banking in computable general equilibrium economies abstract in this paper we develop a computable general equilibrium economy that models the banking sector explicitly banks intermediate between households and between the household sector and the government sector households borrow from banks to finance their purchases of houses and they lend to banks to save for retirement banks pool households savings and they purchase interest bearing government debt and non interest bearing reserves we use this structure to answer two sets of questions one normative in nature that evaluates the welfare costs of alternative monetary and tax policies and one positive in nature that studies the real effects of following a procyclical interest rate policy rule

the effective tax rate and the pretax rate of return abstract this paper presents new estimates of the taxes paid on nonfinancial corporate capital on the pretax rate of return to capital and on the effective tax rate the basic time series show that both the pretax rate of return and the effective tax rate have varied substantially in the past quarter century an explicit analysis indicates that after adjusting for different aspects of the business cycle pretax profitability was between one and 1 5 percentage points lower in the 1970s than in the 1960s the rate of profitability in the 1960s was also about one half of a percentage point greater than the profitability in the 7 years of the 1950s after the korean war changes in productivity growth in inflation in relative unit labor costs and in other variables are all associated with changes in profitability none of these variables however can explain the differences in profitability between the 1950s 1960s and 1970s looking at broad decade averages the effective tax rate and the pretax rate of return move in opposite directions lower pretax profits occuring when the tax rate is high there thus appears to have been no tendency for pretax profits to vary in a way that offsets differences in effective tax rates

a positive effect of human capital on growth abstract recent studies have found that economic growth appears to be unrelated to increases in educational attainment in this note i show that there is a correlation in one dataset but it is typically hidden by unrepresentative observations

the role of investment specific technological change in the business cycle this is a quantitative investigation of the importance of technological change speci c to new investment goods for postwar us aggregate uctuations a growth model that incorporates this form of technological change is calibrated to us data and simulated using the relative price of new equipment to identify the process driving investmentspeci c technology shocks the analysis suggests that this form of technological change is the source of about 30 of output uctuations 2000 elsevier science b v all rights reserved

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

exploratory analysis of prospects for renewable energy private investment in the u s opportunities for private investments in renewable energies were explored using a stated preference investment allocation instrument allocation alternatives included conventional and renewable energy investments among renewable energy investments solar and wind energy were ranked the highest while grass and wood based technologies were at the bottom of the renewable energy list this ranking mirrors the allocation of investments in sustainable energy technologies in global markets results were analyzed using a two limit tobit model which suggests that certainty of investments a diversified portfolio and expectation on financial returns were the primary drivers behind funds allocated to renewable energy investments using cluster analysis twenty three percent of our sample of current and future investors was identified as individuals most willing to invest in renewable energies

why does household investment lead business investment over the business cycle household investment leads nonresidential business fixed investment over the u s business cycle because real business cycle theory has not been able to account for this observation it represents a potent challenge to the view that transitory productivity disturbances are the main source of aggregate fluctuations this paper reconciles rbc theory with the investment dynamics by extending the traditional home production model to make household capital complementary to business capital and labor in market production empirical evidence suggesting that household capital is a complementary input in market production is also presented

alcohol consumption and human capital a retrospective study of the literature grossman proposed an individual s health can be viewed as one aspect of their human capital following this line of thought a number of recent papers have reported a positive impact of alcohol consumption on earnings the rationale for the existence of such a relationship is the positive impact of alcohol on physical and mental health we conduct a meta analysis to determine whether such factors as the estimation technique the presence of ex drinkers in the sample possible sample selection bias and publication bias may all contribute to these findings an additional suggestion for the positive relationship between alcohol and wages is the presence of a common set of personality traits that determines drinking behaviour and also leads to higher earnings we examine this relationship by reviewing the literature that investigates if the personality influencing aspects of alcohol consumption influences measures of human capital we also survey the significant body of research that has examined how alcohol consumption has been found to influence educational outcomes and the work force participation of problem drinkers

caveat emptor cross country data on education and the labor force abstract cross country data on education and the labor force frequently are used to describe important dimensions of development and to estimate models of economic growth and growth determinants the impact of education and related phenomena this investigation finds 1 there are serious intertemporal and inter country comparability problems with these data that may importantly affect inferences about labor force size trends and productivity and schooling investments and impact 2 data gaps are systematically related to levels of development and literacy and 3 conclusions about the determinants or consequences of development based on constructed data that have been made available to fill data gaps can be seriously misleading

real effective exchange rate volatility and growth a framework to measure advantages of flexibility vs costs of volatility abstract by devising a real effective exchange rate reer index where bilateral exchange rates are weighted for relative trade shares we find that the reer volatility differently from the bilateral exchange rate volatility with the dollar has significant impact on growth of per capita income after controlling for other variables traditionally considered in conditional convergence estimates we also find that this cost of volatility effect can be reconciled with the concurring negative and significant effect on growth of the adoption of a fixed exchange rate regime advantage of flexibility effect where the latter may be also interpreted as the cost of choosing pegged regimes without harmonization of rules and macroeconomic policies with main trading partners the adoption of an reer volatility measure instead of a bilateral exchange rate with the dollar has the advantage of making it possible a joint test for these two effects this is because while fixed exchange rate regimes are strongly negatively correlated and almost collinear with bilateral exchange rate volatility with the dollar the correlation is much weaker when considering our reer volatility measure

housing markets consumption and financial liberalisation in the major economies abstract this paper analyses the implications of relaxing credit restrictions in housing finance markets a theoretical model of the interaction of financial and housing markets and forward looking agents is developed the effects of financial liberalisation in the model are analysed and evidence from the u s a and u k on the impact of easing credit restrictions is presented estimates are also made of the degree to which credit restrictions may bind on households in those countries where the range of mortgage products on offer is still more limited than in the u k and u s a simulations are undertaken to gauge the effect on consumption saving and bequests of wealth of possible future convergence in national systems of housing finance

housing dynamics over the business cycle housing construction measured by housing starts leads gdp in a number of countries measured as residential investment the lead is observed only in the united states and canada elsewhere residential investment is coincident variants of existing theory however predict housing construction lagging gdp in all countries in the sample nominal interest rates are low ahead of gdp peaks introducing long term nominal mortgages and an estimated process for nominal interest rates into a standard model aligns the theory with observations on starts as mortgages transmit nominal rates into real housing costs longer time to build makes residential investment cyclically coincident abstract from author

the estimation of human capital by administrative archives in a static and longitudinal perspective the case of milan this paper focuses on the estimation of the latent variable human capital hc at disaggregated level worker by available routinely institutional data flows in particular we utilize the lombardy region administrative archive employment centers of the province of milan collecting information about careers of workers in the private sector of the milan area and administrative flows collecting mandatory workers individual income tax returns filed with the national internal revenue service first we propose and empirically estimate hc scores in a static referred to 2004 framework by means of a realistic measurement model within causal relationships among endogenous and exogenous investment hc indicators furthermore the model also specifies a set of concomitant indicators that not belonging to hc investment indicators have causal impact on endogenous variables and on hc scores too second we propose a longitudinal analysis period 2000 2004 aimed to investigate how workers earned income growth rates vary over workers educational levels and other personal characteristics the empirical results of both analyses confirm the characteristics of the italian job market denoted by marked inequalities and knowledge regarding the process of school to work transition characterized by a weak incidence of education on longitudinal trajectories of earned income

capital goods measured tfp and growth the case of spain the effect of investing in equipment and or structures on tfp and long run growth is investigated here we argue that economies can grow in spite of stagnant tfp if the investment rate is inefficiently high we study the case of spain where real gdp per worker grew at 2 74 percent annually and tfp was stagnant during 1996 2007 we show that low spanish tfp is due to low istc and an inefficiently high investment in residential structures we quantify the effect of the housing boom of the 2000s the total cost of subsidies to residential structures in terms of tfp and income growth

household borrowing constraints and residential investment dynamics abstract it is well known that residential investment leads output in the us economy the main contribution of our paper is to highlight the role of household borrowing constraints in accounting for this fact we study the role of home equity loans used to boost consumption as a channel that affects residential investment we consider a multi agent model where some home owning households face borrowing constraints that reflect home equity loans or refinancing constraints we show that the severity of the households borrowing constraints in an economy can generate this stylized fact of us residential investment dynamics interestingly the model correctly predicts coincident residential investment dynamics in countries with less severe borrowing constraints this prediction is borne out when the model is calibrated to french data

measuring investment in education historic debates about the measurement of capital are even more complicated in the case of education and human capital as extensive research demonstrates education resources are not consistently related to student performance in existing elementary and secondary schools this inefficiency in public schools implies that spending and resource measures do not accurately capture variations in school quality this finding then has clear implications for both education policy and economic research because school inputs are poor policy instruments an alternative policy focus that appears much more productive is performance incentives related to student achievement

quality of human and physical capital and technological gaps across italian regions scoppa v 2007 quality of human and physical capital and technological gaps across italian regions regional studies 41 585 599 this paper evaluates the relative contribution of factor accumulation and technology in explaining output per worker differences across italian regions the contributions of physical and human capital are separately estimated through the variance decomposition of output per worker whereas from a basic analysis of development accounting with crude data total factor productivity tfp emerges as a fundamental determinant when more accurate data are used in the estimations of human and physical capital to take into account their quality results change radically showing a higher importance of factor accumulation with respect to previous standard estimations scoppa v 2007 la qualite des capitaux humain et physique et les ecarts technologiques a travers les regions d italie regional studies 41 585 599 cet article cherche a evaluer la contribution relative de l accumulati

a macroeconomic model of price swings in the housing market this paper shows that a macro model with segmented financial markets can generate sizable movements in housing prices in response to changes in credit conditions we establish theoretically that reductions in mortgage rates always have a positive effect on prices whereas the relaxation of loan to value constraints has ambiguous effects a quantitative version of the model under perfect foresight accounts for about one half of the observed price increase in the united states in the 2000s when we include shocks to expectations about housing finance conditions the model s ability to match house values improves significantly the framework reconciles the observed disconnect between house prices and rents since in general equilibrium financial shocks can decrease rents and increase prices

relative prices complementarities and comovement among components of aggregate expenditures abstract recent work suggests that the standard real business cycle framework has difficulty accounting for co movement among aggregate expenditure components when they are disaggregated even slightly to include business and household investment in addition relative prices of these goods have displayed substantial variation over the post war period this paper reports that incorporating a source of empirically plausible relative price variability makes the framework s implications for comovement even worse compounding the comovement problem the possibility that complementarities in the production of household and business capital may help account for observed co movement is considered the results suggest that complementarities improved the framework s empirical performance

requiem for the representative consumer aggregate implications of microeconomic consumption behavior macroeconomists pursuing microfoundations for aggregate consumption have generally adopted one of two approaches either to model microeconomic consumption behavior carefully and then to aggregate or to thoroughly understand the behavior of a representative consumer in general equilibrium then to introduce microeconomic risk and heterogeneity the broad conclusion from the bottom up approach has been that precautionary saving and microeconomic heterogeneity can profoundly change behavior stephen p zeldes 1989 angus s deaton 1991 christopher d carroll 1992 the broad conclusion from the top down approach has been that precautionary saving is of little importance in determining the aggregate capital stock s rao aiyagari 1994 per krusell and anthony a smith 1998 leading some economists to conclude that heterogeneity is unimportant for macroeconomic purposes this paper shows that while general equilibrium effects do imply that the aggregate magnitude of precautionary saving is modest nevertheless when a model with uninsurable idiosyncratic risk is modified so that it can match the key micro facts it produces behavior very different in important respects from that produced by the representative agent economy this leads to the conclusion that for many purposes the representative consumer model should be abandoned in favor of a model which matches key microeconomic facts this abstract was borrowed from another version of this item

financial deregulation and household saving the last decade has seen widespread domestic financial deregulation in the industrial world particularly in the united states united kingdom and the nordic countries resulting in an increase in competition both between banks and saving institutions thrifts or building societies as they moved into each others services and within each sector this opened up new financial options particularly for households the sector that was probably most affected by government regulation for example there was a significant increase in equity withdrawals from personal housing wealth in both the united kingdom and united states over the ig8os 2 this period also saw a significant change in household consumption behaviour the most dramatic illustration being the fall in the household saving ratio in those countries where the process of deregulation has gone furthest this paper reports the results from estimating a model of household saving using regional data for the united kingdom with a particular emphasis on the interaction between household saving and financial deregulation the estimates are used to calculate the relative importance of different factors in the fall in personal saving over the i98os i conclude that deregulation lowered the equilibrium level of saving over the i98os probably 2 percentage points per annum as well as making saving significantly more dependent on changes in wealth income and real interest rates there have been a number of earlier empirical studies looking at the interaction between financial deregulation and household behaviour manchester and poterba i 989 miles i 992 and koskela et al i 992 present empirical evidence on the interaction between deregulation the housing market and saving in the united states united kingdom and finland respectively others have estimated saving functions which include variables representing the effects of financial deregulation or have considered the impact of financial deregulation on liquidity constraints in consumption 3 the

making development simple the genetic deterministic hypothesis for economic development abstract this paper discusses the dangers inherent in attempting to simplify something as complex as development it does this by exploring the lynn and vanhanen theory of deterministic development which asserts that varying levels of economic development seen between countries can be explained by differences in national intelligence national iq assuming that intelligence is genetically determined and as different races have been shown to have different iq then they argue that economic development measured as gdp capita is largely a function of race and interventions to address imbalances can only have a limited impact the paper presents the lynne and vanhanen case and critically discusses the data and analyses linear regression upon which it is based it also extends the cause effect basis of lynne and vanhanen s theory for economic development into human development by using the human development index hdi it is argued that while there is nothing mathematically incorrect with their calculations there are concerns over the data they employ even more fundamentally it is argued that statistically significant correlations between the various components of the hdi and national iq can occur via a host of cause effect pathways and hence the genetic determinism theory is far from proven the paper ends by discussing the dangers involved in the use of over simplistic measures of development as a means of exploring cause effect relationships while the creators of development indices such as the hdi have good intentions simplistic indices can encourage simplistic explanations of under development

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

generalizations that aren t evidence on education and growth abstract several papers have suggested that the relationship between changes in average schooling and growth is weak in the cross country data this might call into question the relevance of micro estimates of returns to schooling at least for developing countries this paper examines the reliability of some of the aggregate evidence and presents an alternative framework for analysing these questions

investment behavior observable expectations and internal funds we use earnings forecasts from securities analysts to construct a new measure of the neoclassical fundamentals that drive investment spending we find that investment responds significantly to our new measure of fundamentals but is insensitive to cash flow even for firms typically thought to be liquidity constrained these results have two key implications first fundamentals may be more important for investment spending than would be suggested by the results to date from investment q models second the positive cash flow effects obtained in such models may reflect a failure to control properly for fundamentals rather than the presence of financial constraints jel d92 e22

risk shocks and housing supply a quantitative analysis this paper analyzes the role of stochastic uncertainty in a multi sector housing model with financial frictions we include time varying uncertainty i e risk shocks in the technology shocks that affect housing production and provide estimates of the time series properties of risk shocks by using firm level productivity data the analysis demonstrates that risk shocks to the housing production sector are a quantitatively important impulse mechanism for understanding housing price movements specifically the model can match the volatility of housing prices observed in the data it is also demonstrated that adjustment costs are important in replicating the contemporaneous correlation of housing prices with gdp and residential investment critically bankruptcy costs act as an endogenous markup factor in housing prices and are an important determinant of house price volatility however in comparison to housing demand shocks risk shocks have low explanatory power for real quantities

macroeconomic implications of agglomeration cities exist because of the productivity gains that arise from clustering production and workers a process called agglomeration how important is agglomeration for aggregate growth this paper constructs a dynamic stochastic general equilibrium model of cities and uses it to estimate the effect of local agglomeration on aggregate growth we combine aggregate time series and city level panel data to estimate the model s parameters via generalized method of moments the estimates imply a statistically and economically significant impact of local agglomeration on the growth rate of per capita consumption raising it by about 10

the anticipated and concurring effects of the emu exchange rate volatility institutions and growth abstract reduced exchange rate volatility and higher and less heterogeneous quality of institutional rules and macroeconomic policies are two of the main anticipated and concurring effects expected from a currency union in this paper we measure the magnitude of these two effects for the eurozone countries looking at real effective exchange rates reer and at different indicators of quality of institutional rules and macroeconomic policies qirmp we find that the first effect is much stronger than the second when we compare relative changes for eurozone countries and the rest of the world in the relevant period we further evaluate the impact of both effects on economic growth on a larger sample of countries our findings show that both have significant impact on levels more robust and on rates of growth weaker of per capita gdp

inflation capital markets and household saving in the nordic countries household saving ratios in the nordic countries are very low by international standards and have declined markedly during the 1980s aggregate quarterly time series data for the period 1970 89 are used to study the development of household saving behavior over time the evidence suggests that the household saving ratio responds positively to both the inflation rate and real income growth there is also some weak evidence to support the view that the rate of change in real housing prices has a negative effect on household saving ratios copyright 1992 by the editors of the scandinavian journal of economics

saving and capital market imperfections the italian experience italy s saving rate is high by international standards even when differences in growth are taken into account we argue that credit and insurance market imperfections provide a plausible explanation for the high italian saving rate we also reject the potential roles of the public sector informal financial arrangements bequests and the slope of the earnings profile as alternative explanations of the evidence

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

is school the best route to skills returns to vocational school and vocational skills in egypt this paper tests the assumption that formal education is the best route to job skills the returns to formal vocational secondary schooling are compared to the returns to acquiring skills outside the education system such as undertaking an apprenticeship for male wage workers in egypt a unique longitudinal dataset with information on schooling and skills allows for causal inference about returns by comparing siblings for recent cohorts the estimated returns to formal vocational secondary education are the same as attaining no formal education however the returns to skills obtained outside of formal education are substantial

on the different approaches of measuring uncertainty shocks as uncertainty has become an increasingly prominent source of business cycle fluctuations various uncertainty proxies have been proposed in the literature this paper shows that uncertainty measures based on realized variables fluctuate more than the measures that are based on forecasts more precisely the variation in the realized cross sectional standard deviation of profit growth and stock returns is larger than the variation in the forecast standard deviation moreover the forecast standard deviation of profit growth and stock returns are negatively or uncorrelated the uncertainty measures increase stock returns due to a risk premium but they decrease profit growth

schooling data technological diffusion and the neoclassical model this research was supported by the spanish ministry of science and technology through cicyt grants sec99 1189 and sec99 0820 and by the spanish ministry of finance and fundacion caixa galicia

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

household savings and debts the experience of the nordic countries the paper discusses the development of savings and household debt in the nordic countries during the last two decades the main conclusion is that the timing of political reforms in the 1980s and 1990s was fundamental for the development of consumption and household savings in general financial deregulation took place before tax reforms and lifting of foreign exchange controls the wrong timing of these reforms resulted in households accumulating high debt burdens which in turn led to a deep and longer recession or process of debt deflation than might otherwise have occurred copyright 1994 by oxford university press

the credit view old and new recent writings in the so called credit view focus on binding finance constraints of macroeconomic activity which arise from the incomplete substitutability of bank credit and from changes in borrowers net worth they criticize the standard approaches in the money view for not taking full account of the observable effects of monetary restrictions on real activity in this paper the new credit view is contrasted with older macroeconomic theories that placed special emphasis on the banks systemic potential to expand credit beyond planned saving the comparative discussion of the underlying arguments about bank behaviour about the non neutrality of credit money and about the transmission of monetary policy impulses reveals some shortcomings in the new view history helps moreover to set the conventional confrontations of the credit view and the money view in perspective jel classification b22 e32 e44 e51 e52

international differences in saving rates and the life cycle hypothesis a comment abstract in a recent paper john graham 1987 has argued that the life cycle approach performs rather well in accounting for intercountry differences in household saving rates so that the negative evidence sometimes reported is not warranted this comment presents pieces of evidence against this view some new evidence from a somewhat larger data set from the 1970s and 1980s casts considerable doubt on the ability of the conventional life cycle and demographic variables to explain intercountry differences in household saving rates graham s results though taken at face value are robust neither to data sample nor to time period

human capital tangible wealth and the intangible capital residual since income is the return on wealth the total wealth of any given country should be on the order of 20 times its gdp instead the average observed ratio from the balance sheet accounts of the system of national accounts sna is a factor of 2 6 to 6 6 depending on whether natural resource stocks are included in the balance sheet the clear implication is that the sna wealth accounts are incomplete with the most obvious omission being human capital estimating the value of human capital using the lifetime income approach for a sample of thirteen mostly high income countries yields a mean share of human capital in total wealth of 62 four times the value of produced capital and 15 times the value of natural capital but for selected high income countries in the sample there is still an average of 25 of total wealth which is unaccounted it is neither produced nor natural nor human capital this residual intangible wealth is arguably the stock equivalent of total factor productivity the value of assets such as institutional quality and social capital which augment the capacity of produced natural and human capital to support a stream of consumption into the future

where has all the education gone cross national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker this implies that the association of educational capital growth with conventional measures of total factor production is large strongly statistically significant and negative these are on average results derived from imposing a constant coefficient however the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons first the institutional governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth second marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant third educational quality could have been so low that years of schooling created no human capital the extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education or the lack thereof

deep recessions fast recoveries and financial crises evidence from the american record do steep recoveries follow deep recessions does it matter if a credit crunch or banking panic accompanies the recession moreover does it matter if the recession is associated with a housing bust we look at the american historical experience in an attempt to answer these questions the answers depend on the definition of a financial crisis and on how much of the recovery is considered but in general recessions associated with financial crises are generally followed by rapid recoveries we find three exceptions to this pattern the recovery from the great contraction in the 1930s the recovery after the recession of the early 1990s and the present recovery the present recovery is strikingly more tepid than the 1990s one factor we consider that may explain some of the slowness of this recovery is the moribund nature of residential investment a variable that is usually a key predictor of recessions and recoveries

measurement error in education and growth regressions the use of the perpetual inventory method for the construction of education data per country leads to systematic measurement error this paper analyzes its effect on growth regressions we suggest a methodology for correcting this error the standard attenuation bias suggests that using these corrected data would lead to a higher coefficient our regressions reveal the opposite we discuss why this is the case

indeterminacy home production and the business cycle a calibrated analysis abstract in this paper i present a business cycle model with one market sector that produces a standard good and another that produces a non market or home good the model can have multiple equilibria and therefore cycles driven only by self fulfilling expectations with low externalities to market production in particular an upward sloping aggregate labor demand as e g in farmer and guo j economic theory 63 1994 42 72 is not required for indeterminacy the effect of technology shocks is also studied in all cases the time series that are generated have properties that are comparable to the real us postwar series

housing and the business cycle revisited abstract i present a multisectoral dsge model with housing real frictions and variable capital utilization that generates aggregate and sectoral co movements due to uncorrelated sector specific shocks major advances are the robust positive correlations of residential investment with house prices and business investment in addition business investment is lagging other economic activities the key improvements are adjustment costs to business investment i identify the parameters of the exogenous shock processes business adjustment costs and variable capital utilization with bayesian estimation the results confirm those obtained from earlier work in this field

permanent income liquidity and expenditure on automobiles evidence from panel data several recent papers have tested the permanent income cum rational expectations hypothesis using data on nondurable or semidurable consumption we show how this approach can be extended to the case of durables an application to panel data on automobile expenditures reveals no evidence against the permanent income hypothesis this result is unchanged in subsamples segregated by family holdings of liquid assets

the taylor rule and optimal monetary policy where it denotes the fed s operating target for the federal funds rate pt is the inflation rate measured by the gdp deflator yt is the log of real gdp and y t is the log of potential output identified empirically with a linear trend the rule has since been subject to considerable attention both as an account of actual policy in the united states and elsewhere and as a prescription for desirable policy taylor argues for the rule s normative significance both on the basis of simulations and on the ground that it describes u s policy in a period in which monetary policy is widely judged to have been unusually successful taylor 1999 suggesting that the rule is worth adopting as a principle of behavior here i wish to consider to what extent this prescription resembles the sort of policy that economic theory would recommend i consider the question in the context of a simple but widely used optimizing model of the monetary transmission mechanism which allows one to reach clear conclusions about economic welfare the model is highly stylized but incorporates important features of more realistic models and allows me to make several points that are of more general validity out of concern for the robustness of the conclusions reached the analysis here addresses only broad qualitative features of the taylor rule and attempts to identify features of a desirable policy rule that are likely to hold under a variety of model specifications

cross country differences in the quality of schooling abstract this paper constructs a cross country measure of the quality of education using a novel approach based on international test scores data the first main finding is that there are large differences in education quality one year of schooling in the u s is equivalent to three or more years of schooling in a number of low income countries i incorporate the estimated series for schooling quality in an accounting framework calibrated using evidence on mincerian returns this leads to the second important finding which is that the fraction of income differences explained by the model rises substantially when one includes education quality the increase is around 22 percentage points

housing dynamics over the business cycle housing dynamics over the business cycle over the u s business cycle fluctuations in residential investment are well known to systematically lead gdp these dynamics are documented here to be specific to the u s and canada in other developed economies residential investment is broadly coincident with gdp nonresidential investment has the opposite dynamics being coincident with or lagging gdp these observations are in sharp contrast with the properties of nearly all business cycle models with disaggregated investment including mortgages and interest rate dynamics aligns the theory more closely with u s observations longer time to build in housing construction makes residential investment coincident with output

measuring human capital and its effects on wage growth ever since mincer years of labour market experience were used to approximate individual s general human capital while years of seniority were used to approximate job specific human capital this specification is restrictive because it assumes that starting wages at a new job depend only on job market experience in this paper i investigate the effects of human capital on wage growth by using a more flexible specification of the wage equation which allows for a rich set of information on past employment spells to affect the starting wages in addition i endogenize the labour mobility decision in order to illuminate the effects of human capital accumulation patterns on wage growth i compare counterfactual career paths for representative individuals copyright 2010 blackwell publishing ltd

endogenous imperfectly competitive business cycles abstract we investigate how imperfect competition affects the occurrence and the properties of endogenous rational expectations business cycles in an overlapping generations model with constant returns to scale in production the model has explicit product and labor markets all characterized by monopolistic competition an implicit assumption of barriers to entry justifies that the number of firms is fixed even when positive profits occur it turns out that both market power of firms on the product markets and market power of unions on the labor markets make the occurrence of cycles more likely in particular imperfect competition on the product markets and the positive profits associated with it may have the effect that there is a cycle even if the labor supply curve is increasing in the real wage rate for competitive cycles is required not only a decreasing labor supply curve but a wage elasticity below 1 2 at stationary equilibrium market power on the labor markets may have the effect that imperfectly competitive cycles are in accordance with certain empirical regularities some well known some reported in the paper concerning fluctuations in output and involuntary unemployment since involuntary unemployment does not occur under perfect competition such regularities are incompatible with competitive cycles

a new database on human capital stock in developing and industrial countries sources methodology and results abstract the paper describes the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years 1960 1987 the series are built from enrollment data using the perpetual inventory method adjusted for mortality estimates are corrected for grade repetition among school goers and country specific drop out rates for primary and secondary students enrollment data series used start as far back as 1930 for most countries and even earlier for others this reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory

education and income growth implications for cross country inequality this paper examines the extent to which patterns of human capital convergence can account for observed patterns of income inequality between countries to do this i decompose national income into three components one due to education levels one reflecting the return to education and a residual component i then examine in turn the contribution of each of them to changes in income dispersion among the developed countries convergence in education levels has resulted in a reduction in income dispersion however for the world as a whole incomes have diverged despite substantial convergence in education levels this is a result of increases in the return to education that favor the developed countries at the expense of the less developed countries

cost and income based measures of human capital human capital is increasingly believed to play an important role in the growth process however adequately measuring its stock remains controversial in this paper three general approaches to measurement are identified cost based income based and educational stock based this survey focuses on the first two approaches and provides a critical review of the theories and their applications to data from a range of countries particular emphasis is placed upon the work of jorgenson and fraumeni 1989 1992 and some new results for new zealand based upon their approach are also presented

five capital impact assessment appraisal framework based on theory of sustainable well being abstract this paper sets out to formulate an appraisal approach in context with sustainable development in conventional project appraisal such as energy undertakings most emphasis is placed on financial flows and rate of return on infrastructure investments although current greenhouse gas emissions are estimated to pose large costs on future generations these emissions are generally not estimated as part of the investment cost other public goods may also be omitted because their value is not recognized we review conventional cost benefit assessment and propose a new broader evaluation this new evaluation approach is based on the theory that five capital value types support long term well being rather than economic growth alone the theory states that humans depend on the size of stocks and flows from natural manufactured human social and financial capital we describe the five capitals to illustrate the value categories and outline an approach to evaluate all these in the context of energy development

intermediate inputs and sectoral comovement in the business cycle abstract the post war us business cycle is characterized by positive comovement of employment and output across sectors it has been argued that multi sector growth models are inconsistent with this observation when changes in relative productivities are the main source of fluctuations we suggest that the input output structure of an economy in particular the pervasive use of intermediate inputs can induce positive comovement in sectoral employment and output following changes in relative productivities we calibrate a model of the us economy for the durable and nondurable goods producing sectors and show that sectoral employment and output move together if intermediate inputs are used in production the model is also consistent with the observation that the relative price of nondurable goods is procyclical

energy price shocks and the macroeconomy the role of consumer durables so far the literature on dynamic stochastic general equilibrium models with energy price shocks uses energy on the production side only in these models energy shocks are responsible for only a negligible share of output fluctuations we study the robustness of this finding by explicitly modeling private consumption of energy at the household level in addition to energy use at the firm level to account for total energy use in the economy additionally we distinguish between investment in consumer durables and investment in capital goods the model economy is calibrated to match total energy use and durable goods consumption as observed in the u s data simulation results indicate that despite higher total energy use this economy has an even smaller proportion of output fluctuations attributable to energy price shocks productivity shocks continue to be the primary force behind business cycle fluctuations the driving force behind our results is that the household now has the flexibility to rebalance its investment portfolio specifically the energy price hike is absorbed by reducing durable goods investment more than investment in capital goods thereby cushioning the hit to future production at the expense of current consumption hence our model better matches the consumption volatility observed in the data jel classification e32 q43

home production meets time to build an innovation in this paper is to introduce a time to build technology for the production of market capital into a model with home production our main finding is that the two anomalies that have plagued all household production models the positive correlation between business and household investment and household investment s leading business investment over the business cycle are resolved when time to build is added

housing and financial wealth financial deregulation and consumption the swedish case the effects of using wealth disaggregated as housing and net financial wealth are investigated in an error correction function model data for sweden 1970 92 are used in the analysis unit root tests indicate that consumption income and wealth are all integrated of order one and that the variables cointegrate if wealth is disaggregated financial wealth is crucial in explaining consumption and wealth in disaggregated form improves the models significantly household debt is an important determinant of short run behavior indicating credit rationing there is also evidence that the observed dramatic increase in savings is a consequence of the recent tax reform copyright 1995 by the editors of the scandinavian journal of economics

human capital vs signalling explanations of wages increases wages by directly increasing the worker s productivity this learning explanation is usually associated with human capital theory however it seems unlikely that learning explains all the wage differences associated with schooling and work history better educated workers are not a random sample of workers they have lower propensities to quit or to be absent are less likely to smoke drink or use illicit drugs and are generally healthier it is unlikely that employers make full use of differences in propensities to quit or to be absent or sick when hiring workers these characteristics are often not directly observed and the americans with disabilities act precludes firms from using either poor health or the likelihood of future sickness as a hiring criterion unless it is directly related to job performance however if low levels of education are associated with these unfavorable employee characteristics and employers are allowed to take education into account when hiring workers we would expect employers to favor better educated workers as a means of reducing their costs of sickness and job turnover in turn students will take these hiring criteria into account when deciding how long to stay in school students will choose a length of schooling to signal their ability to employers and employers will demand a minimum level of schooling

the cyclical behavior of household and business investment in a cash in advance economy abstract this paper focuses on a monetary explanation of two business cycle regularities i business and household investment are positively correlated and procyclical and ii business investment tends to lag household investment over the cycle our general equilibrium framework is essentially a standard cash in advance economy where households purchase both non durable and durable consumption goods and businesses accumulate productive capital financial intermediaries provide interest bearing deposits to households and loanable funds to finance business investment it is shown that the adaptation of particular interest rate rules by the monetary authority provides a mechanism to capture both the timing and direction of business and household investment the results are then discussed within the context of recent limited participation models which emphasize the liquidity effects of monetary shocks

specifying human capital a review of the measures of the stock of human capital used in empiricalgrowth research including adult literacy rates school enrollmentratios and average years of schooling of the working age population reveals that human capital is mostly poorly proxied the simple use ofthe most common proxy average years of schooling misspecifies therelationship between education and the stock of human capital based onhuman capital theory the specification of human capital is extended toallow for decreasing returns to education and for differences in thequality of a year of education the different specifications give riseto hugely differing measures of the stock of human capital acrosscountries and development accounting results show that misspecifiedhuman capital measures can lead to severe underestimation of thedevelopment effect of human capital

human capital in spain an estimate of educational attainment in this article an alternative methodology is proposed for obtaining long time series data for a human capital indicator based on the average number of years of education of the working age population in contrast to previous studies we use labour force survey microdata relating to the level of education actually completed in order to construct temporal profiles of educational attainment and thus avoid the need to interpolate from censuses to illustrate the method proposed we evaluate the average number of years of education of the spanish working age population for the period 1910 to 2000

organizational change skill formation human capital measurement evidence from italian manufacturing firms basing on a job competition approach in this paper we provide a labour demand oriented measure of human capital as defined by the amount of specific skills a firm generates through work based training wbt activities by merging three rich firm level datasets we estimate the impact of a set of variables that are supposed to affect both the propensity to invest in wbt and the intensity of training within the italian manufacturing industry over the period 2001 2005 the estimates show that the effects of innovation on wbt is higher when the introduction of new technologies is supported by organizational innovations when looking at the nature of wbt we investigate the different determinants of the firms propensity to provide both in house and outside training finally we estimate training intensity in terms respectively of the number of training activities provided private and total training costs and the share of trainees

contracts and money why are contracts not fully indexed in a setting in which fully indexed contracts are feasible we find that when price level data are gathered with delay these contracts are not renegotiation proof the contracts that replace them entail a lower level of welfare for the parties to that contract they also imply that real variables respond to nominal shocks

detailed estimation of worklife expectancy for the measurement of human capital accounting for marriage and children abstract measuring an individual s human capital at a point in time as the present actuarial value of expected net lifetime earnings has a lengthy history calculating such measures requires accurate estimates of worklife expectancy here worklife estimates for men and women in the usa categorized by educational attainment race marital status parental status and current labour force status are presented race has a much larger impact on the worklife expectancy of men than women education is associated with larger worklife differentials for women the association between marriage and worklife expectancy is significant but of opposite sign for men and women married women men have a lower higher worklife expectancy than single women men parenthood is associated with a reduction in the worklife expectancy of women the association is smaller and varies from positive for some education marital status groups to negative for others for men

lending constraints real estate prices and business cycles in emerging economies abstract we investigate a small open economy with constraints in both the domestic and the international credit market the informational opaqueness of the domestic market hinders foreign lenders activity so that entrepreneurs face looser borrowing constraints vis a vis domestic financiers however limited capitalization constrains domestic lenders calibrating the model to data from argentina we find that the interaction between lending and borrowing constraints is a channel through which real interest rate shocks generate fluctuations in output real estate prices and consumption external financial liberalization increases volatility and affects welfare more than domestic liberalization but also mitigates the destabilizing impact of domestic deregulation

home production with endogenous growth abstract benhabib et al 1991 and greenwood and hercowitz 1991 demonstrate that general equilibrium beckerian home production models that incorporate separate technology shocks to the home and market production functions are able to explain either the comovements in employment across consumption and investment sectors of the economy or the comovement in output across market and home investment sectors but not both simultaneously this paper demonstrates that these comovements can be resolved by introducing endogenous growth into the model while retaining only a single technology shock to market production the additional margin for allocating time between formal training and market activities is sufficient to bring about the observed positive comovements in employment and output across sectors

home is where the equity is mortgage refinancing and household consumption applying a permanent income model with exogenous liquidity constraints and mortgage behavior household refinancing when mortgage interest rates are historically high and rising a persistent empirical puzzle is explained using data from the panel study of income dynamics households experiencing an unemployment shock and having limited initial liquid assets to draw upon are shown to have been 25 more likely to refinance 1991 94 on average such liquidity constrained households converted over two thirds of every dollar of equity they removed into current consumption as mortgage rates plummeted 1991 94 producing an estimated expenditure stimulus of at least 28 billion

stock market wealth and consumption this paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending it presents data on the distribution of corporate stock ownership based on the 1998 survey of consumer finances it also uses time series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate the wealth effect it concludes that in the year after a change in stock market values consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded