the phillips curve macroeconomic policy and the welfare of canadians a review of the two competing paradigms explaining inflation and unemployment fluctuations singles out the keynesian phillips curve as the clear empirical winner over its classic competitors reestimation of the canadian phillips curve for 1957 90 identifies a sharp structural shift toward a high degree of unemployment hysteresis after 1972 the recent attempt of macropolicy to flatten the aggregate demand curve and limit supply side shock accommodation which aims at lower and more stable inflation is then shown to make unemployment higher and more unstable on average to an extent that is an increasing function of the degree of hysteresis understanding and reducing hysteresis and developing a consensus based incomes policy that has a chance of alleviating the dismal trade off should therefore to top research and policy priorities

malawi s agricultural development a success story abstract at a time when attention was focused on africa s poor agricultural performance malawi demonstrated a capacity not only to feed itself but to produce a surplus for export during the periods covered in this paper its agricultural growth exceeded that of most african countries and compared favorably with success stories on the continent this research focuses on malawi s recent performance with particular attention on trends in the provision of essential agro support services credit extension and farmer training and input supply and marketing trends in these services are examined first at the national level and then at the district level while overall trends indicate substantial progress district level data reveal extensive unevenness moreover at the farm level census data on farmer training and technology utilization show fewer benefits to female operators and smaller farmers important elements of developmentally oriented infrastructure and services have been put in place and are functioning better than in most african countries this is important in terms of longer term agricultural development prospects there is ample evidence however that malawi s progress has not spread across different segments of the farm population or agriculture development districts both the unevenness and overall progress have been heavily influenced by donor support

oil price shocks and the macroeconomy this paper examines the impact of oil price shocks and attempts to explain why the rise in oil prices up to 2008 had little impact on the world economy it makes three main arguments first that oil prices have never been as important as is popularly thought second that the most important route through which oil prices affect output is monetary policy when oil prices pass through to core inflation monetary authorities raise interest rates slowing growth based on the second argument the third argument is that high oil prices have not reduced growth in recent years because they no longer pass through to core inflation so the monetary tightening previously seen in response to high oil prices is absent it also argues that oil prices had little impact on the global recession of 20089

oil price shocks and their short and long term effects on the chinese economy a considerable body of economic literature shows the adverse economic impacts of oil price shocks for the developed economies however there has been a lack of empirical study of this kind on china and other developing countries this paper attempts to fill this gap by answering how and to what extent oil price shocks impact china s economy emphasizing on the price transmission mechanisms to that end we develop a structural vector auto regressive model our results show that an oil price increase negatively affects output and investment but positively affects inflation rate and interest rate however with the differentiated price control policies for materials and intermediates on the one hand and final products on the other hand in china the impact on real economy represented by real output and real investment lasts much longer than that to price monetary variables our decomposition results also show that the short term impact namely output decrease induced by the cut of capacity utilization rate is greater in the first one to two years but the portion of the long term impact defined as the impact realized through an investment change increases steadily and exceeds that of short term impact at the end of the second year afterwards the long term impact dominates and maintains for quite some time

fuel taxes an important instrument for climate policy abstract this article shows that fuel taxes serve a very important role for the environment and that we risk a backlash of increased emissions if they are abolished fuel taxes have restrained growth in fuel demand and associated carbon emissions although fuel demand is large and growing our analysis shows that it would have been much higher in the absence of domestic fuel taxes people often assert that fuel demand is inelastic but there is strong research evidence showing the opposite the price elasticity is in fact quite high but only in the long run in the short run it may be quite inelastic which has important implications for policy makers had europe not followed a policy of high fuel taxation but had low us taxes then fuel demand would have been twice as large hypothetical transport demand in the whole oecd area is calculated for various tax scenarios and the results show that fuel taxes are the single most powerful climate policy instrument implemented to date yet this fact is not usually given due attention in the debate

household food demand in burkina faso implications for food policy abstract chronic food production deficits since the early 1970s have prompted policymakers of burkina faso to emphasize technological research with the goal of increasing the production of the most consumed locally grown cereals sorghum millet and maize meanwhile urban consumers have been developing preferences for rice and wheat cereals that are primarily imported this study estimates demand relationships among food items in ouagadougou burkina the results of the estimation suggest that prices income household composition education marital status and urbanization were jointly important in explaining household expenditure allocations both local and imported cereal consumption responded positively to an income increase however incremental income changes would lead to relatively greater consumption of locally produced cereals by low income households whereas high income households would consume relatively more wheat and rice the household model is then used to demonstrate its relevance in addressing food policy issues by forecasting the levels of urban grain demand under alternative income and demographic scenarios with increased production due to advances in technology the urban demand levels do not exhaust the rural surplus of local cereals but deficits persist in the rice wheat sector the results underscore the importance of technological research since burkina could become self sufficient in at least the production of sorghum millet and maize

the effects of petroleum product price regulation on macroeconomic stability in china abstract china has undertaken measures to regulate the prices of petroleum products since 1998 in order to deal with the world oil price shocks on its macro economy however the effects of price regulation are yet unknown especially when the world oil price fluctuates in different regimes the study first analyses the mechanisms of petroleum product price ppp regulation in the case of gasoline and the crude oil gasoline price fluctuation transmission followed by the identification of regimes and their time intervals using regime switching vector autoregressive model and then estimates the effects of gasoline price regulation in reducing macroeconomic volatility it is found that the world crude oil fluctuates in different regimes the mild fluctuation regime and the violent fluctuation regime the ppp regulation can reduce oil price volatility and then macroeconomic volatility but it is more effective in the mild fluctuation regime the findings present a deeper understanding of the stabilization effect of ppp regulation on the macroeconomy provide an evidence for sustaining china s ppp regulation for the purpose of macroeconomic stability and offer policymakers new information for petroleum product pricing reforms

the green paradox and budgetary institutions abstract we examine oil production strategies in response to the rise of alternative energy in context of saudi arabia and the united states in a unified simultaneous equation model sem over the period 1976 2015 we investigate the extent to which budget balance behaviour explains the nature of oil production strategies we find that green regulations have a positive impact on u s oil production while an inverse relationship holds for saudi arabia we argue that the nature of budgetary institutions prevents saudi arabia from following a profit maximising behaviour saudi arabia is incentivised to ensure political cohesion through adopting a procyclical fiscal policy rather regulators seem incentivised to channel surplus towards individuals to gain popularity in the united states a thriving shale oil industry is a plausible rationale for u s production strategies also known as a weak green paradox this is problematic for climate change initiatives to reduce global emissions climate experts may wish to pay more attention to the supply side of oil markets when designing decarbonisation plans the results challenge conventional wisdom of the green paradox neglecting the role of incentive structure between different types of oil producers

employment unemployment and demand shifts in local labor markets this paper analyzes the effects of demand shifts within and between local labor markets on unemployment and employment outcomes observed in those markets the demand shifts are calculated from sales growth data at the firm and industry levels the results show that in general employment and wage adjustments by firms are primarily driven by shifts in labor demand demand shifts between local areas account for large fractions of the observed variation in unemployment and employment rate levels and changes across areas within area shifts cause much smaller and insignificant amounts of unemployment and only if they are between industry copyright 1991 by mit press

secular labor reallocation and business cycles we study the eect of mean preserving idiosyncratic industry shocks on business cycle outcomes we develop an empirical methodology using a local area s exposure to industry reallocation based on the area s initial industry composition and employment trends in the rest of the country over a full employment cycle using confidential employment data by local area and industry over the period 1980 2014 we find sharp evidence of reallocation contributing to worse employment outcomes during national recessions but not during national expansions we repeat our empirical exercise in a multi area multi sector search and matching model of the labor market the model reproduces the empirical results subject to inclusion of two key empirically plausible frictions imperfect mobility across industries and downward nominal wage rigidity combining the empirical and model results we conclude that reallocation can generate substantial amplification and persistence of business cycles at both the local and the aggregate level

job tenure and cyclical changes in the labor market using data on male heads of households from the michigan panel study of income dynamics this paper finds that although short tenure workers accounted for a disproportionate share of total unemployment during the early seventies cyclical fluctuations in joblessness were concentrated among persons currently holding or recently having held longer lasting employment greater unemployment durations were a more important source of rising joblessness than increased separation probabilities and cyclical changes in both variables were larger for recent leavers of medium or long tenure employment than for persons with similar seniority in their current job

demand disturbances and aggregate fluctuations the implications of near rationality the paper investigates some properties of near rational models of the cycle examining two types of framework in the first an otherwise classical competitive economy is shown to respond to demand disturbances when some firms follow a near rational hiring policy in the second model a dynamic setting is addressed and a criterion termed stochastic near rationality is employed simulation results are consistent with recent empirical findings and suggest that further quantitative evaluation is merited copyright 1987 by royal economic society

job creation and job destruction in great britain in the 1980s using data from the workplace industrial relations surveys of 1980 1984 and 1990 the authors investigate processes of job creation and job destruction in britain they find that rates of employment growth job creation and job destruction were higher at the end of the 1980s than at the beginning bothjob creation and job destruction were extremely concentrated about 50 of each was accounted for by just 4 of continuing establishments employment growth was apparently more variable in manufacturing plants than in private service sector workplaces some variables negatively related to employment growth were unionization establishment size establishment age and location in the private manufacturing sector versus private service sector

allocative disturbances and specific capital in real business cycle theories chanted albeit in varying degree with business cycle theories that either posit unexplained nominal wage and price rigidities or rely on misperceptions about nominal variables as a key driving force one response to this disenchantment has been a concentration of research effort on real business cycle theories aside from dissatisfaction with competitor theories the very visible oil price shock episodes of the 1970 s lent plausibility to the view that exogenous real disturbances cause large fluctuations in aggregate economic activity this essay on real business cycle theory considers the role of allocative disturbances in aggregate economic fluctuations when human and physical capital are specialized by allocative disturbances i mean events that impinge on the economy by inducing a costly time consuming reallocation of specialized resources at least since the publication of ricardo s principles in 1817 economists have recognized some of the potentially important aggregate consequences of allocative disturbances ricardo writes

fuel riots definition evidence and policy implications for a new type of energy related conflict abstract fuel riots are a distinct type of energy related conflict we provide the first fuel riots database and explore their social economic and environmental drivers the analysis demonstrates links between fuel riots and high international crude oil prices in countries characterised by weak state capacity deficient governance fuel scarcity and poor economic performance we suggest a potential causal pathway for fuel riots when international fuel prices spike net fuel importing countries bear higher costs if these countries are politically unstable and their government inefficient the likelihood of fuel riots is high wealthier countries can absorb price increases and maintain subsidies as opposed to poorer societies where fuel riots are more likely our findings demonstrate the role of state capacity and socio economic conditions in enabling conflict and will inform policy by identifying fertile ground for fuel riots i e societies likely to be affected by increases in fuel prices due to scarcity and climate action such as carbon taxes we propose that policies which better control international prices and action designed to reduce political instability in vulnerable countries are key to preventing fuel riots fuel subsidy reform must anticipate popular opposition and mitigate the impact upon vulnerable populations in order to reduce the likelihood of instability and minimise hardship

business cycles with costly search and recruiting a business cycle model is developed in which output is traded on lucas phelps islands and labor services on each island are exchanged through costly search and recruiting with transactions externalities the model exhibits persistent involuntary unemployment and inefficient equilibria even though there are no nominal rigidities and no unexploited privately attainable gains from trade it also exhibits employment fluctuations without any real wage fluctuations it yields a lucas aggregate supply curve to a linear approximation it also implies that the natural rate of unemployment depends positively upon the variability and persistence of relative price shocks

fossil fuel subsidies in the pacific island context analysis of the case of kiribati abstract kiribati is highly vulnerable to climate change induced sea level rise at the same time the country is also very dependent on fossil fuel imports kiribati uses price controls and tax exemptions to make fossil fuels more affordable for low income households this study reviews the subsidies on consumption of fossil fuels specifically gasoline diesel and household kerosene in kiribati and investigates their macroeconomic fiscal distributional and environmental impact the subsidies are quantified using price gap approach over a five year period the subsidies were on average aud 4 2 million when using 2011 2015 data with 2015 tax policies this is equivalent to 2 2 per cent of kiribati gdp over 2011 2014 the average fiscal impact would have been equivalent to 3 7 per cent of government revenues and 29 per cent of government health expenditure apart from being a fiscal burden the subsidies increase greenhouse gas emissions and make kiribati even more dependent on fossil fuel imports and more vulnerable to volatility in international fuel prices no evidence was found to support the argument for using the subsidies to support low income households in fact there are signs of considerable leakages to high income households which is consistent with findings from studies in other countries

some evidence on demand fluctuations and the increased stability of the post war american economy this paper investigates the implications of a sticky wage contracting model that can explain both the decline in wage and price flexibility and the increased stability of the post war american economy the reduction in the size of demand shocks in the post war period has increased agents incentives to write longer contracts though longer contracts have rendered real activity more responsive to demand shocks in the post war period the reduction in the size of these shocks has dominated the increase in the size of response to a particular shock overall real activity has become more stable in the post war period as predicted by theory

carbon pricing effectiveness and equity abstract the 2015 paris agreement adopted the goal of limiting the rise in global mean temperature to 1 5 2 c above pre industrial levels carbon pricing can play a key role in meeting this objective a cap and permit system or alternatively a carbon tax indexed to a fixed emission reduction trajectory not only can spur cost effective mitigation and cost reducing innovation but also crucially can ensure that emissions are held to the target level the carbon prices needed to meet this constraint are likely to be considerably higher however than existing prices and conventional measures of the social cost of carbon this poses issues of distributional equity and political sustainability that can be addressed by universal dividends funded by carbon revenues

international effects of stock market dispersion we study the extent to which stock market dispersion is related to unemployment and output growth for 16 countries over 20 years using panel vector auto regressions and panel dynamic regressions we find increases in stock market dispersion across industries to induce future increases in unemployment and future decreases in industrial production ip growth moreover the responses of unemployment and ip growth following a positive shock to stock market dispersion are persistent and are robust to various controls sample periods and estimation methods our article provides cross country evidence in support of the hypothesis that shifts in demand across industries negatively affect employment

sectoral shifts unemployment and vacancies an empirical analysis for the netherlands abstract in this paper the correlation between sectoral dispersion of employment growth and unemployment is analyzed empirical results for the netherlands indicate that fluctuations in unemployment are due to aggregate demand factors with no substantial influence of shifts in sectoral demand

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

fuel subsidies versus market power is there a countervailing second best optimum fuel subsidies distort end use prices below cost resulting in overconsumption and huge environmental cost on the other hand the mark up over cost due to the exercise of market power results in the social loss of consumer surplus we open a new line of inquiry into the potential for a market based solution from these two countervailing forces can the two offsetting distortions conceivably achieve a second best optimum relying on dynamic panel techniques and gasoline market data for 68 developing countries we uncover an excessive second best subsidy offset to market power mark up on the order of 4 5 our results indicate that the potential for policy failure strongly exceeds the potential for market failure in our model and gasoline prices across our sample may not be aligned with vigorous anti climate change policy

an estimate of a sectoral model of labor mobility this paper develops a model of sectoral labor mobility and tests its main implications the model nests two distinct hypotheses on the origin of mobility a sectoral shocks and b worker employer mismatch we estimate the relative importance of each hypothesis and find that the bulk of labor mobility is caused by mismatch rather than by sectoral shift we then try to put a value on society s match specific information that is we ask to what extent the availability of the option to change jobs raises gnp we find that the mobility option raises expected earnings by roughly between 8 5 percent and 13 percent of labor earnings which translates to an increase in gnp of between 6 percent and 9 percent

changes needed in agricultural policy for female headed farm families in tropical africa abstract the decline in per capita agricultural production has been reversed somewhat in tropical africa by the structural adjustment programs which have increased producer prices liberalized marketing and devalued currencies but the 30 of smallholder farm households which are female headed will not be assisted much due to their special constraints of shortages of labor and credit lack of extension visits and appropriate labor saving technologies for these households the authors argue improved extension services credit for agricultural inputs small ruminant animals and poultry labor saving devices and craft inputs will be necessary to increase their incomes and levels of living

does britain or the united states have the right gasoline tax this paper develops an analytical framework to assess the second best optimal level of gasoline taxation taking into account unpriced pollution congestion and accident externalities as well as interactions with the broader fiscal system we provide calculations of the optimal taxes for the us and the uk under a variety of parameter scenarios under our central parameter values the second best optimal gasoline tax is 1 01 gal for the us and 1 34 gal for the uk current tax rates are much lower than this in the us and higher in the uk the calculations are moderately sensitive to alternative parameter assumptions the congestion externality is the largest component in both nations revenue raising needs also play a significant role as do accident externalities and local air pollution potential welfare gains from reducing the current uk tax rate are estimated at nearly one fourth the production cost of all gasoline used in the uk even larger gains could be achieved by switching to a tax on vehicle miles with equal revenue yield for the us the welfare gains from optimizing the gasoline tax are smaller but those from switching to an optimal tax on vehicle miles are very large

cyclical variations in wage differentials and unemployment this paper attempts to reformulate in a general equilibrium framework reder s model which explains cyclical variations in wage differentials and their general tendencies to narrow specifically i focus on the three aspects of his model the microeconomic behavior of a firm under imperfect information about labor quality the mechanism of the economy creating unemployment and the interaction between wage differentials and unemployment i also explore its implications for the macroeconomic issues on the characteristics of current unemployment and the question of why aggregate employment fluctuates

alleged instability of the okun s law relationship in australia an empirical analysis the determinants of the long run equilibrium unemployment rate are modelled through a cointegrating regression the residual term which represents the error correction mechanism is used in the testing of a general dynamic model to obtain a simplified representation of the data generation process over the period 1968 2 1989 2 the long period equilibrium unemployment rate which is i 1 is shown to be related to the rate of capacity utilization a structural change variable and the rate of capacity growth steady state rates of unemployment are calculated which are based on different assumptions about the magnitudes of the independent variables in contrast to the other two variables changes in the rate of capacity utilization are shown to have only modest effects on the steady state unemployment rate the okun coefficient is inversely related to the steady state unemployment rate which accords with intuition the statistically significant decline in the trend growth rate of non farm gdp in the 1970

capital reallocation and liquidity this paper studies the cyclical properties of capital reallocation and the frictions which inhibit such reallocation we show that the amount of capital reallocation and the benefits to reallocation vary at the business cycle frequency the amount of capital reallocation is procyclical in contrast the benefits to capital reallocation appear countercyclical we measure the amount of reallocation using data on flows of capital across firms and the benefits to capital reallocation using several measures of the cross sectional dispersion of the productivity of capital we then study a calibrated model of an economy where capital reallocation is costly and impute the cost of reallocation which is consistent with the amount of and benefits to reallocation in the data we find that the cost of reallocation needs to be substantially countercyclical to be consistent with the observed joint cyclical properties of reallocation and productivity dispersion the cyclical variation in this cost is interpreted as variation in the liquidity of capital broadly defined since physical costs are unlikely to vary countercyclically

sectoral shocks learning and aggregate fluctuations we present a model in which sectoral shocks have aggregate consequences the model relies on irreversible investment and imperfect information to slow the adjustment of expanding industries we show that this gradual expansion is sub optimal

sectoral shocks and structural unemployment abstract this paper is a first empirical application of the 1988 riordan and staiger paper which showed that in the presence of informational asymmetries between current and potential employees about workers quality abilities sectoral unemployment need not be monotonic in sectoral shocks we find weak evidence in favor of the riordan and staiger model in that the favored sector fills more vacancies the greater is the number of layoffs in the injured sector making use of the empirical implications of the r s model provides no evidence to the suggestive hypothesis that government measures that reduce the number of unemployed workers raise the duration of those who are unemployed in sweden

the unequal benefits of fuel subsidies a review of evidence for developing countries summary this paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries on average the burden of subsidy reform is substantial and is approximately neutrally distributed across income groups a 0 25 decrease in the per liter subsidy results in a 5 decrease in income for all groups more than half of this impact arises from the indirect impact on prices of other goods and services consumed by households fuel subsidies are a costly approach to protecting the poor due to substantial benefit leakage to higher income groups in absolute terms the top income quintile captures six times more in subsidies than the bottom

good subsidies or bad subsidies evidence from low carbon transition in china s metallurgical industry abstract since the metallurgical industry has become the main source of china s carbon dioxide emissions and energy consumption in recent years low carbon transition in that industry is of great significance for achieving china s carbon reduction targets it is generally believed that phasing out fossil fuel subsidies is an effective way to reduce energy related co2 emissions since it can increase the energy prices and lower its consumption this paper aims to investigate whether the energy subsidy removal can promote the low carbon transition of china s metallurgical industry taking inter fuel and inter factor substitution effects as the link we calculate the co2 mitigation potential on the assumption that the subsidies for each category of fossil energy were eliminated we find that the metallurgical industry has a sluggish reaction to the changes in energy price supposing eliminating the energy subsidies in the period of 2003 2015 the amount of reduced co2 would be 487 286 million tons accounting for a slight proportion of the total emissions in the industry but it is meaningful for the global co2 mitigation since it approximates the whole co2 emissions in norway during the same period these findings can provide some new insights for the energy subsidy issue and suggest that the additional measures are required to promote the low carbon transition in china s metallurgical industry rather than just relying on the removal of fossil fuel subsidies

the impact of oil prices on gdp in european countries an empirical investigation based on asymmetric cointegration this paper investigates the existence of a long term relationship between oil prices and gdp in 12 european countries to account for the fact that economic activity responds asymmetrically to oil price shocks we propose an approach based on asymmetric cointegration our results show that while standard cointegration is rejected there is evidence for asymmetric cointegration between oil prices and gdp in the majority of the considered european countries

an empirical model of sectoral movements by unemployed workers using canadian data i investigate the relationships among sectoral mobility unemployment spells and total unemployment recent north american evidence suggests that incidence shifts toward high wage high tenure workers may increase equilibrium unemployment through decreasing sectoral mobility and increasing spells using a multiple spell transition model i find that while shifts toward such workers may have these effects composition changes that lead to higher mobility can also increase unemployment a further investigation into the relative roles of mobility and spell lengths in driving total unemployment indicates that the influence of the former is comparatively small

the aggregate effects of sectoral reallocations abstract can a one time permanent change in the fundamentals behind the sectoral composition of the economy prompt an aggregate downturn can this downturn be non negligible even if one uses us data to determine the relative size of gross vs net job flows and the importance of job creation costs can one consider the military build down of the 1990s as a plausible cause for the 1990 1991 recession do sectoral reallocations generate responses that are qualitatively similar to productivity shocks we use a variant of the mortensen pissarides 1994 review of economic studies 61 397 415 job creation destruction model calibrate it to us labor market data and run experiments that suggest one can answer yes to all these questions

agricultural policy in tropical africa is a turnaround possible abstract the food crisis in africa has entered our living rooms through television and the press why is per capita agricultural production lower now than at independence in the early 1960s this article examines the factors responsible and outlines some solutions both external and internal factors have converged to create the crisis low prices to farmers to placate vocal urban consumers inefficient high cost marketing boards governments neglect of agriculture in favor of industry over valued exchange rates lack of foreign exchange and increasing debt burdens externally the depressed world market decreased demand for africa s exports and contributed to the stagnation of the economics drought a population growth rate approaching 3 year and a shortage of human capital added to the crisis

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

unemployment and recruitment with heterogeneous labor this paper describes the equilibrium wage distribution and unemployment rate when firms recruit search for employees a model in which firms inability to distinguish workers who refuse job offers increases their expected recruiting costs is contrasted with one in which indistinguishable low productivity workers decrease firms expected gains from hiring in both work force heterogeneity enhances search uncertainty firms recruit less intensively than otherwise and so the equilibrium unemployment rate rises heterogeneity reflects searchers incomplete knowledge of desirable trading partners locations and will likely be a confounding influence and source of unemployment in large economies with imperfectly observable sector specific shocks

welfare impact of electricity subsidy reforms in pakistan a micro model study abstract electricity subsidies in developing countries have always been debated in economics circles despite their popular appeal of providing relief to the poor the research has proven otherwise they increase the magnitude of deadweight loss and taper consumer welfare however complete withdrawal of a subsidy will make electricity unaffordable for the underprivileged therefore in the context of developing countries there is a need to determine the optimal level of subsidy which will have the least economic impact and benefit the maximum number of users pakistan has been marred by deep energy crises and the government is forced to provide very large subsidies for electricity using pakistan as a case study this study uses a uniform and non uniform price increase to determine the optimal level of electricity subsidies this study employs a micro model technique for the calculation of deadweight and welfare losses when the price of electricity is increased uniformly or non uniformly across different consumption groups this study also introduces a targeted subsidy approach for curbing the mounting deadweight loss due to immense electricity subsidies our research has identified that the targeted subsidy approach not only generates fiscal savings but also improves the welfare of the vulnerable in society

how much can co2 emissions be reduced if fossil fuel subsidies are removed abstract this paper analyzes consumers price elasticities of demand for fossil fuels and how a reduction of fossil fuel subsidies can lead to important reduction in co 2 emissions for various groups of countries that have relatively high fossil fuel subsidies and notably on diesel including countries in the middle east and north africa mena these countries continue to maintain significant levels of fuel subsidies with iran and saudi arabia being the largest contributors to co 2 emissions this paper illustrates that fuel price policy reforms by these countries would be an important instrument for both climate and economic policies we estimate that a reduction in subsidies to both gasoline and diesel by about 20 us cents per liter will lead to significant decreases in co 2 emissions both in the mena region and globally in iran for example the reductions could be up to 90 and 50 of current emissions generated from diesel and gasoline consumption respectively and for saudi arabia approximately 70 and 40 respectively

asymmetric fluctuations in consumption abstract this paper develops simple models of consumption which allow for the possibility that decreases in consumption are less frequent but more severe than increases statistical tests provide some support for this asymmetry

poverty and distributional effects of carbon pricing in low and middle income countries a global comparative analysis abstract even though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing the existing literature reveals ambiguous results for this reason we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low and middle income countries building on a consistent dataset and method we find that for countries with per capita incomes of below usd 15 000 per year at ppp adjusted 2011 usd carbon pricing has on average progressive distributional effects we also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy rather than of food goods or services we argue that an inverse u shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income since these countries are likely to have more financial resources and institutional capacities to deal with distributional issues our findings suggest that mitigating climate change raising domestic revenue and reducing economic inequality are not mutually exclusive even in low and middle income countries

an inquiry into the sources of macroeconomic fluctuations abstract this paper attempts to decompose the sources of fluctuations in quarterly employment by industry and region into 1 an aggregate national shock 2 region specific shocks 3 industry specific shocks and 4 idiosyncratic factors the empirical analysis is motivated by a dynamic theory of the business cycle the empirical methodology is the engle watson dynamic mimic model implemented via the em algorithm the work is motivated as an attempt to compare empirically aggregate single factor theories of the cycle with real business cycle theories emphasizing industrial or regional shocks

the impact of phasing out fossil fuel subsidies on the low carbon transition abstract there is growing consensus on the fact that fossil fuel subsidies provided by governments in high income countries represent a misalignment on emissions reduction with the global climate agenda in addition a discussion emerged on the negative socio economic and environmental externalities associated with fossil fuel subsidies nevertheless pathways for phasing out fossil fuel subsidies in high income countries and their implications on the low carbon transition have not yet been assessed with the aim to narrow this knowledge gap we extend the eirin stock flow consistent behavioral model to study the implications on sustainable development of the gradual phasing out of fossil fuels subsidies whose revenues could be used by the government to subsidize energy investments in green capital e g solar panels either via fiscal policies or green bonds we assess the effects on green growth employment credit and bonds market as well as the distributive effects across heterogeneous households and sectors a smooth phasing out of fossil fuels subsidies contributes to improve macroeconomic performance to decrease inequality and helps the government to find fiscal space to support stable renewable energy policies renewable energy subsidies contribute to foster the low carbon transition but could imply distributive effects depending on the way in which they are implemented

excess worker reallocation workers face a trade off between macroeconomic and individual incentives to work in different occupations industries namely between search frictions and personal comparative advantages workers endowed with heterogeneous multi dimensional skills search for jobs that require different skill combinations in equilibrium specialized individuals contact few selected types of vacancies where they are likely to be hired those with weak comparative advantages are seldom chosen among competing applicants thus seek any job type in a tight labour market comparative advantages dominate waiting costs offsetting labour mobility across industries occupations excess worker reallocation is lower and matches are more successful consistently with direct and indirect evidence

unemployment fluctuations in the united states further tests of the sectoral shifts hypothesis this paper presents further evidence on the importance of sectoral shifts by examining unemployment fluctuations in the united states over the period 1960 to 1991 extending previous research in three directions first by using a thirty industry decomposition of quarterly nonagricultural employment second by employing modern time series econometric techniques and third by using dispersion measures purged of both monetary and aggregate demand influences the authors findings support the view that sectoral shifts have been an important element of fluctuations in u s employment and also indicate that a given amount of dispersion has been associated with more unemployment during downturns than upturns copyright 1995 by mit press

the welfare effects of unprecedented electricity price hikes in zambia abstract this paper simulates the real household expenditure effects of large electricity price increases in zambia first we find that electricity subsidies are highly regressive the richest household quintile receives over 60 of the subsidies while the poorest quintile receives less than 1 second our partial equilibrium simulations of the welfare effects of a 75 electricity price increase show that the poorest households would experience a 3 times larger percentage loss in real expenditure compared to the wealthiest households naturally these adverse effects lead to an increase in poverty however we find that transferring the fiscal savings realised from the complete elimination of electricity subsidies to the poor reduces extreme poverty significantly this budget neutral strategy is particularly attractive for zambia and other sub saharan economies currently battling the twin challenges of widening budget deficits and high extreme poverty

cyclical fluctuations and sectoral reallocation evidence from the psid abstract this paper documents the correlation between permanent sectoral reallocation and the business cycle using data from the michigan panel study of income dynamics we find that the outflow of workers from goods to services accelerates during recessions the flow from services to stable employment in surables accelerates during booms we also document the contribution of sectoral reallocation to total unemployment permanent switchers account for about a quarter of the total weeks of unemployment during booms this proportion rises to nearly 40 duing recessions

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

accounting for unemployment a labour market perspective i examine whether prolonged high unemployment in canada can be attributed to various structural causes rather than to demand deficiency as found by macro econometric models the answer is largely negative neither the dispersion of sectoral growth rates nor excessive and rigid real wages can convincingly account for most unemployment contentions to the contrary are based upon inappropriately partial analyses enduring shifts in industrial structure have if anything been declining labour mobility is high much unemployment lasts too long to be frictional fuller quantitative understanding of the nature of unemployment can be achieved only in a more general framework

bottlenecks and the phillips curve a disaggregated keynesian model of inflation output and unemployment benchmark macroeconomic models of output and inflation combine the demand side of the economy with aggregate supply equations based upon some version of the phillips curve in contrast to classical and new classical models such as lucas i972 and sargent 1979 chs i xii and xvi in which prices jump instantaneously to market clearing levels the gradual price adjustment approach represented by tobin 1972 laidler and parkin i975 section 4 barro and grossman 1976 ch 5 sargent 1979 ch ii and ch v i okun i98i and perry i983 take wages and or prices to be predetermined at an instant in time while their rates of change depend on the level of aggregate output in the prototype complete macroeconomic model incorporating this approach output is determined by aggregate demand equations while the augmented phillips curve specifies that prices move in a direction which will tend to return output to its equilibrium value this short run keynesian long run monetarist character is typical of many structural macroeconometric models it is the standard textbook account found for example in dornbusch and fischer i98i and is implicit in much current research there are fundamental questions of consistency in the type of model just described the central difficulty is that with wages and prices predetermined the non market clearing analysis ofbarro and grossman i 976 ch 2 and malinvaud i977 is applicable but in this world the aggregate demand equations are decisive only in the keynesian regime in the other regimes which must arise at high levels of aggregate demand the effective supplies of output or labour or both must be modelled indeed at the aggregate level it is difficult to provide a coherent account of how it is possible to have output above its equilibrium value since this would require labour and output in excess of their notional supplies violating barro and grossman s min condition that quantities be determined by the short side of the market an appealing line for addressing this last difficulty is to disaggregate markets an approach taken by hansen i970 tobin i972 and barro and grossman i976 ch 5 however because each market can be in either excess supply or demand a formal fixed price general equilibrium model appears to be intractable due to the resulting multiplicity of regimes and is not attempted by these authors in this paper these problems are overcome in a disaggregated model in which

regional and sectoral evidence of the macroeconomic effects of labor reallocation a panel data analysis this paper revisits the sectoral shifts hypothesis by examining unemployment fluctuations for 48 u s states over the period 1990 01 2011 12 we develop a panel approach that incorporates dynamics parameter heterogeneity aggregate factors and cross sectional dependence our findings provide support for a positive and significant effect of the employment dispersion index on unemployment this outcome is robust under alternative specifications and measures of employment dispersion the empirical evidence corroborates the presence and relevance of cross sectional dependence and heterogeneity among states the results show that once unobserved common factors and cross state heterogeneity are taken into account labor reallocation has a significant effect on unemployment that is half the size of the estimate when cross sectional dependence is not taken into account

interpreting the beveridge curve an agent based approach abstract we construct an agent based computational model of the labour market with heterogeneous workers and firms to study the behaviour of the beveridge curve along the business cycle in this framework search frictions arise because filling a vacancy is a costly activity that takes time whereas productivity mismatch comes from firms imperfect information about the value of the workers before the job interview takes place the model offers an interpretation for the outward movement exhibited by the u s beveridge curve since the last months of 2009 sectoral misallocation plays a role moreover when the speed of recovery from a recession is not uniform across sectors unemployed workers are less selective in their application strategy and firms must spend more time in choosing the best match unemployment remains high in spite of an increase in the number of vacancies

structural unemployment in the united states the effects of interindustry and interregional dispersion structural unemployment in the united states the effects of interindustry and interregional dispersion the effects of sectoral shifts measured by dispersion in the growth rates of employment or earning across industries or regions on unemployment are tested in a specification controlling for the effects of other labor market variables and shifts in the demographic composition of the labor force interindustry and geographical shifts in labor demand have significant unemployment effects with adult males the group most strongly affected the estimated equations imply that most of the fluctuation in unemployment over the period 1956 87 was been due to microeconomic causes rather than aggregate demand i introduction the unemployment rate in the united states increased from an average of 4 9 percent for 1956 73 to 7 2 percent for 1974 87 it is of considerable importance for purposes of economic policy to evaluate the contributions of various microeconomic and macroeconomic factors to this increase in the unemployment rate if the primary cause is deficient aggregate demand then the appropriate policy response may include stimulative monetary and fiscal policy if microeconomic factors are most significant then the appropriate policies would be microeconomic in nature job training programs restructuring of minimum wage laws and unemployment insurance programs etc the period from 1974 to 1987 differed from the earlier postwar period in several widely recognized ways oil prices increased dramatically in 1974 and 1979 and decreased substantially beginning in 1982 the steady postwar increase in the female labor force participation rate became more rapid in the 1970s the large population cohort associated with the postwar baby boom began reaching maturity and entering the labor market in the early 1970s inflation in the united states was sustained at levels higher than ever before the dollar began floating against the currencies of other industrial countries following the collapse of the bretton woods system in 1971 and fluctuated considerably in both nominal and real value first west germany then japan and most recently taiwan and south korea developed impressive manufacturing bases in industries in which u s exports had formerly faced far less competition government expenditures on income transfer programs accelerated dramatically in the 1970s while regulatory policies were changed in many industries the influence of these disturbances on the natural rate of unemployment has been modeled through three main channels 1 the effects of labor market distortions such as minimum wage laws unemployment insurance and unions 2 the effects of changes in the demographic composition of the labor force and 3 the effects of shifts in the sectoral composition of production and employment a growing literature has emerged following david lilien s 1982a finding that sectoral shifts measured by interindustry dispersion in rates of employment growth explain much of the increase in unemployment in the late 1970s however the studies relating unemployment to dispersion measures have largely ignored the effects of demographic changes and other traditional labor market variables the present paper tests whether dispersion variables help to explain unemployment when the effects of several market distortion variables and changes in the demographic composition of the labor force are taken into account i also examine the relative explanatory power of several alternative measures of both interindustry and interregional dispersion the second section of the paper summarizes the literature on the effects of dispersion on unemployment the results of my empirical analysis are presented in section iii and applied to current economic policy issues in section iv the final section of the paper summarizes my conclusions

how large are global fossil fuel subsidies summary this paper estimates fossil fuel subsidies and the economic and environmental benefits from reforming them focusing mostly on a broad notion of subsidies arising when consumer prices are below supply costs plus environmental costs and general consumption taxes estimated subsidies are 4 9 trillion worldwide in 2013 and 5 3 trillion in 2015 6 5 of global gdp in both years undercharging for global warming accounts for 22 of the subsidy in 2013 air pollution 46 broader vehicle externalities 13 supply costs 11 and general consumer taxes 8 china was the biggest subsidizer in 2013 1 8 trillion followed by the united states 0 6 trillion and russia the european union and india each with about 0 3 trillion eliminating subsidies would have reduced global carbon emissions in 2013 by 21 and fossil fuel air pollution deaths 55 while raising revenue of 4 and social welfare by 2 2 of global gdp

measuring global gasoline and diesel price and income elasticities abstract price and income elasticities of transport fuel demand have numerous applications they help forecast increases in fuel consumption as countries get richer they help develop appropriate tax policies to curtail consumption help determine how the transport fuel mix might evolve and show the price response to a fuel disruption given their usefulness it is understandable why hundreds of studies have focused on measuring such elasticities for gasoline and diesel fuel consumption in this paper i focus my attention on price and income elasticities in the existing studies to see what can be learned from them i summarize the elasticities from these historical studies i use statistical analysis to investigate whether income and price elasticities seem to be constant across countries with different incomes and prices although income and price elasticities for gasoline and diesel fuel are not found to be the same at high and low incomes and at high and low prices patterns emerge that allow me to develop suggested price and income elasticities for gasoline and diesel demand for over one hundred countries i adjust these elasticities for recent fuel mix policies and suggest an agenda of future research topics

organizational adjustment and institutional factors in japanese labour market adjustment an empirical evaluation abstract this paper examines the importance of institutional factors in the mechanism of japanese labour market adjustment the commonly held view suggests that transfers of employees both between and within firms have enhanced flexibility while contributing to the maintenance of low unemployment rates the paper produces evidence in support of the importance of transfers as an adjustment device limited to a subset of large manufacturing enterprises however the direct macroeconomic contribution of these institutional factors is marginal and the common view may have overestimated their importance

regional income fluctuations common trends and common cycles this paper investigates trend and cycle dynamics in per capita income for the major u s regions during the 1956 1995 period cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components we find considerable differences in the volatility of regional cycles controlling for differences in volatility we find a great deal of comovement in the cyclical response for all regions but the far west possible sources underlying differences in regional cycles are explored such as the share of a region s income accounted for by manufacturing defense spending as a proportion of a region s income oil price shocks and the stance of monetary policy somewhat surprisingly we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles but manufacturing share differentially affects trend growth for four of the seven regions studied

relative price dispersion aggregate price movement and the natural rate of unemployment this paper develops a model of relative price stickiness and examines its implications for the relationship between relative prices inflation and the natural rate of unemployment estimation of the model demonstrates that causality in the relationship between relative and aggregate prices runs in both directions however microeconomic disturbances have been the primary source of relative price change variance over the postwar period and these micro disturbances have exerted a strong effect on inflation in the short run it also is shown that micro relative price change dispersion has had a significant influence on the natural rate of unemployment

unemployment in regional labor markets using structural theories to understand local jobless rates in west virginia the author uses a range of structural labor market models to understand differing regional jobless rates in a state affected by pockets of structural unemployment four theories of regional structural unemployment are presented and their hypotheses are statistically evaluated using west virginia county panel data the author then presents case study evidence to compare these statistical results with the realities of the county labor markets both types of empirical evidence suggest that a segmented non market clearing model in which structural unemployment stems from queuing for above market clearing wages in both a high wage primary sector and a lower wage secondary sector can shed the most light on regional unemployment rates in west virginia

sectoral shifts and aggregate unemployment additional empirical evidence 1990 sectoral shifts and aggregate unemployment additional empirical evidence applied economics vol 22 no 3 pp 331 346

global kerosene subsidies an obstacle to energy efficiency and development summary it is widely agreed that energy subsidies impede the efficient functioning of markets the resulting distortions in prices work at odds with policies to improve energy efficiency and reduce the cost of energy services and associated externalities such as health and environmental damages the analysis developed in this article finds that kerosene is used in 173 countries at a cost to consumers of 43 4b y 60 3b y including direct economic subsidies and 77 2b y including certain externalities despite low world oil prices direct economic subsidies for kerosene were 18 4b in 2013 and 34 7b including environmental externalities these values correspond to 72 and 56 of total kerosene costs being passed through to consumers respectively when excluding advanced economies the pass through values fall to 40 and 35 approximately 52 of the global kerosene supply receives direct subsidy or 63 when externality costs are considered the cooking end use receives 2 0b y in direct kerosene subsidies lighting 7 1b y and heating and other residual uses 9 3b y or 76 per over all households each year defining subsidies at this level of granularity is useful for pinpointing policy issues and opportunities promoting a transition to energy efficient off grid energy services is one of the most cost effective ways of reducing dependency on subsidies however the very presence of subsidies undercuts this process by diluting market price signals and rendering energy efficiency investments less cost effective while competing with other social and development focused budgetary needs kerosene subsidies are additionally counterproductive because the emerging technologies they impede e g improved lighting and cook stoves also improve productivity safety and quality of life forty five countries many in the developing world have priced kerosene such that there are no direct subsidies and twenty two have done so even when accounting for environmental externalities suggesting the practice is economically and politically feasible

sectoral shifts and canadian unemployment in this paper lilien s 1982 hypothesis that sectoral shifts in employment raise aggregate unemployment is tested using canadian quarterly data lilien s framework is extended to investigate regional labour market rigidities and to distinguish between industry shifts that are correlated with changes in aggregate activity and those which are exogenous to the overall level of activity the robustness of the results to various changes in model specification is also investigated i find that in canada exogenous shifts in employment between sectors do not have a significant effect on the aggregate unemployment rate this abstract was borrowed from another version of this item

oil prices and the south african economy a macro meso micro analysis abstract three levels of analysis are used to track the channels by which south africa and its people are impacted by an increase of oil prices namely the macro economic level the meso economic level and the micro economic household level the paper uses an economy and energy integrated approach to quantify these different channels the approach combines a household survey dataset and an input output dataset to implement the models results indicate that the impacts on the macroeconomy are negative with gross domestic product falling and the current account balance worsening all of the industries falling into the high intensive oil use group witness an increase of their input cost that is above the economy wide average the impact of doubling paraffin prices results in poor households in rural areas and among the black population in particular witnessing an increase of their cost of living which is much higher than their corresponding highest expenditure quintile groups an increase of transport fuel hits the richer households much harder the distributional impacts of rising transport cost as a consequence of high oil and oil products prices shows that median quintile expenditure groups observe the highest impact both in urban and rural areas and especially among the black population

regional beveridge curves a latent variable approach dixon r lim g c and freebairn j regional beveridge curves a latent variable approach regional studies this paper applies an unobserved components model to a panel of australian data to identify the direction and timing of the shifts in regional beveridge curves the approach identifies a common factor while allowing for region specific effects the common factor that drives the relationship between regional unemployment and vacancy rates is extracted and it is then related to various explanatory variables the contribution of common shocks to fluctuations in regional unemployment ranges from 18 to 68 the paper demonstrates the usefulness of a latent variable approach and in relation to policy the findings suggest the need for an explicit regional policy to tackle unemployment in australia

sectoral shifts labor market sorting and aggregate fluctuations a model of sectoral reallocation is constructed where intersectoral friction is not caused by search or mobility costs instead a sectoral disturbance has a negative effect on production possibilities because it reduces the value of previous sorting in the labor market in equilibrium a measure of sectoral dispersion is positively correlated with the unemployment rate an increase in the incidence of sectoral disturbances increases unemployment at cyclical peaks and at cyclical troughs copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

oil price shocks and transportation firm asset prices abstract the transportation sector is a major user of oil based energy even as oil prices continue to fluctuate greatly the impact of oil price changes on transportation firms has heretofore not been adequately examined this paper fills this gap documenting important new findings based on analysis of over two decades of daily data on large changes in oil prices oil price shocks first while transportation firm returns are influenced negatively by oil price increases risks are increased more by oil price declines second firm characteristics are important with the market to book ratio being the most important firm characteristic and roa firm size and the prior run up in prices are also important in influencing oil price related returns betas variances and trading volumes third in the s p transportation sub sector industry concentration is negatively related to returns oil price risk and trading volume and asymmetrically related to returns and market betas these new findings enhance our understanding of the asset price impact of oil price shocks and should be of much interest to scholars corporate executives money managers regulators and policy makers