on a 1972 cohort of high school graduates i show that high school students who reveal negative attitudes and self esteem subsequently attain fewer years of postsecondary education relative to their high school cohort are less likely to be employed 14 years following high school and where working for pay earn less accounting directly for the labor force participation decision i also document a higher incidence of unemployment among these individuals furthermore i find evidence that negative attitudes and self esteem are associated with jobs later in life that require the individual to spend time working with things as opposed to people for example and that those who exhibit poor pre labor market attitude and self esteem are subsequently more closely supervised at work and given less discretion in their daily activities all told attitude and self esteem in youth are shown to have important and long lasting economic implications in the following section i briefly discuss related literatures specifically two areas of the literature are considered the effect of joblessness on self esteem and the relationship between other noncognitive skills or worker attributes and labor market outcomes section ii then introduces the data and methods used in investigating the relationships in question empirical results are reported in section iii and are followed by some discussion and concluding remarks i previous literature this article is closely related to two areas of existing literature first there exists a small body of literature that documents a relationship between labor market activity and self esteem however this literature has heretofore focused more on the damage of joblessness to an individual s perception of self worth than on the direction of causality considered here for example goldsmith et al 1995 1996a find relationships between contemporaneous joblessness and self esteem and historic joblessness and subsequent self esteem respectively arguably the causality between attitudes and jobless spells is not clearly in one direction or the other in this article i contribute clear evidence of the reverse causation causation running from attitude and self esteem to future labor market outcomes second there is a growing body of literature on the importance of noncognitive skills in wage determination this literature suggests that measures of aggression and withdrawal osborne 1999 individual motivation goldsmith et al 2000 behavioral problems in high school cawley et al 2001 one s locus of control or outlook on life goldsmith et al 1997b osborne 1999 bertrand and mullainathan 2001 coleman and deleire 2003 and mental health bartel and taubman 1979 1986 frank and gertler 1991 mullahy and sindelar 1993 each have predictive power with respect to wages that employer surveys suggest that attitude is highly valued alone leads one to anticipate that attitude be related to earnings

type of employer and fertility of working women does working in the public sector or in a large private firm matter this work investigates how fertility rates of working women have been influenced by employer characteristics public versus private sector and small versus large firms and features of the employment contracts using a representative sample of italian working women in the last 30 years of the twentieth century in particular we find that women working in the public sector have a higher probability of having a child during a working spell than women working in the private sector furthermore women working in large private sector firms who enjoy stronger employment protection have a higher probability of having a child than those working in smaller firms in turn more stable contracts also increase the likelihood of having a child during a working spell results are robust to controlling for individual unobserved heterogeneity and for the possible endogeneity of working in the public sector copyright oxford university press

accounting for the u s earnings and wealth inequality we show that a theory of earnings and wealth inequality based on the optimal choices of ex ante identical households that face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the u s earnings and wealth inequality almost exactly

a matter of taste estimating import price inflation across u s income groups abstract we estimate import price inflation for different income deciles of u s consumers over the years 1998 through 2014 after structurally estimating the parameters of a model capturing non homotheticity across sectors we use price data from the universe of foreign establishments exporting goods to the u s as well as consumer expenditure information to construct import price indexes we find that lower income households experienced the most import price inflation while higher income households experienced the least over our time period

a monetary analysis of food price determination erratic food price movements during the 1970s have received much attention in recent literature salathe and boehm found that movements in retail food prices since 1970 have been substantially more volatile than in earlier periods and that the food component of the consumer price index cpi has often displayed an annual rate of change different from that of the total cpi such changes in agricultural prices reflect low price elasticities for food products and the difficulty of predicting weather patterns and their effects on farm output research interest stems from relatively larger recent price changes caused by persistent general inflation and unexpected supply disruptions several recent studies of retail food prices are based on cost push theories these models posit that as input costs faced by food manufacturers rise the increases are passed through to consumers in the form of higher product prices to model cost push behavior changes in components of the marketing bill such as processing packaging and transportation costs are measured and related to subsequent changes in retail product prices examples of such empirical studies are those by lamm heien and lamm and westcott however these models represent only one perspective of the pricing process this paper suggests the use of a family of alternative models in particular by making a clear distinction between changes in nominal and real values a different set of variables is selected to measure each component of overall price change it is argued that not all models can explain behavior of both real and nominal price changes

asymmetry in farm retail price transmission for major dairy products an econometric model is used to estimate the net relationship between changes in the farm level price of milk and changes in the retail prices of four major dairy products fluid milk butter cheese and ice cream results indicate that the farm retail price transmission process in the dairy sector is asymmetric retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases the role in pricing asymmetry of retail demand versus farm supply shifts is tested via a chow type test asymmetry is tested using the houck procedure for estimating nonreversible functions

credit constraints interest rates and agricultural prices although there are some earlier contributions the paper by schuh the exchange rate and u s agriculture touched off a controversy within the agricultural economics profession that has yet to be resolved in its original form the controversy centered around whether or not exchange rates had a significant effect on u s agricultural prices exports and farm income later the argument seems to have moved one step further back along the logical line to a question of whether or not monetary phenomena can have real effects thus to some extent agricultural economists interested in this issue have polarized themselves into two camps that closely resemble what for lack of a better term might be called keynesians and non keynesians this paper is not an attempt to settle this dispute indeed if observations based on developments in macroeconomics offer any guide i think that the dispute is based upon such fundamentally different perceptions of the world that no single paper or series of papers will ever settle the issue rather in this paper i want to discuss what i perceive to be one of the key issues in this debate are agricultural prices more flexible than nonagricultural prices my choice of this topic is somewhat personal and i choose it mainly because i feel that if monetary variables are going to have real effects these effects can only be short run in nature and are best explained by differential price adjustments the argument is simple suppose you have two goods a and b and suppose that good a is priced administratively a la gardiner means while good b s price is perfectly flexible now suppose further that the money supply is artificially inflated in the current instances the price of a will not adjust instantaneously while the price of b is free to adjust if the price of b does adjust as a result of an increase in the money s pply then manipulation of the money supply has caused a real change since the price ratio between a and b changes in this case therefore we can also expect other real changes in the economy but such effects should be only short run in nature the real effects set in motion by the relative price change should ultimately be self correcting under the usual ceteris paribus assumptions since even administered prices have to adjust in the long run to maintain entrepreneurial profitability however even if such issues of relative flexibility are not a central element in the discussion that is germane to the present paper and the associated controversy the general belief that agricultural prices are more flexible than nonagricultural prices is firmly rooted in the stylized facts of agricultural economics moreover the high degree of instability of agricultural prices is often given as the primary argument for extensive government interference in the agricultural economy in what follows i will first offer a brief survey of some of the studies of the effects of monetary phenomena on u s agricultural prices exports and incomes in this part of the paper i specifically exclude papers of what i think of as the is inflation neutral with

on the heterogeneous welfare gains and losses from trade how are the gains and losses from trade distributed across individuals within a country first we document that tradable goods constitute a larger fraction of expenditures for poor households second we build a trade model with nonhomothetic preferences to generate the documented relationship between tradable expenditure shares income and wealth and uninsurable earnings risk to generate heterogeneity in income and wealth third we use the calibrated model to quantify the differential welfare gains and losses from trade along the income and wealth distribution in a numerical exercise we permanently reduce trade costs so as to generate a rise in import share of gdp commensurate with that seen in the data from 2001 to 2014 we find that households in the lowest wealth decile experience welfare gains over the transition measured by permanent consumption equivalents that are 67 percent larger than those in the highest wealth decile

market power and hot air in international emissions trading the impacts of us withdrawal from the kyoto protocol ten years after the initial climate change convention from rio in 1992 the industrialized world is finally likely to ratify the kyoto protocol which will impose legally binding greenhouse gas emission reductions on the developed world however the kyoto protocol will enter into force without the usa which withdrew under president bush in march 2001 accounting for hot air and market power of the former soviet union on emission permit markets it is shown that us withdrawal has important consequences on environmental effectiveness compliance costs and excess costs of market power under the kyoto protocol non compliance of the usa implies a dramatic decrease in environmental effectiveness as well as compliance costs of oecd countries whereas the former soviet union and transitional economies in eastern europe suffer from a huge decline in permit sales revenues excess costs of market power in permit trade increase in relative terms but decline substantially in absolute terms due to us withdrawal pol

solving the incomplete markets model with aggregate uncertainty using the krusell smith algorithm and non stochastic simulations abstract this article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices one innovation relative to most of the literature is the use of a non stochastic simulation routine

production smoothing in the japanese vehicle industry abstract physical data from the japanese vehicle industry covering monthly observations from 1985 1 to 1994 12 are investigated across nine goods ranging from bicycles to large buses smaller variance of production is found relative to sales across all goods for unadjusted data and in 17 out of 18 cases for seasonally adjusted data such evidence in favor of the production smoothing model psm is confirmed by full information maximum likelihood employed jointly on inventories and sales equations the estimates suggest the industry operates in the range of increasing marginal costs in six out of nine goods positive costs of being away from targeted inventory are also present in six out of these nine goods which make the psm a good description of this industry

the output inflation relationship abstract this paper shows how the optimal pricing and production policy of a multiperiod profit maximizing firm under demand and output disturbances leads in the aggregate to a positive relationship between production and price deviations from the expected level as depicted by the lucas type supply function the pricing and production decisions are made simultaneously by market agents who base their decisions on the same rational expectations before the disturbances are realized here although the planned production is not affected by the price deviations there is still a contemporaneous positive relationship between them where both production and prices reflect the firm s adjustment to unexpected levels of inventory we show that this positive relationship prevails even when the production decisions are made ex ante based only on expectations before the realization of the random shocks a closed form linear approximation for the supply function is derived which captures the effect of both systematic and unsystematic economic disturbances finally we present an empirical test which supports our assertion that our inventory adjustment mechanism contributes to the creation of the positive relationship between production and price deviations

deconstructing life cycle expenditure we revisit two well known facts regarding life cycle expenditures the hump shaped profile of nondurable expenditures and the increase in cross household consumption inequality we document that the behavior of total nondurables masks surprising heterogeneity in the life cycle profile of individual consumption subcomponents we provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production using a quantitative model we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that is substantially lower than that implied by a model using a composite consumption good

trade liberalization and regional dynamics abstract we study the evolution of trade liberalization s effects on brazilian local labor markets regions facing larger tariff cuts experienced prolonged declines in formal sector employment and

impacts of monetary and macroeconomic factors on food prices in eastern and southern africa eastern and southern africa has been experiencing relatively large increases in real food prices since the early 1980s real food prices in some african countries grew as much as 11 per year during the 1980 1996 period the huge volatility in food prices coincided with the implementation of structural adjustment programmes in several african countries this study examines the impacts of monetary and macroeconomic factors on real food prices in eastern and southern africa using the technique of cointegration and error correction modelling to test the long run relationship between real food prices and the factors that influence their behaviour in selected african countries demand elasticities for food are estimated for selected countries the empirical results show that changes in domestic food production coupled with income trade exchange rate and monetary policies have significant impacts on real food prices with wide implications for food availability and food security in the region

economic welfare analysis of policy induced structural change in the indonesian poultry industry abstract the performance of the poultry industry in indonesia is analyzed in terms of changes in producer and consumer welfare as a result of public policy intended to limit the size of production units in order to distribute growth opportunities to smaller farms elasticities of supply and demand are estimated using the seemingly unrelated system of equations the hypothesis of a policy induced structural change estimated through a dummy variable accounting for a shift in supply associated with implementation of the policy shows a negative impact on the output supplied and the welfare of producers and consumers to the tune of about rp 94 billion or roughly about 0 1 of national income as of 1983 the study suggests an important trade off between more equitable income distribution and economic efficiency

structural change and the kaldor facts in a growth model with relative price effects and non gorman preferences u s data reveal three facts 1 the share of goods in total expenditure declines at a constant rate over time 2 the price of goods relative to services declines at a constant rate over time and 3 poor households spend a larger fraction of their budget on goods than do rich households i provide a macroeconomic model with non gorman preferences that rationalizes these facts along with the aggregate kaldor facts the model is parsimonious and admits an analytical solution its functional form allows a decomposition of u s structural change into an income and substitution effect estimates from micro data show each of these effects to be of roughly equal importance

cost pass through in the u s automobile market we study cost pass through in the u s automobile market using a framework that incorporates the effects of cost changes on input decisions we find that accounting for firms factor market decisions significantly increases measured cost pass through although we reject the hypothesis of full cost pass through and constant markups in addition our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model specific cost shocks finally we examine how pass through varies with manufacturer nationality finding that u s firm cost pass through exceeds that of european and asian firms

causality of u s agricultural prices and the money supply further empirical evidence empirical evidence presented in this study indicates that the results of causality tests of u s agricultural prices and the money supply are sensitive to the lag selection relying on the minimum final prediction error causality testing technique a unidirectional causal flow is established from the monetary base to retail level agricultural prices no such flow is found to exist from m2 to retail agricultural prices when farm level agricultural prices are investigated no causal flow exists from any of the measures of the money supply to farm prices

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

the distribution of wealth and fiscal policy in economies with finitely lived agents we study the dynamics of the distribution of wealth in an overlapping generation economy with finitely lived agents and intergenerational transmission of wealth financial markets are incomplete exposing agents to both labor and capital income risk we show that the stationary wealth distribution is a pareto distribution in the right tail and that it is capital income risk rather than labor income that drives the properties of the right tail of the wealth distribution we also study analytically the dependence of the distribution of wealth of wealth inequality in particular on various fiscal policy instruments like capital income taxes and estate taxes and on different degrees of social mobility we show that capital income and estate taxes can significantly reduce wealth inequality as do institutions favoring social mobility finally we calibrate the economy to match the lorenz curve of the wealth distribution of the u s economy

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

decomposition of structural and exogenous changes 1989 decomposition of structural and exogenous changes applied economics vol 21 no 1 pp 125 137

investment in finished goods inventories an analysis of adjustment speeds it is well known that fluctuations in inventory investment are a major source of fluctuations in gross national product this has stimulated numerous empirical studies designed to understand the causes of changes in inventory investment these studies include those for example michael lovell that utilize a flexible accelerator model of inventory behavior as well as those for example david belsley that utilize the linear decision rule approach to optimal inventory holding the latter approach however can be interpreted in terms of a flexible accelerator model see j c r rowley and p k trivedi for a survey of the literature recently several authors for example martin feldstein and alan auerbach observed that these studies yield very implausible empirical results the basic difficulty is that the estimates of the speed with which firms close gaps between desired and actual inventory stocks are very low often the estimated speed of adjustment is less than 10 percent per quarter as feldstein and auerbach stress this is extremely implausible when even the largest swings in inventories in a given quarter amount to less than one day s production the purpose of this paper is to undertake an analysis of adjustment speeds for finished goods inventory investment in our empirical work we utilize a modified flexible accelerator model of inventory investment 1 like the conventional flexible accelerator the model permits firms to close a fraction of the gap between desired and actual inventories in any period the relevant fraction is of course the adjustment coefficient and it may vary in principle between zero and unity our model differs from the conventional model in assuming that the desired stock of finished goods inventories depends on the normal levels of exogenous variables that firms must forecast to make decisions on inventory holdings these include not only the normal level or orders or demand which is a standard explanatory variable in the empirical literature but also the normal levels of real factor input prices and real interest rates in addition we permit the normal levels to change relatively slowly in response to changes in past levels of orders real factor input prices and real interest rates our objective is to investigate whether the slow adjustment speeds that have been estimated in the literature are due to the use of models which contain an incomplete menu of exogenous variables to determine desired inventories and pay inadequate attention to lags in the adjustment of normal levels of exogenous variables

the effects of changing input costs on food prices the relationships between changes in food sector input costs and retail food prices are examined results indicate that increases in factor prices pass quickly to consumers within two quarters for most foods in addition rising farm level prices and substantial increases in nonfarm resource prices appear to explain why food prices rose more rapidly than nonfood prices in the 1970s the analysis is based on a twenty equation econometric model of the food price determination process specified following popkin s stage of processing approach causality and validation test statistics for the model are presented

determinants of price adjustment this paper reports results of an empirical study investigating the adjustment speed of prices to change in costs and demand particular emphasis is laid on the impact of concentration on the adjustment speed in addition the effects of the business cycle and capital intensity are considered it shows that concentrated industries tend to adjust prices faster while capital intensity has a negative impact prices are more flexible during an upswing than in times of a recession

monopolistic competition aggregation of competitive information and the amount of product differentiation consider an industry with a large number of homogeneous firms each firm s profits are a function of its own strategy and the strategies the other firms select suppose other firms strategies enter into each firm s profit function only through one or more statistics for example average price in the market may parameterize every firm s profit function we prove that as a general rule the industry s firms will in equilibrium follow at most m 1 distinct strategies where m is the number of statistics by which competitors strategies affect each firm s profits

two birds with one stone female labor supply fertility and market childcare abstract the correlation between the female labor force participation rate fpr and the total fertility rate tfr has switched from negative to positive in some developed countries in this paper we show how increasing the substitutability between maternal time and market childcare can raise both fpr and tfr and provide an explanation for the change in the tfr fpr correlation simulations of a life cycle model of married women s work and fertility decisions indicate that the fpr increases whereas the tfr is u shaped with regard to substitutability the dynamic relationship depends on the relative strength of behavioral and composition effects greater substitutability allows working women to have more children but it also attracts less productive women to enter the labor force who trade childbirths for labor supply the findings imply that raising substitutability to a sufficiently high level can achieve the two seemingly conflicting goals increasing female labor force participation and fertility rates

a mediterranean perspective on the breakdown of the relationship between participation and fertility in this paper the authors address two related questions first why does the inverse relationship between female participation and fertility appear to have broken down on a cross country basis in the western industrialized nations and second why has mediterranean europe contributed to this breakdown with its combination of record low fertility and low participation they re examine the cross country fertility participation nexus from a long term perspective and verify that there are no longer reasons to expect a systematic inverse relationship to hold for developed countries the authors argue further that differences in participation and fertility reflect differences in the economics of the family across countries in mediterranean countries the combination of low fertility and low participation is favored by a family centered welfare system a family biased production system and a family oriented value system and contrary to widespread expectations a very cohesive family has encouraged very low fertility copyright 1998 by oxford university press

can traditional theories of structural change fit the data two traditional explanations for structural changes are sector biased technological progress and non homothetic preferences this paper integrates both into an otherwise standard growth model and quantitatively evaluates them vis a vis time series the exercise identifies a set of puzzles for standard theories i the model cannot account for the steep decline in manufacturing and rise in services in the later data ii the standard model requires implausibly low elasticity of substitution across goods to match the consumption and output data and iii the behavior of consumption and output shares differs significantly from that of employment shares we argue that models that incorporate home production sector specific factor distortions and differences across sectors in the accumulation of human capital are promising avenues to amend the standard models jel o11 o14 o41

agricultural and financial market interdependence in the short run a theoretical model capable of examining the effects of various monetary policies on agriculture is developed results from comparative static experiments with the model show that a restrictive monetary policy may adversely affect agriculture results from the theoretical model are compared with earlier studies and are empirically investigated using vector autoregression techniques in general empirical analysis supports the theoretical developments

limits on price analysis in a recent book sir peter medawar distinguishes between those questions that scientific research can and cannot answer my paper has a more modest goal price analysts have never pretended to answer deep philosophical questions but rather have tried to understand agricultural markets the general objective of price analyses is to make forecasts and simulations that assist private and public decision makers progress has been made toward this general goal but limitations clearly exist to obtaining precise forecasts and useful simulations this paper is about the progress that has been made and the limitations that exist examples from the supply demand and marketing margin literature are used to illustrate the progress and limitations in particular i contrast the progress that has been made in supply analysis with the progress in demand analysis i then suggest ways in which some of the problems might be addressed space constraints however do not permit an exhaustive discussion of these topics

contractual difficulties in environmental management the case of wetland mitigation banking abstract this paper offers a principal agent model of private contracting in mitigation banking aimed at protection of wetland acreage and habitat bio diversity and physical functions of us wetlands while it is straightforward to design an incentive contract such a contract may be incapable of achieving the federally mandated objective of no net loss of wetland functions through wetland mitigation there may be failure of contract design or execution also considered are several institutional mechanisms that may promote the convergence of private contracting and attainment mandated wetland protection these include greater oversight by the government payment of subsidies greater accuracy in the identification of actual wetland quality by the principal and use of several other incentive alignment mechanisms

target buffer stocks the behaviour of a buffer stock holding firm facing stationary demand shocks is considered from the viewpoint of recent evidence on inventories and price setting attention is focussed on the responses of price and supply to changes in autonomous demand and compared with those of a nondurable producer the results conflict with recent theoretical work in providing support for a keynesian interpretation of inventory series

inventory adjustment and dynamic winery behavior this paper develops a dynamic model of processor behavior which is applied to the california wine industry price production and input demand functions are derived from an optimal control model which takes into account inventory growth from aging and the linkage between product inventories and input purchases an important feature of the model is that expected future market conditions and beginning inventories influence current behavior through changes in the inventory shadow price the empirical results generally conform to the theoretical specification and emphasize the role of demand expectations on winery behavior

on the theory of the firm underlying empirical models of aggregate price behavior recent empirical work on aggregate and industrial price behavior has been conducted within the framework of a static neo classical theory of price formation 2 the purpose of this paper is to propose a more general theoretical framework for analyzing price behavior the proposed framework is neo classical in its basic characteristics but unlike the recent literature it is based on a dynamic theory of firm behavior in which decisions on price inventories and the capital stock are integrated to serve as a basis for comparison with the model developed here it is useful to state briefly the main propositions of the static neo classical model the model presumes that the typical firm behaves as if it were a simple monopolist that faces competitive factor input markets and sets its price so as to maximize current profits assuming a log linear demand function and production function the model yields the result that the firm s long run optimal price policy in general is

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 risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

a ricardian model with a continuum of goods under nonhomothetic preferences demand complementarities income distribution and north south trade this paper develops a ricardian model of trade in which goods are indexed according to priority and higher indexed goods are consumed only by richer households south north has a comparative advantage in lower higher indexed goods and hence specializes in goods with lower higher income elasticities of demand product cycles and a southern terms of trade deterioration result from faster population growth and uniform productivity growth in south and a global productivity improvement south s domestic income redistribution policy can improve its terms of trade so much that every household in south may be better off at the expense of north

the motherhood earnings dip evidence from administrative records using spanish social security records we document the channels through which mothers fall onto a lower earnings track such as shifting into part time work accumulating lower experience or transitioning to lower paying jobs and are able to explain 71 percent of the unconditional individual fixed effects motherhood wage gap the earnings trajectories analysis reveals that mothers to be experience important relative earnings increases several years before giving birth but this earnings advantage falls right after birth taking in average nine years to recover heterogeneity matters as most of the motherhood dip is driven by workers with permanent contracts

price and output adjustment in a model with inventories econometric evidence from categorical in this paper we investigate the role of inventories in the adjustment process of prices and output in response to demand and cost shocks using the qualitative information contained in business surveys of u k firms the discussion is organized around a model based on the assumption of monopolistic competition and which permits a production smoothing role for inventories the econometric results suggest that the stock of inventories has no impact on output decisions the effect on pricing decisions is weak at best anticipated demands shocks are the main factor accounting for output changes while both cost and demand shocks are important determinants of prices coauthors are fabio schiantarelli jon breslaw and william low copyright 1993 by mit press