fixing exchange rates a virtual quest for fundamentals abstract fixed exchange rates are less volatile than floating rates but the volatility of macroeconomic variables such as money and output does not change very much across exchange rate regimes this suggests that exchange rate models based only on macroeconomic fundamentals are unlikely to be very successful it also suggests that there is no clear tradeoff between reduced exchange rate volatility and macroeconomic stability

real exchange rate volatility and economic openness theory and evidence this paper relates the volatility of the trade weighted effective real exchange rate to the degree of trade openness of an economy the theoretical part presents an intertemporal monetary model of a small open economy with nominal rigidities both monetary and aggregate supply shocks are shown to produce ceteris paribus smaller real exchange rate movements if the country is more open to foreign trade empirical evidence on a cross section of forty eight countries confirms this relationship differences in trade openness explain a large part of the cross country variation in the volatility of the effective real exchange rate

measuring and decomposing the gender pay gap a new frontier approach abstract the gender pay gap measures the differences in the wages earned by female workers when compared to male workers accurately measuring the gender pay gap is an important exercise in order to assess how far we are from the ideal of equal pay for work of equal value determining the different sources of the gender pay gap is also very important in order to design appropriate policies for eliminating this gap we develop an enhanced method to measure and decompose the gender pay gap this method is based on the data envelopment analysis dea technique and on the malmquist index mi we use dea and the mi to construct an index reflecting an adjusted measure of the gender pay gap taking into account multiple productive characteristics and multiple types of pay furthermore we propose a decomposition of the gender pay gap into four components same gender pay gap cross gender frontier gap magnitude productive characteristics bias and pay package bias the method is applied to data relative to 15 712 men and 17 175 women working as business and administration associate professionals in the finance and insurance industry in 20 countries the results reveal the existence of a gender pay gap in all countries and that the value of the gap and of its components vary considerably between countries requiring different policies to tackle it

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

exchange rate volatility and intervention implications of the theory of optimum currency areas we show that variables pointed to by the theory of optimum currency areas ocas help to explain patterns of exchange rate variability and intervention across countries but oca considerations affect exchange market pressures and intervention in different ways exchange market pressures mainly reflect asymmetric shocks while intervention largely reflects the variables that oca theory suggests cause countries to value stable exchange rates small size and the extent of trade links intervention and exchange market pressure also vary with the structure of the international monetary system

the incidence of and returns to overeducation in the uk the 1991 wave of the british household panel survey is used to examine the extent of and the returns to overeducation in the uk about 11 of the workers are overeducated while another 9 are undereducated for their job the results show that the allocation of female workers is more efficient than the allocation of males the probability of being overeducated decreases with work experience but increases with tenure overeducated workers earn less while undereducated workers earn more than correctly allocated workers both the hypothesis that productivity is fully embodied and the hypothesis that productivity is completely job determined are rejected by the data it is found that there are substantial wage gains obtainable from a more efficient allocation of skills over jobs

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

the law and economics movement in the last thirty years the scope of economics has expanded dramatically beyond its traditional domain of explicit market transactions today there is an economic theory of property rights of corporate and other organizations of government and politics of education of the family of crime and punishment of anthropology of history of information of racial and sexual discrimination of privacy even of the behavior of animals and overlapping all these but the last of law 2 some economists oppose this expansion in whole or more commonly in part 3 there are a number of bad reasons all i think closely related for such opposition and one slightly better one 1 one bad reason is the idea that economics means the study of markets so that nonmarket behavior is simply outside its scope this type of argument owes nothing really to economics but instead reflects a common misconception about language more specifically a failure to distinguish among three different types of word or concept the first type illustrated by the term marginal cost is purely conceptual the term is rigorously and unambiguously defined by reference to other concepts just as numbers are but again like numbers there is no observable object in the real world that it names try finding a firm s marginal costs on its books of account the second type of word illustrated by rabbit refers to a set of real world objects few such words are purely referential one can speak of a pink rabbit or a rabbit the size of a man without misusing the word even though one is no longer using it to describe anything that exists nevertheless the referential function dominates finally there are words like law religion literature and economics which are neither conceptual nor referential such words resist all efforts at definition they have in fact no fixed meaning and their dictionary definitions are circular they can be used but not defined 4 one cannot say that economics is what economists do because many noneconomists do economics one cannot call economics the science of rational choice either the word rational lacks a clear definition and passing that difficulty there can be noneconomic theories of rational choice in which few predictions of ordinary economics may hold for example because the theory assumes that people s preferences are unstable there can also be nonrational economic theories an example is the type of survival theory in industrial organization in which firms that randomly hit on methods of lowering their costs expand vis a vis their rivals another example is marxism one cannot call economics the study of markets either not only because that characterization resolves the question of the domain of eco judge u s court of appeals for the seventh circuit senior lecturer university of chicago law school 1111 e 60th st chicago il 60637 i thank gary becker frank easterbrook william landes geoffrey miller richard porter george stigler geoffrey stone and alan sykes for comments on a previous draft and nir yarden for research assistance see for example gary becker 1976 jack hirshleifer 1985 p 53 george stigler 1984 gerard radnitzky and peter bernholz 1986 2 for a recent conspectus of economic analysis of law see my book 1986 3see for example ronald coase 1978 coase is of course a leading figure in the economics of property rights so his opposition is far from total 4for an excellent discussion see john ellis 1974 ch 2

a note on the empirical effectiveness of formal fiscal restraints abstract an important agrument in the current debate over european monetary integration is that a monetary union requires formal fiscal restraints limiting individual member states budgetary powers to reduce the common monetary authority s risk of having to bail out insolvent member governments this note presents empirical evidence on the effectiveness of fiscal restraints on state budgets in the united states nonparametric tests reveal that fiscal restraints significantly affect the probability of fiscal choices and performance without however preventing extreme outcomes fiscal restraints induce substitution of nonrestricted for restricted debt instruments

unique equilibrium in a model of self fulfilling currency attacks even though self fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals this unique equilibrium depends not only on the fundamentals but also on financial variables such as the quantity of hot money in circulation and the costs of speculative trading in contrast to multiple equilibrium models our model allows analysis of policy proposals directed at curtailing currency attacks

a meta analysis of the international gender wage gap abstract since the early 1970s a number of authors have calculated gender wage differentials between women and men of equal productivity this meta study provides a new quantitative review of this vast amount of empirical literature on gender wage differentials as it concerns not only differences in methodology data and time periods but also different countries we place particular emphasis on a proper consideration of the quality of the underlying study which is done by a weighting with quality indicators the results show that data restrictions i e the limitation of the analysis to new entrants never marrieds or one narrow occupation only have the biggest impact on the resulting gender wage gap moreover we are able to show what effect a misspecification of the underlying wage equation like the frequent use of potential experience has on the calculated gender wage gap over time raw wage differentials worldwide have fallen substantially however most of this decrease is due to better labor market endowments of females

mismatch in the spanish labor market overeducation the objective of this article is to explain the job match which is assessed by comparing attained education and job required education as reported by workers we frame our empirical work according to the occupational mobility theory using a cross section of workers from a representative survey of the spanish labor force we consider overeducated workers to be those who report that the level of education their jobs require is below the level of education they have attained our results indicate that overeducated workers have less experience decreased on thejob training and higher turnover than other comparable workers we also observe an improvement in the job match over age and mobility

fiscal transparency political parties and debt in oecd countries abstract many believe and argue that fiscal or budgetary transparency has large positive effects on fiscal performance however the evidence linking transparency and fiscal policy outcomes is less compelling to analyze the effects of fiscal transparency on public debt accumulation we present a career concerns model with political parties this allows us to integrate as implications of a single model three hitherto separate results in the literature on deficit and debt accumulation that transparency decreases debt accumulation at least by reducing an electoral cycle in deficits that right wing governments at least for strategic reasons tend to have higher deficits than left wing governments and that increasing political polarization increases debt accumulation to test the predictions of the model we construct a replicable index of fiscal transparency on 19 country oecd data simultaneous estimates of debt and transparency strongly confirm that a higher degree of fiscal transparency is associated with lower public debt and deficits independent of controls for explanatory variables from other approaches

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

understanding bilateral exchange rate volatility abstract this paper develops an empirical model of bilateral exchange rate volatility we conjecture that for developing economies external financial liabilities have an important effect on desired bilateral exchange rate volatility above and beyond the standard optimal currency area oca factors by contrast industrial countries do not face the same set of constraints in international financial markets in our theoretical model external debt tightens financial constraints and reduces the efficiency of the exchange rate in responding to external shocks we go on to explore the determinants of bilateral exchange rate volatility in a broad cross section of countries for developing economies bilateral exchange rate volatility relative to creditor countries is strongly negatively affected by the stock of external debt for industrial countries however oca variables appear more important and external debt is generally not significant in explaining bilateral exchange rate volatility

exchange rate uncertainty and foreign trade abstract this paper starts with reviewing the existing literature on exchange rate uncertainty and trade flows it then argues that potential costs of medium term uncertainty in exchange rates and competitiveness are likely to be much larger than that of exchange risk which has been the focus of the existing literature two measures of medium term exchange rate uncertainty are constructed one is a weighted function of the magnitude of past movements in nominal exchange rates and the current deviation of the exchange rate from equilibrium while the second depends on both the duration and the amplitude of misalignment from equilibrium exchange rates the empirical evidence reported in the paper suggests that when exchange rate uncertainty is defined over a medium term period it does affect adversely trade flows of the industrial countries under review with the notable exception of the united states

do state balanced budget requirements matter testing two explanatory frameworks balanced budget requirements bbrs affect all aspects of financial operations previous studies relied on characterizations that highlight a constitutional statutory distinction hou and smith public budgeting finance 26 3 22 45 2006 instead propose a political technical construct this article uses probit estimation six measures of balance and long panels to test which framework offers more explanatory power the findings suggest that bbrs matter to varying degrees technical requirements exert bigger effects than political ones the effects are more obvious on narrower than broader measures of balance and in the later phases of the budget cycle and the political technical construct offers more explanatory power than the constitutional statutory distinction

pay gap by gender in the tourism industry of brazil abstract this study aims to analyse wage gaps by gender in the brazilian tourism sector this involves investigating wage differences in order to identify the variables that determine the wages paid for these activities we sourced our statistics from the micro data collected by the national household sample survey pnad released by the brazilian institute of geography and statistics ibge in 2012 we deployed the decomposition of oaxaca 1973 and blinder 1973 to measure the differences in wages within the sector through this decomposition we conclude that gender pay discrimination exists in tourism in brazil demonstrating that women are less valued than men even when sharing the same job characteristics as a result we make policy recommendations and put forward suggestions for further research on the subject

gender wage differentials and educational mismatch an application to the spanish case this article aims to analyse gender wage differentials in spain by taking into account the levels of educational attainment and by studying whether the educational mismatch affects the gender wage gap focusing on returns to education evidence is found on the existence of educational mismatch and on its contribution to determine wages with women suffering greater wage penalties that are associated with educational mismatch furthermore although the gender wage gap is lower for individuals with low educational levels we find that the part of this gap due to differences in returns is greater in this group on the contrary the gender gap is greater among highly educated workers but in this case most of the wage differentials are due to differences in productive characteristics in any case our results suggest that gender wage discrimination tends to be greater for those workers who show educational mismatch

federalism fiscal restraints and european monetary union a prominent feature of the maastricht treaty on european union is the restrictions it places on fiscal policy under the provisions of the excessive deficit procedure or edp the success of member states in avoiding excessive deficits during the transition to economic and monetary union emu is one of four criteria governing admission to the monetary union once monetary union has begun member states are unconditionally required to avoid excessive deficits a state has an excessive deficit when it is so declared by the european council upon a report by the european commission and a judgment by the monetary committee the edp is set in motion if a country s deficit and general government debt respectively exceed 3 percent and 60 percent of gdp the justification for these procedures is that member states participating in the monetary union must be restrained from overborrowing to avoid destabilizing the common currency if excessive deficits cause a debt crisis the european central bank ecb will come under pressure to bail out the imperiled government the bailout could be ex post in which case the ecb would monetize the government s debt or ex ante in which case it would keep interest rates low to lighten the debt service burden either way unfettered fiscal policies could create inflationary pressures that the ecb will find difficult to resist

gender wage differentials by education in italy in this article we evaluate wage differentials in italy combining gender and education perspectives the main goal of this article is to verify whether the extent of the gender pay gap varies between highly and low educated workers and whether or not the role played by gender differences in characteristics and in market rewards is similar in the two groups we apply quantile regression analysis and an adaptation of the procedure suggested by machado and mata 2005 to evaluate the predicted wage gap at different points of the female wage distribution scale the analysis is carried out on the italian sample of the last available year of the european community household panel echp we show that the extent and the trend of the gap predicted across the female distribution is sharply different between groups with diverse educational levels in the case of low educated workers although the predicted gap is largely explained by differences in rewards lower levels of education or experience are responsible

monopolistic competition and international trade reconsidering the evidence we test some propositions about international trade flows that are derived from models of monopolistic competition developed by elhanan helpman and paul krugman we investigate whether the volume of trade between oecd countries is consistent with the predictions of a model in which all trade is intraindustry trade in differentiated products we then repeat the test with non oecd countries we also investigate whether the share of intraindustry trade is consistent with a more general theoretical model in which some but not all trade is intraindustry trade our results lead us to question the apparent empirical success of these models

do credit markets discipline sovereign borrowers evidence from u s states the degree to which credit markets discipline sovereign borrowers is investigated by estimating the supply curve for debt faced by u s states the results generally support an optimistic view of the market discipline hypothesis with credit markets providing incentives for sovereign borrowers to restrain borrowing while the risk premium on bond yields is estimated to increase only gradually at low levels of debt this effect appears to become much larger as debt rises there is also some evidence that credit markets may withhold access to credit at very high levels of debt copyright 1995 by ohio state university press

exchange rate uncertainty and us bilateral fresh fruit and fresh vegetable trade an application of the gravity model in order to analyse the effect of exchange rate uncertainty we apply an empirical gravity equation to two sets of us bilateral trade data fresh fruit over the period 1976 1999 for a panel of 26 countries and fresh vegetables over the period 1976 2006 for a panel of nine countries based on panel estimation methods and using both a moving sd measure and the peree and steinherr 1989 measure of exchange rate uncertainty the results show that us bilateral fresh fruit trade has been negatively affected by exchange rate uncertainty we also find some evidence that the exchange rate between the us dollar and the currencies of latin american trading partners accounts for most of the negative impact of exchange rate uncertainty on bilateral trade flows in fresh fruit in contrast when using panel estimation methods and both measures of exchange rate uncertainty we find no statistically significant evidence for any negative effect of exchange rate uncertainty on us bilateral fresh vegetable trade however

law focal points and fiscal discipline in the united states and the european union many studies suggest that strict balanced budget rules can restrain sovereign debt and lower sovereign borrowing costs even if those rules are never enforced in court why might public officials adhere to a rule that is practically never enforced in court existing literature points to a legal deterrence logic in which the threat of judicial enforcement deters sovereigns from violating the rules in the first place by contrast we argue that balanced budget rules work by coordinating decentralized punishment of sovereigns by bond markets rather than by posing a credible threat of judicial enforcement therefore the clarity of the focal point provided by the rule rather than the strength of its judicial enforcement mechanisms determines its effectiveness we develop a formal model that captures the logic of our argument and we assess this model using data on u s states we then consider implications of our argument for the impact of the balanced budget rules recently imposed on eurozone states in the fiscal compact treaty

the impact of surplus schooling on earnings some additional findings this paper examines the impact of overeducation or surplus schooling on earnings overeducated workers are defined as those with educational attainments substantially above the mean for their specific occupations two models are estimated using data from the 1980 census though our models data and measure of overeducation are different from those used by rumberger 1987 our results are similar our results show that overeducated workers often earn less than their adequately educated and undereducated counterparts

overeducation in the labour market abstract this paper presents a review of the literature on overeducation the paper assesses the consistency of overeducation within the context of a number of theoretical frameworks including human capital theory hct and assignment theory the analysis goes on to discuss the various measurement controversies associated with the study of overeducation in order to provide an assessment of the extent to which the impacts of the phenomenon represent an economic reality as opposed to a statistical artefact after reviewing the literature it is concluded that the impacts of overeducation are likely to be non trivial and that the phenomenon may potentially be costly to individuals and firms as well as the economy more generally the existence of overeducation also raises some doubts with respect to the validity of some of the central assumptions and predictions of hct that are unlikely to be fully explained by gaps in the standard wage equation framework

overeducation undereducation and the british labour market this paper addresses the issue of overeducation and undereducation using for the first time a british dataset which contains explicit information on the level of required education to enter a job across the generality of occupations three key issues within the overeducation literature are addressed first what determines the existence of over and undereducation and to what extent are over and undereducation substitutes for experience tenure and training second to what extent are over and undereducation temporary or permanent phenomena third what are the returns to over and undereducation and do certain stylized facts discovered for the us and a number of european countries hold for britain

education and skills mismatch in the italian graduate labour market this paper focuses on education and skills mismatch among italian graduates indicators for over and under utilization of education and under utilization of skills are included as explanatory factors in a wage equation testing theories that could explain the effect of over schooling on wages we find little evidence to support assignment theory and also identify a relatively weak wage effect arising from educational mismatch associated with employers as opposed to employees perceptions of the job requirements our interpretation is that some employers have re categorized jobs as requiring a degree when they were previously filled by non graduates and many have not altered pay scales accordingly

testing purchasing power parity under the null hypothesis of co integration this paper analyzes monthly data on the exchange rates and price indices of the eleven major industrial countries over the modern period of floating exchange rates it presents tests that are based upon the null hypothesis of cointegration the paper finds evidence that most country pairs not involving north american currencies have exchange rates and price indices that are cointegrated it estimates the error correction representation for the series that are cointegrated and it shows that the dynamic adjustment of the relationship between exchange rates and prices is accomplished almost entirely in the market for foreign exchange copyright 1991 by royal economic society

gender pay gaps and the restructuring of graduate labour markets in southern europe in this article we investigate whether education job mismatches and growing occupational diversity are important explanatory factors of gender pay gaps amongst university graduates in southern europe namely in portugal spain and italy we use standard decomposition techniques and test the implications of controlling for selection bias our results indicate that over education and greater occupational segregation associated with the emergence of new graduate job profiles are important determinants of earnings inequality whilst our focus is on graduates early careers demonstrating that occupational assignment and selection into employment shape gender pay gaps amongst the highly skilled provides a more pessimistic view on the ability of educational expansion or equal pay legislation to significantly reduce gender pay inequality southern european economies are also particularly interesting to look at since there may be a greater degree of mismatch between the pace of higher education expansion and the changes in the job structure making women particularly vulnerable to over education

balanced budget rules and fiscal outcomes evidence from historical constitutions this paper studies the long run fiscal consequences of balanced budget rules bbr that are enshrined in a country s constitution using historical data dating back to the 19th century and applying a difference in difference approach we find that the introduction of a constitutional bbr reduces government debt to gdp and expenditure to gdp ratios on average by around 11 and 3 percentage points respectively we do not find evidence that bbrs affect tax revenues our analysis indicates that such rules reduce the probability of experiencing a debt crisis and that the effective enforcement of bbrs can be conditional on the quality of democratic institutions in addition we implement an instrumental variable approach by instrumenting the probability of having budget rules on de jure constraints on changing the constitution this and other tests suggest that the relations we find are largely causal going from bbrs to fiscal outcomes