consumption and debt response to unanticipated income shocks evidence from a natural experiment in singapore abstract this paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock consumption rose significantly after th

intertemporal substitution and durable goods long run data abstract in this paper we use long run annual data to estimate the intertemporal elasticity of substitution while accounting for the intra temporal substitution between nondurable consumption goods and durable consumption goods we apply a two step procedure that combines a cointegration approach to preference parameter estimation with generalized method of moments

the effect of income on mortality evidence from the social security notch abstract legislation in the 1970s created a notch in social security payments with those born after january 1 1917 receiving sharply lower benefits using restricted use versions of the national mortality detail file combined with census data we use this quasi experiment to examine the income mortality link in an elderly population estimates from difference in difference and regression discontinuity models show the higher income group has a statistically significantly higher mortality rate contradicting the previous literature we also found that younger cohorts responded to lower incomes by increasing postretirement work effort suggesting that moderate employment has beneficial health effects for the elderly

job search and the effect of urban structure on unemployment and married female participation rates a model of urban job search is presented concentrating on the skill level of the seeker the implications for the effect of urban structure on intra urban unemployment and married female participation rate differentials are examined it is found using census data for greater london that urban structure represented by the intra urban distribution of jobs per worker as derived from the job search model has the predicted effects on unemployment and participation rates after allowing for other determinants of these rates the paper concludes with some implications for urban manpower policy

elasticity of intertemporal substitution in consumption in the presence of inertia empirical evidence from a natural experiment this paper estimates the elasticity of intertemporal substitution in consumption by exploiting a natural experiment provided by a change in the indian banking legislation the new legislation authorized banks to offer higher interest rates on deposits to citizens above 60 years of age we find evidence that households exhibit inertia in reoptimization and are sensitive to the timing of the actual change in the interest rate households do not respond to the predictable changes in future interest rates induced by the change in the legislation we incorporate this and estimate the to be approximately equal to 2 2 this paper was accepted by amit seru finance

policy review section in this policy review section gerry stoker of the institute of local government studies presents a critical review of the role of urban development corporations udcs in comparing the experience of the udcs consideration is given to the varying nature of the land and property market in each udc area to the relationship with local authorities and other local bodies and the regeneration strategies pursued by the udcs this is followed by an assessment of the impact of the udcs in economic social and political terms in the second article john britton of the university of toronto examines the theoretical case for interventionist public policies to assist the innovation process in small and medium sized enterprises these arguments are supported by a review of the experience of various national support programmes introduced in the uk in particular the manufacturing advisory service introduced in 1978 and the design advisory service launched in 1982

the 1929 stock market irving fisher was right many stock market analysts think that in 1929 at the time of the crash stocks were overvalued irving fisher argued just before the crash that fundamentals were strong and the stock market was undervalued in this article we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations our estimate is based on values of productive corporate capital both tangible and intangible and tax rates on corporate income and distributions the evidence strongly suggests that fisher was right even at the 1929 peak stocks were undervalued relative to the prediction of theory

substantive issues in the definition of localities evidence from sub group local labour market areas in the west midlands coombes m g green a e and owen d w 1988 substantive issues in the definition of localities evidence from sub group local labour market areas in the west midlands reg studies 22 303 318 local labour market areas llmas are now widely accepted as the most appropriate areal units for analyses of spatial patterns of employment and unemployment the most commonly used set of llmas in britain are the travel to work areas ttwas of the department of employment these areas are increasingly being used for locality studies that encompass not only labour and demand trends but also their social and political implications however ttwas are defined on the basis of aggregate commuting patterns which generalize substantial differences in the journey to work behaviour of different sections of the workforce this paper compares the ttwas as revised in 1984 with llmas defined using the same methodology for four sub groups of the labour force with differing skill levels in the west midlands the numb

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

unemployment duration in the recession the local labour market area scale green a e 1985 unemployment duration in the recession the local labour market area scale reg studies 19 111 129 this paper examines spatial variations in the duration of uncompleted unemployment spells using median lower and upper quartile duration measures within a local labour market area llma framework regional hierarchical and functional differentials in unemployment duration during the recession are investigated using a nineteen fold llma classification it is discovered that pre existing spatial differentials in unemployment duration experience were largely maintained with longer durations recorded in the north than in the south around provincial conurbations than in the london metropolitan region at higher than at lower levels of the urban hierarchy and in llmas with a manufacturing employment base than in those with a service or commercially oriented employment structure

urban rural variations in the structure of manufacturing production this paper demonstrates that recent attempts to explain manufacturing shifts to nonmetropolitan areas can be synthesised into a capital vintage model of production the result is a set of systematic differences between urban and rural production methods which are consistent with the locational implications of the manufacturing process cycle theory the model is supported by the first comprehensive estimation of separate production functions for smsas and nonmetropolitan areas using census data for the us from 1977 only smsas are shown to possess the significant agglomeration economies needed for product development and process innovation cost competitive nonmetropolitan areas show much greater variation in input proportions due to spatial factor price differentials

do consumers react to anticipated income changes evidence from the alaska permanent fund a central implication of the life cycle permanentincome hypothesis lc pih is that consumers should not respond to predictable changes in their income to test this hypothesis a number of recent papers have exploited natural experiments to identify anticipated income changes in particular recent work by parker 1999 uses the change in after tax income due to the cap on earnings subject to the social security tax and a related paper by souleles 1999 examines the response of consumption to income tax refunds surprisingly parker and souleles find that even when income is expected to change within the year expenditure is excessively sensitive to the timing of the income change while their results can be interpreted as evidence that our canonical model of consumption is inadequate an alternative explanation is that the anticipated income changes they exploit are small and irregular and that households will not bother to change their consumption paths when the computational costs involved are large relative to the utility gains in support of this interpretation browning and collado 2001 find that the seasonal consumption patterns of spanish households that work in sectors that provide regular bonus payments do not differ from those of households that do not receive bonus payments this paper adds to this evidence by exploiting a natural experiment provided by annual payments from the state of alaska s permanent fund to every resident in the state of alaska that should yield an unusually powerful test of the lc pih these payments are large and clearly anticipated by alaskan residents using the variation in the size of the payments over time and in the amount received by families of different sizes to identify the response of consumption to payments from the permanent fund i find no evidence that the consumption of alaskan households reacts to these payments in addition i find no evidence that the seasonal pattern of consumption in alaska differs from that in the other 49 states or that households in alaska are subject to fewer liquidity constraints engage in less buffer stock saving or spend a smaller fraction of their income on semidurable goods than households in the rest of the united states however although households in alaska do not overreact to payments from the permanent fund i find that the consumption of the very same households is excessively sensitive to their income tax refunds this evidence suggest that households will take anticipated income changes into account in their consumption decisions when the income changes are large regular and easy to predict but will not do so when they are small and irregular the paper proceeds as follows the next section of the paper presents details on the department of economics princeton university princeton nj 08544 and national bureau of economic research e mail chsieh princeton edu i am very grateful to the bureau of labor statistics bls for providing access to the data from the consumer expenditure survey and to its staff particularly steven henderson walter vandeheide and wolf weber for their generous assistance during my visits to the bls i also thank nanci jones for providing data and patiently answering questions on the operation of the alaska permanent fund anne case angus deaton jonathan parker and two referees provided useful comments the views expressed in this paper are personal and should not be attributed to the bls 1 i refer to the certainty equivalent version of the lc pih or one in which the expected variance of consumption is constant as is well known without these assumptions the lc pih only implies smoothing of marginal utility not necessarily of consumption 2 see christina h paxson 1992 john shea 1995 jonathan a parker 1999 nicholas s souleles 1999 martin browning and m dolores collado 2001 also see ronald a bodkin 1959 for an early example of the use of a natural experiment to test for excess sensitivity for comprehensive reviews of the large literature on empirical tests of the lc pih see angus deaton 1992 browning and annamaria lusardi 1996 and browning and thomas f crossley 2001 3 in 1998 for example the permanent fund paid 1 541 to every resident of the state of alaska

optimal inattention to the stock market inattentive agents update their information sporadically and thus respond belatedly to news we generate optimally inattentive behavior by assuming that to observe the value of his investment portfolio the consumer must pay a cost that is proportional to the portfolio s contempo raneous value it is optimal for the consumer to check his investment portfolio at equally spaced points in time consuming from a riskless trans actions account in the interim the riskless transactions account that finances consump tion guarantees that funds are never unwittingly exhausted we show that the optimal interval of time between consecutive observations of the value of the portfolio is the unique positive solution to a nonlinear equation quantitatively even a small observation cost one basis point of wealth implies a substantial eight month decision interval under conventional parameter values

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

the reaction of consumer spending and debt to tax rebates evidence from consumer credit data we use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates we estimate the monthly response of credit card payments spending and debt exploiting the unique randomized timing of the rebate disbursement we find that on average consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt but soon afterward their spending increased counter to the permanent income model spending rose most for consumers who were initially most likely to be liquidity constrained whereas debt declined most so saving rose most for unconstrained consumers

the new deal and modern memory summary economists and other social scientists may never be able to explain fully why the greatdepression happened when it did or why it initially was so severe numerous hypotheses havebeen advanced as we have seen and each of them contributes important insights into thecauses of the macroeconomic calamity in which most of the world was mired in 1929 1933 if however one is forced to adopt a monocausal theory it must center on the actions of america scentral bank which presided over an extraordinary expansion in bank credit in the mid to late1920s and then took the punch bowl off the table for the purposes of this article though the key question is why did the great depressionlast longer in the united states than it did in any other nation the answer as laid out in thenext section is presidential politics 23 there will come seven years of great plenty throughout all the land of egypt but after them will arise seven years offamine and all the plenty will be forgotten in the land of egypt the famine will consume the land genesis 41 29 30 nkjv

the impact of idiosyncratic uncertainty when investment opportunities are endogenous this paper develops a general equilibrium model to study the impact of aggregate fluctuations in idiosyncratic volatility that incorporates the endogenous determination of investment opportunities by making investment options more valuable an increase in volatility encourages the creation of new investment options i find the response of the economy to a volatility shock depends on how investment opportunities are obtained if potential entrants are allowed to invest in new idiosyncratic technologies thereby acquiring options for further investment the volatility shock increases overall investment and results in an economic boom on the other hand if such an investment in option creation is precluded and investment opportunities are exogenously given the volatility shock decreases aggregate investment

forecasting the depression harvard versus yale was the depression forecastable after the crash how long should it have taken contempo rary forecasters to realize how severe the downturn was going to be these questions are addressed by studying the predictions of the harv ard economic service and yale s irving fisher during 1929 and the ear ly 1930s the data assembled by the harvard and yale forecasters tog ether with modern historical data are subjected to statistical analy sis to learn whether their verbal pronouncements were consistent with the data both the harvard and yale forecasters were systematically too optimistic yet nothing in the data suggests that the optimism w as unwarranted copyright 1988 by american economic association

the elasticity of intertemporal substitution new evidence from 401 k participation abstract using health and retirement study data and a structural econometric model we exploit variation in employer matching rates in 401 k plans to generate new estimates of the eis 0 74 in our richest specification with a 95 confidence interval of 0 37 1 21

the changing urban and regional system in the united kingdom cooke p 1986 the changing urban and regional system in the united kingdom reg studies 30 243 251 the uk space economy has been subject to important structural shifts of late the north has a disproportionately large amount of old capital stock and associated industry and labour shedding in response to international competition has been massive the south is increasingly the location for newer more buoyant economic activity but there are localities within each area which do not conform to the stereotype research on localities enables the finer grained impact of economic restructuring to be more clearly understood preliminary findings from a representative set of seven uk localities suggest that significant change is taking place in the structure of local labour markets the organization of work local social structure politics and policies being pursued locally many of the processes characterizing spatial development in the 1960s and 1970s such as decentralization in manufacturing services

job shortfalls in british local labour market areas a classification of labour supply and demand trends 1971 1981 owen d w gillespie a e and coombes m g 1984 job short falls in british local labour market areas a classification of labour supply and demand trends 1971 1981 reg studies 18 469 488 using data from the censuses of population for 1971 and 1981 this paper applies the labour market accounts methodology to the analysis of change in labour demand and supply over the decade in local labour market areas llmas a cluster analysis of the components of demand and supply change is performed and llmas with similar characteristics identified an attempt is then made to explain the spatial distribution of these clusters by reference to the size functional status and regional location of their members

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

the definition of housing market areas and strategic planning the purpose of this paper is to develop the concept of a housing market area thereby provide insights into our understanding of the sub regional structures of the housing system and hence propose a framework for strategic planning research in the housing market to tackle this task it is first necessary to consider the criteria for a local housing market area the paper begins by reviewing previous definitions by both academics and planners and their underlying assumptions based on the principle of spatial arbitrage a local housing market area is defined by reference to criteria linked to migration self containment parallels are drawn with the principles that have been applied to define a system of spatial labour markets using travel to work areas this spatial arbitrage definition is tested empirically by developing a system of housing market areas for west central scotland using data derived from the land registry finally the paper draws together the empirical findings to discuss the nature of s

does innovation cause stock market runups evidence from the great crash this article examines the stock market s changing valuation of corporate patentable assets between 1910 and 1939 it shows that the value of knowl edge capital increased significantly during the 1920s compared to the 1910s as investors responded to the quality of technological inventions innovation was an important driver of the late 1920s stock market runup and the great crash did not reflect a significant revaluation of knowledge capital relative to physical capital although substantial quantities of influential patents were accumulated during the post crash recovery high technology firms did not earn significant excess returns over low technology firms for most of the 1930s

capital taxation during the u s great depression previous studies of the u s great depression find that increased government spending and taxation contributed little to either the dramatic downturn or the slow recovery these studies include only one type of capital taxation a business profits tax the contribution is much greater when the analysis includes other types of capital taxes a general equilibrium model extended to include taxes on dividends property capital stock excess profits and undistributed profits predicts patterns of output investment and hours worked that are more like those in the 1930s than found in earlier studies the greatest effects come from the increased taxes on corporate dividends and undistributed profits jel codes e13 e32 h25 copyright 2012 oxford university press

the industrial structure and labour market segmentation urban and regional implications danson m w 1982 the industrial structure and labour market segmentation urban and regional implications reg studies 16 255 65 we argue that dualism in the industrial structure as suggested by averitt 1968 and galbraith 1967 determines stratification and segmentation in the labour market as suggested by kerr 1954 piore 1973 and friedmann 1977 in recognizing this the urban and regional economist has greater understanding of the processes of change of the last fifty years in particular government and corporate policy by replacing the pre 1914 centre industries of steel shipbuilding and engineering with branch and other peripheral plants and firms has led to a deterioration in the relative position of the inner cities and regions

the spatial interaction of housing and labour markets commuting flow analysis of north west england the consideration of housing and labour market interaction is a relatively recent development in an academic and policy debate which has traditionally considered home and work in isolation this pa

why women work closer to home this paper analyzes the extent to which differences in labor force status in household composition and in household roles account for sex differences in workplace residence separation modelling work trip length as the outcome of the choice of household residential and individual job locations equilibrium work trip length is estimated empirically as a function of labor market housing and household characteristics for male and female employees in seven different household categories data from the 1976 panel survey of income dynamics are used the study concludes that while sex differences in job tenure work hours and wages are in themselves sufficient to fully account for observed sex differences in workplace residence separation sex differences in household roles i e responses to spouses characteristics are of even greater importance in influencing women to work closer to home

targeting jobs to local people the british urban policy experience the paper compares the effectiveness of a number of employment generating schemes in terms of the proportion of jobs created going to locally resident unemployed workers whilst the paper establishes that considerable leakages do occur a wide range of experience is identified which may in part be due to the differing methodologies used by the policy analysts concerned this is due to the often inadequate attention paid to the study of local labour market institutions and dynamics some categories of workers continue to be systematically discriminated against and policies which are currently being developed may help some of these workers overcome obstacles but without identifying and dismantling labour market barriers