efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

financial dollarization the role of foreign owned banks and interest rates abstract why in many economies households and firms borrow and make deposits in foreign currency expanding on the existing literature our framework addresses this question allowing for interest rate differentials and access to foreign funds to play a role in explaining this process of asset substitution or financial dollarization using a newly compiled data set on transition economies and employing a standard panel as well as a panel var methodology we find that increasing access to foreign funds leads to higher credit dollarization while it decreases deposit dollarization interest rate differentials matter for the dollarization of both loans and deposits

prices institutions and determinants of supply in the malian cotton sector cotton both a source of livelihood for millions of poor rural households and a major source of export revenues is a vital commodity for the economic and social development of mali inefficiencies in the malian cotton system at the ginnery and producers cooperative levels e g late payment to farmers and poorly functioning credit schemes have recently led to an important decline in supply threatening the sustainability of the sector using regional data from 1998 1999 to 2008 2009 this study aims to quantitatively assess the contribution of key determinants such as cotton prices and timely payment toward the downward trend in cotton area a dynamic supply model based on adaptive expectations and partial adjustment is employed to estimate the effects of prices and institutional factors such as credit recovery rates and date of payment to farmers on the malian cotton supply results show that supply responds significantly to cotton prices relative to cereal and fertilizer prices date of payment varies across agricultural cycles and late payment negatively influences land devoted to cotton low credit repayment rates create disincentives to grow cotton therefore the revitalization of the malian cotton sector depends upon getting both prices and institutions right

fixed investment and economic growth new results on causality this study re examines the issue of causality between investment shares and economic growth a methodology is applied based on arellano and bond 1991 and holtz eakin newey and rosen 1988 to quinquennial panel data on growth and investment shares for the post war period and shows that contrary to previous results in the literature causality between fixed investment and growth runs in both directions investment shares granger cause growth rates and growth rates granger cause investment shares granger causality from investment shares to growth rates is found to be negative the result is in contrast with a capital fundamentalist view which sees fixed investment as the key to long run growth but is fully consistent with the predictions of solow type growth models

foreign aid an instrument for fighting communism abstract in this paper we test the argument that the sizeable reduction in aggregate aid levels in the 1990s was due to the end of the cold war we test two different models using a dynamic econometric specification on a panel of 17 donor countries spanning the years 1970 97 we find aid to be positively related to military expenditures in the former eastern bloc during the cold war but not in the 1990s suggesting that the reductions in aid disbursements are driven by the disappearance of an important motive for aid we also study the effect on aid allocation but here we do not find any robust effects of the end of the cold war

effects of the minimum wage on the employment status of youths an update the large decline in the relative value of the minimum wage during the 1980s makes that period a valuable one for identifying the impact of variation in the minimum wage on youth employment this study produces the robust finding that when the experience of the 1980s is included a 10 percent increase in the minimum wage is estimated to reduce teen employment by less than 1 percent the lower end of the range of previous estimates because this small employment effect is offset by a labor force withdrawal effect the study finds no discernible effect on measured unemployment the study also finds no apparent effect of the minimum wage on the employment of young adults aged 20 24

financial intermediation as a beliefs bridge between optimists and pessimists this paper proposes a new framework for understandingnancial intermediation in contrast to previous research we consider a setting in which intermediaries possess no inherent information processing or monitoring advantages instead in an economy with overly optimistic entrepreneurs who require funding from overly skeptical pessimistic investors we show that intermediaries can arise endogenously in such a setting only a rational intermediary will be su ciently optimistic tond it worthwhile to invest in a technology for screening entrepreneurs projects and yet be pessimistic enough to use this technology our framework produces implications consistent with heretofore unexplained stylized facts and a number of others which are as of yet untested

the demand for liquid assets corporate saving and international capital flows the recent period of capital outflows from emerging economies has coincided with an increase in their corporate saving in this paper we model corporate saving as a demand for liquid assets by credit constrained firms in a dynamic open economy macroeconomic model we find that the implications of this model are very different from standard models because the demand for foreign bonds is a complement to domestic investment rather than a substitute we show that this complementarity is at work when an emerging economy is on its convergence path or when it has a higher tfp growth rate this framework is consistent with a number of stylized facts found in high growth high investment emerging economies

the last word on the wage curve abstract since 1990 there has been extensive international research on the responsiveness of wages of individuals to changing local labour market conditions for many countries an inverse relationship between wages and local unemployment rates has been found in their book the wage curve blanchflower and oswald argued that the unemployment elasticity of pay is around 0 1 in most countries in a 1995 literature survey card referred to this striking empirical regularity as being close to an empirical law of economics nonetheless reported elasticities do vary even excluding outliers between about 0 5 and 0 1 there is also considerable heterogeneity among wage curve studies in terms of data and model specification this paper carries out meta analytic techniques on a sample of 208 elasticities derived from the literature to uncover the reasons for the differences in empirical results across studies several causes of variation are identified there is also clear evidence of downward publication bias in addition many reported t statistics are biased upwards due to the use of aggregate unemployment rates a maximum likelihood method and a trimming procedure are used to correct for these biases both methods give similar results for our sample an unbiased estimate of the wage curve elasticity at the means of study characteristics is about 0 07

the savings multiplier we develop a theory of macroeconomic development based on the novel concept of savings multiplier capital accumulation changes relative prices and income shares between generations creating further incentives to accumulate and thereby rising saving rates as the economy develops the savings multiplier hinges on two mechanisms first accumulation raises wages and leads to redistribution from the consuming old to the saving young second higher wages raise the price of services consumed by the old and the anticipation of such price rise prompts the young to increase their savings our theory captures important aspects of china s development and suggests new channels through which the one child policy and the dismantling of cradle to grave social benefits have fuelled china s savings and accumulation rates

democracy and economic growth a historical perspective recent studies appear to show that democracy has no robust association with economic growth yet all such work assumes that the causal effect of democracy can be measured by a country s regime status in a particular year t which is correlated with its growth performance in a subsequent period t 1 the authors argue that democracy must be understood as a stock rather than a level measure that is a country s growth performance is affected by the number of years it has been democratic in addition to the degree of democracy experienced during that period in this fashion democracy is reconceptualized as a historical rather than a contemporary variable with the assumption that long run historical patterns may help scholars to understand present trends the authors speculate that these secular historical infiuences operate through four causal pathways each of which may be understood as a type of capital physical capital human capital social capital and political capital this argument is tested in a cross country analysis and is shown to be robust in a wide variety of specifications and formats

financial development financial fragility and growth the authors study the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity on the one hand the empirical growth literature finds a positive effect of financial depth as measured by for instance private domestic credit and liquid liabilities for example levine loayza and beck 2000 on the other hand the banking and currency crisis literature finds that monetary aggregates such as domestic credit are among the best predictors of crises and their related economic downturns for example kaminski and reinhart 1999 the authors account for these contrasting effects based on the distinction between the short and long run impacts of financial intermediation working with a panel of cross country and time series observations they estimate an encompassing model of short and long run effects using the pooled mean group estimator developed by pesaran shin and smith 1999 their conclusion from this analysis is that a positive long run relationship between financial intermediation and output growth coexists with a mostly negative short run relationship the authors further develop an explanation for these contrasting effects by relating them to recent theoretical models by linking the estimated short run effects to measures of financial fragility namely banking crises and financial volatility and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions

state capacity and long run economic performance we present new evidence about the long run relationship between state capacity the fiscal and administrative power of states and economic performance our database is novel and spans 11 european countries and 4 centuries from the old regime to world war i we argue that national governments undertook two political transformations over this period fiscal centralization and limited government we find a significant direct relationship between fiscal centralization and economic growth furthermore we find that an increase in the state s capacity to extract greater tax revenues was one mechanism through which both political transformations improved economic performance our analysis shows systematic evidence that state capacity is an important determinant of long run economic growth

disagreement and learning dynamic patterns of trade we study volume dynamics when there are disagreements among investors for that purpose we develop a dynamic model in which differences in the interpretation of public information lead to trade we obtain a simple linear equilibrium in closed form in which risk averse agents take into account future trading opportunities when solving for their optimal portfolio allocation using this framework we then study what restrictions on the disagreement process are needed to generate empirically observed patterns in volume and prices we show that having infrequent but major disagreements leads to autocorrelation in volume and correlation between volume and absolute price changes when agents disagree on past news but agree on the interpretation of current news there is learning and the convergence of agents opinions leads to trade

economic growth with endogenous corruption an empirical study the effect of corruption on the rate of economic growth for a panel of countries during 1984 2007 is investigated using recent improvements in dynamic panel data techniques to control for the endogeneity of corruption and investment corruption has a significant effect on the growth rate of real per capita income this effect is non linear

saving investment correlations and capital mobility on the evidence from annual data this paper evaluates the use of saving investment correlations to measure capital mobility it is argued that the intertemporal approach to the balance of payments predicts that the practice of calculating the correlation coefficient using long term averages of saving and investment shares biases the result toward accepting the hypothesis of capital immobility calculations based on annual data show that the correlation coefficient is much lower and that is varies considerably estimates of intranational capital mobility based on saving and investment shares of u s federal states show that the saving and investment link is much looser within a nation than among nations copyright 1992 by royal economic society

public provision of sales contingent claims backed finance to smes a policy alternative abstract in europe and elsewhere governments intervene to stimulate innovation in the sme sector and because smes face financial constraints in particular governments encourage the provision of debt and equity venture capital finance to such firms this paper discusses sales contingent claim scc backed finance funding secured only on a claim written on sales that offers a different repayment profile to debt and equity the attractiveness of such finance to firms as well as the behaviour of firms financed in this way are analysed for various reasons scc backed financial instruments are generally not available to smes on the market but it is argued that wider availability could further stimulate the growth and innovative activity of smes the correction of this market incompleteness by the introduction of government schemes providing scc backed corporate finance for smes in higher risk higher tech sectors is recommended the workability of such a scheme is explored by looking at existing examples aimed largely at project finance for larger firms

habit formation in consumption and its implications for monetary policy models this paper explores a monetary policy model with habit formation for consumers in which consumers utility depends in part on current consumption relative to past consumption the empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous condence largely because the habit formation model captures the gradual hump shaped response of real spending to various shocks the paper then embeds the habit consumption specication in a monetary policy model and nds that the responses of both spending and inflation to monetary policy actions are signicantly improved by this modication jel d12 e52 e43

trade with heterogeneous prior beliefs and asymmetric information no trade theorems have shown that new information will not lead to trade when agents share the same prior beliefs this paper explores the structure of no trade theorems with heterogeneous prior beliefs it is shown how different notions of efficiency under asymmetric information ex ante interim ex post are related to agents prior beliefs as well as incentive compatible and public versions of those efficiency concepts these efficiency results are used to characterize necessary and sufficient conditions on agents beliefs for no trade theorems in different trading environments

sudden stops banking crises and investment collapses in emerging markets abstract we evaluate whether financial openness leaves emerging market economies vulnerable to the adverse effects of capital reversals sudden stops on domestic investment we investigate this claim in a broad sample of emerging markets during the period 1976 2002 if the banking sector does not experience a systemic crisis sudden stop events fail to have a significant impact on investment bank crises on the other hand have a significant negative effect on investment even in the absence of a contemporaneous sudden stop crisis we also find that openness to capital flows worsens the adverse impact of banking crises on investment our results provide statistical support for the policy view that a strong banking sector which can withstand the negative fallout of capital flight is essential for countries that open their economies to international financial flows

multiple bgps in a growth model with habit persistence this paper establishes multiple balanced growth paths in an otherwise standard competitive growth model without externality or distortions and with households preference dependent upon how his her consumption compares to a habit stock formed by his her own past consumption the key feature in our model is that consumption forms habits in combination with existing habits this model establishes multiple equilibria because habit persistence induces an internal intertemporal complementarity effect among consumption flows with current consumption reinforcing future consumption as a result there exist two balanced growth paths with one path exhibiting low consumption and habits and high economic growth and the other path exhibiting high consumption and habits and low growth that is not necessarily a development trap both steady states are saddles but global indeterminacy arises where a high balanced growth path co exists with a low balanced growth path where the two equilibrium paths cannot be pareto ranked and history need not matter for the selection of the equilibrium path

saving growth and investment a macroeconomic analysis using a panel of countries this paper provides a descriptive analysis of the long and short run correlations among saving investment and growth rates for 123 countries over the period 1961 94 three results are robust across data sets and estimation methods i lagges saving rates are positively related to investment rates ii investment rates granger cause growth rates with a negative sign iii growth rates granger cause investment with a positive sign

business cycle fluctuations and household saving in oecd countries a panel data analysis abstract we investigate the cyclicality of the household saving to household disposable income ratio for a panel of 16 oecd countries over the period 1969 2012 we find evidence that the household saving ratio is countercyclical we empirically investigate whether the determinants of saving suggested by a standard buffer stock model of saving can explain this finding the three main determinants of household saving implied by such a model i e unemployment risk household wealth and credit constraints have a significant impact on the household saving ratio while their combined effect completely offsets its countercyclicality the saving regression results are robust to potential endogeneity of the regressors to making use of a reduced sample size that leaves out the period of the great recession and to the one by one addition of variables suggested by alternative theories that also predict a countercyclical saving ratio

saving investment and international capital mobility in ec countries abstract drawing on different assumptions on the behaviour of the private and public sectors and on alternative scenarios of international capital mobility causality relationships are derived between saving and investment and between the private sector and public sector saving investment gaps cointegration is used to measure the resulting relationships between these sets of variables in ec countries over the 1960 1988 period the paper shows that there has been a lack of any reaction by budgetary policy to the current account balance in all the countries under study furthermore the empirical results suggest that capital controls have been the main instrument used to target the external balance

an analysis of the interaction among savings investments and growth in turkey turkey has been implementing tight fiscal and monetary policies for years these policies rely on the basic understanding that savings trigger growth and investments however there are alternative theoretical discussions and empirical findings related to the interaction among these variables in this study while one of the purposes is to analyse the interaction among these variables for the turkish case the other is to try to bring an insight for other developing countries for the issues such as data production econometric analysis and as well as making policy suggestions in line with the evidence from the turkish case the findings of this study show that it is the growth that induces both savings and investments hence it is necessary to question policies that assume it is the savings triggering growth and investments

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

minimum wages and the demand for labor i formulate measures of the effective minimum wage based on broad definitions of the labor costs that face employers and use these measures in reestimating some simple equations relating the relative employment of youths and adults to the u s minimum wage using aggregate data for 1954 78 i then ground the model more closely in the theory of factor demand first by adding the relative wages of youths and adults to the equation describing their relative employment and then by specifying a complete system of demand equations for these two types of labor teen employment responds quite robustly to changes in the effective minimum in these specifications with an elasticity of 0 1 a translog cost function defined over young workers adults and capital shows that the effective minimum wage reduces employers ability to substitute other factors for young workers using both sets of results i find that a subminimum wage for youths would have increased their employment with at most a small loss of jobs among adults this abstract was borrowed from another version of this item

searching for non linear effects of fiscal policy evidence from industrial and developing countries several recent studies suggest that the response of national saving to scal policy may be non linear in this paper we use two data sets to search for the circumstances in which such non linear response may arise a sample of oecd countries already used in previous studies and a sample of developing countries using more recent world bank data we nd that in both samples non linear e ects tend to be associated with large and persistent scal impulses in the oecd sample the non linearity of the response is stronger for scal contractions than for expansions an increase in net taxes has no e ect on national saving during large scal contractions while it has a positive e ect in less pronounced contractions high or rapidly growing public debt does not appear to be a good predictor of non linear e ects in the world bank sample of developing countries non linearities in the response national saving to scal policy are not limited to large scal contractions and also tend to occur in periods in which debt is accumulating rapidly regardless of its initial level 2000 elsevier science b v all rights reserved jel classixcation e21 e62 h31

capital accumulation and growth a new look at the empirical evidence using annual data for 75 countries in the period 1960 2000 we present evidence of a positive relationship between investment as a share of gross domestic product gdp and the long run growth rate of gdp per worker this result is robust for our full sample and for the subsample of non oecd countries but not for the subsample of oecd countries our analysis controls for time invariant country specific heterogeneity in growth rates and for a range of time varying control variables we also address endogeneity issues and allow for heterogeneity across countries in model parameters and for cross section dependence

the feldstein horioka hypothesis versus the long run solvency constraint model a critical assessment abstract this paper proposes an extended version of the long run solvency constraint model developed by coakley et al coakley j kulasi f smith r 1996 current account solvency and the feldstein horioka puzzle economic journal 106 620 627 that provides a theoretical and empirically testable distinction from the feldstein horioka hypothesis the empirical application shows that the feldstein horioka approach presents a useful but incomplete measure of capital mobility in 6 oecd countries

democratisation and growth this article challenges cross sectional findings that democracy has a negligible effect on growth we employ a new dataset of political transitions during the third wave of democratisation and examine the within effect of democratisation in countries that abandoned autocracy and consolidated representative institutions the panel estimates imply that on average democratisations are associated with a 1 increase in annual per capita growth the dynamic analysis reveals that while during the transition growth is slow in the medium and long run it stabilises at a higher level this evidence favours development theories of democratic rule and friedrich hayek 1960 s idea that the merits of democracy appear in the long run leading politicians and commentators have argued that democratisation will bring prosperity and growth into pariah and economically poorly performing countries 1 others however remain sceptical pointing to the mixed and inconclusive empirical evidence the old debate dating back to plato and aristotle on which political regime is socially and economically optimal arises again this debate is not purely academic and philosophical as it has important policy implications in the last thirty years the world has experienced an unprecedented move towards democratic institutions influential policy makers and scholars urge western authorities to foster democratic movements in totalitarian countries see the economist article philosophers and kings june 19th 2003 yet the question remains will democratisation bring economic growth to assess the average growth effect of a successful democratic transition we analyse the evolution of annual real per capita gdp growth before and after incidents of permanent democratic reform in the 1960 2003 period in our analysis we exploit a newly constructed dataset of permanent democratisations during the so called third wave of democratisation and the 1990s when many former socialist countries moved towards representative rule the panel results reveal new evidence that contrast with the previous mainly cross sectional work first conditioning on time invariant country characteristics and global shocks a permanent democratisation is associated with approximately a one half to one per cent increment in annual real per capita gdp growth second a dynamic j shaped effect emerges with considerable though not this article is a major revision of an earlier paper titled aristotle was right stable democracy fosters

a fallacy in causality research on growth and capital accumulation abstract in this paper we argue that recent causality research on economic growth and accumulation rates dismisses the constant returns neoclassical growth models based on a fallacy we argue that the finding of no or negative granger causality is perfectly consistent with solow type of models with exogenous saving

talent and or popularity what does it take to be a superstar the phenomenon of superstars wherein small numbers of people earn enormous amounts of money and dominate the activities in which they engage seems to be increasingly important in the modern world rosen 1981 845 i introduction this the opening sentence of sherwin rosen s seminal paper the economics of superstars applies today more than ever technological change has increased the scope and the intensity of the so called winner takes all markets in the last decades the central question addressed in this article is what does it take to be a superstar why do some artists media stars professional athletes or executives earn disproportionately high salaries while others receive comparatively low remuneration in the literature there are basically two competing but not mutually exclusive theories of superstar formation proposed by rosen 1981 and adler 1985 1 although sherwin rosen explains how small differences in talent translate into large differences in earnings moshe adler argues that superstars might even emerge among equally talented performers due to the positive network externalities of popularity empirical tests of the different driving forces of superstar salaries have proved to be very difficult because an objective measure of a star s talent is often hard to find and even harder to quantify krueger 2005 for example what characterizes the talent of a pop music star the literature offers different approaches hamlen 1991 1994 uses the physical concept of voice quality which measures the frequency of harmonic content that singers use when they sing the word love in one of their songs but is such a high quality voice really a deciding factor for success in pop music krueger 2005 measures star quality by the number of millimeters of print columns devoted to each artist in the rolling stone encyclopedia of rock roll nevertheless as he admits this measure reflects the subjective importance the editors of the encyclopedia implicitly devote to each artist which may correlate both with the artist s talent and with his her popularity in team settings the difficulty of accurately measuring star talent is even greater as individual contributions to team output are mostly unclear however the empirical relevance of stars within teams is undoubted star ceos in top management teams lead singers of rock bands and star athletes on sports teams are just a few examples of superstars embedded in teams this article argues that rank order tournaments in professional sports allow a more accurate determination of talent than in the arts even though each athlete s performance is also affected by random events luck or other factors like weak fitness in individual sports it can typically be assumed that the most talented athlete enjoys the highest probability of winning as we examine superstars in a team setting namely in professional soccer we first estimate a team production function to identify the playing characteristics that significantly influence the probability of a team winning to do so we use the detailed statistics of the opta sports data company which counts and classifies every touch of the ball during the game by each player in a second step we use the individual performance statistics of all variables that have proved to be critical for winning as indicators of the player s talent we estimate the impact of talent popularity and various controls on the player s market value employing individual panel data from the highest german soccer league a player s popularity is measured by the annual press publicity he receives in over 20 different newspapers and magazines purged of the positive influences of on field performance so that our popularity indicator captures the nonperformance related celebrity status of a player we find empirical evidence that both talent and nonperformance related popularity increase the market values of soccer stars

on the duality between prior beliefs and trading demands in an abstract model with asymmetric information we show that there is a duality relationship between the prior beliefs and trading demands of bets for any given individual then we aggregate all the agents to obtain a second duality relationship between common prior beliefs and trading possibilities we easily derive from these relationships the no trade theorem and its converse general efficiency results can be obtained moreover our framework is sufficiently general to cover special cases proved previously for example econometrica 62 1994 1327 discussion paper 83 center for rationality and interactive decision theory the hebrew university of jerusalem 1995 j econom theory 91 2000 127 gameseconom behav 24 1998 172 yet our argumentsare both simple and intuitive r 2003 published by elsevier science usa

biofuels and land use change sugarcane and soybean acreage response in brazil scientists and economists are increasingly worried that biofuels production is leading to land use changes in the form of competition with food crops or loss of natural ecosystems i estimate acreage conversion in response to shocks in sugarcane a biofuels feedstock and soybean thought to be affected by united states corn ethanol production prices in brazil at a national and regional level using county level data from 1973 to 2005 i consider a dynamic panel data model of input demand for agricultural land conditioning on price changes of other commodities the short run crop price elasticity of sugarcane acreage in brazil is estimated to be approximately zero whereas the elasticity of soybean acreage is 0 9 when both spot and futures prices change the regional estimates for soybeans show considerable variation and are highest in areas of ecological importance such as the cerrado sugarcane estimates are more homogeneous these results should be taken into account in impact assessments of biofuels

axiomatic characterizations of rational choice in strategic environments for more than forty years economists have wrestled with the elusive notion of rational behavior in strategic environments generating a variety of competing approaches even for simple simultaneous move games four distinct solution concepts including the notions of nash equilibria correlated equilibria rationalizability and iterated dominance currently have some standing as theories of strategic rationality here i propose four axioms for rational choice in strategic environments and use these to characterize the sets of pure strategies that players may select under each of the solution concepts mentioned above my results underscore both the similarities and differences between the four concepts

barriers to formal saving micro and macroeconomic effects this paper examines different barriers to formal saving considering various interventions and their possible effects at microeconomic and macroeconomic levels it presents a comprehensive review of the literature based on a detailed classification of the barriers associated with supply side factors related to access to financial products and demand side barriers related to the use and frequency of use of those products the paper concludes that this classification and analysis contributes to a fuller understanding of the question of financial inclusion and how to achieve it

employment effects of two northwest minimum wage initiatives i introduction the impact of a minimum wage on employment has long been of interest to economists such as stigler 1946 because it provides a relatively direct test of a conventional theoretical prediction that a binding increase in the minimum wage should reduce employment among low skilled workers although this theoretical prediction has not gone unchallenged as in lester 1946 early empirical work summarized in brown gilroy and kohen 1983 confirmed theoretical predictions using aggregate time series data for young workers which indicated that a minimum wage has a small negative employment effect by 1990 there was general consensus in the profession that minimum wage laws reduced employment among teenage and low wage workers albeit by a small amount ehrenberg 1995 and others have argued that subsequent empirical evidence provides less confidence in both the conventional view that the minimum wage lowers teenage or low skilled employment and that neoclassical theory can account for the relationship between them for example card and krueger 1995 show in a 30 study meta analysis that past time series results are sensitive to the specification and suggest that when appropriately specified the minimum wage has had no significant effects on employment over the last 25 yr alternatively neumark and wascher 1998 find negative employment effects of the minimum wage consistent with structural change using time series data and specifications that do not suffer from the biases present in earlier work cross sectional studies as in currie and fallick 1996 burkhauser couch and wittenburg 2000 and neumark and wascher 2001 also find mixed evidence of employment effects on low wage workers due to the minimum wage thus traditional empirical assessments of the minimum wage yield mixed evidence on the employment impact of the minimum wage the natural experiment methodology was introduced as an alternative to the cross sectional and time series approaches and exploits both the time series wage variation before and after the treatment of a minimum wage increase and the cross sectional wage variation between the treatment state and a control state that did not experience a change in the minimum wage for example card and krueger 1994 analyzed employment growth in 410 fast food restaurants in new jersey and pennsylvania before and after the 1992 minimum wage increase in new jersey from 4 25 to 5 05 they find no evidence linking the increase in the minimum wage to reduced employment in fast food restaurants both when comparing new jersey with pennsylvania and when comparing impacted versus nonimpacted restaurants in new jersey neumark and wascher 2000 reexamine the impact of the 1992 new jersey minimum wage increase using payroll data for hours worked by fast food employees and bureau of labor statistics bls eating and drinking employment data and find that the minimum wage significantly reduced employment in new jersey versus pennsylvania thus even studies that apply similar natural experiment techniques and data for a given minimum wage treatment as in katz and krueger 1992 deere murphy and welch 1995 kim and taylor 1995 and card and krueger 2000 can yield different conclusions regarding its employment effect our empirical analysis exploits a unique natural experiment initiated by oregon and washington voter initiatives that raised the minimum wage over three successive years 1997 1999 in oregon and 1999 2001 in washington by approximately 37 in both states following prior work we focus on the eating and drinking industry sic 58 which is a low wage industry that has been extensively studied in prior work due to an expectation of a binding minimum wage bls wage data available between 1997 and 2001 indicate that the successive minimum wage increases become increasingly binding for most but not all eating and drinking jobs at the lower end of the wage distribution

convergence in the oecd transitional dynamics or narrowing steady state differences i introduction research on growth and convergence has proceeded through several stages that can be described as a process of accommodating cross country heterogeneity into the convergence equation in the first stage the world could be described as countries approaching to equal absolute convergence or to different conditional convergence steady states in both cases see baumol 1986 barro and sala i martin 1992 or mankiw et al 1992 the assumption of parameter homogeneity of the underlying production function was assumed and not tested later some researchers knight et al 1993 islam 1995 durlauf and johnson 1995 or caselli et al 1996 among others began to challenge the view that the productivity shift parameter of the underlying production function is homogeneous across countries from an econometric point of view the transition from the first to the second stage made researchers resort to panel data methods that exploit the time dimension of data sets a natural extension to accommodate heterogeneity was developed in lee et al 1997 in this third stage the authors extended the use of panel data methods to allow for differences not only in the initial conditions the constant term but also in other coefficients of the production function and in the rate of technological progress itself if there is widespread heterogeneity there are substantial econometric difficulties in obtaining precise estimates of the speed of convergence in particular the estimated rate of convergence is biased downward in cross section regressions see lee et al 1997 or caselli et al 1996 suggesting a slower convergence rate than is actually the case 1 the pooled fixed effect estimator would partially solve the problem of accommodating level effects across countries through heterogeneous intercepts but in dynamic panels heterogeneity in speeds of convergence renders this estimator inconsistent too pesaran and smith 0995 show that the mean group estimator i e estimating the convergence equation separately for each country using annual data and averaging the coefficients is appropriate in this case nevertheless as recognized by these authors this procedure may also be subject to a small sample bias that can be important even for time dimensions as large as 30 years in this article we do not discuss further the advantages or shortcomings of these different econometric methods to estimate convergence equations 2 our aim is not presenting an alternative econometric method to estimate consistently the parameters in growth regressions rather we focus on some implications of the different econometric techniques that so far have been extensively used in the convergence literature and that have been largely unexplored to this end we present three well established estimation approaches as a benchmark of the way the literature has estimated convergence equations in some fundamental contributions and we explore the implications of parameter heterogeneity within the standard mankiw romer and weil theoretical framework cross section and fixed effects models lead us to conclude that the observed reduction in the dispersion of per capita incomes that has taken place among organisation for economic co operation and development oecd countries since the 1960s is mostly a process of transitional dynamics according to this interpretation the dispersion of the long run steady state features of oecd economies has remained fairly stable during the past 40 years if the dispersion of incomes has narrowed it is because these countries started from very different initial conditions and have been approaching their own steady state this is in accordance with the predictions of the standard exogenous growth model mean group estimates tell us a different story namely that the process of transitional dynamics has been negligible oecd countries have never been too far from their steady states and the reduction of dispersion is mostly explained in terms of convergence in steady states themselves that is in the long run determinants of per capita income savings rates human capital accumulation etc

sufficient and necessary conditions for information to have social value in pure exchange this paper extends corrects and unifies earlier statements concerning the social value of public information as well as the no trading conditions in pure exchange sufficient and necessary conditions are provided for both the single period and two period cases in a postsignal trading model the social value of information is shown to be closely linked to the allocational efficiency of the market the degree of homogeneity of prior beliefs and of information structures the time additivity of preferences and the efficiency of endowments we conclude that the case in favor of public information is much stronger than previously suggested

the minimum wage and teenage employment a reanalysis with attention to serial correlation and seasonality we examine the effects of minimum wage legislation in canada over the period 1975 93 for teenagers we find that a 10 increase in the minimum wage is associated with roughly a 2 5 decrease in employment we also find that this result is driven by low

is the time series evidence on minimum wage effects contaminated by publication bias i introduction economists often express concern that the journal review process has the unintended effect of biasing published empirical results towards the rejection of economic null hypotheses in favor of statistically significant results that are consistent with economists priors or predictions in other disciplines meta analyses of published papers generally focusing on clinical trials provide some evidence consistent with a bias towards publication of significant results see for example berlin et al 1989 under the reasonable presumption that the parameter of interest such as the effect of a drug should be constant across studies 1 in economics however the parameters of statistical models are more likely to vary across samples especially when the samples cover different time periods because of changed behavior e g lucas 1976 model misspecification or measurement changes the possibility of parameter instability makes it difficult to apply standard meta analysis techniques to the economics literature because these techniques draw inferences regarding publication bias from changes in estimates across samples 2 in this paper we suggest a method of testing the null hypothesis of no publication bias when parameters are changing in particular if there is a specification that is plausibly free of selective specification search then that specification can be used as a benchmark with which to compare changes in estimates across the published studies a statistical test for whether the changes in estimates across the published studies are significantly different from those for the benchmark specification estimated over different sample periods can then be used to assess the evidence of publication bias in the published studies under consideration we apply our approach to the question of whether there is evidence of publication bias in the time series literature on the employment effects of the minimum wage we choose this application for three reasons first the economic impact of the minimum wage is an important issue for policy second widespread interest in this question has generated sufficient research to make the application of meta analysis techniques feasible third it is the topic of one of the rare applications of meta analysis in economics card and krueger 1995a b we show that when we recognize the special complexities associated with meta analysis of studies using time series data the evidence that the minimum wage literature is contaminated by publication bias is much weaker ii evidence of publication bias the approach used by card and krueger to test for publication bias in the minimum wage literature is relatively straightforward first in the absence of publication bias and if parameters are stable then estimated t statistics for employment effects of minimum wages should rise as the sample period is extended more precisely the log of the absolute t ratios should rise one for one with the log of the square root of the degrees of freedom this is closely related to the approach of berlin et al 1989 who test for publication bias in research from clinical trials by asking whether the estimated magnitudes of the effects in published studies are negatively related to sample sizes the intuition is that if only significant results get published the estimated effect will be bigger when it is based on a smaller sample second a tendency for published t statistics for employment effects to be clustered around two can be interpreted as an indication of publication bias using these techniques card and krueger report evidence that is consistent with publication bias in the minimum wage literature focusing on the existing time series studies that use quarterly data they first report that a regression of the log of the absolute t statistics for the estimated minimum wage effects from these studies on the log of the square root of the degrees of freedom yields a negative coefficient estimate rather than the positive coefficient of one implied by the null hypothesis of no publication bias

growth by destination the role of trade in africa s recent growth episode summary over the period 1990 2009 africa has experienced a distinct and favorable reversal in its growth fortunes in stark contrast to its performance in the preceding decades leading to a variety of hypotheses seeking to explain the phenomenon this paper presents both cross country and panel data evidence on the causal factors driving the recent turnaround in africa s growth and takes the unique approach of disaggregating the separate growth impacts of africa s bilateral trade with china europe and america the empirical analysis presented in this paper suggests that the primary and most robust causal factors driving africa s recent growth turnaround are private sector and foreign direct investment although empirical evidence of the role of bilateral trade openness in africa s recent growth emerges within a fixed effect estimation setting these results are not as robust when endogeneity and other issues are fully accounted for among the three major bilateral partners africa s bilateral trade with china has been a relatively important factor spurring growth on the continent and especially so in resource rich oil producing and non landlocked countries the econometric results are not as supportive of growth inducing effects of foreign aid these findings emerge after applying a variety of panel data specifications to the data including the recent fixed effects filtered fef estimator introduced by pesaran and zhou 2014 and the dynamic panel generalized method of moments gmm estimator which allows for endogeneity between trade and growth

bias corrected estimation of panel vector autoregressions we derive a bias corrected least squares estimator for panel vector autoregressions with fixed effects the estimator is straightforward to implement and is asymptotically unbiased under asymptotics where the number of time series observations and the number of cross sectional observations grow at the same rate this makes the estimator particularly well suited for most macroeconomic data sets

a meta analytic assessment of the effect of immigration on wages in our increasingly interconnected and open world international migration is becoming an important socio economic phenomenon for many countries since the early 1980s many studies have been undertaken of the impact of immigration on host labour markets borjas 2003 noted that the estimated effect of immigration on the wage of native workers varies widely from study to study and sometimes even within the same study in addition these effects cluster around zero such a small effect is a rather surprising outcome given that in a closed competitive labour market an increase in labour supply may be expected to exert a downward pressure on wages we revisit this issue by applying meta analytic techniques to a set of eighteen papers which altogether generated 348 estimates of the percentage change in the wage of a native worker with respect to a one percentage point increase in the ratio of immigrants over native workers while many studies in our database employ us data estimates are also obtained from germany the netherlands france norway austria israel and australia our analysis shows that results vary across countries and are inter alia related to the type of modelling approach technical issues such as publication bias and quality of the estimates are addressed as well

generalized method of moments and macroeconomics we consider the contribution to the analysis of economic time series of the generalized method of moments estimator introduced by hansen we outline the theoretical contribution conduct a small scale literature survey and discuss some ongoing theoretical research

an introduction to the theory of rational expectations under asymmetric information every good economics textbook contains the cliche that market prices provide signals which facilitate the allocation of resources to their best use in a world not subject to random shocks consumers and producers when faced with competitive prices need look no further than their own preferences or production technology to be able to make a decision they need give no thought to the tastes endowments or technology of other agents however in a world subject to random shocks this is no longer the case agents are faced with the problem of forecasting future states of nature and more importantly of forecasting the impact of these states on the actions of other agents rational expectations theories provide a model of how agents make those forecasts in a world subject to random shocks it will be the case that agents acquire or at least attempt to acquire information about the future realization of the shocks it will in general be the case that different agents have access to different information the fact that information is dispersed throughout the economy has the potential to cause a misallocation of resources relative to what would be the case if all agents knew everything an efficient allocation of resources will in general require the transfer of information from consumers who have some information about their future demands to producers who can take current actions to mitigate avoidable scarcities or surpluses though many classical and neo classical writers emphasize the informational role of prices the standard marshallian or walrasian model of competitive equilibrium does not involve prices transferring information across traders the purpose of this paper is to show that rational expectations models are radically different from walrasian models in an economy where traders have diverse information this is demonstrated by showing that unlike what occurs in a walrasian equilibrium of an economy with heterogeneous information if there is a complete set of insurance markets and utility is additively separable over time then there exists a rational expectations equilibrium which gives consumers the same allocation as if each consumer has access to all of the economy s information this implies that under the above assumptions a central planner with all the economy s information could not pareto dominate the competitive allocation achieved when traders have diverse information and rational expectations this paper makes no attempt to survey the literature on rational expectations the reader is referred to shiller 1978 barro 1981 for a survey of macroeconomics and rational expectations and radner 1980 for a survey of the microeconomics and mathematical theory of rational expectations this paper will however try to outline the evolution of the rational expectations concept from a notion of optimal forecasting to a virtually complete departure from the walrasian model of equilibrium the rest of this section is devoted to a discussion of pre rational expectations ideas

the veil of public ignorance abstract a theory of cooperative choice under incomplete information is developed in which agents possess private information at the time of contracting and have agreed on a utilitarian standard of evaluation governing choices under complete information the task is to extend this standard to situations of incomplete information our first main result generalizes harsanyi s j polit econ 63 1955 309 classical result to situations of incomplete information assuming that group preferences satisfy bayesian coherence and interim pareto dominance these axioms are mutually compatible if and only if a common prior exists we argue that this result partly resolves the impossibility of bayesian preference aggregation under complete information

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

financing growth through foreign aid and private foreign loans nonlinearities and complementarities abstract are the growth consequences of foreign aid and foreign private loans different for the recipient nations in this study we analyze in a unified way how these two instruments affect economic growth of 131 developing nations over the period 1996 2010 we find that there are diminishing returns to foreign aid while there are increasing returns to foreign loans using these estimated non linearities we find a critical level of international financial transfer where the marginal effect of foreign aid is larger than that of loans if and only if the transfer loans or foreign aid is below this critical level in addition we analyze the interaction between these two types of transfers and find evidence of complementarity disaggregation of aid into grants and concessional loans suggests that it is in fact the former that exhibits concave relationship with growth

household saving behaviour in an extended life cycle model a comparative study of china and india abstract this paper examines the determinants of household saving in china and india over the last few decades using the life cycle model with appropriate modifications to account for the expected benefits of pension saving consistent with the predictions made in the life cycle model higher income growth promotes more household saving and higher age dependency does the opposite an increase in the inflation rate appears to encourage household saving interestingly the evidence suggests that an increase in expected pension benefits tends to discourage household saving in china in the long run but the reverse is found in india

time series minimum wage studies a meta analysis time series minimum wage studies a meta analysis author s david card and alan b krueger reviewed work s source the american economic review vol 85 no 2 papers and proceedings of the hundredth and seventh annual meeting of the american economic association washington dc january 6 8 1995 may 1995 pp 238 243 published by american economic association stable url http www jstor org stable 2117925 accessed 04 11 2011 15 46

the balance of payments constrained growth rate and the natural rate of growth new empirical evidence this paper implements a panel approach to investigate the empirical relevance of thirlwall s law which states that long run growth must be consistent with balance of payments bop equilibrium and is thus determined on the demand side building on ardl modelling mean group and pooled mean group estimation methods we use annual data over the 1960 2010 years for a panel of 22 oecd countries and find significant support for the law next we also explore empirically the hypothesis that the bop constrained growth rate yb must equal the natural or potential rate of growth yn and find that the data do not reject this hypothesis finally we adopt a new approach based on panel granger causality methods to explore the direction of causality between yb and yn the results indicate the existence of unidirectional long run causality from yb to yn thus reinforcing the view embodied in the law that long run growth is demand determined and constrained by the bop