macroeconomic uncertainty through the lens of professional forecasters abstractwe analyze the evolution of macroeconomic uncertainty in the united states based on the forecast errors of consensus survey forecasts of various economic indicators comprehensive information contained in the survey forecasts enables us to capture a real time measure of uncertainty surrounding subjective forecasts in a simple framework we jointly model and estimate macroeconomic common and indicator specific uncertainties of four indicators using a factor stochastic volatility model our macroeconomic uncertainty estimates have three major spikes has three major spikes aligned with the 1973 1975 1980 and 2007 2009 recessions while other recessions were characterized by increases in indicator specific uncertainties we also show that the selection of data vintages affects the estimates and relative size of jumps in estimated uncertainty series finally our macroeconomic uncertainty has a persistent negative impact on real economic activity rather than producing wait and see dynamics

testing the s s model the s s model has enjoyed tremendous popularity over the past decade it has been employed almost everywhere that discrete adjustment is observed today microeconomic rigidities are seen as an important influence on aggregate dynamics in this paper we quickly characterize the microeconomic evidence for the model to narrow the scope of our discussion we will focus our attention on real variables and we will comment on price inertia where appropriate we conclude that in spite of its popularity the evidence for the importance of the s s adjustment is surprisingly weak we argue that discrete adjustment is in and of itself of little macroeconomic interest to be important these frictions must coordinate agents to act together thereby exacerbating deviations from the neoclassical benchmark to date there have been few attempts at empirically identifying such interactions in the last section we present some results of our own we test one of the main implications of s s adjustment that a greater variance in the forcing process leads to more frequent adjustment using data on automobiles from the consumer expenditure survey we find that more variable income leads to less frequent adjustment we speculate that this correlation is indicative of a link between discrete adjustment and imperfect capital markets this interaction could provide an important role for s s frictions

household labor market choices and the demand for recreation this paper introduces household labor market choices into the demand for recre ation showing that the opportunity cost of time wage rate connection is severed when several household members have the opportunity to par ticipate in the labor market at fixed wages an ap plication of recreation demand for households in new bedford massachusetts shows that the rec reation demand models and estimates of con sumer surplus are sensitive to household labor market choices q26

possibilities for including the opportunity cost of time in recreation demand systems recreation demand modelers have attempted to identify and incorporate the opportunity cost of an individual s time in travel and on site in the model larson 1993b focused on the value of leisure time in a model where individuals face a fixed work week in this paper we examine the connection between labor supply and recreation demands and focus on conditional demand systems we illustrate that corner solution models are not needed to explain several interesting time related recreation issues

revealing preferences for leisure time from stated preference data when consumer choice is constrained by time as well as money willingness to pay can be defined with respect to either numeraire the two measures can be related formally within a utility consistent model of choice subject to two constraints furthermore when information is collected on both the respondent s marginal value of time can be identified a system of willingness to pay time and money and the marginal value of leisure time is estimated jointly in an application to california whalewatching and whale stock enhancement the empirical approach can be applied with only minor additions to survey techniques for nonmarket valuation

using revealed preferences to estimate the value of travel time to recreation sites the opportunity value of travel time vtt is one of the most important elements of the total cost of recreation day trips and arguably the most difficult to estimate most studies build upon the theoretical framework proposed by becker 1965 by using a combination of revealed and stated preference data to estimate a value of time which is uniform in all activities and under all circumstances this restriction is relaxed by deserpa s 1971 model which allows the value of saving time to be activity specific we present the first analysis which uses actual driving choices between open access and toll roads to estimate a vtt specific for recreation trips thereby providing a value which conforms to both becker s and deserpa s theoretical models using these findings we conduct a monte carlo simulation to identify generalizable results for subsequent valuation studies our results indicate that 3 4 of the wage rate provides a reasonable approximation of the average vtt for recreation trips while the commonly implemented assumption of 1 3 of the wage rate generates downward biased results

estimating the cost of leisure time for recreation demand models abstract in this paper we propose a method of determining the opportunity cost of leisure time with an empirical recreation demand application typically the opportunity cost of leisure time is assumed to be some fraction of the wage rate this practice has limitations first it assumes that individuals can trade time for money at their wage second it offers no guidance about how to value the time of an individual who is not in the labor force this paper proposes a method of determining this cost that does not suffer from these drawbacks an empirical example is provided which demonstrates the proposed approach and contrasts it with commonly applied approaches

using subjective income expectations to test for excess sensitivity of consumption to predicted income growth abstract we test for precautionary saving and excess sensitivity of consumption to predicted income growth using a 1989 1993 panel survey of italian households that has measures of subjective income and inflation expectations these expectations provide a powerful instrument for predicting income growth the empirical specification controls for predictable changes in labor supply and allows a fairly general specification for the stochastic structure of the forecast error we find that consumption growth is positively correlated with the expected variance of income and uncorrelated with predicted income growth overall the results support the precautionary saving model

reconciling models of recreational route and site choices when employing travel cost models the unit cost of the essential input travel in the household s production of a recreation experience is central to obtaining the preference structure for the recreational good however little attention has been given to the choice of the route although the route defines the monetary and time costs used to compute travel costs conventional wisdom considers time and money costs in determining the cost per mile in the estimation of site choices but does not use both in determining the route choices and mileages this paper investigates whether models of recreational site and route choices can be reconciled

the opportunity cost of travel time in recreation demand models deciding how to allocate forage among animals is a fundamentally important process in range management the wisdom of these decisions can be enhanced by estimating the marginal value of forage needed by competing species we present a method for

consumer durables and inertial behaviour estimation and aggregation of s s rules for automobile purchases the s s model originally introduced in the study of inventories see arrow et al 1951 scarf 1959 has recently received renewed attention both in the durable consumption and in the investment and labour demand literatures caballero 1993 for instance appeals to these type of models to explain the time series properties of durable expenditure and in particular the persistence or slow adjustment of such a variable in this paper i model the purchase behaviour of automobiles by u s households as an s s rule i estimate a flexible specification of such a rule using a large microeconomic data set and study some of the aggregate implications of this type of inertial behaviour the paper is one of the first attempts at estimating directly the parameters of an s s rule using micro data because of this some of the methodological issues concerning the specification and the estimation of s s rules are relevant for many potential applications furthermore the paper is one of the first to discuss and quantify the aggregate implications of an s s rule estimated on micro data in the presence of non convex transaction costs a full and consistent characterization of individual behaviour is very hard and typically requires strong restrictions grossman and laroque 1991 prove that an s s rule is optimal for a consumption and investment problem under very special circumstances some of their results were extended by eberly 1991 and beaulieu 1993a b eberly 1991 in particular has derived some closed form solutions for durable consumption in the presence of transaction costs while caballero and engel 1994 construct a model of investment where an s s rule is optimal the main problem with these theoretical results is that it is only possible to show optimality of s s rules under very stringent conditions in particular a necessary condition to derive them is that the optimization problem faced by an individual consumer can be reduced to a problem with a single state variable unfortunately as pointed out by bar ilan and blinder 1992 even simple generalizations are extremely difficult to analyse

measuring uncertainty based on rounding new method and application to inflation expectations abstract the literature on cognition and communication documents that people use round numbers to convey uncertainty this paper introduces a method of quantifying the uncertainty associated with round responses in pre existing survey data i construct micro level and time series measures of inflation uncertainty since 1978 inflation uncertainty is countercyclical and correlated with inflation disagreement volatility and the economic policy uncertainty index inflation uncertainty is lowest among high income consumers college graduates males and stock market investors more uncertain consumers are more reluctant to spend on durables cars and homes round responses are common on many surveys suggesting numerous applications of this method

modeling multiple objective recreation trips with choices over trip duration and alternative sites traditionally recreation demand studies have focused on single day single activity trips despite anecdotal and empirical evidence that many recreational trips involve overnight stays and multiple purposes this paper develops a random utility model that explores how visitors choose alternative sites and trip durations for multiple objective trips we focus on a recreational activity beach visits that appear to have significant proportions of the population taking single and multiple day trips and many of the multiple day trips involve multiple objectives multiple duration and multiple objective issues are incorporated in pricing trip costs the results of the research suggest that the accepted method for incorporating travel costs into random utility models can lead to biased estimates of the structural utility parameters and consequently biased measures of welfare in a multiple objective trip setting for single and multiple day users

a simple repackaging model of recreational choices the traditional travel cost model uses trips or visits as its measure of quantity and travel cost per trip or visit as its price however because many estimated demand curves do not hold visit length constant they cannot be used to value increments of use the simple repackaging model of muellbauer and fisher and shell is used to derive demand curves exhibiting constant visit length from demand curves exhibiting variable visit length the former allow the marginal quantity valuations that are necessary for management decisions involving capacity or use the travel cost method for measuring recreation demand was originally developed to assist in determining the value of a given resource used for recreational purposes comparison of the recreation value with values in other uses is important for the planning process resource allocation however often requires estimates of the marginal values of additional quantities of the resource i e additional recreation capacity and or increases in the use of the resource or improvements in resource quality marginal valuations of quality improvements involve shifts in the travel cost demand

the role of site and job characteristics in hedonic wage models recent economic analyses of wage rate differentials have generally used some form of hedonic framework in explaining the observed wage structure while these studies have adopted this common theoretical justification the models have been used to serve two distinct objectives the first of these is an empirical test of the theory of equalizing differences originally introduced by adam smith in such applications see brown 7 lucas 26 olson 28 thaler and rosen 36 and viscusi 40 as examples specific job characteristics measured with technical information or with worker perceptions have been used to explain differences in wage rates across individuals and jobs while there are a number of these studies there has not been a consistent pattern of support for the theory indeed with the exception of job risks many characteristics that a priori would be expected to lead to equalizing differences have often exhibited incorrect and or statistically insignificant measured effects on wages the second use for wage models has been as the basis for an index of the quality of life in urban areas in this framework households are assumed to select residential locations so as to maximize their individual welfare migration between cities provides the mechanism for an equilibrium household assignment under ideal conditions the pattern of equilibrium wage rates reflects the attributes of the cities involved see hoch 20 izraeli 23 cropper lo cropper and arriaga salinas 111 and rosen 31 as examples the purpose of this paper is to develop a model for wage rate differentials that includes both job and site characteristics and to estimate the model with a large micro data set our wage models provide estimates of a market clearing envelope which includes each of two types of past analyses as a

permanent income liquidity and adjustments of automobile stocks evidence from panel data a recent article by bernanke 1984 tests the rational expectations permanent income hypothesis using panel data on automobile expenditures he finds no evidence refuting the hypothesis this paper incorporates a threshold adjustment process into bernanke s model estimations based on a subset of the data used by bernanke reveal evidence that resale market imperfections and credit market constraints have important effects on automobile expenditures

durable goods an explanation for their slow adjustment at the microeconomic level durable purchases are often discontinuous and relatively large this feature has the potential to explain why aggregate expenditure on durables responds only slowly relative to the frictionless permanent income model to wealth and other aggregate innovations in this paper i develop new results on the problem of dynamic aggregation of stochastically heterogeneous units which help to characterize the connection between microeconomic behavior and aggregate dynamics in the presence of nonconvex adjustment costs using these results and splitting postwar u s aggregate durable purchases into different subcategories and time periods i provide further support for the view that lumpy microeconomic purchases play an important role in explaining the time series behavior of aggregate expenditure on durable goods

measuring uncertainty and its impact on the economy we propose a new framework for measuring uncertainty and its effects on the economy based on a large var model with errors whose stochastic volatility is driven by two common unobservable factors representing aggregate macroeconomic and financial uncertainty the uncertainty measures can also influence the levels of the variables so that contrary to most existing measures ours reflect changes in both the conditional mean and volatility of the variables and their impact on the economy can be assessed within the same framework moreover identification of the uncertainty shocks is simplified with respect to standard var based analysis in line with the favar approach and with heteroskedasticity based identification finally the model which is also applicable in other contexts is estimated with a new bayesian algorithm which is computationally efficient and allows for jointly modeling many variables while previous var models with stochastic volatility could only handle a handful of variables empirically we apply the method to estimate uncertainty and its effects using us data finding that there is indeed substantial commonality in uncertainty sizable effects of uncertainty on key macroeconomic and financial variables with responses in line with economic theory

signals or noise explaining the variation in recreation benefit estimates this paper uses meta analysis to summarize the benefit estimates derived from travel cost recreation demand models after reviewing approximately 200 published and unpublished studies prepared from 1970 to 1986 77 were found to report either consumer surplus estimates or sufficient information to derive them using these estimates of the consumer surplus per unit of use from each study it was possible to evaluate the influence of variables describing the site characteristics the activities undertaken at each site the behavioral assumptions and the specification decisions the findings provide clear support for using econometric methods to summarize results from diverse empirical studies they highlight the important research issues in model development and offer a consistency check to the procedures used in benefit transfer analyses for policy evaluations

fixed adjustment costs and aggregate fluctuations this paper studies the analytics of a canonical model of xed adjustment costs in the presence of idiosyncratic productivity shocks we provide a novel analytical characterization of the steady state and dynamics of aggregate outcomes implied by the model the dynamics are shown to have an intuitive partial adjustment representation these results are then used to derive a set of approximations to model outcomes in the presence of a small adjustment cost surprisingly these reveal that both aggregate steady state outcomes and aggregate dynamics are approximately neutral with respect to a small xed adjustment cost we show that this neutrality result emerges from a symmetry property in the distributional dynamics of the model and arises even in the absence of general equilibrium adjustment of prices a set of quantitative illustrations con rms these analytical results for parameterizations commonly used in the literature on employment adjustment

spring cleaning rural water impacts valuation and property rights institutions the brief summarizes the spring cleaning rural water impacts valuation and property rights institutions the first two rounds of spring protection occurred in january april 2005 and august november 2005 the author measure health impacts of spring protection an investment that improves source water quality the author also estimate households valuation of spring protection and simulate the welfare impacts of alternatives to the current system of common property rights in water which limits incentives for private investment spring infrastructure investments reduce fecal contamination by 66 percent but household water quality improves less due to recontamination child diarrhea falls by one quarter travel cost based revealed preference estimates of households valuations are much smaller than both stated preference valuations and health planners valuations and are consistent with models in which the demand for health is highly income elastic the author estimate that private property norms would generate little additional investment while imposing large static costs due to above marginal cost pricing private property will function better at higher income levels or underwater scarcity and alternative institutions could yield pareto improvements

the opportunity cost of travel time as a noisy wage fraction few issues are more important to welfare estimation with recreation demand models than the specification of the opportunity cost of travel time the two most common approaches to specifying this cost treat it as a fixed fraction of the recreationist s wage and either estimate the fraction done infrequently or assume it takes some value done commonly with references to results from the commute time literature used to justify the latter however these approaches lack firm conceptual rationales and the consequences of using them are not fully understood recognizing that information limitations often preclude more general approaches we use a joint recreation travel labor supply model to show that under relatively modest assumptions the opportunity cost of travel time can be expressed as a wage fraction with noise this formulation is straightforward to implement as part of random parameters based recreation demand models we then evaluate the welfare consequences of using the two approaches noted above which are special cases of the noisy wage fraction specification our results suggest that the more critical restriction to relax in opportunity cost of travel time specifications is the absence of noise rather than the specific level of the wage fraction

hedonic onsight cost model of recreation demand for many recreational activities onsite pecuniary costs can be a significant portion of the cost of a recreational trip onsite expenditures however often depend upon endogenous quality choices made by the household we formulate a recreation demand model that formally accounts for household selection of quality of onsite time household behavior is constrained by income prices and the onsite hedonic price schedule assuming complete optimization a reduced form marshallian demand curve for recreation trips still results and a specialized version of roy s identity provides a basis for welfare analysis instrumenting for endogenous quality choices does not improve demand estimation

commitment risk and consumption do birds of a feather have bigger nests abstract consumption commitments goods like housing for which adjustment is costly change the relationship between risk and consumption commitment provides a motive to reduce consumption when possible future losses are too small to warrant adjustment but not when losses are large enough that adjustment would be worthwhile this implies conditions under which mean preserving increases in risk can increase housing consumption our empirical evidence exploits the interaction of these conditions with a novel proxy for unemployment risk couples sharing an occupation consistent with our model same occupation couples consume more housing only when adjustment costs are high and potential losses are sufficiently large

economic uncertainty before and during the covid 19 pandemic abstract we consider several economic uncertainty indicators for the us and uk before and during the covid 19 pandemic implied stock market volatility newspaper based policy uncertainty twitter chatter about economic uncertainty subjective uncertainty about business growth forecaster disagreement about future gdp growth and a model based measure of macro uncertainty four results emerge first all indicators show huge uncertainty jumps in reaction to the pandemic and its economic fallout indeed most indicators reach their highest values on record second peak amplitudes differ greatly from a 35 rise for the model based measure of us economic uncertainty relative to january 2020 to a 20 fold rise in forecaster disagreement about uk growth third time paths also differ implied volatility rose rapidly from late february peaked in mid march and fell back by late march as stock prices began to recover in contrast broader measures of uncertainty peaked later and then plateaued as job losses mounted highlighting differences between wall street and main street uncertainty measures fourth in cholesky identified var models fit to monthly u s data a covid size uncertainty shock foreshadows peak drops in industrial production of 12 19

intertemporal nonseparability or borrowing restrictions a disaggregate analysis using a u s consumption panel we propose a method to test for liquidity constraints which relies on using the within period marginal rate of substitution condition as a benchmark to evaluate the intertemporal euler equation if spot markets for nondurable goods exist but financial markets either do not exist or are imperfect we show how the comparison of first order conditions involving the relevant spot and intertemporal prices can be used to detect the imperfection we apply our methodology to a large sample of u s households drawn from twelve years of the consumer expenditure survey allowing for a general nonseparable preference structure our estimates of first order conditions do not indicate the presence of liquidity constraints with the possible exception of young households

separability and the shadow value of leisure time recreation choices are often viewed as short run decisions conditioned on longer run labor supply using weak separability to reflect this relationship the wage rate is the shadow value of time for individuals who get no utility from work whether or not they are observed to be trading time for money in the short run this result widens the circumstances under which the wage rate not some fraction thereof is the theoretically correct shadow value of time modifications to such a conclusion are developed for cases in which work is a source of utility and in which the first stage choice is not continuous

risk pooling precautionary saving and consumption growth in this paper we model the evolution of income risk and consumption growth we decompose the time series innovation of the income process into its common and cohort specific components from these we compute conditional variances which are used as separate risk terms in a consumption growth equation using a long series of british household data we exploit the time series variation to identify precautionary saving effects and find strong evidence of their importance specifically after allowing for demographic and labour market status there is an independent role for income risk in explaining consumption growth rather than the component that is common across cohorts however it is the cohort specific element that is important in determining changes in consumption growth this result points to a failure of between cohort insurance mechanisms

consumption dynamics during recessions when will durable expenditures respond strongly to economic stimulus we build from micro evidence and show that in a heterogeneous agent business cycle model with xed costs of durable adjustment responsiveness is substantially dampened during recessions our model estimates imply that during the great recession durable expenditures were half as responsive to additional stimulus as during the boom in the 1990s this procyclical responsiveness is driven by changes in the distribution of households desired durable holdings over the cycle we directly test our model by estimating this distribution empirically using psid micro data and nd that the distribution in the data moves cyclically as predicted in addition to this micro evidence we also provide support for our model s procyclical responsiveness using aggregate time series data and we show this time series evidence is inconsistent with simpler models featuring smooth adjustment costs

precautionary saving a review of the empirical literature standard macroeconomic models show that uncertainty plays a significant role in consumption and saving decisions under rather mild conditions namely the convexity of the marginal utility of consumption increased uncertainty generates a positive extra saving the so called precautionary saving although this hypothesis has been tested by a large number of authors both at macro and micro level the empirical results are not conclusive and the main conclusion than can be drawn is that there is neither consensus on the intensity of that motive for saving nor on the most appropriate measure of uncertainty this paper provides a comprehensive review of the empirical literature discussing the main controversial issues and the different approaches followed by the studies addressing empirically the test of precautionary saving

recreation demand choices and revealed values of leisure time i introduction at least since the work of becker 1965 it has been recognized widely that time may play an important role in consumer demand one of the areas where this may be most significant empirically is in the valuation of natural resource amenities through their associated recreation demands a principal reason is that recreation is a time intensive commodity so that the value of the time spent in recreation would be expected to play a large role in its overall value the potential bias to consumer s surplus estimates of the net economic value of recreation from excluding time prices from the demand model has been recognized from the outset for example by knetsch 1963 and clawson 1959 to incorporate time into recreation demand models researchers have generally adopted the practice suggested by mcconnell 1975 of defining the full price of recreation as the money cost of a trip plus its monetized time cost though the use of full budgets also called for by the becker approach is less widespread bockstael et al 1987 pointed out quite clearly that both full budgets and full prices are required in the demand function if the recreationist is jointly choosing labor supply with recreation at an exogenous marginal wage but that the structure of demand was unclear if the individual was not making such marginal labor supply choices i e if he or she was working fixed hours subsequently larson and shaikh 2001 showed that the full prices full budgets specification is sufficient to satisfy the constraints on demand parameters that arise because choice is made subject to two binding constraints regardless of the individual s position in the labor market they also pointed out that models that use full prices but only money income in effect ignoring the role of time as a resource constraint cannot be consistent with the requirements of choice subject to two constraints although the outlines of how time should enter the structure of demand are becoming clear a major unresolved issue is how to determine its value in practice several studies have followed the basic logic of becker s early work assuming that the opportunity cost of recreation time i e the value of other time forgone in favor of recreation is an exogenous parameter such as the average wage rate or more commonly some fraction thereof this fraction is either chosen arbitrarily or estimated as part of the recreation demand model as in cesario 1976 mcconnell and strand 1981 and smith et al 1983 such assumptions may be erroneous for a variety of reasons assuming the average wage is the appropriate opportunity cost of time presumes that the individual faces no constraints on hours worked derives no utility or disutility from work and has a linear wage function as has been noted by chiswick 1967 bockstael et al 1987 and smith et al 1983 this is unlikely to be true for many people assuming some constant fraction of the wage is the opportunity cost of time especially an arbitrarily chosen fraction also seems likely to be incorrect for most people for all of these reasons an individual s average wage does not necessarily reveal anything about the shadow value of discretionary leisure time either as an upper or lower bound in a recent advance feather and shaw 2000 adapted the heckman 1974 labor supply model to include information supplied by recreationists about their labor supply status in particular whether they felt under or over employed relative to their desired number of hours this information is used to identify subgroups in the data for which the shadow value of leisure time is less than the wage or more than the wage which helps in the estimation of both a wage function and a shadow value of leisure time function this approach produces individual specific estimates of the opportunity cost of leisure time based on their demographics and labor market decisions which are used in a subsequent recreation demand analysis

the adoption of switchgrass and miscanthus by farmers impact of liquidity constraints and risk preferences lignocellulosic biomass is expected to become a key feedstock for renewable energy production however the potential supply strongly depends on farmers willingness to grow the new perennial energy crops many economic assessments have been led at the farm level all based on the standard net present value approach this paper looks into the effect of farmers liquidity constraints and risk preferences on switchgrass and miscanthus adoption by farmers we study the problem of the land allocation between a traditional cropping system and an innovative one in a static framework using four intertemporal choice models we find that in central france agronomic and economic conditions switchgrass and miscanthus result to be less profitable in terms of annualised net margin than the usual rape wheat barley rotation nevertheless they can be highly competitive as diversification crops when appropriate contracts are offered to farmers despite the additional liquidity they require

time is money improved valuation of time and transportation costs the proper valuation of time isimportant for estimating the demand for severaleconomic goods this paper explores the propervaluation of time when estimating recreationaldemand where time costs represent asubstantial portion of the purchase price toestimate demand this paper uses a travel costframework to analyze actual behavior revealedpreference data and hypothetical behavior stated preference data which is induced byhypothetical increases in access fees traveltime and travel distance by comparing theresponses to these three contingencies theanalysis adjusts and improves the valuation oftime costs as evidence of this improvement this analysis demonstrates a great increase inthe consistency between the revealed and stateddata similarly this paper improves thevaluation of transportation related costs

latent consideration sets and continuous demand systems this paper develops a theoretically consistent continuous demand system model that incorporates latent probabilistic consideration sets in contrast to existing discrete choice consideration models the proposed model is econometrically tractable with consumption data for many goods the model s empirical properties are illustrated with an 89 site recreation data set from the 1994 national survey of recreation and the environment nsre parameter and welfare estimates suggest that the latent consideration set models fit the data better and may imply a bias variance tradeoff relative to traditional models

an economic assessment of potential ethanol production pathways in ireland abstract an economic assessment was conducted on five biomass to ethanol production pathways utilising the feedstock wheat triticale sugarbeet miscanthus and straw the analysis includes the costs and margins for all the stakeholders along the economic chain this analysis reveals that under current market situations in ireland the production of ethanol under the same tax regime as petrol makes it difficult to compete against that fuel with tax breaks however it can compete against petrol on the other hand even under favourable tax breaks it will be difficult for indigenously produced ethanol to compete against cheaper sources of imported ethanol therefore the current transport fuel market has no economic reason to consume indigenously produced ethanol made from the indigenously grown feedstock analysed at a price that reflects all the stakeholders costs to deliver a significant penetration of indigenous ethanol into the market would require some form of compulsory inclusion or else considerable financial supports to feedstock and ethanol producers

accounting for stochastic shadow values of time in discrete choice recreation demand models abstract in this paper a discrete choice recreation demand model that explicitly accounts for a stochastic shadow value of time function is proposed using data from a survey of san diego beach users the stochastic shadow value of time labor supply and beach choice are jointly estimated results from this joint estimation approach are compared with the familiar two step approach that estimates labor supply first and uses predicted values of time in the recreational site choice model the approaches produce markedly different welfare measures with the two step model which does not account for unobserved variability of time values predicting significantly higher values a monte carlo simulation illustrates how ignoring the stochastic nature of shadow value of time in discrete choice recreation demand models can bias model parameters and hence welfare estimates

searching for the opportunity cost of an individual s time a traditional assumption made in the literature is that the value of an individual s time spent in any activity is equal to his or her wage rate this result stems from the derivation of the value of leisure time in the context of the standard labor supply model this paper pre sents some reasons why the relationship be tween the wage rate and the value of time does not hold suggestions for what to do when the relationship breaks down and the investigator needs some value to impute to the individual are given in the final section of the paper

excess sensitivity of consumption to income growth a model of loss aversion the article provides an empirical test on micro data of a model of individual behavior based on loss aversion utility is s shaped i e concave above reference consumption and convex below it as a consequence individuals do not reduce current consumption in response to an expected income decline as long as uncertainty is high enough such a behavior is consistent with excess sensitivity of consumption to income growth an empirical regularity which is hard to explain within a standard life cycle model loss aversion is tested on an italian dataset the bank of italy s survey on households income and wealth the conclusion is that excess sensitivity could be explained by a model that do not assume individuals to be expected utility maximizers copyright 2009 oxford university press

uncertainty and the geography of the great recession we document the link between increased levels of economic and policy uncertainty and unemployment at the state level during the 2007 2009 recession the cross sectional variation in uncertainty robustly matches the distribution of employment outcomes during this period when we instrument for this cross sectional variation using preexisting institutions we find evidence for a causal role for uncertainty in increasing unemployment a simple model of hiring and firing under uncertainty rationalizes these results and the within state distribution of effects across industries occupations and individuals is consistent with this model s predictions together these results suggest that increased uncertainty contributed to the severity of the great recession

theory and estimation of the household production function for wildlife recreation abstract the household production function is an intuitively appealing way to model man s interaction with nature this paper models the interaction between the household s behavior and publicly provided inputs into wildlife recreation the paper shows how to compute benefits assuming that the household production function is known the household production function approach collapses to the simple travel cost approach when households are unable to substitute their own inputs for publicly provided inputs in addition the paper demonstrates the conditions under which the parameters of cost and preference functions can be identified the conditions for identification are quite restrictive when several choices are endogenous

the spending and debt response to minimum wage hikes abstract immediately following a minimum wage hike household income rises on average by about 250 per quarter and spending by roughly 700 per quarter for households with minimum wage workers most of the spending response is caused by a small number of households who purchase vehicles furthermore we find that the high spending levels are financed through increases in collateralized debt our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock jel d12 d14 d91 j38

an empirical analysis of earnings and employment risk the mean and higher moments of the distribution of future income are crucial determinants of individual choices these moments are usually estimated in panel data from past income realizations inthis article we rely instead on subjective expectations available in the 1995 survey of household income and wealth a large random sample representative of italian households the survey elicits information on the distribution of future earnings and on the probability of unemployment analysis of this distribution helps us understand how individual uncertainty evolves over the life cycle and if attitudes toward risk affect occupational choices and income riskiness

houses as atms mortgage refinancing and macroeconomic uncertainty we estimate a structural model of household liquidity management in the presence of long term mortgages households face counter cyclical idiosyncratic labor income uncertainty and borrowing constraints which aect optimal choices of leverage precautionary saving in liquid assets and illiquid home equity debt repayment mortgage renancing and default taking the observed historical path of house prices aggregate

fluctuations in uncertainty this review article tries to answer four questions i what are the stylized facts about uncertainty over time ii why does uncertainty vary iii do fluctuations in uncertainty matter and iv did higher uncertainty worsen the great recession of 2007 2009 on the first question both macro and micro uncertainty appears to rise sharply in recessions on the second question the types of exogenous shocks like wars financial panics and oil price jumps that cause recessions appear to directly increase uncertainty and uncertainty also appears to endogenously rise further during recessions on the third question the evidence suggests uncertainty is damaging for short run investment and hiring but there is some evidence it may stimulate longer run innovation finally in terms of the great recession the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in gdp

balladurette and juppette a discrete analysis of scrapping subsidies this paper studies the effects of subsidies on durable goods markets in particular we focus on a recent policy in france in which the governments of balladur and juppe subsidized the replacement of old cars with new ones to study this policy we construct a dynamic stochastic discrete choice model of car ownership at the household level the resulting decision rules and equilibrium conditions are used to estimate the underlying parameters of the model using aggregate data these policy functions are used to evaluate the short and long run effects of the french policies we find that these policies do stimulate the automobile sector in the short run but through the induced changes in the cross sectional distribution of car ages create the basis for subsequent low activity further while these policies increase government revenues in the short run revenues in the long run are lower relative to a baseline without intervention

empirical specification requirements for two constraint models of recreation choice two constraint models are common in recreation demand analysis because of the important role time can play in consumer choices two versions of roy s identity hold for these models and imply coefficient restrictions on empirical demand functions the two constraint restrictions are fully observable and can be expressed in a form analogous to the slutsky hicks equations in single constraint consumer models empirical specifications that use full prices and full budgets can be consistent with the two constraint models when the marginal value of time is either exogenous or endogenous but models with full prices and money income alone are not copyright 2001 oxford university press

consumer durables evidence on the optimality of usually doing nothing the authors argue that lumpy nonconvex transaction costs are the norm for a wide range of economic decisions which are thus characterized by inertial behavior application of this idea to the consumption of durable goods yields an s s decision rule which when aggregated highlights the different expected behavior of average expenditure per purchase versus the number of purchases the empirical implications of this rule are presented and compared to other theories a battery of empirical tests generally supports the predictions of the model in particular it does a good job of explaining the time pattern of response of spending on durables to a change in income copyright 1992 by ohio state university press

linking individual and aggregate price changes this paper studies the implications of lumpiness and heterogeneity in microeconomic pricing decisions for dynamics in price aggregates to capture the latent deviation between actual and target prices it develops a semi structural empirical model of two sided s s price setting applying the model to a unique panel of store level retail prices reveals that fluctuations in the shape of cross sectional price deviation densities contain extra information on aggregate price change dynamics asymmetry in the density particularly matters idiosyncratic shocks magnify the size but do not alter the direction of aggregate fluctuations when the target price is proxied by the cross store mean price the link between inflation and the price deviation density disappears

measuring the cost of time in recreation demand analysis an application to sportfishing since the work of cesario and knetsch economists have recognized that the opportunity cost of time plays an important role in determining the demand for outdoor recreation the opportunities one has for spare time are more significant for consumption of time intensive outdoor recreation activities than for other commodities especially nondurables bishop and heberlein illustrate the overwhelming importance of time costs to final recreational values total consumer surplus is nearly four times as large when time costs are added at half the income rate as when time costs were set at zero p 21 despite the recognition economists have neither successfully integrated the costs of time with the methods of recreational demand analysis nor reached a consensus on how it should be measured brown charbonneau and hay state finally the apparently crucial importance of how opportunity cost of time is handled needs further work while we are convinced it is an appropriate concept exactly how it should be included and measured s remains to be determined p 24 several approaches have been taken to include it in the travel cost method one approach brown and nawas gum and martin suggests that time in transit be considered as a separate independent variable another approach bishop and heberlein brown charbonneau hay nicols bowes dwyer cesario and knetsch measures the cost of time and adds it to other costs several approaches have been suggested to measure time costs one approach is simply to choose an hourly wage e g 2 00 per hour or perhaps the minimum wage rate a more flexible but still ad hoc approach is to use some proportion of the individual s wage rate as the opportunity cost of time nichols bowes dwyer the proportion is usually taken from independent studies and used to value the travel time this approach is better than using a constant opportunity cost of time because it allows variation across individuals it suffers because the choice of the percentage of the wage rate is arbitrary independent of the sampled population cesario has discussed the consequences of ignoring time costs and the differences in values arising from alternative measurement approaches in this paper we argue that the opportunity cost of time is some proportion of the individual s market wage rate or income per hour and that this proportion can be determined from sample data this method permits the proportion to vary from one study to another rather than imposing either an arbitrary estimate or one from a sample different from the study s sample

how prudent are consumers using data from the consumer expenditure survey this paper presents a simple test that provides an explicit estimate of the parameter in the utility function that reflects the strength of the precautionary saving motive the coefficient of relative prudence the test yields a fairly precise estimate of a small precautionary motive in fact the estimate is too small to be consistent with widely accepted beliefs about risk aversion the presence of liquidity constrained households does not appear to explain this finding and there is some evidence that self selection of households into risky environments also cannot explain the results

adjustment of consumers durables stocks evidence from automobile purchases this paper tests an optimal s s rule in household durable purchases and examines directly the resulting aggregate expenditure dynamics the observed decision rule responds to income uncertainty and growth as predicted by an s s model resulting from transactions costs tests against liquidity constraints find that about half the households purchase according to an optimal s s rule aggregating the s s rule over households produces a cross section distribution of durables holdings the empirical distribution is similar to that predicted theoretically as is its response to aggregate shocks furthermore simulations of aggregate expenditure based on the household distribution exhibit dynamics consistent with those observed in the 1980s

consumption dynamics under time varying unemployment risk abstract in response to an adverse labor market shock a calibrated heterogeneous agent model predicts that aggregate spending on durable goods falls mainly due to the ex ante increase in income uncertainty caused by higher unemployment risk in contrast aggregate spending on nondurable goods falls mainly due to the ex post income losses associated with realized unemployment spells when households hold little liquid assets the nondurable spending response is amplified whereas the durable spending response is dampened these differences stem from micro level adjustment frictions involved in purchases of durable goods the model is corroborated with evidence from micro survey data

economic evaluation of miscanthus production a review this paper reviews the peer reviewed literature dealing with the economics of miscanthus cultivation to identify factors influencing the adoption of miscanthus and to reveal shortcomings in research in total 51 studies have been identified for this review the majority of these publications are recent i e the majority is published after 2009 and concern case studies in europe particularly the uk and ireland and north america this review reveals that the economic viability of miscanthus depends on largely uncertain assumptions especially concerning yields 10 48 t dry matter per ha and prices 48 134 t dry matter but also concerning the lifespan 10 20 years and different cost items a lack of established markets high establishment costs and uncertainties arising to a large extent from the long term commitment are identified as major barriers to miscanthus adoption in addition the level of support for miscanthus production e g via subsidies is identified as crucial for miscanthus profitability but is found to be highly heterogeneous across countries next to diversity in agronomic and economic assumptions also the assessment criteria and research techniques used to investigate the profitability of miscanthus differ widely while the net present value criterion was most frequently used we identify a lack of approaches that account for risks and uncertainties which seem to potentially play a critical role in the uptake of miscanthus by farmers

uncertainty and consumer durables adjustment we characterize infrequent durables stock adjustment by consumers who also derive utility from non durable consumption flows in the presence of idiosyncratic income uncertainty the data we analyse include subjective future income uncertainty measures which we use as instruments in the estimation of relevant parameters of heterogeneous consumers dynamic adjustment problems the data feature two conceptually distinct sources of variation cross sectional heterogeneity of the sampled households dynamic problems and history dependent heterogeneity in their situation during the observation period we note that the latter should affect the likelihood but not the size of stock adjustment decisions and find broad support for theoretical predictions in formal selection controlled regressions based on this insight

firm related risk and precautionary saving response we propose a new approach to identify the strength of the precautionary motive and the extent of self insurance in response to earnings risk based on euler equation estimates to address endogeneity problems we use norwegian administrative data and instrument consumption and earnings volatility with the variance of firm specific shocks the instrument is valid because firms pass some of their productivity shocks onto wages moreover for most workers firm shocks are hard to avoid our estimates suggest a coefficient of relative prudence of 2 in a very plausible range

precautionary saving in the small and in the large the theory of precautionary saving is shown to be isomorphic to the arrow pratt theory of risk aversion making possible the application of a large body of knowledge about risk aversion to precautionary saving and more generally to the theory of optimal choice under risk in particular a measure of the strength of the precautionary saving motive analogous to the arrow pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the dreze modigliani substitution effect copyright 1990 by the econometric society