the reformed eu ets intertemporal emission trading with restricted banking abstract with the increase of the linear reduction factor the implementation of the market stability reserve and the introduction of the cancellation mechanism the eu ets changed fundamentally we develop a discrete time model of the intertemporal allowance market that accurately depicts these reforms assuming that prices develop with the hotelling rule as long as the aggregated bank is non empty a sensitivity analysis ensures the robustness of the model results regarding its input parameters the accurate modelling of the eu ets allows for a decomposition of the effects of the individual amendments and the evaluation of their cost effectiveness the market stability reserve shifts emissions to the future but is allowance preserving a one time cancellation reduces the overall emission cap increasing allowance prices in the long run but does not significantly impact the emission and price path in the short run the increased linear reduction factor leads with 9 billion cancelled allowances to a stronger reduction than the cancellation mechanism and is therefore the main price driver of the reform

public private sector wage differentials in canada evidence from the 1991 and 1982 surveys of consumer finance this paper extends the work of gunderson and shapiro and stelcner that considered wage differentials between public and private sector workers in canada using the 1971 and 1981 censuses respectively here the survey of consumer finances from 1991 and 1982 is used which allows for better distinction between public and private sector workers the estimated public sector premium is decomposed into an endowments component and a residual term estimates are corrected for sample selection bias with respect to the choice between full time and part time work in the two sectors tests for bias caused by self selection into the private and public sectors revealed no such bias as a benchmark the overall wage premium calculated for 1981 compares very well with that of shapiro and stelcner during the 1980s no significant increases in the public sector wage premium for males are found but the female premium increased significantly this may be due to changes in pay equity legislation in the public sector relative

public sector pay and corruption measuring bribery from micro data abstract this study provides the first systematic measure of bribery using micro level data on reported earnings household spending and asset holdings we use the compensating differential framework and the estimated sectoral gap in reported earnings and expenditures to identify the size of unobserved unofficial compensation i e bribes of public sector employees in the case of ukraine we find that public sector employees receive 24 32 less wages than their private sector counterparts the gap is particularly large at the top of the wage distribution at the same time workers in both sectors have essentially identical level of consumer expenditures and asset holdings that unambiguously indicate the presence of non reported compensation in the public sector using the conditions of labor market equilibrium we develop an aggregate measure of bribery and find that the lower bound estimate of the extent of bribery in ukraine is between 460 million and 580 million u s dollars 0 9 1 2 of ukraine s gdp in 2003

the social cost of carbon with economic and climate risks uncertainty about future economic and climate conditions substantially affects the choice of policies for managing interactions between the climate and the economy we develop a framework of dynami

explaining european union citizens trust in the european central bank in normal and crisis times we study the determinants of trust in the european central bank ecb as measured by the european commission s eurobarometer survey in particular during the global financial crisis and the european sovereign debt crisis we find that the fall in trust in the ecb in crisis times can be rather well explained based on the pre crisis determinants we also show that the fall in trust reflected the macroeconomic deterioration a more generalized fall in the trust in european institutions in the wake of the crisis and the severity of the banking sector s problems to which the ecb was associated in the public opinion

learning to love globalization education and individual attitudes toward international trade recent studies of public attitudes toward trade have converged on one central finding support for trade restrictions is highest among respondents with the lowest levels of education this has been interpreted as strong support for the stolper samuelson theorem the classic economic treatment of the income effects of trade that predicts that trade openness benefits those owning factors of production with which their economy is relatively well endowed those with skills in the advanced economies while hurting others low skilled workers we reexamine the available survey data showing that the impact of education on attitudes toward trade is almost identical among respondents in the active labor force and those who are not even those who are retired we also find that while individuals with college level educations are far more likely to favor trade openness than others other types of education have no significant effects on attitudes and some actually reduce the support for trade even though they clearly contribute to skill acquisition combined these results strongly suggest that the effects of education on individual trade preferences are not primarily a product of distributional concerns linked to job skills we suggest that exposure to economic ideas and information among college educated individuals plays a key role in shaping attitudes toward trade and globalization this is not to say that distributional issues are not important in shaping attitudes toward trade just that they are not clearly manifest in the simple broad association between education levels and support for free trade the authors would like to thank james alt jeffry frieden robert lawrence dani rodrik ron rogowski ken scheve andy baker peter gourevitch and beth simmons for helpful comments on earlier drafts

the timing of partisan and nonpartisan appointments to the central bank some new evidence this paper empirically tests two prevalent but competing theories regarding the timing of appointments to the board of governors by presidential administrations both theories were developed simultaneously in the economics literature by havrilesky and gildea 1992 and waller 1992 and are observationally equivalent by suggesting that administrations will select partisans early in their four year terms and nonpartisans sectoral later in their four year terms although each bases this prediction on a different theoretical model several empirical replications with updated data sets presented here work to confirm the solutions put forth consistently by both models however the results of a new statistical test perhaps lends slightly more credence to the theoretical foundations of waller s bargaining model

bootstrapping statistical inferences of decomposition methods for gender earnings differentials applying the standard bootstrapping technique with corrections for heteroskedasticity for a sample of the 1997 urban household survey in china the present article attempts to test 1 whether the commonly used decomposition methods for gender earnings differentials give significantly different results and 2 whether the explained component is significantly different from the unexplained component which is commonly referred to as discrimination within each decomposition method based on a national data set the empirical results indicated some significant differences in both tests the implication of the results is that the proposed bootstrapping technique can be regarded as a guideline on applying which approach to decompose gender earnings differentials among different methods without losing important information and on evaluating the relative importance of the decomposition components for any chosen method

trust no more the impact of the crisis on citizens trust in central banks abstract citizens trust in economic institutions has generally declined since the onset of the crisis in particular eurobarometer surveys show that trust in the european central bank ecb has fallen significantly during the crisis this paper studies the determinants of public trust in the ecb over the lifetime of the euro net trust in the ecb has decreased significantly in those countries which have experienced increasing sovereign bond yields and financial market turbulence the finding that country specific variables affect citizens trust in the ecb may seem counterintuitive however it is consistent with strong evidence in the political science literature showing that domestic considerations play a significant role when citizens get an opportunity to express their opinion on eu matters

the distribution of the male female earnings differential 1970 1990 the authors examine the male female earnings differential between 1970 and 1990 their objective is to provide consistent estimates that can be compared and interpreted over time and to assess the sensitivity of their results to alternative specifications the authors find that women made modest gains over the period standard decomposition techniques reveal that gender differences in observable characteristics do not explain much of the earnings differential most of the improvement in women s relative earnings has come by a decline in the unexplained component the authors also find that the differential varies systematically across age and education groups and across high and low income women coauthors are dwayne benjamin andree desaulniers and mary grant

the frequency of monetary policy signaling from the administration to the federal reserve note recently this journal published a paper that reported the first hard evidence of direct and systematic administration influence on monetary policy havrilesky 1988a an index was constructed from a simple weekly sum of the number of wall street journal articles that indicated whether the administration desired either easier 1 or tighter 1 monetary policy the index signaling from the administration to the federal reserve or safer was premised on the notion that the financial press efficiently reports the content of the mostly informal exchanges that are occumng between the executive branch and the fed one problem with using this index as a means of continually measuring an administration s influence on monetary policy and whether its signals are heeded regularly or only episodically say as presidential elections approach l is that periodically the level of signaling shifts rather abruptly for example a precipitous drop in signaling occurred after 1984 the yearly average of the absolute value of monthly signals fell by over one half in the 1984 1988 period compared to the 1981 1984 period the break coming in 1985 when the yearly total of the absolute value of monthly signals fell to six as compared to twenty two in 1984 2 unless such shifts can be explained standard reaction function estimation of the causes and consequences of signaling is not feasible across all time periods this paper will attempt to explain these and other changes in signaling over the period from october 1974 to december 1989 using data on the state of the economy and the partisan composition of the federal reserve board of governors except for the welldocumented shift that occurred during the reagan administration it will be as

who wants the euro and why economic explanations of public attitudes towards a single european currency the paper looks at whether public attitudes towards a single european currency held in the european union member states reflect a rational evaluation of the involved benefits and costs it finds that they do the looser monetary and fiscal policy was in the past and the more time a country spent in the ems the more citizens welcome the euro attitudes towards the euro do not seem consistent with attitudes towards a european central bank however upon closer scrutiny opponents of a single currency appear to be less consistent and less rational in their responses than proponents

overlapping efforts in the eu emissions trading system abstract according to the phase iv 2021 2030 rules of the eu ets the total amount of emission permits allocated to firms is not fixed but endogenous this implies that a national climate policy that overlaps with the ets can have an impact on total aggregate emissions roughly speaking if firms increase their holdings of emission permits the total amount of permits allocated is reduced this paper analytically investigates how an overlapping national policy affects the aggregate bank of emission permits if marginal abatement costs are not too convex national climate policies increase banking and thus tend to reduce overall emissions

a social cost of carbon for almost every country this paper uses imputed national climate change impact functions to estimate national social costs of carbon which are largest in poor countries with large populations the national social costs of carbon of faster growing economies are less sensitive to the pure rate of time preference and more sensitive to the rate of risk aversion the pattern of national social costs of carbon is not sensitive to the assumed impact function climate sensitivity and scenario although the global social cost of carbon is income convergence raises the national social costs of carbon of poorer countries and lowers them for richer countries both global and national social costs of carbon are most sensitive to the income elasticity of climate change impacts a parameter about which we know little

would nonprofit workers accept to earn less evidence from france this article focuses on wage differentials between french nonprofit for profit and public sectors considering the public sector allows testing more extensively the labour donation theory preston 1989 the findings support this theory because nonprofit workers accept to earn significantly less than they would earn in the for profit and public sectors they also suggest differences in the motivations of workers in these sectors nonprofit workers are attracted to their work for reasons transcending material compensation

central bank communication and monetary policy a survey of theory and evidence over the last two decades communication has become an increasingly important aspect of monetary policy these real world developments have spawned a huge new scholarly literature on central bank communication mostly empirical and almost all of it written in this decade we survey this ever growing literature the evidence suggests that communication can be an important and powerful part of the central bank s toolkit since it has the ability to move financial markets to enhance the predictability of monetary policy decisions and potentially to help achieve central banks macroeconomic objectives however the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy

expecting the unexpected emissions uncertainty and environmental market design we study potential equilibria in california s cap and trade market for greenhouse gases ghgs based on information available before the market started we find large ex ante uncertainty in business as usual emissions and in the abatement that might result from non market policies much larger than the reduction that could plausibly occur in response to an allowance price within a politically acceptable range this implies that the market price is very likely to be determined by an administrative price floor or ceiling similar factors seem likely to be present in other cap and trade markets for ghgs

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

union wage differentials in the public and private sectors a simultaneous equations specification the paper attempts to integrate new approaches to estimating union wage effects with the analysis of public private sector wage differentials estimates of the union differential in both public and private sectors allowing for the endogeneity of union status are presented the hypothesis that the recently measured rents to public sector employment primarily reflect the recent increase in unionization in that sector is examined and receives considerable empirical support there was evidence of positive selection into the union sector especially for private sector workers union status appears to be strongly influenced by the expected wage gain from joining the union sector

bashing and coercion in monetary policy bashing and coercion in monetary policy i introduction we ve got excess plant capacity i don t think that growth is excessive i have not been overly concerned with inflation president bush in a february 14 1989 interview with the wall street journal p a8 with the economy running close to potential the risks seem to be on the side of a further strengthening of price pressure chairman greenspan in testimony before congress on february 21 1989 reprinted from the wall street journal february 22 1989 p a2 many investors appeared to be confused by conflicting statements by bush greenspan and other u s officials wall street journal february 22 1989 p a1 if the fed pushes interest rates significantly higher bush may go public with critism wall street journal march 24 1989 p a1 recent research in macroeconomic policy games by rogoff 1985 alesina 1988 tabellini 1987 and waller 1989a has concentrated on the importance of an independent central bank in a discretionary policymaking environment in the original work on policy games by barro and gordon 1983a 1983b no distinction was made between the monetary authority and the fiscal authority but these researchers argue that because the fiscal authority may have incentives to create excessive inflation giving the powers of money creation to an independent monetary authority whose inflation preferences differ from the current fiscal authority may enable society to reduce the equilibrium inflation rate this results holds even though monetary policy is still chosen in a discretionary fashion therefore backus and driffill 1985a 537 conclude autonomous central banks thus act as a precommitment device which may help to make noninflationary policies more credible and less costly implicit in the term independent is the belief that the central bank is free to choose monetary policy without interference from the fiscal authority administration however this is not generally the case the appointment of central bankers by the legislative or executive branch of the government governmental oversight of policy decisions or political pressure on the central bank by these branches will tend to influence the setting of monetary policy and subsequently the extent to which the central bank is truly independent 1 kane 1984 argues that even if it is not able to directly choose monetary policy the current administration still may be able to achieve its preferred monetary growth path by putting pressure on the monetary authority to do its bidding restricting the powers of the central bank public criticism of central bank performance here after referred to as bashing 2 exclusion from fiscal policy planning which hurts the egos of central bankers or undertaking actions which damage the post central bank income or opportunities of the central bankers are ways he suggests in which the administration can coerce cooperation from the central bank in creating excessive money growth such arguments have given rise to the view that the administration is engaged in a reputation building game with the central bank although the central bank has control of the money supply the administration can threaten to impose a welfare loss by bashing the central bank if it does not generate the monetary policy preferred by the administration the success of this strategy depends on the size of the bashing costs imposed on the central bank and also on the extent to which these threats are credible credibility in turn depends on the benefits and costs incurred by the administration in carrying out its threats as a result the administration may choose to bash the central bank if it does not produce the administration s preferred money inflation outcome by establishing a reputation for bashing the administration may be able to obtain its desired policy outcome in the future

inflation targeting a new framework for monetary policy he world s central bankers and their staffs meet regularly in venues from basle to washington to share ideas and discuss common problems perhaps these frequent meetings help explain why changes in the tactics and strategy of monetary policymaking such as the adoption of money growth targets in the 1970s the intensification of efforts to reduce inflation in the 1980s and the recent push for increased institutional independence for central banks tend to occur in many countries more or less simultaneously whatever their source major changes in the theory and practice of central banking are of great importance for both individual countries and the international economy in this article we discuss a new strategy for monetary policy known as inflation targeting which has sparked much interest and debate among central bankers and monetary economists in recent years this approach is characterized as the name suggests by the announcement of official target ranges for the inflation rate at one or more horizons and by explicit acknowledgment that low and stable inflation is the overriding goal of monetary policy other important features of inflation targeting include increased communication with the public about the plans and objectives of the monetary policymakers and in many cases increased accountability of the central bank

a carbon price floor in the reformed eu ets design matters abstract despite the reform of the european emissions trading system eu ets discussions about complementing it with a carbon price floor cpf are ongoing this paper analyzes the effect of a european cpf in the reformed eu ets using a hotelling model of the eu ets amended by the market stability reserve msr and the cancellation mechanism two cpf designs are compared 1 a buyback program and 2 a top up tax the buyback program sets a minimum price for the allowances from the implementation year onwards after the announcement firms anticipate the cpf which immediately increases the carbon price to the discounted cpf level therefore firms emit less and bank more allowances leading to more intake into the msr and more cancellation of allowances the top up tax imposes a tax on emissions which enhances the market price of allowances to the cpf level from the implementation year onwards firms increase their short run emissions in anticipation of the upcoming tax only after the implementation year firms start to lower their emissions thus the effect on aggregate cancellation is ambiguous despite being equivalent in a static setting the design choice for the cpf matters in a dynamic context such as the eu ets

public inflation aversion and the political economy of macroeconomic policymaking do the macroeconomic priorities of citizens differ across countries if so what accounts for this variation and what are its consequences for explanations of the choice of monetary institutions macroeconomic policy and international monetary cooperation this article uses survey data from twenty advanced economies to examine individual preferences about macroeconomic priorities the analysis establishes three key findings first the results suggest that economic context defined by inflation and unemployment performance has a substantial impact on the public s economic objectives in a way that is broadly consistent with the specification of utility loss functions in the theoretical political economy literature second the results suggest that there is significant cross country variation in inflation aversion controlling for economic context third some of this variation is accounted for by national level factors affecting the aggregate costs of inflation and unemployment these results have significant implications for optimal monetary policymaking the explanation of variation in economic outcomes and for accounts of the choice of institutional frameworks for policymaking i thank the bank of england the center for basic research in the social sciences and the institution for social and policy studies for research support and jim alt andrew bailey bill bernhard lawrence broz john freeman jeff frieden jim granato shigeo hirano david lake jeff lax simon price rose razaghian ron rogowski david stasavage gabriel sterne mike tomz jim vreeland the editor and two anonymous reviewers for helpful comments all views expressed are those of the author and do not represent those of the bank of england

a modified switching regression model for earnings differentials between the public and private using dutch 1986 data the wage differentials between public sector and private sector workers are investigated by employing a variation of the switching regression model this model imposes fewer identification restrictions on the parameters of the model than the standard switching regression model the estimation results show that some categories of public sector workers earn substantially less than private sector workers copyright 1993 by mit press

differing preferences between anti inflation and anti unemployment policy among the rich and the poor abstract this paper assesses the preferences of the rich and the poor towards anti inflationary and anti unemployment policy using a consistent cross country social survey i find that the poor are less likely than the rich to prioritize combating inflation rather than unemployment

revisiting the coyne affair a singular event that changed the course of canadian monetary history the coyne affair occurred during the 1959 61 period and led to the resignation of the governor eventually major reforms of the bank of canada act were enacted archival and empirical evidence is used to assess the performance of monetary policy throughout the 1950s in doing so a real time data set is constructed for both canada and the us that permits the estimation of a reaction function i find that while the case against james coyne is not proven there was a brief period when monetary policy was excessively tight and this may well have worsened an already weak economic environment l affaire coyne a eu lieu au cours de la periode 1959 61 et a conduit a la demission du gouverneur de la banque du canada eventuellement des reformes majeures a la loi sur la banque du canada ont ete mises en uvre on utilise des documents d archives et des resultats empiriques pour evaluer la performance de la politique monetaire dans les annees 1950 ce faisant on construit une base de donnees en temps reel pour le canada et les etats unis qui permet de faire l estimation d une fonction de reaction on decouvre que meme si l argumentation developpee contre coyne n est pas prouvee il y a eu une courte periode durant laquelle la politique monetaire a ete excessivement restrictive et que cela peut fort bien avoir entraine la deterioration d une economie deja affaiblie

government wage differentials a sample selection approach this paper uses the econometrics of sample selection to estimate the net wage differential between workers in the public and private sectors of the united states the results indicate workers self select by systematically locating in the sector which offers them the higher expected wage as a consequence previous research based on the assumption of random allocation between sectors is subject to serious specification bias the present estimation indicates government workers are slightly underpaid taking into account their observed characteristics and the selection process

banking and borrowing in the eu ets a review of economic modelling current provisions and prospects for future design this article deals with the issue of banking and borrowing in the context of the european union emissions trading scheme eu ets by attempting to provide a policy oriented unifying theoretical framework after describing the main features of the eu ets the core part of the article consists of variations of an inter temporal continuous time optimization model additional elements include flexibility measures currently discussed and proposed in other emissions trading systems usa australia which include the use of safety valves minimum price auctioning or offsets from domestic or international projects

who supports the ecb evidence from eurobarometer survey data this paper contributes empirically to the long debated issue of the legitimacy of the european central bank ecb with regard to european polities using micro level data from the eurobarometer survey we shed light on the socio demographic determinants of public opinion support for the ecb we find that people with higher level of education and income and centre to right wing political orientation tend to support the ecb as well as people with optimistic expectations on the economic situation by contrast the unemployed tend to distrust the ecb the policy relevance of such results is important for ecb s communication strategy with the general public

modern hyper and high inflations since 1947 hyperinflations by cagan s definition in market economies have been rare much more common have been longer inflationary processes with inflation rates above 100 percent per annum based on a sample of 133 countries and using the 100 percent threshold as the basis for a definition of very high inflation episodes this paper examines the main characteristics of such inflations among other things we find that i close to 20 percent of countries have experienced inflation above 100 percent per annum ii higher inflation tends to be more unstable iii in high inflation countries the relationship between the fiscal balance and seigniorage is strong both in the short and long run iv inflation inertia decreases as average inflation rises v high inflation is associated with poor macroeconomic performance and vi stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary

an analysis of public and private sector wages allowing for endogenous choices of both government and union status a general selection model is estimated in which workers select across four labor markets private nonunion private union public nonunion and public union evidence is found of positive selection bias in the private nonunion sector and of negative selection bias in the public union sector union wage differentials in the public and private sectors as well as public private wage differentials are then calculated two different types of wage differentials are contrasted we discuss when it is appropriate to use each type of differential

is it possible that an independent central bank is impossible the case of the australian notes issue board 1920 1924 the history of the australian notes issue board over the period 1920 1924 is presented it is shown that the board was created as a genuinely independent monetary authority but was soon abolished as its policies antagonised interests upon which the government depended the episode illustrates the thesis that the possibility of a genuinely independent monetary authority is problematic

procrastinating reform the impact of the market stability reserve on the eu ets abstract we study the impact of the market stability reserve msr on price and emission paths of the eu ets from 2019 onwards the msr will adjust the number of allowances auctioned as a function of the size of the surplus i e in times of a large surplus it shifts the issue date of allowances into the future in a perfectly competitive allowance market the msr only affects price and emission paths if the baseline equilibrium becomes unfeasible if the msr is binding prices increase in the short run but drop in the medium run relative to the baseline the msr increases price variability if uncertainty over future allowance demand is resolved while there is a surplus the long run cap is unaffected by both the msr and overlapping climate policies this contrasts the eu s objectives of improving the resilience of the eu ets and increasing synergies with overlapping climate policies