stabilizing inflation in the open economy optimal monetary policy in the open economy continues to be of interest to the profession as in benavie and froyen 1 and price level stabilization has been investigated by bradley and jansen 4 marquis and cunningham 13 and fischer 6 among many others price level stabilization has also been investigated in the monetary policy literature by for example black 2 or black and gavin 3 the academic literature has included analysis of price level stabilization in a variety of macroeconomic frameworks ranging from overlapping generations models to equilibrium business cycle models and keynesian contracting models what has been lacking however is a rigorous analysis of price level stabilization in the open economy this apparent omission is interesting because the most famous historical application of price level targeting occurred in the 1930s in sweden a small open economy in this paper we carefully examine the effectiveness of price level or inflation stabilization in the small open economy 2 employing an equilibrium business cycle model with differentially informed agents we find that when shocks to the economy exhibit some persistence inflation stabilization has favorable output stabilization properties relative to alternative monetary policies further these beneficial aspects of inflation stabilization exist whether or not agents contemporaneously observe the money stock the only instance in which inflation stabilization policy is not preferred is when all shocks to the economy are strictly temporary shocks and when uninformed agents can not observe the money stock contemporaneously finally in all instances we find that price level stabilization is preferred from a macroeconomic stabilization perspective to exchange

social security liquidity constraints and pre retirement consumption one of the primary goals of the social security retirement program is the maintenance of consumption in old age in the past decade since the pioneering paper by feldstein 13 studies have examined the impact of the system on consumption over the entire life cycle and not just in old age empirical work has tested the impact on consumption of the individual wealth transfers accompanying the introduction of a pay as you go social security system extending this discussion of the impact of social security on pre retirement consumption hubbard 21 has shown in the context of lifetime uncertainty that even an actuarially fair fully funded social security system can raise lifetime consumption hence previous partial equilibrium estimates of the impact of social security on consumption drawn solely from consideration of the intergenerational wealth transfer at the introduction of the system are underestimates of the potential effect 2 an important assumption in the approaches cited above is that of perfect capital markets i e that individuals can borrow against prospective gains from participating in the social security system such an assumption is at variance with actual limitations on borrowing e g upward sloping interest rate schedules collateral requirements and quantity restrictions hayashi 18 found that approximately twenty percent of all consumption in the u s is accounted for by liquidity constrained consumers 3 flavin 16 found that the estimate of the marginal propensity to consume is affected dramatically by the inclusion of proxies for liquidity constraints suggesting that liquidity constraints are an important part of the observed excess sensitivity of consumption to current income since its inception in 1935 old age and survivors insurance oasi provided

bequests gifts and social security this paper analyses the very long run or stationary state impact of an unfunded social security system we use an overlapping generations model framework a key feature is that while parents care about their children and can leave non negative bequests to them children also care about their parents and can make non negative gifts to them we show that the possibility of negative net bequests may make social security less harmful to private wealth accumulation than would otherwise be the case a subsidiary finding is that risk loving behaviour may emerge for some households due to the nature of intergenerational transfers within family lines

an empirical investigation of the effects of rounding on the spf probabilities of decline and output growth histograms i consider the possibility that respondents to the survey of professional forecasters round their probability forecasts of the event that real output will decline in the future as well as their reported output growth probability distributions i make various plausible assumptions about respondents rounding practices and show how these impinge upon the apparent mismatch between probability forecasts of a decline in output and the probabilities of this event implied by the annual output growth histograms i find that rounding accounts for about a quarter of the inconsistent pairs of forecasts

social security and aggregate capital accumulation revisited dynamic simultaneous estimates in a wealth generation model this paper re examines feldstein s 1974 1982 results of the effect of social security on private capital accumulation in the context of a simultaneous equation model of capital accumulation the model incorporates dynamic feedback effects in capital accumulation and is estimated by fiml to incorporate theoretical restrictions that are tested against the data it is then simulated as a full dynamic model to analyze the long run effect of ssw on private capital accumulation the simulated effects are in the same direction as found by feldstein but are considerably weaker

new tests of the life cycle and tax discounting hypotheses abstract we first test a version of the permanent income consumption function recently suggested by barro the results support the theory except that consumption expenditures show sensitivity to transitory income next we use the consumption model to test the tax discounting hypothesis which is strongly supported this support for tax discounting disagrees with results from some earlier studies using more traditional specifications of the consumption function however we show that when certain obviously inadequate estimation procedures are corrected the traditional models also support tax discounting this uniform support for tax discounting suggests that the sensitivity of consumption to transitory income is not due to liquidity constraints

explanations of the inconsistencies in survey respondents forecasts a comparison of the point forecasts and the probability distributions of inflation and output growth made by individual respondents to the us survey of professional forecasters indicates that the two sets of forecasts are sometimes inconsistent we evaluate a number of possible explanations and find that not all forecasters update their histogram forecasts as new information arrives this is supported by the finding that the point forecasts are more accurate than the histograms in terms of first moment prediction c 2009 elsevier b v all rights reserved

interdependency of personal savings and labour force participation of the elderly and social security wealth a time series analysis using japanese annual time series data covering the period 1950 1982 our study shows that social security wealth during this period depressed personal savings as a result there was a reduction of approximately 79000 yen of wealth per capitain real terms from 1960 to 1980 however the declining labour force participation of elderly males brought about for example by earlier retirement stimulated personal savings by an estimated 13000 yen over the same period the results indicate that the benefit effect tends to outweigh the retirement effect furthermore this study has identified a negative interdependency between the level of personal savings and the retirement behaviour of elderly males a typical male worker saves more before retirement if that individual expects to stay a shorter time in the labour market retirement behaviour is less responsive to a change in personal savings behaviour than vice versa

on the substitutability between private consumer expenditure and government spending in canada the purpose of this paper is twofold first to examine whether there is any substitutability between private consumer expendit ure and government spending in canada second to test the ricardian equivalence principle both hypotheses are nested within the life cyc le rational expectations model the results indicate that the joint h ypothesis of rational expectations and ricardian equivalence can not be rejected by the data moreover they suggest that government spend ing substitutes poorly for private consumer expenditure these result s imply that temporary increases in government spending will result i n an expansion of real output

capital accumulation and the characteristics of private intergenerational transfers many recent studies of the process of family accumulation in general and household response to social security in particular have revealed growing dissatisfaction with the life cycle theory of saving see for example barro 1978 kotlikoff 1979 darby 1979 kotlikoff and summers 1981 kurz 1981 blinder gordon and wise 1981 david and menchik 1982 leimer and lesnoy 1982 an alternative to the life cycle hypothesis is expressed by defining the preference of each family over its own consumption as well as the welfare of the generations that follow thus each family consists of an infinite chain of generations who have interdependent preferences and for this reason we shall call it the inter generational hypothesis it was recently used by barro 1974 1978 to attack the conclusions of the life cycle hypothesis our purpose in this paper is to start the long road of studying the structure of the private inter generational transfer system with the aim of providing additional tests of the two competing hypotheses

differential mortality and social security this paper studies the normative problem of redistribution between individuals who differ in their lifespans we discuss aspects related to the objective function and argue that aversion to multiperiod inequality should be taken into account then we study the properties of the social optimum both with full information and with asymmetric information we highlight the role of aversion to multiperiod inequality and show that it has substantial consequences on the design of social security schemes in particular we show that for a low resp high aversion to multiperiod inequality a negative resp positive implicit tax rate on continued activity is desirable

openness and inflation a new assessment romer 1993 uses a barro gordon type model to argue that openness puts a check on the government s incentive to engage in unanticipated inflation because of induced exchange rate depreciation 2 therefore in the absence of precommitment in monetary policy more open economies will tend to have lower inflation rates romer finds that empirically over a large sample of countries and over a broad time frame average inflation rates are lower in smaller more open economies this relationship is significant quantitatively large and robust moreover these findings suggest that models in which the absence of precommitment in monetary policy leads to inefficiently high average levels of inflation are essential to understanding inflation in most of the world this comment suggests that the negative link between inflation and openness romer found may be largely driven by the responses of severely indebted countries sics to the debt crisis of the 1980s figures i and ii show the scatterplots of the logarithms of average inflation and openness for the subperiods 1973 to 1981 predebt crisis and 1982 to 1990 the debt crisis period different groups of countries are separated according to their indebtedness level 3 the solid lines in the figures represent the predicted value of inflation obtained from a regression of openness on inflation for the countries in each group as the scatterplots show there is indeed a strong negative relation between openness and inflation among sics during the debt crisis

forecast encompassing tests and probability forecasts we consider tests of forecast encompassing for probability forecasts for both quadratic and logarithmic scoring rules we propose test statistics for the null of forecast encompassing present the limiting distributions of the test statistics and investigate the impact of estimating the forecasting models parameters on these distributions the small sample performance is investigated in terms of small numbers of forecasts and model estimation sample sizes we show the usefulness of the tests for the evaluation of recession probability forecasts from logit models with different leading indicators as explanatory variables and for evaluating survey based probability forecasts copyright c 2010 john wiley sons ltd

price level targeting vs inflation targeting a free lunch price level targeting without base drift and inflation targeting with base drift are compared under commitment and discretion with persistence in unemployment price level targeting is often said to imply more short run inflation variability and thereby more employment variability than inflation targeting counter to this conventional wisdom under discretion a price level target results in lower inflation variability than an inflation target if unemployment is at least moderately persistent a price level target also eliminates the inflation bias under discretion and as is well known reduces long term price variability society may be better off assigning a price level target to the central bank even if its preferences correspond to inflation targeting a price level target thus appears to have more advantages than commonly acknowledged

on the performance of nominal income targeting as a strategy for monetary policy in a small open economy abstract there is a great deal of support for nominal income targeting in the literature on strategies for monetary policy in a closed economy framework is nominal income targeting equally attractive in a small open economy this paper compares nominal income targeting to alternative monetary policy rules in a stochastic macro model for a small open economy we find that both the weighting in the overall price level of the exchange rate and foreign prices and the elasticity of output supplied with respect to the real exchange rate are important factors in assessing the attractiveness of nominal income targeting in a small open economy where the size of both parameters is not negligible a rule targeting the overall price level may actually be preferred to nominal income targeting

pay as you go social security and the distribution of altruistic transfers this paper studies the impact of an unfunded social security system on the distribution of altruistic transfers in a framework where savings are due to both life cycle and random altruistic motivations we show that the effect of social security on the distribution of these transfers depends crucially on the strength of the bequest motive in explaining savings behaviour we measure this strength by the expected weight that individuals attach to the utility of future generations on the one hand if the bequest motive is strong then an increase in the social security tax raises the bequests left by altruistic parents on the other hand when the importance of altruism in motivating savings is sufficiently low the increase in the social security tax could result in a reduction of the bequests left by altruistic parents under some conditions on the attitude of individuals toward risk and on the relative returns associated with private saving and social security some implications concerning the transitional effects of introducing an unfunded social security scheme are also discussed

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

new evidence on the ricardian equivalence theorem a multicointegration approach this paper derives major theoretical constructs which underlie richardian equivalence and using multicointegration methodology empirically tests whether they bear out results indicate that government spending and revenues are cointegrated however the cointegrating scalar is less than one therefore in order for government to obey its intertemporal budget constraint debt and government revenue must be multicointegrated they are not additional evidence indicates that saving and debt may be weakly cointegrated the findings suggest that failure of richardian equivalence may be due to public rather than private sector failure

aggregate consumption function and public social security the first time series study for a developing country turkey this article is the first attempt in the literature to investigate the effects of public social security on aggregate consumption in a time series setting for a developing country turkey that has one of the most generous social security systems in the organization for economic cooperation and development oecd region in order to quantify the social security variable this article uses the social security wealth ssw series calculated for turkey in a separate study this study indicates that ssw is the largest part of the household wealth in turkey and therefore should not be ignored in the aggregate consumption studies the results show that its effect on consumption is positive and robust

social security and private saving new time series evidence in an important article in the journal of political economy martin feldstein 1974 estimated that the introduction of the social security system had reduced personal saving by 50 percent with serious consequences for capital formation and output his conclusion was based on a consumer expenditure function estimated with u s time series data and incorporating a social security wealth variable of his construction this paper presents new evidence that casts considerable doubt on feldstein s conclusion first the social security wealth variable used by feldstein was seriously flawed as a result of a computer programming error simply correcting this error substantially changes the estimated effect of social security on saving second the statistical evidence depends upon assumptions which are embedded in the construction of the social security wealth variable assumptions that are not demonstrably preferable and are in some cases inferior to alternative assumptions these assumptions relate first to how individuals form their expectations about the social security benefits they expect to receive and the social security taxes they expect to pay and second to estimates of the number of workers dependent wives and surviving

the meaning of failed replications a review and proposal the welcome rise of replication tests in economics has not been accompanied by a consensus standard for determining what constitutes a replication a discrepant replication in current usage of the term can signal anything from an unremarkable disagreement over methods to scientific incompetence or misconduct this paper proposes a standard for classifying one study as a replication of some other study it is a standard that places the burden of proof on a study to demonstrate that it should have obtained identical results to the original a conservative standard that is already used implicitly by many researchers it contrasts this standard with decades of unsuccessful attempts to harmonize terminology and argues that many prominent results described as replication tests should not be described as such adopting a conservative standard like this one can improve incentives for researchers encouraging more and better replication tests

viewpoint replication in economics this examination of the role and potential for replication in economics points out the paucity of both pure replication checking on others published papers using their data and scientific replication using data representing different populations in one s own work or in a comment several controversies in empirical economics are used to illustrate how and how not to behave when replicating others work the incentives for replication are examined and proposals aimed at journal editors and authors are advanced that might stimulate an activity that most economists applaud but few perform

a head to head comparison of augmented wealth in germany and the united states we examine the composition of augmented household wealth i e the sum of net worth and pension wealth in the united states and germany pension wealth makes up a considerable portion of household wealth of about 48 percent in the united states and 61 percent in germany when pension wealth is included in household wealth the gini coefficient falls from 0 889 to 0 700 in the united states and from 0 755 to 0 508 in germany if the wealth shares in germany were the same as in the united states this would lead to a 12 6 percent increase in the gini coefficient in the augmented wealth distribution in germany

social security and private saving a reconsideration of the assumptions whether social security discourages private saving has been the focus of an ongoing debate since feldstein s 1974 paper on that paper he assumes that people expect after retirement social security benefits to increase at an annual real rate of 2 in this paper using a wide sample of cross section data we estimate people expected real rate of growth of after retirement social security benefits the estimates range between 0 63 and 0 76 depending on the specification used the obtained estimates are far different from the 2 imposed ad hoc by feldstein these estimates will presumably imply lower values of the social security wealth variable this casts a serious doubt on the strong depressing effect of social security on private saving

welfare and comparative statics implications of fair social security a steady state analysis abstract this paper examines the steady state welfare and comparative statics implications of fair social security in an overlapping generations model with uncertain lifetime the model is designed to capture the effects of lifetime uncertainty extending over the individual s entire lifespan the effects of intentional and unintentional bequests and the effects of the earning profile he shows that the welfare effects depend on the size of the benefits and the structure of the social security tax in particular even fair social security may have negative welfare implications if the underlying tax structure is ill designed some comparative statics implications are analyzed

the economic implications of public disability insurance in the united states a review of previous analyses of labor supply effects of social security disability insurance di concludes that estimates of labor supply effects and net social costs are upward biased because they ignore interactions between di and other insurances a model of optimal insurance postinjury accommodations and labor supply shows that reduction in labor supply and increase in consumption when disabled do not necessarily imply moral hazard optimal postinjury accommodations vary inversely with firm size the americans with disabilities act will reduce wages and labor supply of healthy workers particularly in small firms effects on labor supply of the disabled are ambiguous

a new assessment of openness and inflation reply terra 1998 argues that my finding romer 1993 of a negative relationship across countries between openness and inflation is actually caused by the severely indebted countries over the debt crisis period she proposes an explanation of the openness inflation relationship based on indebted countries need to raise revenue to repay their debts the smaller a country s trade share the more depreciated the real value of the currency must be in order to generate a given trade surplus as a share of gdp and the more depreciated the currency the greater the pressure on the government s budget and thus the greater pressure to inflate in contrast in my paper i argue that the relationship stems from imperfect commitment in monetary policy the less open the economy the greater the benefits of surprise inflation and thus the higher the level of inflation in the absence of complete commitment terra has uncovered interesting variation in the opennessinflation relationship across countries and over time nonetheless i want to make three brief points that suggest that the channel she proposes accounts for only a modest part of the overall relationship first terra s results do not justify her claim that the relationship is a product only of the severely indebted countries sics during the debt crisis this can be seen from her table i for the sics the openness inflation link in the precrisis period though weaker than during the crisis is large and statistically significant the estimates for the moderately indebted countries although imprecise suggest a relationship that is very similar to that for the sics in both periods and for the less indebted countries the point estimates again suggest a negative relationship indeed for the full sample period the coefficient on openness is significantly different from zero only for the high income countries terra s all other countries is there no evidence of a negative association between openness and inflation

uncertainty and optimal social security systems this paper examines the annuity aspect of social security within the framework of an overlapping generations model the duration of life is assumed to be uncertain under a fully funded system demand for social security is determined by each generation so as to maximize expected lifetime utility taking into account the welfare of future generations under a pay as you go system with intergenerational transfers demand for retirement benefits by the working population takes into account taxes paid by descendants it is shown that the two modes of finance are equivalent in terms of all real aggregates effects of changes in expected lifetime and in the birth rate are analyzed starting at the optimal level a compulsory balanced increase in social security taxes and benefits is shown to increase short run savings

do consumers respond to future income shocks evidence from social security reform in taiwan abstract a prediction of the basic permanent income hypothesis life cycle model is that an unexpected increase in future income produces an immediate increase in current consumption this paper tests that prediction using data from taiwan the 1985 labor standards law granted all employees in covered industries a windfall retirement severance benefit my results indicate that consumption did not increase immediately for those who were granted the windfall relative to those who received no windfall moreover consumption for those receiving a greater windfall did not increase relative to those who were granted less

government debt government spending and private sector behavior a current period tax reduction financed by issuing government debt shifts the timing of tax collection from the current period to the future if the future taxes implied by government debt are not fully perceived and discounted by the private sector there will be a net wealth effect that increases private sector consumption thus reducing capital accumulation and growth if on the other hand the implied future taxes are perceived and discounted by the private sector the current period tax reduction will be used to increase private saving to pay for the future taxes and government debt will be absorbed without any real effects on the economy the effects of government spending financed by current period taxation also depend upon private sector perceptions 2 if the benefits of government spending are ignored private sector consumption will decrease in accordance with the reduction in permanent disposable income to the extent that government spending is on consumption type goods that are perceived as substitutes for privately provided consumption goods there will be a relatively greater reduction in private sector consumption to the extent that government spending is on investment type goods yielding future goods and services that are perceived as substitutes for future privately provided consumption goods there will be a relatively smaller reduction in private sector consumption the standard approach to modeling private sector consumption saving behavior involves a rather asymmetric set of assumptions as to how the private sector perceives the various elements of government fiscal policy 3 current period taxes are assumed to be fully perceived but current period government spending is implicitly assumed to be completely ignored by the private sector in considering permanent personal disposable income the private sector is assumed to be forward looking in its assessment of income and taxation the stock of government debt is nevertheless included as part of the stock of private wealth the implicit assumption associate professor of economics graduate school of business university of chicago 1101 east 58th street chicago il 60637 i thank eugene fama levis kochin michael mussa paul evans and an anonymous referee for helpful comments i am particularly grateful to daniel benjamin for contributing many hours of discussion and laura lahaye who was a research assistant and valuable adviser on earlier drafts the theoretical debate on the burden of the debt has been long standing gerald o driscoll 1977 documents ricardo s nineteenth century position robert barro 1974 reopened the debate by introducing the fundamental issue of intergenerational transfers also discussed in merton miller and charles upton 1974 the empirical side of the debate was initiated by levis kochin s 1974 attempt to test for the effects of deficits on consumption and by martin feldstein s 1974 attempt to test for the effects of social security wealth on consumption other empirical contributions include jess yawitz and laurence meyer 1976 myself 1978 and j earnest tanner 1978 1979 with respect to the effects of government deficits and debt and barro 1978 michael darby 1979 and dean leimer and selig lesnoy 1982 with respect to social security wealth see also interesting recent papers by john seater 1982 who generates detailed tests of the effects of deficits and debt on consumption charles plosser 1982 who explores the effects of government spending and debt shocks on interest rates and feldstein 1982 who attempts tests similar to some in this paper see fn 29 2martin bailey s 1962 1971 development of the effects of government spending on private consumption and aggregate economic activity is the seminal contribution paul david and john scadding 1974 extend bailey s ideas and provide some supporting empirical evidence more recently willem buiter 1977 and myself 1978 developed models based on bailey s earlier work barro 1981 has an interesting paper on related issues see also david aschauer 1982 3the standard approach incorporates fiscal policy through the concept of personal disposable income and by including the stock of government debt as part of personal wealth see for example the empirical specification of albert ando and franco modigliani 1963 which has been the basis of most empirical consumption studies since and feldstein 1974 for one of the more influential papers based on the ando modigliani specification

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

effects of social security on personal saving abstract to fill a gap in literature we formulate and estimate a simultaneous equation model to separately measure the substitution and retirement effects of social security on personal saving taking explicit account of the influence of pension saving

the labor force participation of older workers this study examines the decision to participate in the labor force made by persons over 54 years of age through the use of a set of pooled time series cross section observations from the current population survey over the years 1974 80 the analysis emphasizes the effect of two factors on this decision cohort crowding and supplemental security income ssi the empirical results reveal that pressures arising from the relative growth in the youth population led to increased labor market activity by older women that retirement incentives in the form of ssi and social security had a negative effect on female as well as male labor force behavior though the effects were considerably stronger for men and that the differential between men s and women s participation rates was largely a result of the female response to marital status and retirement incentives

the effects of social security in a life cycle family labor supply simulation model abstract we simulate a number of social security provisions in an overlapping generations model of family labor supply the program causes both men and women to shift labor toward the beginning of the life cycle increases the family s ratio of retirement consumption to consumption when young and lowers both wage rates but does not substantially alter the male female wage ratio the wealth effects of the program appear to dominate the incentive effects our exhaustive sensitivity analysis reveals that our results are robust to changes in several key labor supply parameters the intertemporal male and female own wage elasticities and the cross wage elasticity

pensions and household wealth accumulation abstract economists have long suggested that higher private pension benefits crowd out other sources of household wealth accumulation we exploit detailed information on pensions and lifetime earnings for older workers in the 1992 wave of the health and retirement study and employ an instrumental variable iv identification strategy to estimate crowd out the iv estimates suggest statistically significant crowd out each dollar of pension wealth is associated with a 53 67 cent decline in nonpension wealth with less precision we use an instrumental variable quantile regression estimator and find that most of the effect is concentrated in the upper quantiles of the wealth distribution

testing among models of intrahousehold resource allocation households are the locus for much economic decision making households function as producers investors in human and physical capital managers of risk and as consumers many resources are allocated within households and the effects of many policies depend on the dynamics of household decision making for example household decisions about allocating food among individual household members may determine who benefits from programs to improve health nutrition or welfare in many microeconomic studies the household is treated as an individual for analytical purposes in other words it is assumed that a household acts as a single entity with a single set of preferences recently however a number of economists have recognized that households are sites of conflict as well as cooperation and have begun to use new classes of models to explain how resources are allocated among household members this literature has especially improved our understanding of households in which income is not completely pooled in such a setting standard household models may offer misleading conclusions about the effects of policies on individual household members i this paper goes beyond recent surveys of intrahousehold issue by explicitly examining the assumptions predictions and empirical implications of different intrahousehold models in particular it analyzes empirical tests that distinguish among competing models by clarifying the similarities and differences among alternative models this paper also clarifies what has actually been demonstrated and what has not been demonstrated by previous empirical studies in so doing the paper points to specific topics in need of further research this paper is organized as follows section 2 analyzes the assumptions and predictions of each of the five main classes of intrahousehold resource allocation models section 3 describes empirical tests of these assumptions along with an analysis of empirical work that has been generated sections 4 and 5 discuss the questions that remain unanswered and directions for future research

the stabilizing properties of a nominal gnp rule the author examines the ability of a nominal gnp rule for monetary policy to stabilize output and inflation other regimes considered are a money rule an exchange rate rule a price level rule and discretion the rules compare favorably to discretion to the extent that a time consistent commitment to a nominal anchor is needed to eliminate an inflationary bias in the economy the choice among the four rules depends on the relative magnitudes of the disturbances considered supply shocks velocity shocks and exchange rate shocks the nominal gnp rule dominates the exchange rate and other rules for plausible parameter values copyright 1995 by ohio state university press

should social security benefits be means tested social security retirement benefits distort the saving decisions of workers who are rational enough to save for their future since the implicit rate of return in an unfunded social security program is less than the marginal product of capital the resulting decline in saving causes a welfare loss the present paper examines the conditions under which the welfare loss could be reduced by replacing the current universal social security program with a means tested program that pays benefits only to those individuals with little or no other retirement income or assets every society must solve the problem of supporting those individuals who become too old to work but have not made adequate provision for their own old age by saving when they were young at the present time the major industrial countries of the world have responded to this problem by creating social security programs that tax the working population and use the proceeds to provide a universal benefit to all retirees regardless of their financial condition this universal provision of social security benefits distorts the saving decisions of those workers who are rational enough to plan for the future since the implicit rate of return that taxpayers get on their this research is part of the nber study of the government budget and the private economy a more complete version of this paper with some numerical calculations is available as nber working paper no 1775 feldstein 1985b i am grateful to gilbert metcalf for assistance with the calculations presented in this paper and for helpful discussions for a discussion of the effect of promised retirement benefits on the savings of employees see feldstein 1974 1982 barro 1974 1978 has discussed an interesting

comparing the point predictions and subjective probability distributions of professional forecasters we use data from the survey of professional forecasters spf to compare point predictions of gross domestic product gdp growth and inflation with the subjective probability distributions held by forecasters we find that most spf point predictions are quite close to the central tendencies of forecasters subjective distributions tend to be asymmetric with spf forecasters tending to report point predictions that give a more favorable view of the economy than do their subjective means medians modes

forecast uncertainty ex ante and ex post u s inflation and output growth survey respondents who make point predictions and histogram forecasts of macro variables reveal both how uncertain they believe the future to be ex ante as well as their ex post performance macroeconomic forecasters tend to be overconfident at horizons of a year or more but overestimate i e are underconfident regarding the uncertainty surrounding their predictions at short horizons ex ante uncertainty remains at a high level compared to the ex post measure as the forecast horizon shortens there is little evidence of a link between individuals ex post forecast accuracy and their ex ante subjective assessments

the inflationary bias in a model of the open economy a note abstract in this paper we highlight the importance of aggregate supply effects on the size of the inflationary bias under discretionary policy making using a simple model of an open economy that imports a foreign resource input we show that under discretion the inflationary bias bears an inverse relationship to the elasticity of output supplied with respect to the real exchange rate this theoretical finding is consistent with romer 1993 romer d 1993 openness and inflation theory and evidence quarterly journal of economics 108 869 903 empirical results that point to the existence of a negative association between openness and inflation

social security trust fund flows and the welfare costs of rent seeking the current study provides estimates from a parks regression using panel data that suggest that the welfare costs due to rent seeking efforts by interest groups to obtain social security trust fund flows ranged from approximately 132 million per twoyear federal election cycle from 1985 1994 to a theoretical expectation of 66 billion all in real terms these welfare costs are in addition to any other social costs that may be present including the reduced levels of national saving that social security may induce

social security uncertainty adjustments and the consumption decision this paper analyzes the consumption decision focusing on the degree of substitutability between fungible assets and prospective wealth and on the different risk adjustments associated with different types of prospective wealth the results reveal substantial differences among these risk adjustments and imply that a dollar of social security wealth substitutes for about three fifths of a dollar of fungible assets although implying that social security wealth reductions would have a positive and sizeable effect on private saving the results also suggest that such reductions could entail a substantial loss in consumer welfare copyright 1992 by the london school of economics and political science

social security preretirement labor supply and saving a confirmation and a critique in an earlier article in thejournal of political economy burkhauser and turner 1978 we used time series data to test the net empirical importance of the substitution and wealth effects of social security on the market work of prime age men we found that hours worked per week would have fallen by 2 3 hours without the present social security system a recent paper by leimer and lesnoy this issue has shown that the feldstein 1974 social security wealth variable which we used in our regressions was calculated incorrectly in the light of this finding we have reestimated our original regressions using the leimer lesnoy corrected social security wealth variables our primary regression in table 1 col 1 which uses the entire sample period confirms our original results again we find that the work week is 2 3 hours higher than it would have been in the absence of social security a result empirically significant by conventional standards leimer and lesnoy have made an important contribution to research on social security by correcting a calculation error our empirical results however raise a fundamental question not discussed in our original paper which requires a reexamination of the empirical methodology found in feldstein 1974 leimer and lesnoy this issue and other papers the facile assumption that the effect of social security on saving can be directly determined from a consumer expenditure function we show leads to an overstatement of social security s negative effect on saving

inflation in open economies abstract this paper relates the time consistent inflation rate to the degree of trade openness of an economy the mechanism linking the welfare effects of monetary surprises and hence the incentives to inflate to openness does not rely on a large country terms of trade effect but rather is due to imperfect competition and nominal price rigidity in the non traded sector the empirical evidence supports the main predictions of the model 1997 elsevier science b v

bequest motives social security and economic growth junxi zhang this article conducts a systematic analysis of four bequest motives in a simple model of endogenous growth it analyzes how bequest motives affect fertility savings growth and the effects of pay as you go social security it is found that altruistic and exchange motives give equivalent outcomes if the discount factors are set the same the outcome under the joy of giving motive may involve a higher bequest ratio higher saving and better growth rates than that under altruism if bequests are accidental the equilibrium values will depend on the probability of survival moreover the results provide testable implications on bequest motives jel d1 d9 h55 j1 i introduction although the importance of bequests in aggregate savings has been established by kotlikoff and summers 1981 who reported that 80 of u s household wealth is inherited wealth what bequest motives lead to inheritance remains an unsolved problem yet it is well known that bequest motives have important implications for the behavior of financial markets the macroeconomic impacts of fiscal policies and the intergenerational transmission of inequality in the distribution of wealth at least four hypotheses for the existence of bequests have been discussed in the literature 1 bequests may arise from intergenerational altruism that is parents obtain utility from their heirs utility as well as from their own consumption barro 1974 2 the prospect of bequests is used by parents to induce children to behave as desired by parents bernheim et al 1985 3 bequests may arise from the joy of giving that is parents leave bequests simply because they obtain utility directly from the bequest yaari 1964 1 and 4 bequests may be the unintentional by product of precautionary savings and a stochastic date of death in the absence of an annuity market abel 1985 following barro 1974 and becker 1974 the altruistic bequest motive has been used most frequently however the enormous empirical work using micro data has not led to conclusive evidence on the one hand bernheim et al 1985 cox 1987 and cox and rank 1992 show that bequests are more consistent with exchange than altruism altonji et al 1992 1997 also show that altruism is decisively rejected moreover wilhelm 1996 finds little support for an altruistic theory of bequests on the other hand a recent reexamination of the exchange motive by perozek 1998 shows that the finding of bernheim et al is not robust laitner and juster 1996 find some evidence of altruistic bequests therefore a definite conclusion on bequest motives seems far from over indeed though altruism has not been supported by most of those empirical studies it remains a plausible hypothesis and continues to be used frequently see e g coate 1995 and davies and zhang 1995 abel 1985 argues theoretically that although the simple life cycle model without bequest motives is an inadequate description of the savi ng behavior in the united states as found in kotlikoff and summers 1981 accidental bequests by selfish consumers can account for a sizable fraction of aggregate wealth however little formal empirical work has been done to test whether bequests are accidental or arise from joy of giving given the lack of consensus on bequest motives it is interesting to conduct a systematic theoretical analysis of different bequest motives in a particular context becker et al 1990 and caballe 1995 assume altruism in their models of economic growth wiedmer s 1996 analysis of social security and growth does not consider bequests except ihori 1994 there seems to be no analysis of other bequest motives in the context of economic growth the purpose of this article is to analyze how different bequest motives affect fertility savings and economic growth the article will also examine how the effects of pay as you go social security depend on bequest motives

redistributive taxation in a simple life cycle model an overlapping generations model with rich and poor life cycle planners is developed positive aspects of redistributive capital and labor taxation are then analyzed the conditions required for feldstein s result that the long run capital labor ratio is invariant to wage taxations are discussed the utility frontier is shown to generally have a slope with an absolute value different from one in the neighborhood of a no tax equilibrium labor income is clearly a more efficient base for long run redistribution only if the economy is dynamically inefficient and the rich household benefits from an increase in the gross interest rate even in this case the labor income base may not be considered more desirable when transitional effects are considered copyright 1989 by the london school of economics and political science

replication in empirical economics the journal of money credit and banking project this paper examines the role of replication in empirical economic research it presents the findings of a two year study that collected programs and data from authors and attempted to replicate their published results the research provides new and important information about the extent and causes of failures to replicate published results in economics the findings suggest that inadvertent errors in published empirical articles are a commonplace rather than a rare occurence copyright 1986 by american economic association