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Template-Type: ReDIF-Paper 1.0
Title: Real Exchange Rate Effects of Fiscal Policy
Author-Name: Jeffrey Sachs
Author-Name: Charles Wyplosz
Author-Person: pwy2
Note: ITI IFM
Number: 1255
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1255
File-URL: http://www.nber.org/papers/w1255.pdf
File-Format: application/pdf
Abstract: This paper develops a framework for analyzing the effects of fiscal policy on the real exchange rate. The short-run impact of various types of fiscal measures are considered as well as the dynamics of adjustment to long-run steady states. The analysis and related simulations suggest that the effect of fiscal policy changes on the real exchange rate can vary widely and will depend closely on a number of structural features, including the degree of asset substitutability,the composition of government spending, and the initial size of the public debt and net external position.
Handle: RePEc:nbr:nberwo:1255
Template-Type: ReDIF-Paper 1.0
Title: Occupation, Race, Unemployment and Crime In a Dynamic System
Author-Name: Michael Massourakis
Author-Name: Farahmand Rezvani
Author-Name: Tadashi Yamada
Note: LS
Number: 1256
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1256
File-URL: http://www.nber.org/papers/w1256.pdf
File-Format: application/pdf
Abstract: Inthis paper, the relationship between unemployment and property crime is investigated in the context of dynamic system by using quarterly time series data for the United States during the period of 1973 (I) - 1981(IV). The results of Granger's causality tests indicate that unemployment by occupation (white and blue collars) is significantly associated with robbery, which is the most serious property crime. Unemployment by race (white, black, and Hispanic) also supports the above finding. In general, the linkage between unemployment rate and property crime seems to become stronger as the degree of seriousness of crime increases.The findings of the dynamic system show that blue collar, Hispanic, and black unemployment rates have persistently positive effects on robbery. Therefore, these above findings suggest that any attempt to reduce property crime through alleviation of unemployment would most efficiently be directed towards specific categories of the labor force.
Handle: RePEc:nbr:nberwo:1256
Template-Type: ReDIF-Paper 1.0
Title: Can The Production Smoothing Model of Inventory Behavior be Saved?
Author-Name: Alan S. Blinder
Author-Person: pbl41
Note: EFG
Number: 1257
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1257
File-URL: http://www.nber.org/papers/w1257.pdf
File-Format: application/pdf
Publication-Status: published as Blinder, Alan S. "Can the Production Smoothing Model of Inventory Behavior Be Saved?" Quarterly Journal of Economics, August 1986, pp431-453.
Abstract: The production smoothing model of inventory behavior has a long and venerable history, and theoretical foundations which seem very strong. Yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework, but actually to argue that the basic idea of production smoothing is all wrong. Most prominent wnong these is the fact that the variance of detrended production exceeds the variance of detrended sales.This paper first documents the stylized facts. Then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts. Next, estimates of stock adjustment equations derived from the theory are presented and evaluated. Finally, it reviews the theoretical and empirical evidence and tries to drawsome tentative conclusions.
Handle: RePEc:nbr:nberwo:1257
Template-Type: ReDIF-Paper 1.0
Title: The Federal Civil Service Retirement System: An Analysis of its Financial Condition and Current Reform Proposals
Author-Name: Herman B. Leonard
Number: 1258
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1258
File-URL: http://www.nber.org/papers/w1258.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Herman B. "The Federal Civil Service Retirement System: An Analysis of its Financial Condition and Current Reform Proposals." Pensions, Labor, and Individual Choice, edited by David Wise. Chicago: University of Chicago Press, (1985), pp. 399-443.
Abstract: This paper analyzes the financial condition of the Federal Civil Service Retirement System. It begins by examining various official annual reports about the system published by the Office of personnel Management, discussing their differing assumptions and resulting differences in estimates of the unfunded liability.It then discusses the construction of a simulation model in which the current unfunded liabilities can be estimated under an entry age normal definition of pension obligations.The results suggest that, for reasonable estimates of salary increases,inflation,and benefits indexing, the unfunded liabilities of the CSRS are between $500 billionand $600 billion. (Even under the accrued benefits definition of pension obligations, which I argue is more relevant to private sector employment, the unfunded liability exceeds $400 billion). I argue that this constitutes a debt similar in burden per dollar to that represented by the explicitly recognized national debt, and nearly half as large.The last part of the paper considers current proposals to reform the CSRS to reduce the unfunded liabilities. They are found (1) to reduce the pension wealth of current federal workers by nearly one half, (2) to fall rather dramatically on middle aged federal employees, and (3) to leave the unfundedliabilities of the system still in excess of $400 billion.
Handle: RePEc:nbr:nberwo:1258
Template-Type: ReDIF-Paper 1.0
Title: Restriced Cost Functions and the Rate of Return to Quasi-Fixed Factors, with an Application to R&D and Capital in the Bell System
Author-Name: Mark Schankerman
Author-Name: M. Ishaq Nadiri
Note: PR
Number: 1259
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1259
File-URL: http://www.nber.org/papers/w1259.pdf
File-Format: application/pdf
Publication-Status: published as Schankerman, Mark and Ishaq Nadiri. "A Test of Static Equilibrium Models and Rates of Return to Quasi-Fixed Factors, with an Application to the Bell System." Journal of Econometrics, Vol. 33, (1986), pp. 97-118.
Abstract: This paper provides a statistical test to assess the adequacy of static equilibrium models. The test is based on a restricted cost function framework together with the envelope conditions which characterize static equilibrium for the quasi-fixed factors. We also show how restricted cost function models can be exploited to investigate some important issues such as the calculation of the rates of return to quasi-fixed factors, the determination of over- or underinvestment in particular assets, and the distinction between short run excess capacity and long run economies of scale. We provide an empirical application of these techniques to data on the Bell System for the period 1947-1976, treating the stocks of physical capital and of research and development (R&D) as quasi-fixed inputs. The results suggest that there was substantial overinvestment in capital and underinvestment in R&D compared to the static equilibrium levels, and that the rates of return to capital and R&D were about 4.5 and 10-15 percent, respectively.
Handle: RePEc:nbr:nberwo:1259
Template-Type: ReDIF-Paper 1.0
Title: Work Incentive Effects of Taxing Unemployment Benefits
Author-Name: Gary Solon
Author-Person: pso215
Note: LS
Number: 1260
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1260
File-URL: http://www.nber.org/papers/w1260.pdf
File-Format: application/pdf
Publication-Status: published as Solon, Gary. "Work Incentive Effects of Taxing Unemployment Benefits," Econometrica, Vol. 53, No. 2, March 1985, pp. 295-306.
Abstract: Before 1979, unemployment insurance (UI) benefits were not treated as taxable income in the United States. Several economists criticized this policy on the ground that not taxing UI benefits while taxing earned income allegedly encourages unemployed persons to conduct longer than socially optimal job searches. Since 1979, however, UI benefits received by persons in higher-income families have been subject to income tax. This paper investigates whether the introduction of benefit taxation has had the predicted effect of reducing unemployment duration.The study uses data on a sample of persons that filed for UI in 1978 or 1979 to examine whether high-income claimants collected benefits fo rshorter periods after the tax change than they did before benefits became taxable. As part of the empirical analysis, the paper develops a generalization of the Weibull distribution and applies a limited-dependent-variable technique for this distribution similar to the Tobit technique for the normal distribution. Despite some variation in the results from different model specifications, the analysis presents persuasive evidence of a tax effect on unemployment duration. The 1979 policy change is estimated to have reduced average compensated unemployment duration among the sampled high-income claimants by about one week.
Handle: RePEc:nbr:nberwo:1260
Template-Type: ReDIF-Paper 1.0
Title: Military Enlistments: What Can We Learn From Geographic Variation?
Author-Name: Charles Brown
Author-Person: pbr341
Note: LS
Number: 1261
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1261
File-URL: http://www.nber.org/papers/w1261.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Charles. "Military Enlistments: What Can We Learn From Geographic Variation?." American Economic Review, Vol. 75, No. 1, March 1985, pp. 228-234.
Abstract: This paper analyzes the determinants of the supply of enlistees to the U.S. Army, using quarterly data from 1975:4 through 1982:3 for the 50 states and the District of Columbia. For high-quality enlistees, defined as those with test scores in the top half of the population or top scoring individuals who are also high school graduates, supply elasticities with respect to military compensation are estimated to be about 1.0. Elasticities with respect to the unemployment rate center on 0.5, larger than most previous estimates. Recruiting resources have the expected effects (Army recruiters increase and other services recruiters reduce Army enlistments). Advertising (both national and local) does not have consistently positive effects. Results are similar for high school graduates,except that the effect of military compensation depends crucially on how it is measured. Estimates of the supply of enlistees of all qualities are weaker still: estimates of compensation effects vary widely, and estimated effects of recruiters and advertising are less plausible. Unemployment elasticities of about 0.3 are smaller than for high-quality recruits, but hardlyn egligible.A tentative explanation for the weaker results of the latter two groupsis that the number of such enlistees is not supply determined, but reflect demand constraints as well. Further work is needed to determine how standards for enlistees vary in each recruiting district in response to both national and local fluctuations in recruit supply.
Handle: RePEc:nbr:nberwo:1261
Template-Type: ReDIF-Paper 1.0
Title: Incentive Effects of Taxes on Income From Capital: Alternative Policies in the 1980's
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Yolanda K. Henderson
Note: PE
Number: 1262
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1262
File-URL: http://www.nber.org/papers/w1262.pdf
File-Format: application/pdf
Publication-Status: published as Sawhill, Charles R. and Isabel V. Hulten (eds.) The Legacy of Reaganomics: Prospects for Long-Term Growth. University Press of America, 1984.
Abstract: In this paper, we evaluate existing tax law as of 1980, President Reagan's tax reform initiatives as enacted in the Economic Recovery Tax Act of 1981 (ERTA) and the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), as well as other proposals that were not enacted. For each law, we measure marginal effective total tax rates for capital in the corporate sector, the noncorporate sector, and the owner-occupied housing sector. These rates include taxation under the corporate income tax, the personal income tax, and property taxes, in order to capture the full distortion of individuals' choices between present and future consumption as well as the distortions in the choice of investment. Effective tax rates in 1980 were perceived as high in the corporate sector, at least partly because of inflation, and especially when compared to the tax-free treatment of imputed rents from owner-occupied housing. In contrast, we find that (1) the total effective tax rate in the corporate sector was only 35 percent, about half of the rate in some previous estimates; (2) the total effective tax in the noncorporate sector was 36 percent, higher than in the corporate sector; (3) the total effective tax in owner-occupied housing was 19 percent, because of a higher relative property tax rate; and (4) under either 1980 or 1982 law, the marginal effective total tax rate does not rise with inflation in any sector or for the economy as a whole. By 1982 the rate in the corporate sector fell to 30 percent, by more than in other sectors.
Handle: RePEc:nbr:nberwo:1262
Template-Type: ReDIF-Paper 1.0
Title: Air Pollution and Lost Work
Author-Name: Jerry A. Hausman
Author-Person: pha893
Author-Name: Bart D. Ostro
Author-Name: David A. Wise
Author-Person: pwi45
Note: LS
Number: 1263
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1263
File-URL: http://www.nber.org/papers/w1263.pdf
File-Format: application/pdf
Abstract: A Poisson specification of the relationship between atmospheric pollution and lost work days is estimated.An important feature of the procedure is control for city-specific effects. A major source of ambiguity in interpreting the results of observational data on pollution versus health status or death rates is that pollution in a city may be correlated with other characteristics ofthat city that affect these outcomes but are not controlled for in the analysis. Or, individual attributes of residents may be correlated with pollution levels but notaccounted for in the analysis. Our results suggest a statistically significantand quantitatively important effect of total suspended particulates on work days lost. A standard deviation increase in total suspended particulates is associated with approximately a ten percent increase in work days lost. As a concomitant of our analysis, we also find a substantial relationship between smoking by others in the individual's household and work days lost by non-smokers.
Handle: RePEc:nbr:nberwo:1263
Template-Type: ReDIF-Paper 1.0
Title: R&D, Production Structure, and Productivity Growth in the U.S., Japaneseand German Manufacturing Sectors
Author-Name: Pierre A. Mohnen
Author-Person: pmo6
Author-Name: M. Ishaq Nadiri
Author-Name: Ingmar R. Prucha
Author-Person: ppr355
Note: PR
Number: 1264
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1264
File-URL: http://www.nber.org/papers/w1264.pdf
File-Format: application/pdf
Publication-Status: published as Mohnen, P., M.I. Nadiri and I Prucha. "R&D, Production Structure, and Rates of Growth in the U.S., Japanese and German Manufacturing Sectors, Actes, du Colleque sur l'Econometrie de la Recherche, 1983, pp. 171-221, Paris: Institut National de la Statistique et des Etudes Economiques.
Publication-Status: published as Mohnen, Pierre, M. Ishaq Nadiri and Ingmar R. Prucha. "R&D, Production Structure, and Productivity Growth in the U.S., Japanese and German Maunfacturing Sectors," European Economic Review, Vol. 30, 1986, pp. 749-771.
Abstract: The paper analyzes the production structure and the demand for inputs in three major industrialized countries, the U.S., Japan and Germany. A dynamic factor demand model with two variable inputs (labor and energy)and two quasi-fixed inputs (capital and R&D) is derived directly from an intertemporal cost-minimization problem formulated in discrete time. Adjustment costs are explicitly specified. The model is estimated for the manufacturing sector of the three countries using annual data from 1965 to 1977. Particular attention is given to the role of R&D. For all countries the rate of return on R&D is found to be higher than that on capital. Their respective magnitudes are similar across countries.We find considerable differences in factor demand schedules; we also find that for all countries the speed of adjustment for capital is higher than that of R&D. Adjustment costs are of importance in the demand equations for capital and R&D, but play a minor role in the decomposition of total factor productivity growth.
Handle: RePEc:nbr:nberwo:1264
Template-Type: ReDIF-Paper 1.0
Title: Current and Anticipated Deficits, Interest Rates and Economic Activity
Author-Name: Olivier J. Blanchard
Author-Person: pbl2
Note: EFG
Number: 1265
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1265
File-URL: http://www.nber.org/papers/w1265.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier J. "Current and Anticipated Deficits, Interest Rates and Economic Activity." European Economic Review, Vol. 25, (1984), pp. 7-27. North-Holland.
Publication-Status: published as Current and Anticipated Deficits, Interest Rates and Economic Activity, Olivier J. Blanchard. in International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, de Ménil and Gordon. 1991
Abstract: There is widespread feeling that current deficits, in Europe and the U.S.,may hurt rather than help the recovery. This paper examines some of the issues involved, through a sequence of three models.The first model focuses on sustainability and characterizes its determinants. It suggests that the issue of sustainability may indeed ber elevant in some countries.The second model focuses on the effects of fiscal policy on real interestrates, and in particular on the relative importance of the level of deficits andthe level of debt in determining interest rates.The third model focuses on the effects of fiscal policy on the speed of the recovery. It shows how a sharply increasing fiscal expansion might be initially contractionary rather than expansionary.
Handle: RePEc:nbr:nberwo:1265
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policies, Debt, and International Economic Interdependence
Author-Name: Jacob A. Frenkel
Author-Name: Assaf Razin
Author-Person: pra388
Note: ITI EFG IFM
Number: 1266
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1266
File-URL: http://www.nber.org/papers/w1266.pdf
File-Format: application/pdf
Publication-Status: published as Frenkel, Jacob A. and Assaf Razin. "Government Spending, Debt, and International Economic Interdependence," The Economic Journal, Vol. 95, (September 1985) pp. 619-636.
Abstract: This paper deals with the relation between government spending and real rates of interest as well as with the international transmission of fiscal policies.The dependence of the patterns of consumption in one country on fiscal policiesin the rest of the world are examined. For this purpose a general equilibrium model which is characterized by fully integrated world capital marketsis constructed, economic agents behave rationally, and government policies are constrained to obey the intertemporal solvency requirements. It is shown that the effects of changes 'in countries' net debt or position as well as the effects offiscal policies can be analyzed by reference to a multitude of "transfer problems criteria", which are familiar from the theory of international economic transfers. In the present case the impact of policies depends on the relations among the spending patterns of domestic and foreign private sectors; of domestic and foreign governments, as well as of domestic and foreign saving propensities.The analysis draws a distinction between permanent and transitory policies as well as between current policies and expected future policies.A transitory current fiscal spending, must crowd out the foreign private sector and, thereby,result in a negative transmission. However, a transitory future rise in government spending induces an immediate increase in foreign private sector's consumption and thereby results in a positive current transmission. These responses are reflected in the current account of the balance-of-payments, in changes in the net debtor-creditor positions, and in complex changes in the term structure of interest rates. It is also shown that with full integration of capital markets,fiscal policies may exert different qualitative effects on real rates of interestin different countries since, depending on the structural parameters, the relative prices of non-traded goods, and thereby the price indices, might be negatively correlated between countries.
Handle: RePEc:nbr:nberwo:1266
Template-Type: ReDIF-Paper 1.0
Title: Trading and the Tax Shelter Value of Depreciable Real Estate
Author-Name: Patric H. Hendershott
Author-Name: David C. Ling
Author-Person: pli857
Note: PE
Number: 1267
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1267
File-URL: http://www.nber.org/papers/w1267.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and David C. Ling. "Trading and the Tax Shelter Value of Depreciable Real Estate." National Tax Journal, Vol. 37, No. 2, (June 1984), pp. 213-223.
Abstract: For well-diversified investors in depreciable real estate, the trading decision may be made with the sole objective of maximizing the property's depreciation tax shelter net of all capital gain taxes and transaction costs.This paper develops a dynamic programming model in which the optimal trading strategies and depreciation methods of all investors in a property are simultaneously determined. The effects of inflation, depreciation, recapture and choice of depreciation method are analyzed, and the costs of suboptimal trading are measured. The model is applied to both conventional residential and commercial income properties under post-ERTA tax rules. At single digitinflation rates, properties are traded multiple times, and the costs of suboptimal trading are significant.
Handle: RePEc:nbr:nberwo:1267
Template-Type: ReDIF-Paper 1.0
Title: Expectations, Surprises and Treasury Bill Rates: 1960-82
Author-Name: Patric H. Hendershott
Note: ME
Number: 1268
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1268
File-URL: http://www.nber.org/papers/w1268.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. "Expectations, Surprises and Treasury Bill Rates: 1960-82. "The Journal of Finance, Vol. 39, No. 3, (July 1984), pp. 685-696 .
Abstract: Changes in six-month bill rates over semiannual periods in the 1960s and 1970s are successfully related to expected changes and to surprises. The latter include unanticipated changes in expected inflation, in the growth of industrial production and base money, and in inflation uncertainty. Estimation of the basic equation through the middle of 1983 does not suggest anychange in structure. Moreover the equation "explains" 60 percent of the extraordinarily high level of real rates since late 1980, largely owing to an excess of unexpected net increases in anticipated inflation over actualin creases.Our estimates provide some support for the expectations theory; there appears to be information content in six-month forward rates. While this content is swamped by the impact of surprises in equations explaining rate changes in terms of forward rates alone, the content is clear when proxies for the surprises are included in the equations.
Handle: RePEc:nbr:nberwo:1268
Template-Type: ReDIF-Paper 1.0
Title: "Though Much is Taken" -- Reflections on Aging, Health, and Medical Care
Author-Name: Victor R. Fuchs
Author-Person: pfu157
Note: EH
Number: 1269
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1269
File-URL: http://www.nber.org/papers/w1269.pdf
File-Format: application/pdf
Publication-Status: published as Fuchs, Victor R. "'Though Much Is Taken': Reflections on Aging, Health, and Medical Care." Milbank Memorial Fund Quarterly/Health and Society, Vol. 62, No. 2, (Spring 1984), pp. 143-166.
Abstract: The Medicare trust funds face huge prospective deficits by the end of this decade.This paper discusses trends in six areas that bear on the Medicare problem: the number of the elderly, their health status, use of medical care, labor force participation, income, and living arrangements. Among the most important findings are: 1) a very large increase since 1965 in life expectancy at age 65; 2) a very large increase since 1976 in real per capita health care expenditures on the elderly relative to expenditures on persons under age 65; 3) a cross-sectional increase with age in per capita health care expenditures that is primarily attributable to very large expenditures in the last year of life; 4) a sharp decrease in labor force participation and a sharp increase in relative income of the elderly since 1965.The paper concludes by raising questions about the need to reconsider the definition of the elderly, the need for more flexible labor market arrangements for older workers, and a need for a social consensus concerning appropriate care of dying patients.
Handle: RePEc:nbr:nberwo:1269
Template-Type: ReDIF-Paper 1.0
Title: Employment and Occupational Advance Under Affirmative Action
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1270
Creation-Date: 1984-01
Order-URL: http://www.nber.org/papers/w1270
File-URL: http://www.nber.org/papers/w1270.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "Employment and Occupational Advance Under Affirmative Action." The Review of Economics and Statistics, (August 1984), Vol. 6 6, No. 3, pp. 377-385.
Abstract: Affirmative Action is not only supposed to help move minorities and females into employment, it is also supposed to help move them up the job ladder, and it is this second goal that is perhaps the more controversial. Studies of Affirmative Action during thel ate 1960's and early 1910's found it generally ineffective in the white-collar and skilled occupations. Using disaggregated employment data in a new sample of nearly 10,000 establishments,this study finds that Affirmative Action was generally successful during the late 1910's in increasing minority employment in skilled white-collar occupations as well as in unskilled jobs.
Handle: RePEc:nbr:nberwo:1270
Template-Type: ReDIF-Paper 1.0
Title: Family Labor Supply With Taxes
Author-Name: Jerry A. Hausman
Author-Person: pha893
Author-Name: Paul Ruud
Author-Person: pru215
Note: LS PE
Number: 1271
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1271
File-URL: http://www.nber.org/papers/w1271.pdf
File-Format: application/pdf
Publication-Status: published as Hausman, Jerry A. Hausman and Paul Ruud. "Family Labor Supply With Taxes." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 242-248.
Abstract: Over the period 1960 - 1983 the proportion of federal tax revenue raised by taxation of labor supply has risen from 57-77 percent. In this paper, we specify and estimate a model of family labor supply which treats both federal and state taxation. Husbands and wives labor supply are treated jointly rather than in aseparate manner as in previous research. A method to calculate the virtual wage for nonworking spouses is used within a utility maximizing framework to treat correctly the joint family labor supply decision. Joint family efforts are found to be important. The efficiency cost (deadweight loss) of labor taxation is estimated to be 29.6% of tax revenue raised. The effect of the new 10% deduction to ease the marriage tax for working spouses leads to a prediction of 3.8% increase in wives labor supply and a .9% decrease in husbands labor supply.Overall taxes paid are predicted to decrease by 3.4%.
Handle: RePEc:nbr:nberwo:1271
Template-Type: ReDIF-Paper 1.0
Title: Lessons from the 1979-1982 Monetary Policy Experiment
Author-Name: Benjamin M. Friedman
Note: ME
Number: 1272
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1272
File-URL: http://www.nber.org/papers/w1272.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "Lessons from the 1979-1982 Monetary Policy Experiment." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 382-387.
Abstract: The experience of U.S. monetary policy during 1979-82 provided useful and potentially important new evidence about how monetary policy affects economic activity. This paper considers, inthe light of that evidence, six familiar propositions supporting the use of monetary aggregate targets for monetary policy. These propositions deal with money and nominal income, with price inflation and real economic growth, and with long-term interest rates. The evidence from the1979-82 experiment leads to doubt rather than confidence in each of these six propositions, and hence doubt rather than confidence in the use of monetary aggregate targets.
Handle: RePEc:nbr:nberwo:1272
Template-Type: ReDIF-Paper 1.0
Title: The Behavior of U.S. Short-Term Interest Rates Since October 1979
Author-Name: Richard H. Clarida
Author-Person: pcl69
Author-Name: Benjamin M. Friedman
Note: ME
Number: 1273
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1273
File-URL: http://www.nber.org/papers/w1273.pdf
File-Format: application/pdf
Publication-Status: published as Clarida, Richard H. and Benjamin M. Friedman. "The Behavior of the U.S. Short-Term Interest Rates Since October 1979." Journal of Finance, Vol. 39, No. 3, (July 1984), pp. 671-682.
Abstract: Short-term interest rates in the United States have been "too high" since October 1979 in the sense that both unconditional and conditional forecasts, based on an estimated vector autoregression model summarizing the prior experience,under predict short-term interest rates during this period. Although a non-structural model cannot directly answer the question of why this has been so,comparisons of alternative conditional forecasts point to the post-October 1979 relationship between the growth of real income and the growth of real money balances as closely connected to the level and pattern of short-term interestrates. This finding is consistent with the authors' earlier conclusion, based on analysis of a small structural macroeconometric model, that the high average level of interest rates has been due to a combination of slow growth of (nominal)money supply and continuing price inflation, which together have kept real balances small in relation to prevailing levels of economic activity.
Handle: RePEc:nbr:nberwo:1273
Template-Type: ReDIF-Paper 1.0
Title: The Interaction of Residential Segregation and Employment Discrimination
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1274
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1274
File-URL: http://www.nber.org/papers/w1274.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "The Interaction of Residential Segregation and Employment Discrimination," Journal of Urban Economics, Vol. 21, no. 3, May 1987, pp. 323-346.
Abstract: This paper seeks to disentangle the impactof residential segregation from that of employment discrimination in determining black employment share. The major finding is that distance of a workplace from the main ghetto is one of the strongest and most significant determinants of both changes over time and levels of the racial composition of the workforce. This paper presents evidence of more heterogeneous micro labor supply within SMSA's than has usually been recognized for policy purposes. Comparing Chicago with Los Angeles, we find that distance from the ghetto has a stronger impact in Chicago, and that this effect increased during the late 1970's. In contrast, residential segregation is relatively less important indetermining workplace demographics in Los Angeles, despite its rudimentary public transit system and prototypical job dispersion. In both cities,residential segregation strongly influences black employment patterns and limits the efficacy of efforts to integrate the workplace.
Handle: RePEc:nbr:nberwo:1274
Template-Type: ReDIF-Paper 1.0
Title: Accounting For The Decline in Union Membership
Author-Name: William T. Dickens
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1275
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1275
File-URL: http://www.nber.org/papers/w1275.pdf
File-Format: application/pdf
Publication-Status: published as Dickens, William T. and Jonathan S. Leonard. "Accounting for the Decline in Union Membership: 1950-1980," Industrial and Labor Relations Review, Vol . 38, No. 3, (April 1985), pp. 323-334.
Abstract: Since the early 50s, the percent of the workforce organized by unions has declined considerably. In the most recent decade that rate of decline has accelerated sharply. In an attempt to discover what factors can account for the overall decline and the further deterioration during the 70s, we decompose the sources of growth and decline to determine the relative importance of changes in organizing activity, success in certification elections, decertifications, and net growth due to economic causes. We find that all factors except decertifications account for a substantial part of the change. In addition, interactions between the factors are very important. A significant finding is that while organizing activity and success rates have been declining over time, the net growth (or loss) of membership due to economic causes has remained stable controlling for the aggregate level of economic activity. We argue that this finding is inconsistent with the prevailing view that the decline in the percent of the workforce organized is primarily due to the decline of the heavily unionized core industries.
Handle: RePEc:nbr:nberwo:1275
Template-Type: ReDIF-Paper 1.0
Title: Black Youth Nonemployment: Duration and Job Search
Author-Name: Harry J. Holzer
Author-Person: pho162
Note: LS
Number: 1276
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1276
File-URL: http://www.nber.org/papers/w1276.pdf
File-Format: application/pdf
Publication-Status: published as Holzer, Harry J."Reservation Wages and Their Labor Market Effects for Blackand White Male Youth," Journal of Human Resources, Vol. 21, No. 2, pp. 157-177, Spring 1986.
Publication-Status: published as Holzer, Harry J. "Black Youth Nonemployment: Duration and Job Search." The Black Youth Employment Crisis, edited by Richard B. Freeman and Harry J. Holzer, 1986, pp. 23-70.
Abstract: This paper analyzes reservation wages and durations of nonemployment for young blacks and whites. Selfreported reservation wages are compared for blacks and whites before and after controlling for indicators of labor demand such as received wages, weeks worked, or other personal characterlstics. The effects of these reservation wages on durations of nonemployment as well as on subsequent wages are analyzed as well.The results show that young blacks seek jobs and wages which are comparable to those of young whites, but which are higher relative to what young blacks obtain. On the other hand, young blacks appear at least if not more likely to take specific low-skill jobs, albeit teporariiy. These reservation wages appear to have positive effects on nonemployment durations and subsequent wages for both groups, and explain up to a third of the higher nonemployment durations of young blacks.
Handle: RePEc:nbr:nberwo:1276
Template-Type: ReDIF-Paper 1.0
Title: Monetarist Rules in the Light of Recent Experience
Author-Name: Bennett T. McCallum
Note: ME
Number: 1277
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1277
File-URL: http://www.nber.org/papers/w1277.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T. "Monetarist Rules in the Light of Recent Experience." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 388-391.
Abstract: Recent experience does not include a "monetarist experiment," as some have argued, but may slightly reinforce preexisting reasons for doubting that the best way of formulating monetarist policy prescriptions is in the form of a constant growth rule for the money stock.A more desirable rule would pertain to the monetary base, which is much more directly under Fed control. While a constant base growth rule might provide good macroeconomic performance, better results should be obtainable from a rule that at regular intervals adjusts the base growth rate upward or downward depending on whether nominal GNP is below or above a target path that specifies constant, non-inflationary growth for that variable. This type of rule is activist, to an extent, but is non-discretionary.The implied absence of policy-making flexibility is desirable for reasons explained in the literature on dynamic inconsistency.
Handle: RePEc:nbr:nberwo:1277
Template-Type: ReDIF-Paper 1.0
Title: Unanticipated Money and Interest Rates
Author-Name: V. Vance Roley
Author-Name: Carl E. Walsh
Author-Person: pwa23
Note: ME
Number: 1278
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1278
File-URL: http://www.nber.org/papers/w1278.pdf
File-Format: application/pdf
Publication-Status: published as Roely, V. Vance and Carl E. Walsh. "Unanticipated Money and Interest Rates ." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 49-54.
Abstract: Evidence on the relationship between unanticipated money and interestrates has been provided by two types of studies. First, several researchers have investigated the relationship using quarterly data. Second, a number of researchers have examined the effect of money announcement surprises on interest rates. In both instances, the correlation between money surprises and interest rates has usually been found to be non-negative.This paper first provides an interpretation of the correlation between unanticipated money and interest rates in terms of Federal Reserve policy objectives and operating procedures. Then, the correlation of unanticipated money and both short- and long-term interest rates is examined over weekly intervals, combining several aspects of the previous quarterly and announcement studies. In addition, the distinction between unpredicted and unperceived money also is considered.
Handle: RePEc:nbr:nberwo:1278
Template-Type: ReDIF-Paper 1.0
Title: Optimal Wage Re-Negotiation
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI IFM
Number: 1279
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1279
File-URL: http://www.nber.org/papers/w1279.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua. "Optimal Wage Re-Negotiation in a Closed and Open Economy. "Journal of Monetary Economics, Vol. 13, (1984), pp. 251-262.
Abstract: This paper investigates an economy in which there are short-term wage contracts that are re-negotiated under certain conditions. This paper determines the optimal frequency of wage re-negotiation and shows that it depends positively on measures of aggregate variability and Phillips curve slope. The role of optimal wage re-negotiation is to mitigate the output effects of various shocks. In the context of an open economy, it is shown that the desirable exchange rate regime in an economy with optimal wage re-negotiation depends on the stochastic structure of the economy.
Handle: RePEc:nbr:nberwo:1279
Template-Type: ReDIF-Paper 1.0
Title: Incentives for Diversification and the Structure of the Conglomerate Firm
Author-Name: William J. Marshall
Author-Name: Jess B. Yawitz
Author-Name: Edward Greenberg
Note: ME
Number: 1280
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1280
File-URL: http://www.nber.org/papers/w1280.pdf
File-Format: application/pdf
Publication-Status: published as Marshall, William J. , Jess B. Yawitz and Edward Greenberg. "Incentives for Diversification and the Structure of the Conglomerate Firm." Southern Economic Journal, Vol. 51, No. 1, (July 1984), pp. 1-23.
Abstract: In this paper, we examine the proposition that both the structures of conglomerate firms and their merger activities evidence a systematic attempt to diversify income sources and reduce the volatility of firms' profits. We test whether firms that are active in one line of business are more likely to be involved in another, the lower is the correlation between returns to the two activities, and whether, ceteris paribus, the likelihood of merger depends inversely on the correlation of cash flows to the principal activities of thecandidates for merger. We conclude that firms do act as if their goals include firm-level diversification.
Handle: RePEc:nbr:nberwo:1280
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Dynamics with Sticky Prices: The Deutsch Mark, 1974-1982
Author-Name: Alberto Giovannini
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: ITI EFG IFM
Number: 1281
Creation-Date: 1984-02
Order-URL: http://www.nber.org/papers/w1281
File-URL: http://www.nber.org/papers/w1281.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Business and Economic Statistics, Vol. 7, No. 2, pp. 169-178,(April 1989).
Abstract: This paper estimates simultaneously dynamic equations for the Deutsche Mark/Dollar exchange rate and the German wholesale price index, which emerge from a model in which German prices are sticky. This stickiness is due to price adjustment costs which take the form posited by Rotemberg(1982).The main results of the empirical analysis are two: First, the version of the model where prices are perfectly flexible is rejected. Second, real exchange rate variability is mostly accounted for by nominal exchange rate variability. We find substantial overshooting of the exchange rate to monetary innovations like those which appear to be typical in Germany.
Handle: RePEc:nbr:nberwo:1281
Template-Type: ReDIF-Paper 1.0
Title: Trade and Structural Interdependence Between the U.S. and the NICs
Author-Name: William H. Branson
Note: ITI IFM
Number: 1282
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1282
File-URL: http://www.nber.org/papers/w1282.pdf
File-Format: application/pdf
Publication-Status: published as Colin I. Bradford and William H. Branson, eds. Trade and Structural Change in Pacific Asia. Chicago: The University of Chicago Press, 1987.
Abstract: During the decade since 1973, the U.S. economy has become increasingly interdependent with the newly industrializing countries (NICs) among the developing countries. These countries have had high investment ratios to GNP, financed mainly by domestic saving, but also partly by foreign borrowing. They have invested in manufacturing capacity,importing capital equipment. This increase in international demand for equipment has resulted in an increase of U.S. capital good exports to over 50 percent of all U.S. manufactures. In turn, exports of consumer manufactures by the NICs to the OECD countries have expanded rapidly. As the NICs grew during the 1970's, they imported capital goods from the U.S., and exported consumer manufactures to the U.S. This pattern of trade has strengthened the interdependence between the U.S. economy and the NICs.The geographical pattern of U.S. trade with the NICs shows some interesting asymmetries. U.S. exports are relatively focused on Latin America, mainly Mexico, and imports on the Far Eastern NICs. A tradetriangle has developed, with the U.S. exporting manufactures, mainly capital goods, to the Latin American NICs; who in turn sell raw materialson the world market. The Far Eastern NICs buy raw materials and sell manufactures, mainly consumer goods, to the U.S. Thus growth in the U.S. economy has become more interdependent with both the Latin American and Far Eastern NICs.
Handle: RePEc:nbr:nberwo:1282
Template-Type: ReDIF-Paper 1.0
Title: The Specification and Influence of Asset Markets
Author-Name: William H. Branson
Author-Name: Dale W. Henderson
Author-Person: phe369
Note: ITI IFM
Number: 1283
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1283
File-URL: http://www.nber.org/papers/w1283.pdf
File-Format: application/pdf
Publication-Status: published as Branson, William H. and Dale W. Henderson. "The Specification and Influence of Asset Markets." Handbook of International Economics, edited by Ronald W. Jones and Peter B. Kenen, (Fall 1984), North - Holland, Amsterdam.
Abstract: This paper is a chapter in the forthcoming Handbook of International Economics. It surveys the literature on the specification of models of asset markets and the implications of differences in specification for the macroeconomic adjustment process. Builders of portfolio balance models have generally employed "postulated" asset demand functions, rather than deriving these directly from micro foundations. The first major sec-tion of the paper lays out a postulated general specification of asset markets and summarizes the fundamental short-run results of portfolio balance models using a very basic specification of asset markets. Then,rudimentary specifications of a balance of payments equation and goods market equilibrium conditions are supplied, so that the dynamic distribution effects of the trade account under static and rational expectations with both fixed goods prices and flexible goods prices can be analyzed.The second major section of the paper surveys and analyzes microfoundation models of asset demands using stochastic calculus. The microeconomic theory of asset demands implies some but not all of the properties of the basic specification of postulated asset demands at the macrolevel. Since the conclusions of macroeconomic analysis depend crucially on the form of asset demand functions, it is important to continue to explore the implications of micro foundations for macro specification.
Handle: RePEc:nbr:nberwo:1283
Template-Type: ReDIF-Paper 1.0
Title: Taxation, Wage Variation, and Job Choice
Author-Name: James N. Brown
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 1284
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1284
File-URL: http://www.nber.org/papers/w1284.pdf
File-Format: application/pdf
Publication-Status: published as Brown and Rosen, Journal of Labor Economics, October 1987.
Abstract: This paper examines the effect of earnings taxes on the variability of wages over time. We estimate a "hedonic wage locus" which indicates how the market allows individuals to substitute the mean level of the wage for its variability across jobs. Information from this locus is used to estimate the parameters of individuals' indifference curves between the mean and temporal variation of hourly wages. On the basis of these utility function parameters, we predict that lowering the rate of taxation on earnings would on average lead workers to choose jobs with a higher pre-tax mean wage and with greater wage variation.
Handle: RePEc:nbr:nberwo:1284
Template-Type: ReDIF-Paper 1.0
Title: Pensions and the Retirement Decision
Author-Name: Barry Nalebuff
Author-Person: pna205
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: PE
Number: 1285
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1285
File-URL: http://www.nber.org/papers/w1285.pdf
File-Format: application/pdf
Publication-Status: published as Nalebuff, Barry and Richard J. Zeckhauser. "Pensions and the Retirement Decision." Pensions, Labor, and Individual Choice, edited by David A. Wise. Chicago: University of Chicago Press, (1985), pp. 283-316.
Publication-Status: published as Pensions and the Retirement Decision, Barry J. Nalebuff, Richard J. Zeckhauser. in Pensions, Labor, and Individual Choice, Wise. 1985
Abstract: Pensions influence retirement decisions. The analysis provides a framework for assessing the phenomenon. The qualitative features of most defined benefit pension plans in the United States, as the first section demonstrates, can be used to induce optimal retirement choices. Pensions are viewed as a form of forced savings; their purposeis to enable the worker to "commit himself" by making it in his own self-interest to retire at an appropriate age. The remaining sections examine the use of pensions in populations that are heterogeneous with respect to such features as disutility of work or expected lifespan.Given heterogeneity, a major policy concern is whether pensions are actuarially fair to different groups, retirement cohorts,etc. It is proven that optimal pension plans cannot be actuarially more than fair, in the sense that someone who retires later must impose a smaller cost on the pension pool than he would were he to retire earlier. However, there are differences in life expectancy among cohorts defined by retirement age: late retirees generallyl ive longer. Late retirees may thus impose a greater expected cost on the pension fund under an optimal plan; interestingly, they do impose a higher cost than those retiring earlier under most common pension funds.In a first-best world, a separate pension plan would be designed for each group of workers. But, government-mandated retirement programs and legislation regulating private pensions require common treatment of different workers. Such homogenization is shown to work to the possible detriment of workers as a whole. Pensions are a workhorse compensation mechanism. They provide an additional instrument beyond wages for attracting, motivating, sorting, and retaining workers, while facilitating appropriate retirement decisions.
Handle: RePEc:nbr:nberwo:1285
Template-Type: ReDIF-Paper 1.0
Title: How Big is the Tax Advantage to Debt?
Author-Name: Alex Kane
Author-Person: pka501
Author-Name: Alan J. Marcus
Author-Person: pma1156
Author-Name: Robert L. McDonald
Note: ME
Number: 1286
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1286
File-URL: http://www.nber.org/papers/w1286.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Alex, Alan J. Marcus and Robert L. McDonald. "How Big is the Tax Advantage to Debt?" Journal of Finance, Vol. 39, No. 3, (July 1984), pp. 841- 853.
Abstract: This paper uses an option valuation model of the firm to answer the question, "What magnitude tax advantage to debt is consistent with the range of observed corporate debt ratios?" We incorporate into the model differential personal tax rates on capital gains and ordinary income. We conclude that variations in the magnitude of bankruptcy costs across firms can not by itself account for the simultaneous existence of levered and unlevered firms. When it is possible for the value of the underlying assets to junip discretely to zero, differences across firms in the probability of this jump can account for the simultaneous existence of levered and unlevered firms. Moreover, if the tax advantage to debt is small, the annual rate of return advantage offered by optimal leverage may be so small as to make the firm indifferent about debt policy over a wide range of debt-to-firm value ratios.
Handle: RePEc:nbr:nberwo:1286
Template-Type: ReDIF-Paper 1.0
Title: Asset Markets, Exchange Rates and the Balance of Payments
Author-Name: Jacob A. Frenkel
Author-Name: Michael L. Mussa
Note: ITI EFG IFM
Number: 1287
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1287
File-URL: http://www.nber.org/papers/w1287.pdf
File-Format: application/pdf
Publication-Status: published as Frenkel, Jacob A. and Michael L. Mussa. "Asset Markets, Exchange Rates andthe Balance of Payments." Handbook of International Economics, Vol. II, edited by R.W. Jones and P.B. Kenen, pp. 679-747. Amsterdam: Elsevier Science Publishers B.V., (1985).
Abstract: This paper, written as a chapter for a Handbook of International Economics, reviews developments in the theory of international monetary economics from the late 1960's through the early 1980's. Following a review of the operation of the monetary mechanism of balance of payments adjustment in the context of the Mundell-Fleming model, the paper reviews the more modern analysis of the dynamics of balance of payments adjustment under fixed exchange rates and of exchange rate determination under flexible exchange rates. Beginning with a simple exposition of the monetary mechanism, the model is then extended to incorporate sluggish wage and output adjustments, endogenous monetary policy and sterilization operations, multiplicity of tradable and nontradable goods, large countries, capital mobility and portfolio balance. The review then turns to an exposition of exchange rate theory, starting with the monetary approach to exchange rate determination. Issues discussed in this context include purchasing power parities, nontraded goods, the real exchange rate, currency substitution and the interaction between real and monetary factors in effecting exchange rates.The paper proceeds with a presentation of a more general framework that views the question of exchange rate determination as part of the general theory of the determination of asset prices, and which highlights the unique role of expectations. The general framework is then applied to characterize the interaction between the balance of payments and the equilibrium real exchange rate.The paper concludes with a brief discussion of some empirical issues of exchange rate analysis.
Handle: RePEc:nbr:nberwo:1287
Template-Type: ReDIF-Paper 1.0
Title: New Evidence that Taxes Affect the Valuation of Dividends
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 1288
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1288
File-URL: http://www.nber.org/papers/w1288.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. and Lawrence H. Summers. "New Evidence that Taxes Affectthe Valuation of Dividends." Journal of Finance, Vol. 39, No. 5, (December 1984), pp. 1397-1415.
Abstract: This paper uses British data to examine the effects of dividend taxes on investors' relative valuation of dividends and capital gains. British data offer great potential to illuminate the dividends and taxes question, since there have been two radical changes and several minor reforms in British dividend tax policy during the last twenty-five years. Studying the relationship between dividends and stockprice movements during different tax regimes offers an ideal controlled experiment for assessing the effects of taxes on investors' valuation of dividends. Using daily data on a small sample of firms, and monthly data on a much broader sample, we find clear evidence that taxes change equilibrium relationships between dividend yields and market returns. These findings suggest that taxes are important determinants of security market equilibrium, and deepen the puzzle of why firms pay dividends.
Handle: RePEc:nbr:nberwo:1288
Template-Type: ReDIF-Paper 1.0
Title: Exchange Market Intervention Under Alternative Forms of Exogenous Disturbances
Author-Name: Stephen J. Turnovsky
Author-Person: ptu5
Note: ITI IFM
Number: 1289
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1289
File-URL: http://www.nber.org/papers/w1289.pdf
File-Format: application/pdf
Publication-Status: published as Turnovsky, Stephen J. "Exchange Market Intervention Under Alternative Forms of Exogenous Disturbances." Journal of International Economics, Vol. 17, No. 3/4, (1984), pp. 279-297.
Abstract: This paper analyzes exchange market intervention in a stochastic model of a small open economy. The distinction is made between disturbances which are unanticipated and anticipated on the one hand, and those that are perceived as being transitory or permanent, on the other. The paper demonstrates how the appropriate form of exchange market intervention is sensitive to these aspects of the disturbances. Of particular interest is the case of an unanticipated permanent disturbance, when output may be stabilized perfectly about its frictionless level by the use of a very simple class of intervention rules.The optimal rules in other cases are also discussed.
Handle: RePEc:nbr:nberwo:1289
Template-Type: ReDIF-Paper 1.0
Title: Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual Versus Spot Labor Markets
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: David A. Wise
Author-Person: pwi45
Note: PE
Number: 1290
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1290
File-URL: http://www.nber.org/papers/w1290.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence J. and David A. Wise. "Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual Versus Spot Labor Markets." Pensions, Labor, and Individual Choice, edited by David A. Wise. Chicago: UCP, (1985), pp. 55-85 and 87.
Publication-Status: published as Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual versus Spot Labor Markets, Laurence J. Kotlikoff, David A. Wise. in Pensions, Labor, and Individual Choice, Wise. 1985
Abstract: Distingiishing "spot" versus "contract" views of the labor market is of critical importance to a host of economic issues ranging from wage flexibility over the business cycle to firm financial valuation. The structural features of U.S. private pension plans permit surprisingly strong inferences concerning the incentive effects of private pension plan provisions and the contractual nature of the U.S. labor market. This paper examines the accrual of vested pension benefits of a nation-wide sample of pension plans. We find strikingly larged is continuities in the profile by age of the ratio of annual accrued pension benefits to the standard wage. These discontinuities primarily occur at the ages of full vesting and early retirement. Representative plans often exhibit absolute changes in accrual ratios of 20 to 30 percentage points at these ages.The provisions of many plans imply large negative accruals after the age of early retirement. Job change typically involves a large loss in pension wealth as well. Since the average worker's marginal product presumably changes smoothly as he or she ages, these pension data can only be reconciled with spotmarket clearing if age wage profiles within a firm exhibit exactly offsetting discontinuities at key ages. Casual inspection of firm wage setting behavior rules out this requirement of spot market clearing. In our view the magnitude,patterns, and variations in pension accrual ratios are strikingly at odds with spot market equilibrium. While market clearing in longer term contracts seems the only equilibrium theory consistent with these findings, it also strains our credulity to ascribe optimizing behavior to the pension accrual profiles chosen by a vast array of U.S. businesses. In the process of presenting these profiles we also consider the following questions concerning U.S. pensions. What are the incentive effects of private pension plans? What is the cost in pension benefits of job turnover? How important is vesting? Is there a cost in pension benefits of foregoing the early retirement option? Do pension stipulations encourage early retirement? While the considerable heterogeneity of pension plan provisions permits no simple or single answer to these questions, the data suggest that pensions can have major incentive effects on job turnover and retirement. In general pensions represent a very significant factor, and at certain ages, a dominant factor in employee compensation.
Handle: RePEc:nbr:nberwo:1290
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomics and Finance: The Role of the Stock Market
Author-Name: Stanley Fischer
Author-Name: Robert C. Merton
Author-Person: pme203
Note: EFG
Number: 1291
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1291
File-URL: http://www.nber.org/papers/w1291.pdf
File-Format: application/pdf
Publication-Status: published as Fischer, Stanley and Robert C. Merton. "Macroeconomics and Finance: The Role of the Stock Market." Carnegie-Rochester Conference Series on Public Policy, Vol. 21, (1984), pp. 57-108.
Abstract: The treatment of the stock market in finance and macroeconomics exemplifies many of the important differences in perspective between the two fields. In finance, the stock market is the single most important market with respect to corporate investment decisions. In contrast, macroeconomic modelling and policy discussion assign a relatively minor role to the stockmarket in investment decisions. This paper explores four possible explanations for this neglect and concludes that macro analysis should give more attention to the stock market. Despite the frequent jibe that "the stockmarket has forecast ten of the last six recessions," the stock market is in fact a good predictor of the business cycle and the components of GNP. We examine the relative importance of the required return on equity compared with the interest rate in the determination of the cost of capital, and hence,investment. In this connection, we review the empirical success of the Q theory of investment which relates investment to stock market evaluations of firms. One of the explanations for the neglect of the stock market in macroeconomics may be the view that because the stock market fluctuates excessively, rational managers will pay little attention to the market informulating investment plans. This view is shown to be unfounded by demonstrating that rational managers will react to stock price changes even if the stock market fluctuates excessively. Finally, we review the extremely important issue of whether the market does fluctuate excessively, and conclude that while not ruled out on a priori theoretical grounds, the empirical evidence for such excess fluctuations has not been decisive.
Handle: RePEc:nbr:nberwo:1291
Template-Type: ReDIF-Paper 1.0
Title: Excess Labor and the Business Cycle
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG
Number: 1292
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1292
File-URL: http://www.nber.org/papers/w1292.pdf
File-Format: application/pdf
Publication-Status: published as Fair, Ray C. "Excess Labor and the Business Cycle." American Economic Review, Vol. 75, No. 1, (March 1985), pp.239-245.
Abstract: This paper compares the Medoff-Fay estimates of labor hoarding during troughs, which are based on data from manufacturing plants, with aggregate estimates of excess labor on hand.The two sets of estimates seem consistent, which provides a strong argument in favor of the excess labor hypothesis. This is one of the few examples in macroeconomics where a hypothesis has been so strongly confirmed using detailed micro data.
Handle: RePEc:nbr:nberwo:1292
Template-Type: ReDIF-Paper 1.0
Title: Effect of Expected Future Government Deficits on Current Economic Activity
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG
Number: 1293
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1293
File-URL: http://www.nber.org/papers/w1293.pdf
File-Format: application/pdf
Abstract: This paper considers that possibility that expected future government deficits directly affect economic decisions, in particular the decisions of the Federal Reserve. Some evidence is presented in Section II that indicates that the behavior of the Fed may be influenced by expected future deficits.The economic consequences of this behavior are examined in Section III. The results in this section show that fiscal policy is less effective if the Fed responds to expected future deficits than otherwise. Quantitative estimates of the differences in fiscal-policy effects are presented.
Handle: RePEc:nbr:nberwo:1293
Template-Type: ReDIF-Paper 1.0
Title: Some Issues Concerning Interest Rate Pegging, Price Level Determinacy, and the Real Bills Doctrine
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 1294
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1294
File-URL: http://www.nber.org/papers/w1294.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T. "Some Issues Concerning Interest Rate Pegging, Price Level Determinacy, and the Real Bills Doctrine," Journal of Monetary Economics, Vol. 17, No. 1, pp. 135-160, January 1986.
Abstract: In a recent paper, Canzoneri, Henderson, and Rogoff have shown that it is possible for the monetary authority to peg the nominal interest rate without creating price level indeterminacy in a simplified version of the 1975 Sargent-Wallace model. The present paper begins by reviewing that result, which involves a limiting case of a money supply rule that depicts the authority as responding to current values of the interest rate. Then it shows that there exists an alternative rule that will peg the nominal rate without creating indeterminacy, but that this rule induces a different pattern of price level fluctuations. Next the paper considers whether indeterminacy will prevail if the authority tries to effect a peg in a third way: by simply standing ready to buy and sell securities at the desired rate. Finally, the implication of the foregoing results are drawn for arguments concerning the real bills doctrine and some critical comments are directed at the recent attempted rehabilitation of that doctrine by Sargent and Wallace.
Handle: RePEc:nbr:nberwo:1294
Template-Type: ReDIF-Paper 1.0
Title: Some Pleasant Monetarist Arithmetic
Author-Name: Michael R. Darby
Note: ITI IFM
Number: 1295
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1295
File-URL: http://www.nber.org/papers/w1295.pdf
File-Format: application/pdf
Publication-Status: published as Darby, Michael R. "Some Pleasant Monetarist Arithmetic." Federal Reserve Bank of Minneapolis Quarterly Review, Vol.8, No. 2, (Spring 1984), pp. 15-2 0.
Abstract: Contrary to the conclusion of Sargent and Wallace, it is possible to exogenously and independently vary monetary and fiscal policy and retain steady-state equlibrium in economies like the United States. In particular,the central bank is not forced to monetize increased deficits either now or in the future. This conclusion is based on the fact that the real after-tax yield on government bonds is considerably less than the growth rate of real income except during brief disinflationary periods.
Handle: RePEc:nbr:nberwo:1295
Template-Type: ReDIF-Paper 1.0
Title: Stock Prices and Economic News
Author-Name: Douglas K. Pearce
Author-Name: V. Vance Roley
Note: ME
Number: 1296
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1296
File-URL: http://www.nber.org/papers/w1296.pdf
File-Format: application/pdf
Publication-Status: published as Pearce, Douglas K. and V. Vance Roley. "Stock Prices an Economic News." Journal of Business, Vol. 58, No. 1, (January 1985), pp. 49-67.
Abstract: This paper examines the daily response of stock prices to announcements about the money supply, inflation, real economic activity, and the discountrate. Except for the discount rate, survey data on market participants' expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement, the surprise,moves stock prices. The empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices. There is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days. There is also only weak evidence of stock price responses to surprises beyond the announcement day.
Handle: RePEc:nbr:nberwo:1296
Template-Type: ReDIF-Paper 1.0
Title: The Demand for Labor in the Long Run
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 1297
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1297
File-URL: http://www.nber.org/papers/w1297.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. "The Demand for Labor in the Long Run." Handbook of Labor Economics, edited by O. Ashenfelter and R. Layard, North-Holland Press, 1986.
Abstract: The theory of the demand for labor is presented along with a catalog and critique of methods that are used to estimate the parameters that describe empirical labor-demand and substitution possibilities. A critical survey is presented of studies of own-price demand elasticities for labor as a whole and for workers categorized by demographic group, of substitution parameters among workers of different types, and of workers for capital. The main findings are: 1) The long-run constant-output demand elasticity for labor that istreated as homogeneous is between .15 and .5; 2) Own-price demand elasticities are higher for workers that have less general human capital embodied and them; 3) Skilled labor and physical capital are p-complements; and 4) More tentatively, youths and wornenare q-substitutes in production. The implications and importance for policy of these and other results are discussed. Suggestions for improving the literature and narrowing the range of knowledge of the underlying parameters, especially by concentrating more on disaggregated and even microeconornic data, are presented.
Handle: RePEc:nbr:nberwo:1297
Template-Type: ReDIF-Paper 1.0
Title: External Shocks and Domestic Response: Israel's Macroeconomic Performance, 1965-1982
Author-Name: Michael Bruno
Note: ITI IFM
Number: 1298
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1298
File-URL: http://www.nber.org/papers/w1298.pdf
File-Format: application/pdf
Publication-Status: published as The Israeli Economy: Maturing Through Crisis, (ed)Y. Ben Porath, Harvard Press, 1986.
Abstract: The paper applies an aggregate supply and demand framework for the study of Israel's brand of stagflation. After a very rapid growth period between 1967-1973 Israel's subsequent share growth slowdown and accelerated inflation seem particularly marked by any international comparison. The unemployment rate and the current account deficit have on average risen less. An attempt is made to disentangle the effects of supply shifts (raw materialprice and real wage changes) and the role of demand management and the main macropolicy trade-offs. Unlike other middle-income countries which continued to expand by borrowing heavily, Israel could not substantially increase an already large foreign debt and had to sacrifice growth and price stability to overcome the large post-1973 current account deficit. This trade-off was considerably exacerbated on the domestic front by the inability to reverse an earlier trend of rapidly rising public expenditure and employment. While this accounts for a relatively low unemployment rate it also hampered the growth potential, particularly of exportables. After 1917 developments are dominated by very much higher,self-perpetuating, inflation which was set in motion by an ill-fated foreign exchange liberalization plan and the loss of monetary control. This has further worsened the current-account/inflation trade-off and seems to have locked the economy into a low-growth,high inflation trap.
Handle: RePEc:nbr:nberwo:1298
Template-Type: ReDIF-Paper 1.0
Title: Incentives and Wage Rigidity
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 1299
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1299
File-URL: http://www.nber.org/papers/w1299.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, Edward P. "Incentives and Wage Rigidity." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 339-344.
Abstract: With the growth of the literature on incentive compensation has come the belief by some that incentive pay may be less rigid than pay that is not designed to effect incentives. Some have gone so far as to argue that this may explain differences in unemployment rates across countries. it is shown that there is no direct link between incentives and wage rigidity. Many compensation schemes that provide incentives have the reverse effect: That is, they tend to make wages more rigid than would be the case were incentives not an issue atall. This paper explores the relationship between wage rigidity and the provision of incentives in a variety of circumstances.
Handle: RePEc:nbr:nberwo:1299
Template-Type: ReDIF-Paper 1.0
Title: Rational Bubbles in the Price of Gold
Author-Name: Behzad T. Diba
Author-Person: pdi273
Author-Name: Herschel I. Grossman
Note: EFG
Number: 1300
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1300
File-URL: http://www.nber.org/papers/w1300.pdf
File-Format: application/pdf
Publication-Status: published as "Explosive Bubbles in Stock Prices", American Economic Review, Vol. 78, no. 3 (1988): 520-530.
Publication-Status: published as "The Theory of Rational Bubbles in Stock Prices", Economic Journal, Vol. 98 no. 3 92 (1988): 746-754. Sep., 1988
Abstract: This paper describes a theoretical and empirical study of the possibility of rational bubbles in the relative price ofgold. The critical implication of the theoretical analysis is that, if rational bubbles exist, the time series of the relative price of gold, as well as any time series obtained by differencing a finite number of times, is nonstationary. The empirical evidence relating to this nonstationarity property involves diagnostic checks for stationarity carried out in both the time domain and the frequency domain. This evidence strongly suggests that the process generating the first difference of the log of the relative price of gold is stationary, a finding that is inconsistent with the existence of rational bubbles. More broadly, the empirical analysis finds a close correspondence between the time series properties of the relative price of gold and the time series properties of real interest rates,which the theory relates to the time series properties of the fundamental component of the relative price of gold. In sum, the evidence is consistent with the combined conclusion that the relative price of gold corresponds to market fundamentals, that the process generating first differences of market fundamentals is stationary, and that actual price movements do not involve rational bubbles.
Handle: RePEc:nbr:nberwo:1300
Template-Type: ReDIF-Paper 1.0
Title: Supply Shocks and Monetary Policy Revisited
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 1301
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1301
File-URL: http://www.nber.org/papers/w1301.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. "Supply Shocks and Monetary Policy Revisted." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 38-43.
Abstract: This paper reviews the main issues that supply shocks pose for the conduct of monetary policy. A simple version of the Gordon-Phelps model shows that the necessary condition for actual real GNP to be maintained at its equilibrium level in the wake of a supply shock is for the change innominal GNP to exceed the change in the nominal wage by the change in the income share of the raw material in GNP. The required "wedge" between nominal GNP and wage growth can be accomplished by any combination of monetary accommodation and nominal wage flexibility. Without this combination a "macroeconomic externality" occurs, with real CNP falling below its equilibrium level. The obstacles to monetary accommodation are examined in terms of a taxonomic wage adjustment equation that allows for differing responses to current inflation, lagged inflation, and lagged wage change. Monetary accommodation is infeasible when there is full indexation to current inflation and creates a permanent acceleration of inflation following a one-time permanent shock when there is indexation to lagged inflation. With "forward-looking" expectation formation in the sense of Taylor, a supply shock is likely to cause changes in parameters of the wage adjustment equation as workers attempt to avoid the macroeconomic externality. The final section of the paper discusses doctrinal debates that originated in part from the empirical failures of earlier Phillips curves that neglected supply shocks.
Handle: RePEc:nbr:nberwo:1301
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Savings - A Neoclassical Perspective
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: PE
Number: 1302
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1302
File-URL: http://www.nber.org/papers/w1302.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence J. "Taxation and Savings: A Neoclassical Perspective." Journal of Economic Literature, Vol. 22, No. 4, (December 1984), pp. 157 6-1629.
Abstract: This paper discusses recent neoclassical analyses of taxation and savings.Contrary to the popular view that fiscal policy has highly ambiguous impacts on savings, neoclassical models admit a host of policies with clear and potentially quite powerful affects on the accumulation of wealth.The paper considers four fundamental types of fiscal policies and compares their quantitative affect on savings.The essential elements of these policies involve inter- and intragenerational redistribution, marginal and intra-marginal taxation, and the level of government consumption. Conventional accounting measures of "taxes", "spending", and "deficits" provide, at best, little guide to changes in underlying fiscal instruments and, at worst, precisely opposite indicators of the direction of such changes. Indeed, the continued use of and concern with conventional fiscal measures is symptomatic of wide spread fiscal illusion.These points are developed within the context of certainty models. The paper also considers the role of fiscal policy in both mitigating and exacerbating economic risks facing the private sector. Since precaution is a major motivation for saving, governments can greatly influence wealth accumulation either by using fiscal policy to pool private risks or by making fiscal policy itself highly uncertain.
Handle: RePEc:nbr:nberwo:1302
Template-Type: ReDIF-Paper 1.0
Title: Bequests as a Means of Payment
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 1303
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1303
File-URL: http://www.nber.org/papers/w1303.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas, Andrei Shleifer and Lawrence H. Summers, "The Strategic Bequest Motive," Journal of Political Economy, Vol. 93, No. 6, (December 1985), pp. 1045-1076.
Abstract: Although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation, our understanding of bequest motives remains incomplete. We develop a simple model of"exchange-motivated" bequests, in which a testator influences the decisions ofhis beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries' actions. The model generates falsifiable empirical predictions which are inconsistent with other theories of intergenerational transfers. We present econometric and other evidence which strongly suggests that bequests are often used as a means of payment for services rendered by beneficiaries.
Handle: RePEc:nbr:nberwo:1303
Template-Type: ReDIF-Paper 1.0
Title: Pecuniary & Market Mediated Externalities: Towards a General Theory of the Welfare Economics & Economies with Imperfect Information & Incomplete Mrkts
Author-Name: Bruce C. Greenwald
Author-Name: Joseph E. Stiglitz
Note: PE
Number: 1304
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1304
File-URL: http://www.nber.org/papers/w1304.pdf
File-Format: application/pdf
Publication-Status: published as Greenwald, Bruce and Joseph E. Stiglitz. "Externalities in Economics with Incomplete Market Information," Quarterly Journal of Economics, Vol. CI, Issue 2, May 1986, pp. 229-264.
Abstract: This paper presents a simple but quite general framework for analyzing the impact of informational externalities. By identifying the traditional pecuniary effect of these externalities which nets out,the paper greatly simplifies the problem of determining when tax interventions can be Pareto improving. In some cases it also leads to simple tests, based on readily observable indicators of the efficacy of a particular tax policy. The framework of the paper is used to analyze adverse selection, signalling, moral hazard, incomplete contingent claim markets and queue rationing equilibria.
Handle: RePEc:nbr:nberwo:1304
Template-Type: ReDIF-Paper 1.0
Title: The Permanent Income Hypothesis and Consumption Durability: Analysis Based on Japanese Panel Data
Author-Name: Fumio Hayashi
Author-Person: pha83
Note: EFG
Number: 1305
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1305
File-URL: http://www.nber.org/papers/w1305.pdf
File-Format: application/pdf
Publication-Status: published as Hayashi, Fumio. "The Permanent Income Hypothesis and Consumption Durability: Analysis Based on Japanese Panel Data," Quarterly Journal of Economics, Vol. C, No. 4, pp. 1083-1113, November 1985.
Abstract: The permanent income hypothesis is tested on a four-quarter panel of about two thousand Japanese households for ten commodity groups. Consumption is a distributed lag function of expenditures, and the utility function is additively separable in time. Durability is defined as the persistence of the distributed lag. The permanent income hypothesis implies that, for each commodity group, expected change in expenditures is correlated neither with past expenditure changes on other commodities nor with expected change indisposable income, if its own lags are controlled for. The main results are the following: (1) durability is substantial even for food and services, (2)the permanent income hypothesis applies to almost all (probably more than ninety percent) of the population, and (3) the habit persistence hypothesis is rejected in favor of the permanent income hypothesis.
Handle: RePEc:nbr:nberwo:1305
Template-Type: ReDIF-Paper 1.0
Title: Monetarist Monetary Policy, Exchange Risk, and Exchange Rate Variability
Author-Name: David H. Papell
Author-Person: ppa73
Note: ITI IFM
Number: 1306
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1306
File-URL: http://www.nber.org/papers/w1306.pdf
File-Format: application/pdf
Abstract: This paper investigates the relationship between the new monetary control procedures, implemented by the Federal Reserve Board in October 1979, and the subsequent increase in exchange rate variability for the United States. It shows that, in the context of a stochastic, rational expectations model,exchange rate variability minimizing monetary policy is identical to the policy which, in a deterministic, perfect foresight model, would place the economy on the borderline between exchange rate overshooting and undershooting. The model is estimated for the United States since generalized floating began in 1973. The new monetary control procedures have had two opposite effects. Monetary policy has become less accommodative, increasing exchange rate variability through overshooting. On the other hand ,systematic deviations from uncovered interest rate parity, which can be attributed to exchange risk, have also increased. These increase exchange rate variability through undershooting. It is shown that the latter dominate the former, providing an explanation of increased exchange rate variability consistent with undershooting, not with overshooting.
Handle: RePEc:nbr:nberwo:1306
Template-Type: ReDIF-Paper 1.0
Title: The Demand for International Reserves and Monetary Equilibrium: Some Evidence From Developing Countries
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: ITI IFM
Number: 1307
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1307
File-URL: http://www.nber.org/papers/w1307.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sabastian. "The Demand for International Reserves and Monetary Equilibrium: Some Evidence From Developing Contries." The Review of Economics and Statistics, Vol. 66, No. 3, (August 1984), pp. 495-500.
Abstract: Traditionally, two alternative explanations have been offered for the behavior of international reserves through time. On the one hand, the literature on the demand for international reserves postulates that reserves movements respond to discrepancies between desIred and actual reserves. Onthe other hand, according to the monetary approach to the balance of payments,changes in international reserves will be related to excess demands or excess supplies for money. The purpose of this paper is to empirically integrate these two basic explanations for international reserves movements. This is done by estimating a dynamic equation that explicitly allows reserves movements to reflect the monetary authority's excess demand for international reserves, and the public's excess demand for money. The results obtained,using a sample of 23 developing countries that maintained a fixed exchange rate during period 1965-1972, confirm the hypothesis that reserves movements respond both to monetary factors and to differences between actual and desired reserves. These results indicate that the exclusion of monetary considerations from the dynamic analysis of international reserves will yield biased coefficients.
Handle: RePEc:nbr:nberwo:1307
Template-Type: ReDIF-Paper 1.0
Title: Simulating Alternative Social Security Responses to the Demographic Transition
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: PE
Number: 1308
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1308
File-URL: http://www.nber.org/papers/w1308.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal, Vol. 38, No. 2, pp. 153-168, (June 1985).
Publication-Status: published as Dynamic Fiscal Policy. Cambridge University Press. 1987.
Abstract: The U.S. and other western economies are experiencing dramatic changes in growth and age structure of their populations. Fluctuations in birth rates are the most important determinants of these changes in the post war period. This paper examines the dynamic effects of baby "booms" and baby"busts" on a range of economic variables using a perfect foresight life cycle simulation model. In addition to describing general transition (as opposed to simply long run) affects of fertility change, the paper considers alter-native Social Security policies for avoiding sharp increases in long run payroll tax rates. These include reductions in benefit replacement rates,advances in Social Security's retirement age, taxation of social security benefits, and the accumulation of a significant Social Security trust fund. According to the simulated demographic transitions, the savings inthe U.S. fertility currently underway can have very major impacts on long run factor returns and produce percipitous short term changes in saving rates. While Social Security policy has important effects on the simulated demographic transitions, these effects are of secondary importance to the long run level of economic welfare. Even if payroll tax rates rise dramatically, long run welfare (measured in terms of levels of adult consumption and leisure) is, nonetheless, substantially higher in the case of a sustained dropin the fertility rate. This reflects, in part, the decline in the number of dependent children per adult; while a sustained decline in the fertility rate eventually means a much larger ratio of elderly per capita, the decline in children per capita means an overall decline in the long run ratio of dependents to prime age workers in the economy. A second explanation for the simulated long run welfare gains is capital deepening associated with lower population growth rates.
Handle: RePEc:nbr:nberwo:1308
Template-Type: ReDIF-Paper 1.0
Title: The Behavior of U.S. Deficits
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG
Number: 1309
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1309
File-URL: http://www.nber.org/papers/w1309.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. (ed.) The American Business Cycle: Continuity and Change. Chicago: University of Chicago Press, 1986.
Publication-Status: published as Barro, Robert J. "U.S. Deficits Since World War I." Scandinavian Journal of Economics, Vol. 88, No. 1, (1986), pp. 195-222.
Abstract: The tax-smoothing theory suggests that deficits would respond particularly to recession, temporarily high government spending, and anticipated inflation. My empirical estimates indicate that a relation of this type is reasonably stable in the U.S. since at least 1920. In particular, the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions. Further, the deficits for 1982-83 and projections for 1984 are consistent with the previous structure. The high values of these deficits reflect the customary response to substantial recession (interacting with big government) and to expected inflation.
Handle: RePEc:nbr:nberwo:1309
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Affirmative Action on Employment
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1310
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1310
File-URL: http://www.nber.org/papers/w1310.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "The Impact of Affirmative Action on Employment." Journal of Labor Economics, Vol. 2, No. 4, (October 1984), pp. 439-463.
Abstract: Affirmative action under Executive Order 11246 ranks among the most controversial of domestic federal policies.This study asks whether affirmative action has been successful in promoting the employment of minorities and females. It compares the change in demographics between 1974 and 1980 at more than sixty-eight thousand establishments, and finds that both minority and female employment have increased faster at establishments subject to affirmative action. Compliance reviews, while not well targeted are also found to have been effective.
Handle: RePEc:nbr:nberwo:1310
Template-Type: ReDIF-Paper 1.0
Title: Unions and Equal Employment Opportunity
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1311
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1311
File-URL: http://www.nber.org/papers/w1311.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "The Effect of Unions on the Employment of Blacks, Hispanics and Women." Industrial and Labor Relations Review, Vol. 39, No. 1,(October 1985), pp. 115-132.
Abstract: This paper analyzes differences in the growth of minority and female employment between union and non-union manufacturing plants in California during the late 1970's, In this sector, unionized plants do not exhibit anymore gross employment discrimination than do nonunion plants against black or Hispanic men, or against black or white women, despite ther ecessions of the 1970's that displaced low seniority workers. Black males actually enjoy faster growth of employment share in unionized plants, suggesting that Title VII has been effective in increasing opportunities for blacks. This may help explain why unionization, though decreasing in the private sector, has been increasing among blacks. The role played by unions in mediating affirmative action regulations is also examined. There are significant differences across particular unions, especially between craft and industrial unions, within industries that correspond with each union's public record on EEO. Black employment increasesmost rapidly in industries with a long history of black employment, in plants organized by unions that take a liberal position towards EEO, and in industries with a large union wage effect. As least in California manufacturing during this period,the belief that unions have hindered minority and female employment does not seem to hold true for industrial unions.
Handle: RePEc:nbr:nberwo:1311
Template-Type: ReDIF-Paper 1.0
Title: Banking and Insurance
Author-Name: Joseph G. Haubrich
Author-Person: pha107
Author-Name: Robert G. King
Author-Person: pki21
Note: EFG
Number: 1312
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1312
File-URL: http://www.nber.org/papers/w1312.pdf
File-Format: application/pdf
Publication-Status: published as Haubrich, Joseph G. & King, Robert G., 1990. "Banking and insurance," Journal of Monetary Economics, Elsevier, vol. 26(3), pages 361-386, December.
Abstract: This paper studies the economic role of financial institutions in economies where agents' incomes are subject to privately observable, idiosyncratic random events. The information structure precludes conventional insurance arrangements. However, a financial institution -- perhaps best viewed as a savings bank -- can provide partial insurance by generating a time pattern of deposit returns that redistributes wealth from agents with high incomes to those with low incomes, resulting in a level of expected utility higher than that achievable in simple security markets. Insurance is incomplete because the bank faces a tradeoff between provision of insurance and maintenance of private incentives.
Handle: RePEc:nbr:nberwo:1312
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Inflation and Money Supply Announcements on Interest Rates
Author-Name: Thomas Urich
Author-Name: Paul Wachtel
Author-Person: pwa884
Note: ME
Number: 1313
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1313
File-URL: http://www.nber.org/papers/w1313.pdf
File-Format: application/pdf
Publication-Status: published as Urich, Thomas and Paul Wachtel. "The Effects of Inflation and Money Supply Announcements on Interest Rates." Journal of Finance, Vol. 39, No. 4, (September 1984), pp. 1177-1188.
Abstract: This paper examines the impact of the money supply and inflation rate announcements on interest rates. Survey data on expectations of the money supply and consumer and producer price indexes are used to distinguish anticipated and unanticipated components of the announcements. This distinction is used to test for the efficiency of the financial market response to the announcements of new information. The results indicate that the unanticipated components of the announced changes in the Producers Price Index and in the money supply have an immediate positive effect on short term interest rates.The Consumer Price Index announcement has no apparent effect. There is no evidence of a delayed announcement effect. However, there is some indication of liquidity effect of the money supply change on interest rates. This takes place when reserves are changing and several weeks prior to the information announcement.
Handle: RePEc:nbr:nberwo:1313
Template-Type: ReDIF-Paper 1.0
Title: A Test of Dual Labor Market Theory
Author-Name: William T. Dickens
Author-Name: Kevin Lang
Author-Person: pla83
Note: LS
Number: 1314
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1314
File-URL: http://www.nber.org/papers/w1314.pdf
File-Format: application/pdf
Publication-Status: published as Dickens, William T. and Kevin Lang. "A Test of Dual Labor Market Theory." American Economic Review, Vol. 75, No. 4, (Steptember 1985), pp. 792-805.
Abstract: Despite substantial differences in their views of the appropriate policy response to the existence of poverty, neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis.This paper presents a test of the two central propositions of dual market theory -- 1) the existence of two distinct labor markets with different wage setting mechanisms and 2) the existence of barriers to mobility between the labor markets. We find considerable support for both hypothesis. Estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations. The one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience. The other equation is flat with no returns to human capital. These two equations resemble the predictions of dual market theory for the "primary" and "secondary" markets respectively. Further, we present evidence that(at least) some non-white workers are involuntarily confined to the secondary market. This crowding of minority workers into the low wage labor market accounts for a substantial portion of white/non-white wage differences. We interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels. In addition, combining the efficiency wage argument with the observation that much of the white/non-white wage difference is explained by the exclusion of non-whites from the primary sector suggests an explanation for the persistance of wage differences.
Handle: RePEc:nbr:nberwo:1314
Template-Type: ReDIF-Paper 1.0
Title: Funding and Asset Allocation in Corporate Pension Plans: An Empirical Investigation
Author-Name: Zvi Bodie
Author-Person: pbo569
Author-Name: Jay O. Light
Author-Name: Randall Morck
Author-Person: pmo146
Author-Name: Robert A. Taggart, Jr.
Number: 1315
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1315
File-URL: http://www.nber.org/papers/w1315.pdf
File-Format: application/pdf
Publication-Status: published as "Corporate Pension Policy: An Empirical Investigation." From Financial Analysts Journal, Vol. 41, No. 5, pp. 10-16, (September/October 1985).
Publication-Status: published as From Issues in Pension Economics, edited by Zvi Bodie, J.B. Shoven, and David A. Wise. Chicago: University of Chicago Press, 1987.
Publication-Status: published as Funding and Asset Allocation in Corporate Pension Plans: An Empirical Investigation, Zvi Bodie, Jay O. Light, Randall Morck. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: This paper contrasts and empirically tests two different views of corporate pension policy: the traditional view that pension funds are managed without regard to either corporate financial policy or the interests of the corporation and its shareholders, and the corporate financial perspective represented by the recent theoretical work of Black (1980), Sharpe (1916),Tepper (1981), and Treynor (1971), which stresses the potential effects of a firm's financial condition on its pension funding and asset allocation decisions. We find several pieces of evidence supporting the corporate financial perspective. First, we find that there is a significant inverse relationship between firms' profitability and the discount rates they choose tor eport their pension liabilities. In view of this we adjust all reported pension liabilities to a common discount rate assumption. We then find a significant positive relationship between firm profitability and the degree ofpension funding, as is consistent with the corporate financial perspective. We also find some evidence that firms facing higher risk and lower tax liabilities are less inclined to fully fund their pension plans. On the asset allocation question, we find that the distribution of plan assets invested in bonds is bi-modal, but that it does not tend to cluster around extreme portfolio configurations to the extent predicted by the corporate financial perspective. We also find that the percentage of plan assets invested in bonds in negatively related to both total size of plan and the proportion of unfunded liabilities.The latter relationship shows up particularly among the riskiest firms and is consistent with the corporate financial perspective on pension decisions.
Handle: RePEc:nbr:nberwo:1315
Template-Type: ReDIF-Paper 1.0
Title: A Reconsideration of the Effects of Unionism on Relative Wages and Employment in the United States, 1920-80
Author-Name: John H. Pencavel
Author-Person: ppe335
Author-Name: Catherine E. Hartsog
Note: LS
Number: 1316
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1316
File-URL: http://www.nber.org/papers/w1316.pdf
File-Format: application/pdf
Publication-Status: published as Pencavel, John H. "A Reconsiderstion of the Effects of Unionism on Relative Wages and Employment in the United States, 1920-80," Journal of Labor Economics, Vol. 2, No. 2, April 1984, pp. 193-232.
Abstract: H. Gregg Lewis' estimates of the relative wage effect of unionism between 1920 and 1958 are routinely cited though they have rarely been subject to scrutiny. This paper extends Lewis' data to 1980 and, in particular, we construct a series on union membership that links up with the data available in the 1970's from the Current Population Surveys. We proceed to reexamine the effects of trade unions both on relative wages and on relative man hours worked.Our estimates of the relative wage effect are similar to Lewis' though these are not measured with precision and a wide range of estimates are consistent with the results. With respect to the effect of unionism on relative man hours worked, we are not at all satisfied that the analysis of these data clearly points to the existence of a negative effect.
Handle: RePEc:nbr:nberwo:1316
Template-Type: ReDIF-Paper 1.0
Title: Open-Economy Implications of Two Models of Business Fluctuations
Author-Name: Alan C. Stockman
Author-Person: pst94
Author-Name: Ai Tee Koh
Note: ITI IFM
Number: 1317
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1317
File-URL: http://www.nber.org/papers/w1317.pdf
File-Format: application/pdf
Publication-Status: published as Koh, Ai Tee and Alan C. Stockman. "Open-Economy Implications of Two Modelsof Business Fluctuations," Canadian Journal of Economics, Vol. XIX, No. 1 , February 1986, pp. 23-34.
Abstract: This paper shows how open-economy implications of alternative business-cycle models can be used to discriminate between those models. Open-economy versions of two well-known models are presented: a model with predetermined nominal wages and a model in which nominal disturbances are misperceived as real disturbances. In the former model applied to a small economy with flexible exchange rates, an unanticipated increase in the money supply increases output of both traded and nontraded goods, lowers the relative price of nontraded goods, and inducesa current-account surplus. In the latter model, an unperceived increase in the money supply increases output of nontraded goods but reduces output of traded goods, raises the relative price of nontraded goods, and induces a current-account deficit.
Handle: RePEc:nbr:nberwo:1317
Template-Type: ReDIF-Paper 1.0
Title: The Heights of Europeans Since 1750: A New Source For European Economic History
Author-Name: Roderick Floud
Note: DAE
Number: 1318
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1318
File-URL: http://www.nber.org/papers/w1318.pdf
File-Format: application/pdf
Publication-Status: published as Floud, Roderick. "Wirtschaftliche und Soziale Einflusse auf der Korhergrossen von Eurohaern seit 1750," Jahrbuch fur Wirtschaftsgeschichte, No. II, 1985, pp. 93-118. Translated by B. Feldmann.
Abstract: Economic and social historians have traditionally been concerned to measure changes in the income and welfare of populations in the past.Until recently, however, they have not recognized that anthropometric data, such as evidence on the average height achieved by a population at a particular age, provide sensitive indicators of the average nutritional status of that population. Records of conscription into the armies of eleven European countries betweeen 1761 and 1975 provide 114 observations of mean height. Using 614 observations, the paper explores the relationship between mean height and other indicators of health and welfare, in particular the level of GDP per capita and the level of infant mortality. Western European heights are shown to have responded systematically over the past hundred years to changes in income and disease, just as heights in the modern world respond to similar changes today. Average height is powerful evidence of the nature and extent of economic development.
Handle: RePEc:nbr:nberwo:1318
Template-Type: ReDIF-Paper 1.0
Title: Optimal Price Adjustment with Time-Dependent Costs
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: EFG
Number: 1319
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1319
File-URL: http://www.nber.org/papers/w1319.pdf
File-Format: application/pdf
Abstract: The purpose of this paper is to analyze an optimal pricing rule for the case in which the costs of price adjustment are time dependent, and where those costs depend positively on the magnitude of the percentage price change. By means of discrete time model, it is shown that the optimal response to the problem under consideration is to pre-set prices for each period at the end of the previous period. Within the period prices will adjust if the unexpected shock exceeds a threshold level. In such a case the new price is established at a level that is a weighted average of the pre-set level and of the equilibrium level that would have obtained in the absence of costs of contemporaneous price adjustment. Under certain conditions, which are derived in the paper, higher volatility of unexpected inflation might reduce relative price volatility.
Handle: RePEc:nbr:nberwo:1319
Template-Type: ReDIF-Paper 1.0
Title: Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition
Author-Name: Edward J. Kane
Author-Person: pka853
Note: ME
Number: 1320
Creation-Date: 1984-03
Order-URL: http://www.nber.org/papers/w1320
File-URL: http://www.nber.org/papers/w1320.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J. "Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition." Journal of Finance, Vol. 39, No. 3 , (July 1984), pp. 759-772.
Abstract: Productlines of traditionally heterogeneous financial institutions are rapidly fusing into a homogeneous blend, institutions and market structures are reshaping themselves to lower the cost of serving customer demand for financial services.This paper contends that contemporary adaptations exploit scope economies rooted in technological change and deposit-insurance subsidies to innovative forms of risk-bearing. As they reorient work flows, financial firms are simultaneously restructuring their organizations to lower net burdens from government regulation. Alternative state and federal regulatory and legislative bodies compete vigorously for the regulatory business of developing institutional hybrids. Evolution of Federal Reserve policy toward "nonbank banks" exemplifies the process.
Handle: RePEc:nbr:nberwo:1320
Template-Type: ReDIF-Paper 1.0
Title: Trade Policy, Income, and Employment
Author-Name: Robert E. Baldwin
Note: ITI IFM
Number: 1321
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1321
File-URL: http://www.nber.org/papers/w1321.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Robert E. "Trade policy and Employment," Employment Growth and Structural Change. Paris: OECD, 1985.
Abstract: Disappointing recent growth rates, the emergence of structurally unfavorable income and employment conditions, and important institutional changes in the international trading environment have caused policy officials in the advanced industrial nations to reconsider the proper mix of reactive versus active trade policy in easing adjustment to labor market disruptions and dealing with structural changes. This paper first examines the implications of traditional trade theory as well as the new theoretical developments emphasizing imperfect markets for this policy reevaluation. Alternative policy options are then considered within a framework that recognizes the imperfect real world conditions within which trade policies must operate.
Handle: RePEc:nbr:nberwo:1321
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Pensions
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: PE
Number: 1322
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1322
File-URL: http://www.nber.org/papers/w1322.pdf
File-Format: application/pdf
Publication-Status: published as in "Research in Labor Economics," Vol. 7, ed. Ronald G. Ehrenberg (Greenwich, CT: JAI Press, 1985): 1-30.
Abstract: Recent and proposed changes in the social security statutes can have profound effects on worker behavior and on pensions themselves. In the context of an optimal lifetime compensation plan, pensions depend on efficient dates of retirement. To the extent that changes in social security affect the efficient date of retirement, both the pension and the wage profile itself will react. Four proposed changes in the social security system are analyzed.The cost savings associated with the change, as well as the effect on pensions and worker compensation in general are discussed.
Handle: RePEc:nbr:nberwo:1322
Template-Type: ReDIF-Paper 1.0
Title: The Informational Content of Bond Ratings
Author-Name: Louis H. Ederington
Author-Name: Jess B. Yawitz
Author-Name: Brian E. Roberts
Note: ME
Number: 1323
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1323
File-URL: http://www.nber.org/papers/w1323.pdf
File-Format: application/pdf
Publication-Status: published as Louis H. Ederington & Jess B. Yawitz & Brian E. Roberts, 1987. "THE INFORMATIONAL CONTENT OF BOND RATINGS," Journal of Financial Research, vol 10(3), pages 211-226.
Abstract: This paper explores the risk structure of interest rates. More specifically, we ask whether yields on industrial and commercial bonds indicate that market participants base their evaluations of a bond issue's default risk on agency ratings or on publically available financial statistics. Using a non-linear least squares procedure, we relate the yield to maturity to Moody's rating, Standard & Poor's rating, and accounting measures of credit worthiness such as coverage and leverage. We find that market yields are significantly correlated with both the ratings and with a set of readily available financial accounting statistics. These results indicate (1) that market participants base their evaluations of an issue's credit worthiness on more than the agencies' ratings and (2) that the ratings bring some information to the market above and beyond that contained in the set of accounting variables. In addition, our results suggest that the market views Moody's and S&P's ratings as equally reliable measures of risk. Although the accounting measures also affect yields on new or recently reviewed issues, our analysis suggests that the market may pay more attention to the accounting measures and less to the ratings if the rating has not been reviewed recently.
Handle: RePEc:nbr:nberwo:1323
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls, The Dual Exchange Rate, and Devaluation
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: ITI IFM
Number: 1324
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1324
File-URL: http://www.nber.org/papers/w1324.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice. "Capital Controls, the Dual Exchange Rate, and Devaluation." Journal of International Economics, Vol. 20, No. 1, (February 1986), pp. 1-20.
Abstract: This paper re-examines the effect of devaluation under capital-account restrictions, adding to traditional formulations the seemingly minor (but realistic) assumption that central-bank reserves earn interest. The extra assumption has important implications. In an intertemporal model, devaluation is no longer neutral in the long run as it is in the literature on the monetary approach to the balance of payments. Further, the economy may possess multiple stationary states, some of them unstable.The analysis confirms, however, that even large devaluations must improve the balance of payments if the economy is initially at a stable stationary position. A by-product of the analysis is a pricing formula for the financial exchange rate in a dual exchange rate system. That formula is consistent with recent consumption-based models of asset pricing.
Handle: RePEc:nbr:nberwo:1324
Template-Type: ReDIF-Paper 1.0
Title: Cyclical Behavior of Prices and Quantities in the Automobile Market
Author-Name: Olivier J. Blanchard
Author-Person: pbl2
Author-Name: Angelo Melino
Author-Person: pme69
Note: EFG
Number: 1325
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1325
File-URL: http://www.nber.org/papers/w1325.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier J. and Angelo Melino. "The Cyclical Behavior of Prices and Quantities; the Case of the Automobile Market," Journal of Monetary Economics, Vol. 17, pp. 379-407, May 1986.
Abstract: This paper has a simple goal, that of understanding the joint behaviorof prices and quantities in a particular market. More precisely, it examines whether we can find decision problems for suppliers and buyers, together with a market equilibrium structure, which are consistent with the observed price and quantity time series. Because of the relative homogeneity of the product, of the size of the market, end of the quality of the data, the market chosen is the automobile market.The first conclusion we reach is that this goal is difficult to achieve.The behavior of prices appears inconsistent with simple -- competitive, monopolistically competitive or monopolistic -- market structures. Prices appear, in a well defined sense, to be too "sticky". We then consider potentiail explanations and extensions. None appears completely satisfactory. In particular, the introduction of costs of changing prices does not seem able to explain the joint behavior of prices and quantities.
Handle: RePEc:nbr:nberwo:1325
Template-Type: ReDIF-Paper 1.0
Title: The Lucas Critique and the Volcker Deflation
Author-Name: Olivier J. Blanchard
Author-Person: pbl2
Note: EFG
Number: 1326
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1326
File-URL: http://www.nber.org/papers/w1326.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier J. "The Lucas Critique and the Volcker Deflation." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 211-215.
Abstract: This paper examines, in light of the Lucas Critique, the behavior of the Phillips curve and of the term structure of interest rates after October 1979. It starts with an informal account of the policy change and then discusses how we might expect these two relations to shift after such a change. It finds little evidence of a direct effect of the policy change on the Phillips curve, at least until 1982. It finds substantial evidence of a direct effect on term structure.
Handle: RePEc:nbr:nberwo:1326
Template-Type: ReDIF-Paper 1.0
Title: Splitting Blacks?: Affirmative Action and Earnings Inequality within and Across Races
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1327
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1327
File-URL: http://www.nber.org/papers/w1327.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "Splitting Blacks?: Affirmative Action and Earnings Inequality within and Across Races," Proceddings of the Industrial Relations Research Association, 39th Annual Meeting, (Winter 1986), pp. 51-57.
Abstract: Critics have said that affirmative action is at best ineffective and at worst counterproductive. In particular, it has been argued that if affirmative action helps anybody, it helps only the highly educated cream of the minority population, and may perversely work to the detriment of the unskilled and uneducated. This study finds that minority males earn higher wages in sectors where affirmative action is prevalent, indicating that it has increased the demand for minority males. I also find evidence of this effect for both the lowly and highly educated, suggesting that affirmative action under the Executive Order has not contributed to the economic bifurcation of the minority community.
Handle: RePEc:nbr:nberwo:1327
Template-Type: ReDIF-Paper 1.0
Title: Affirmative Action as Earnings Redistribution: The Targeting of Compliance Reviews
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1328
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1328
File-URL: http://www.nber.org/papers/w1328.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "Affirmative Action as Earnings Redistibution: The Targeting of Compliance Reviews." Journal of Labor Economics, Vol. 3, No.3,(July 1985), pp. 363-384.
Abstract: Affirmative action may be broadly conceived of as pursuing either the goal of reducing discrimination or that of redistributing jobs and earnings. I attempt to infer the ends of affirmative action policy by analyzing the historical record of enforcement. Optimal enforcement strategies are developed for both the anti-discrimination and the earnings redistribution models, and then compared with new data on the actual targeting of affirmative action compliance reviews during the late 1970s. I find that establishments with very low proportions of minority or female workers are not significantly more likely to be reviewed, but that white-collar intensive establishments are more likely to be reviewed. This indicates the shortcomings of the anti-discrimination model inexplaining the OFCCP's behavior, and suggests the potential usefulness of the earnings redistribution model.
Handle: RePEc:nbr:nberwo:1328
Template-Type: ReDIF-Paper 1.0
Title: Optimal Wage Indexation, Foreign-Exchange Intervention and Monetary Policy
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Jacob A. Frenkel
Note: ITI EFG IFM
Number: 1329
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1329
File-URL: http://www.nber.org/papers/w1329.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Jacob A. Frenkel. "Optimal Wage Indexation, Foreign Exchange Intervention and Monetary Policy." American Economic Review, Vol. 75, No. 3, (June 1985), pp. 402-423.
Abstract: This paper deals with the design of optimal monetary policy and with the interaction between the optimal degrees of wage indexation and foreign exchange intervention. The model is governed by the characteristics of the stochastic shocks which affect the economy and by the information set that individuals possess. Because of cost of negotiations, nominal wages are assumed to be precontracted and wage adjustments follow a simple indexation rule that links wage changes to observed changes in price. The use of the price level as the only indicator for wage adjustments may not permit an efficient use of available information and, may result in welfare loss. The analysis specifies the optimal set of feedback rules that should govern policy aiming at the minimization of the welfare loss. These feedback rules determine the optimal response of monetary policy to changes in exchange rates, interest rates and foreign prices. The adoption of the optimal set of feedback rules results in the complete elimination of the welfare cost arising from the simple indexation rule and from the existence of nominal contracts. Since optimal policies succeed in the elimination of the distortions, issues concerning the nature of contracts and the implications of specific assumptions about disequilibrium positions become inconsequential. The analysis then proceeds to examine the interdependence between the optimal feedback rules and the optimal degree of wage indexation. It is shown that a rise in the degree of exchange rate flexibility raises the optimal degree of wage indexation. One of the key conclusions is the proposition that the number of independent feedback rules that govern a policy must equal the number of independent sources of information that influence the determination of the undistorted equilibrium. Thus, it is shown that with a sufficient number of feedback rules for monetary policy there may be no need to introduce wage indexation. It is also shown that an economy that is not able to choose freely an exchange rate regime can still eliminate the welfare loss by supplementing the(constrained) monetary policy with an optimal rule for wage indexation. The paper concludes with an examination of the consequences of departures from optimal policy by comparing the welfare loss resulting from the imposition of alternative constraints on the degree of wage indexation, on foreign exchange intervention and on the magnitudes of other policy feedback coefficients.
Handle: RePEc:nbr:nberwo:1329
Template-Type: ReDIF-Paper 1.0
Title: Recent U.S. Trade Policy and its Global Implications
Author-Name: Robert E. Baldwin
Author-Name: J. David Richardson
Note: ITI IFM
Number: 1330
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1330
File-URL: http://www.nber.org/papers/w1330.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Robert E. and J. David Richardson. "Recent U.S. Trade Policy and Its Global Implications." The Global Implications of the Trade Patterns of East and Southeast Asia, edited by Colin Bradford and William H. Branson. Chicago: UCP, (1987).
Publication-Status: published as Recent U.S. Trade Policy and Its Global Implications, Robert E. Baldwin, J. David Richardson. in Trade and Structural Change in Pacific Asia, Bradford and Branson. 1987
Abstract: The purpose of this paper is to describe United States trade policy since World War II, and to assess the possibility for ongoing U.S.trade-policy leadership. U.S. trade policy has shown remarkable consistency since World War II. It has never been as purely free-trade-focussed as some commentators suggest, but it has not recently shifted toward isolationism as dramatically as alarmists fear. It has almost always been best described as "open, but fair," with injury to import competitors being the measure of "fairness." The general consistency of U.S. trade policy over time is quite remarkable given the frequent change of political party in power, especially in the executive branch, but also in the Congress. U.S. trade-policy leadership seems still potentially strong despite a decline in U.S. hegemony. It is clearly strong in a protectionist direction.Any shift toward aggressive insularity justifies parallel trade-policy aggression in the eyes of trading partners. It is arguably strong ina liberalizing direction as well. The U.S. seems ideally poised for aggressive trade-policy peacemaking; perhaps multilaterally, but perhaps also bilaterally; perhaps with its traditional industrial trading partners, but perhaps also with Japan and newly industrializing Asian countries that play so importanta role in U.S. trade, and that, on many matters,may be closer in spirit to U.S. economic philosophy than Europe, Canada, or Latin America.
Handle: RePEc:nbr:nberwo:1330
Template-Type: ReDIF-Paper 1.0
Title: Regulatory Structure in Futures Markets: Jurisdictional Competition Among the SEC, the CFTC, and Other Agencies
Author-Name: Edward J. Kane
Author-Person: pka853
Note: ME
Number: 1331
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1331
File-URL: http://www.nber.org/papers/w1331.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J. "Regulatory Structure in Futures Markets: Jurisdictional Competition Among the SEC, the CFTC, and Other Agencies." Journal of Futures Markets, Vol. 5, Fall 1984, pp. 367-384.
Abstract: This paper studies competition among alternative regulatory bodies for authority over innovative financial contracts. In the United States, this rivalry embraces not only the Commodity Futures Trading Commission and the Securities and Exchange Commission, but state and federal deposit-institution regulators and various private regulatory cooperatives. From a political perspective, multipleregulators develop as a way of formally providing ongoing protection for the interests of diverse political constituencies. But from an economic perspective,competition resulting from overlaps in regulatory responsibility establishes an evolutionary mechanism for adapting regulatory structures to technological and regulation-induced innovation. Using both perspectives, this paper explains how interaction between governmental regulatory agencies and self-regulatory cooperatives produces more-efficient regulatory structures over time.The study also seeks to catalog the particular costs and benefits that may be associated with the regulatory tools used to control futures and securities markets(e.g., broker and trader registration, disclosure requirements, margin requirements,and contract-approval processes) and with changes in the distribution of jurisdiction over these tools. The analysis seeks to clarify the tradeoff between the perceived probability of various problems of market performance (e.g., contract nonperformance, widespread financial instability, and activities such as price manipulation by which corrupt or sophisticated operators separate naive investors from their wealth) and the implicit and explicit cost of reducing this probability.
Handle: RePEc:nbr:nberwo:1331
Template-Type: ReDIF-Paper 1.0
Title: Measuring Aspects of Fiscal and Financial Policy
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: ITI IFM
Number: 1332
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1332
File-URL: http://www.nber.org/papers/w1332.pdf
File-Format: application/pdf
Abstract: The paper develops a forward-looking comprehensive accounting framework for the public sector.By integrating the public sector budget constraint forward in time the government's present value budget constraint (PVBC) is obtained. In addition to the familiar financial assets and liabilities, comprehensive public sector networth contains the following items: the value of the public sector capital stock; the value of public sector property rights in landand natural resources; the present value of future seigniorage, the present value of future taxes net of transfers and subsidies and the present value of future planned public sector capital formation, privatization or nationalization programmes. From the "stock" PVBC a number of different "flow" deficit concepts are derived; each one emphasizes a different aspect of the"sustainability" of current and/or prospective fiscal and financial plans. Together they provide a framework for organizing facts and plans about fiscal, financial and monetary policy and for evaluating the consistency of spending and revenue projections or scenarios,public sector debt objectives and monetary targets.
Handle: RePEc:nbr:nberwo:1332
Template-Type: ReDIF-Paper 1.0
Title: Inflation and Real Interest Rates on Assets with Different Risk Characteristics
Author-Name: John Huizinga
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG
Number: 1333
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1333
File-URL: http://www.nber.org/papers/w1333.pdf
File-Format: application/pdf
Publication-Status: published as Huizinga, John and Frederic S. Mishkin. "Inflation and Real Interest Rateson Assets with Different Risk Characteristics." Journal of Finance, Vol. 39, No. 3, (July 1984), pp. 699-712.
Abstract: Several recent studies find that ex ante real returns for short-term U.S. Treasury securities are negatively correlated both with inflation and with nominal interest rates. This paper examines whether these findings extend to the short-term holding return on publicly and privately issued securities of longer maturity, are robust with respect to the choice of price index, and are stable over time. Our results show that before 1979 a negative relationship of ex ante real returns with inflation and nominal interest rates does appear for the longer maturity assets. In fact, the relationship grows stronger with increases in maturity length. This suggests that although short-term U.S. Treasury bills were, of all the assets we study, the best hedge against expected inflation, none of the assets were a perfect hedge. We find a statistically significant change in the stochastic process of bond returns in 1979, with nominal interest rates and ex ante real holding returns being positively correlated in this latter period. This is not true for stocks, however. While the above results are robust to the choice of price index, we show that estimating the level of ex ante real returns depends crucially on the price index chosen.
Handle: RePEc:nbr:nberwo:1333
Template-Type: ReDIF-Paper 1.0
Title: The Architecture of Economic Systems: Hierarchies and Polyarchies
Author-Name: Raaj Kumar Sah
Author-Person: psa736
Author-Name: Joseph E. Stiglitz
Note: PE
Number: 1334
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1334
File-URL: http://www.nber.org/papers/w1334.pdf
File-Format: application/pdf
Publication-Status: published as Sah, Raaj Kumar and Joseph E. Stiglitz. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, Vol. 76, No. 4 , (September 1986), pp. 716-727.
Abstract: This paper presents some new perspectives on the structure and performance of alternative economic organizations. We posit that decision makers make errors of judgement (for example, they sometimes select bad projects while rejecting good projects), and that how these errors are aggregated within different organizations depends on their architecture (for example, on how individuals are organized together). Using this framework, we compare the performances of two polar forms of organizations: hierarchies and polyarchies. Assuming judgmental abilities of individuals are similar in the two systems, we show that polyarchies accept a larger proportion of bad projects (compared to hierarchies) whereas hierarchies reject a larger proportion of good projects. We then determine the conditions under which polyarchies have higher or lower expected profit. The conditions under which polyarchies perform better appear to be more plausible and, moreover, this conclusion holds also in the case where the rules for accepting or rejecting projects are rationally determined based on the information available to individuals. The architecture of organizations also affects their portfolio of available projects; we determine conditions under which polyarchies have better or worse portfolios compared to those available to hierarchies.There are many possible extensions of our approach. Among them are the analysis of internal structure of firms, selection of managers (by other managers) and the reproduction and self-perpetuation of organizations over time.
Handle: RePEc:nbr:nberwo:1334
Template-Type: ReDIF-Paper 1.0
Title: Informational Imperfections in the Capital Market and Macro-Economic Fluctuations
Author-Name: Bruce C. Greenwald
Author-Name: Joseph E. Stiglitz
Author-Name: Andrew Weiss
Note: PE
Number: 1335
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1335
File-URL: http://www.nber.org/papers/w1335.pdf
File-Format: application/pdf
Publication-Status: published as Greenwald, Bruce, Joseph E. Stiglitz and Anfrew Weiss. "Informational Imperfections in the Capital Market and Macro-Economic Fluctuations." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 194-199.
Abstract: This paper describes the role that informational imperfections in capital markets are likely to play in business cycles. It then developes a simple illustrative model of the impact of adverse selection in the equity market and the way in which this may lead to large fluctuations in the effective cost of capital in response to relatively small demand shocks. The model also derives an expression for the cost of equity capital in the presence of adverse selection and provides informational explanations for several widely observed macro-economic phenomena.
Handle: RePEc:nbr:nberwo:1335
Template-Type: ReDIF-Paper 1.0
Title: External Debt, Budget Deficits and Disequilibrium Exchange Rates
Author-Name: Rudiger Dornbusch
Note: ITI IFM
Number: 1336
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1336
File-URL: http://www.nber.org/papers/w1336.pdf
File-Format: application/pdf
Publication-Status: published as Dornbusch, Rudiger. "External Debt, Budget Deficits and Disequilibrium Exchange Rates." International Debt and the Developing Countries, edited by G . Smith and J. Cuddington. Washington D.C.: World Bank, (March 1985).
Abstract: The paper investigates the sources of debt and debt difficulties for a group of Latin American countries. It is argued that external shocks -- oil, interest rates, world recession and the fall in real commodity prices -- cannot account by themselves for the problems. Budget deficits that accommodate terms of trade deterioration and disequilibrium exchange rates are central to a complete explanation. The paper documents that in Chile an extreme currency overvaluation led to a massive shift into imported consumer durables while in Argentina overvaluation in conjunction with financial instability led to large-scale capital flight. In the case of Brazil the budget deficit is the explanation for the growth in external indebtedness.The difference in the experience of the three countries reflects the difference in their openness to the world economy.
Handle: RePEc:nbr:nberwo:1336
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Wage Distributions
Author-Name: Joseph E. Stiglitz
Note: PE
Number: 1337
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1337
File-URL: http://www.nber.org/papers/w1337.pdf
File-Format: application/pdf
Publication-Status: published as Stiglitz, Joseph E. "Equilibrium Wage Distributions." The Economic Journal, Vol. 95, (September 1985), pp. 595-618.
Abstract: This paper analyzes equilibrium in labor markets with costly search. Even in steady state equilibrium, identical labor may receive different wages; this may be the case even when the only source of imperfect information is the inequality of wages which the market is perpetuating. When there are information imperfections arising from (symmetric)differences in non-pecuniary characteristics of jobs and preferences of individuals, there will not in general exist a full employment, zero profit single wage equilibrium.There are, in general, a multiplicity of equilbria. Equilibrium may be characterized by unemployment; in spite of the presence of an excess supply of labor, no firm is willing to hire workers at a lowerwage. It knows that if it does so, the quit rate will be higher, and hence turnover costs(training costs) will be higher, so much so that profits will actually be lower. The model thus provides a rationale for real wage rigidity. The model also provides a theory of equilibrium frictional unemployment.Though the constrained optimality (taking explicitly into account the costs associated with obtaining information and search) may entail unemployment and wage dispersion, the levels of unemployment and wage dispersion in the market equilibrium will not, in general, be (constrained) optimal.
Handle: RePEc:nbr:nberwo:1337
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Pricing of Agricultural and Industrial Goods
Author-Name: Raaj Kumar Sah
Author-Person: psa736
Author-Name: Joseph E. Stiglitz
Note: PE
Number: 1338
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1338
File-URL: http://www.nber.org/papers/w1338.pdf
File-Format: application/pdf
Publication-Status: published as "The Taxation and Pricing of Agricultural and Industrial Goods in Developing Economies." From The Theory of Taxation for Developing Countries, edited by David Newbery and Nicholas Stern, pp. 426-461, Oxford: Oxford University Press, 1987.
Publication-Status: published as in "The Theory of Taxation for Developing Countries," Chapter 16, ed. D.M.G. Newbery and N.H. Stern.
Abstract: This paper presents an analysis of price reform and of optimal pricing and taxation of agricultural and industrial goods in modern-day LDCs. Our analysis is based on a general equilibrium paradigm with a multitude of goods and income groups. It is consistent with several alternative institutional structures with in the agricultural and the industrial sectors, as well as with alternative hypotheses concerning unemployment and migration of labor across the two sectors.This approach differs substantially from the standard tax literature with regard to the structure of the economy and the set of admissible taxes.The rules of price reform which we derive are quite simple to implement, requiring only the knowledge of observable parameters such as price elasticities of demand and supply. The determination of optimal prices (and taxes) requires, in addition, the relative welfare weights on individuals' incomes and on investment. We show that it is desirable, ingeneral, to levy import and export taxes. Among new results are those presenting conditions under which all of the goods belonging to certain categories (such as all purchased agricultural inputs or all agricultural outputs which are not consumed) should be either taxed or stibsidized.
Handle: RePEc:nbr:nberwo:1338
Template-Type: ReDIF-Paper 1.0
Title: Contracts, Credibility, and Disinflation
Author-Name: Stanley Fischer
Note: EFG
Number: 1339
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1339
File-URL: http://www.nber.org/papers/w1339.pdf
File-Format: application/pdf
Publication-Status: published as Fischer, Stanley. "Contracts, Credibility and Disinflation." Inflation and Unemployment: Theory, Experience and Policy Making, edited by Victor Argyand John Nevile, pp. 39-59. London: George Allen & Unwin, Ltd., 1985
Abstract: Estimates of the cost of disinflation made before the recent reduction in the inflation rate varied widely. Estimates were made in terms of the sacrifice ratio -- the percentage points of GNP at an annual rate lost per percentage point reduction in the inflation rate. At one extreme it was argued thata resolute and credible monetary policy could reduce inflation virtually costlessly. At the other extreme were estimates that the sacrifice ratio exceeded 10. Costless immediate disinflation is not possible in an economy with long-term labor contracts. This paper sets out a simple contracting model of wage and output determination and uses it to calculate sacrifice ratios for a disinflation program, under the assumption that announced policy changes are immediately believed. Under this assumption disinflation with a structure of labor contracts like those of the United States would be less costly than typically estimated.The model is then modified to allow for the slow adjustment of expectations of policy to actual policy; sacrifice ratios then approach the ranges typically estimated. The sacrifice ratio for the current disinflation is calculated in the last section: the current disinflation was somewhat more rapid and less costly than previous estimates suggested. The calculated sacrifice ratio is consistent with the predictions of the simple contracting model.
Handle: RePEc:nbr:nberwo:1339
Template-Type: ReDIF-Paper 1.0
Title: Patents as Options: Some Estimates of the Value of Holding European Patent Stocks
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: PR
Number: 1340
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1340
File-URL: http://www.nber.org/papers/w1340.pdf
File-Format: application/pdf
Publication-Status: published as From Econometrica, Vol. 54, No. 4, pp. 755-784, (July 1986).
Abstract: In many countries holders of patents must pay an annual renewal fee in order to keep their patents in force. This paper uses data on the proportion of patents renewed, and the renewal fees faced by, post World War II cohorts of patents in France, the United Kingdom, and Germany, in conjunction with a model of patent holders' renewal decisions, to estimate the returns earned from holding patents in these countries. Since patents are often applied for at a nearly stage in the innovation process, the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce. Formally, then, the paper presents and solves a discrete choice optimal stochastic control model, derives the implications of the model on aggregate behaviour, and then estimates the parameters of the model from aggregate data. The estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans,and calculations of both; the annual returns earned from holding the patents still in force (or the patent stocks) in the alternative countries, and the distribution of the discounted value of returns earned from holding the patents in a cohort.
Handle: RePEc:nbr:nberwo:1340
Template-Type: ReDIF-Paper 1.0
Title: Excess Sensitivity of Consumption to Current Income: Liquidity Constraints or Myopia?
Author-Name: Marjorie A. Flavin
Note: EFG
Number: 1341
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1341
File-URL: http://www.nber.org/papers/w1341.pdf
File-Format: application/pdf
Publication-Status: published as Flavin, Marjorie."Excess Sensitivity of Consumption to Current Income: Liquidity Constraints of Myopia?" Canadian Journal of Economics, Vol. 18, No. 1, pp. 117-136, February 1985.
Abstract: Almost all of the recent empirical tests of the rational expectations - permanent income hypothesis (RE-PIH) have rejected the hypothesis. The null hypothesis in this empirical literature typically consists of the joint hypothesis that 1) agents' expectations are formed rationally, 2) desired consumption is determined by permanent income, and 3) capital markets are"perfect" in the sense that agents can lend or borrow against expected future income at the same interest rate. This paper attempts to determine whether the excess sensitivity of consumption to current income can be attributed to a failure of the third component of the joint hypothesis -- the assumption of "perfect" capital markets -- as opposed to a failure of one or both of the first two assumptions. The paper examines, as a specific alternative to the PIH, a simple "Keynesian" consumption function in which the behavioral MPC out of transitory income is different from zero. Interpreting the unemployment rate as a proxy for the proportion of the population subject to liquidity constraints, the paper uses a generalized version of the econometric model in my earlier paper(1981) to conduct a specification test of the "Keynesian" consumption function. The finding that the estimate of the MPC out of transitory income is dramatically affected, in both magnitude and statistical significance, by the inclusion of the proxy for liquidity constraints suggests that liquidity constraints are an important part of the explanation of the observed excess sensitivity of consumption to current income.
Handle: RePEc:nbr:nberwo:1341
Template-Type: ReDIF-Paper 1.0
Title: The Roles of the Terms of Trade and Nontraded-Good-Prices in Exchange Rate Variations
Author-Name: Alan C. Stockman
Author-Person: pst94
Author-Name: Harris Dellas
Author-Person: pde139
Note: ITI IFM
Number: 1342
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1342
File-URL: http://www.nber.org/papers/w1342.pdf
File-Format: application/pdf
Publication-Status: published as "International Portfolio Nondiversification and Exchange Rate Variability." From Journal of International Economics, Vol. 26, No. 3/4, pp. 271-289,(May 1989).
Abstract: This paper demonstrates that disturbances to supplies or demands for internationally traded goods affect exchange-rates differently than do disturbances in markets for nontraded goods. The paper develops a stochastic two-country equilibrium model of exchange rates, asset prices, and goods prices, with two internationally traded goods and a nontraded good in each country. Optimal portfolios differ across countries because of differences in consumption bundles. Changes in exchange-rates, asset prices, and goods prices occur in response to underlying disturbances to supplies and demands for goods. We examine the ways in which responses of the exchange-rate are related to parameters of tastes and production shares, and we discuss conditions under which these exchange-rate responses are "large" compared to the responses of ratios of nominal price indexes.
Handle: RePEc:nbr:nberwo:1342
Template-Type: ReDIF-Paper 1.0
Title: The 1981-82 Velocity Decline: A Structural Shift in Income or Money Demand?
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 1343
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1343
File-URL: http://www.nber.org/papers/w1343.pdf
File-Format: application/pdf
Publication-Status: published as in "The Proceedings of the Conference on Monetary Targeting and Velocity," Federal Reserve Bank of San Francisco, 1984, pp. 67-99.
Abstract: The velocity of both M1 and M2 appears to have experienced a sharp and persistent downward shift during 1981 and 1982. The implications of this shift are reexamined within the context of the previous literature on quarterly econometric equations explaining the demand for money. The traditional specification of money demand equations popularized by Chow and Goldfeld relates real balances to output, interest rates,and lagged real balances, all expressed as log levels. A consistent finding has been a large coefficient on the lagged dependent variable.While this has been interpreted as indicating substantial adjustment costs in portfolio behavior, it is also consistent with lags or"inertia" in price adjustment due to the presence of long-term wage and price contracts. The fact that the traditional Chow-Goldfeld money demand specification encountered large post-sample prediction errors at the time of the first oil shock in 1973-75 may suggest that a new interpretation of adjustment costs is required. It may be costly to adjust nominal balances by shifting to alternative assets, but it is costless for agents to allow real balances to shrink in response to an unanticipated price shock, as in 1973-75. A substantial amount of evidence is provided on the relationship between money, income, and interest rates, using alternative dynamic specifications. The post-1973 prediction error in a demand equation for M1 is reduced by three-quarters when the equation is specified in nominal first-difference form rather than in the form of real levels in logs. Results indicate much smaller post-1979 prediction errors for equations describing "simple-sum" M2 than for simple-sum M1, Divisia M1,or for Divisia M2 measures of the money supply.
Handle: RePEc:nbr:nberwo:1343
Template-Type: ReDIF-Paper 1.0
Title: Targeted Export Promotion with Several Oligopolistic Industries
Author-Name: Avinash K. Dixit
Author-Person: pdi79
Author-Name: Gene M. Grossman
Author-Person: pgr21
Note: ITI IFM
Number: 1344
Creation-Date: 1984-04
Order-URL: http://www.nber.org/papers/w1344
File-URL: http://www.nber.org/papers/w1344.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M. adn Avinash K. Dixit. "Targeted Export Promotion with Several Oligopolistic Industries." Journal of International Economics, Vol. 2 1, (1986), pp. 233-249.
Abstract: In this paper we ask whether a policy of targeted export promotion can raise domestic welfare when several oligopolistic industries all draw on the same scarce factor of production. Our point of departure is one of Cournot duopoly in which a single home firm competes with a single foreign firm in a market outside the horse country. It has been shown previously that when there is only one such industry in an otherwise perfectly competitive world economy, a subsidy policy by the home government transfers profits to the domestic firm, and thereby raises domestic welfare. However,when many such industries (and only these) utilize the same inelastically supplied resource, promotion of one bids up the return to the specific factor, and consequently disadvantages all of the non-targeted industries in their respective duopolistic competitions. Our question then is which industry(s), if any, is worthy of promotion. We find that, when the specific factor is used in fixed proportion to output, and all of the duopolies have similar demand and cost conditions, a policy of free trade is optimal. We identify the conditions for welfare improvement when a single industry is selected for targeting under asymmetric conditions, and also investigate whether a uniform subsidy to all industries in the imperfectly competitive sector will raise domestic welfare.
Handle: RePEc:nbr:nberwo:1344
Template-Type: ReDIF-Paper 1.0
Title: Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?
Author-Name: N. Gregory Mankiw
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: ME
Number: 1345
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1345
File-URL: http://www.nber.org/papers/w1345.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory and Lawrence H. Summers. "Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?" Brookings Papers on Economic Activity, No. 1, (1984), pp. 223-242.
Abstract: This paper examines the hypothesis that financial markets are myopic by studying the term structure of interest rates. White rejecting decisively the traditional expectations hypothesis regarding the term structure, our statistical results also lead us to conclude that long term interest rates do not overreact to either the level or the change in short termrates. This finding suggests that participants in bond markets are not myopic or overly sensitive to recent events. Our statistical results also suggest that most variations in the yield curve reflect changes in liquidity premia rather than expected changes in interest rates.
Handle: RePEc:nbr:nberwo:1345
Template-Type: ReDIF-Paper 1.0
Title: What Promises Are Worth: The Impact of Affirmative Action Goals
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 1346
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1346
File-URL: http://www.nber.org/papers/w1346.pdf
File-Format: application/pdf
Publication-Status: published as Leonard, Jonathan S. "What Promises Are Worth: The Impact of Affirmative Action Goals." Journal of Human Resources, Vol. 20, No. 1, (Winter 1985) pp. 3-20.
Abstract: Affirmative action goals and timetables for the employment of minorities and females have been criticized by some as being ineffective,and by others as being a system of rigid quotas. Using new data from OFCCP administrative records, this paper estimates the impact of detailed regulatory pressure on goals and on subsequent employment demographics. It also tests for the information content of the goals.While the goals are inflated and are not being fulfilled with the rigidity one might expect of quotas, the establishments that promise to employ more minorities and females do actually employ more in subsequent years. While the detailed enforcement tools of the compliance review process are of doubtful utility, the system of affirmative action goals does appear to have prompted increases in minority and female employment at reviewed establishments.
Handle: RePEc:nbr:nberwo:1346
Template-Type: ReDIF-Paper 1.0
Title: The Inefficiency of Marginal-Cost Pricing and The Apparent Rigidity of Prices
Author-Name: Robert E. Hall
Note: EFG
Number: 1347
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1347
File-URL: http://www.nber.org/papers/w1347.pdf
File-Format: application/pdf
Abstract: Under conditions of natural monopoly, private contracts or government regulation may attempt to avoid inefficiency by setting up a pricing formula. Once the capital stock is chosen,the right price to charge the buyer is marginal cost. But the point of this paper is that marginal-cost pricing provides the wrong incentives for the choice of the capital stock by the seller. If the seller can achieve a high price by deliberately under-investing and driving up marginal cost, there will be asystematic tendency toward too small a capital stock. One type of contract or regulatory policy that avoids this problem charges marginal cost to each buyer, but provides a revenue to the seller that is equal to long-run unit cost, not short-run marginal cost. Such a contract or policy will make the price, in the sense of the revenue of the seller per unit of output, appear to be unresponsive to market conditions.
Handle: RePEc:nbr:nberwo:1347
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Social Security Reforms on Retirement Ages and RetirementIncomes
Author-Name: Gary S. Fields
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: LS
Number: 1348
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1348
File-URL: http://www.nber.org/papers/w1348.pdf
File-Format: application/pdf
Publication-Status: published as Fields, Gary S. and Olivia S. Mitchell. "The Effects of Social Security Reforms on Retirement Ages and Retirement Incomes." Journal of Public Economics, Winter, 1984.
Abstract: Recent changes legislated in the U.S. Social Security system are changing the economic incentives to work and retire. Some older workers will respond to these new incentives by retiring at different ages. This paper evaluates the signs and magnitudes of these responses. Using a representative sample of male workers, we investigate the pre-reform earnings, private pensions, and Social Security profiles available at alternative retirement ages. Then we examine four specific changes in the structure of Social Security benefits: raising the normal retirement age, delaying the cost-of-living adjustment, lowering early retirement benefits, and increasing late retirement payments. Behavioral parameters are estimated using an ordered logit model of retirement ages; these are than used to evaluate how retirement behavior might respond to each of the four reforms.The largest retirement age response is observed for the policy change which cuts benefits at the earliest ages and offers larger rewards for continued work. This change would delay the average retirement age by about three months. The other reforms generate even smaller responses. Changes in retirement ages of this magnitude will be to small to compensate retirees for reductions in benefit formulas. Thus the Social Security's financial burden will be eased but retiree's incomes will fall on average.
Handle: RePEc:nbr:nberwo:1348
Template-Type: ReDIF-Paper 1.0
Title: Microeconomic Evidence on the Composition of Effective Household SavingsDuring the 1960s and 1970s
Author-Name: Edward J. Kane
Author-Person: pka853
Note: ME
Number: 1349
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1349
File-URL: http://www.nber.org/papers/w1349.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. (ed.) The Level and Composition of Household Saving. Cambridge, MA: Harper & Row, Ballinger, 1985.
Abstract: This paper studies the impact of broad changes in the economic and financial environment on the savings rate and portfolio composition of individuals in different age groups and household types. Employing survey data, household savings are cumulated as increases in net transactable wealth observed across three benchmark dates: January-February 1962, the first half of 1970, and August-September,1911. This paper describes how savings rates and the allocation of accumulated savings across different financial and real-estate assets varied with household circumstances. A sharp turn-around is observed between the 1960s and 1970s in the profiles of saving and homeownership for younger and older households.
Handle: RePEc:nbr:nberwo:1349
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Taxes
Author-Name: John H. Makin
Note: ME PE
Number: 1350
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1350
File-URL: http://www.nber.org/papers/w1350.pdf
File-Format: application/pdf
Abstract: This paper demonstrates that different rates of taxation on interest income and exchange gains may bias results of hypothesis testing regarding critical aspects of exchange rate behavior. Two problems are discussed specifically. First, it is shown that omission of tax considerations may bias tests of the uncovered interest parity condition toward acceptance of a "risk premium" hypothesis, conditional on exchange market efficiency. Second it is shown that a rational solution for the exchange rate conditions the relationship between an exchange rate and its determinants on two regimes: (1) tax rates on interest income and foreign exchange gains and losses at home and abroad and (2) the degree of foreign exchange market intervention and sterilization of its effects on the monetary base practiced by central banks.
Handle: RePEc:nbr:nberwo:1350
Template-Type: ReDIF-Paper 1.0
Title: The After Tax Rate of Return Affects Private Savings
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 1351
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1351
File-URL: http://www.nber.org/papers/w1351.pdf
File-Format: application/pdf
Publication-Status: published as Summers, Lawrence H. "The After Tax Rate of Return Affects Private Savings ." American Economic Review, Vol. 74, No. 2, (May 1984), pp. 249-253.
Abstract: This paper reviews theoretical argumrents and empirical evidence regarding the interest elasticity of savings. It concludes that there are strong theoretical reasons to expect an increase in after tax rates of return to increase private savings. Moreover, the empirical rrethods used in most previous studies are likely to produce underestimates of the interestelasticity of savings. New evidence based on direct estimation of utility function parameters suggests that savings are likely to be highly interest elastic. The paper concludes by noting that too little time has passed to evaluate the effects of the savings incentives contained in recent tax legislation.
Handle: RePEc:nbr:nberwo:1351
Template-Type: ReDIF-Paper 1.0
Title: Prospective Changes in Tax Law and the Value of Depreciable Real Estate
Author-Name: Patric H. Hendershott
Author-Name: David C. Ling
Author-Person: pli857
Note: PE
Number: 1352
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1352
File-URL: http://www.nber.org/papers/w1352.pdf
File-Format: application/pdf
Publication-Status: published as Patric H. Hendershott & David C. Ling, 1984. "Prospective Changes in Tax Law and the Value of Depreciable Real Estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 297-317.
Abstract: The Economic Recovery Tax Act of 1981 significantly reduced the taxation of income-producing properties by accelerating tax depreciation on both new and, especially, existing properties. A partial reversal of the 1981 legislation appears likely. To provide some insight into the possible effects of a decrease in tax depreciation of income-producing properties, two potential tax changes are analyzed: an increase from 15 to 20 years in the tax service lives of both new and existing properties and an increase for existing properties only. Both residential and commercial/industrial properties are considered.
Handle: RePEc:nbr:nberwo:1352
Template-Type: ReDIF-Paper 1.0
Title: The Economic Effects of Dividend Taxation
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE ME
Number: 1353
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1353
File-URL: http://www.nber.org/papers/w1353.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. and Lawrence H. Summers. "The Economic Effects of Dividend Taxation." Recent Advances in Corporate Finance, edited by Edward Altman and Marti Subrahmanyam, pp. 227-284. Homewood, IL: Richard D. Irwin Publishers, 1985.
Abstract: This paper tests several competing hypotheses about the economic effects of dividend taxation. It employs British data on security returns, dividend payout rates, and corporate investment, because unlike the United States, Britain has experienced several major dividend tax reforms in the last three decades. These tax changes provide an ideal natural experiment for analyzing the effects of dividend taxes. We compare three different views of how dividend taxes affect decisions by firms and their shareholders. We reject the"tax capitalization" view that dividend taxes are non-distortionary lump sum taxes on the owners of corporate capital. We also reject the hypothes is that firms pay dividends because marginal investors are effectively untaxed. We find that the traditional view that dividend taxes constitute a "double-tax" on corporate capital income is most consistent with our empirical evidence. Our results suggest that dividend taxes reduce corporate investment and exacerbate distortions in the intersectoral and intertemporal allocation of capital.
Handle: RePEc:nbr:nberwo:1353
Template-Type: ReDIF-Paper 1.0
Title: Budget Deficits and Rates of Interest in the World Economy
Author-Name: Jacob A. Frenkel
Author-Name: Assaf Razin
Author-Person: pra388
Note: ITI IFM
Number: 1354
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1354
File-URL: http://www.nber.org/papers/w1354.pdf
File-Format: application/pdf
Publication-Status: published as Frenkel, Jacob A. and Assaf Razin. "Fiscal Policies in the World Economy," Journal of Political Economy, Vol. 94, No. 3, Part 1, (June 1986), pp. 56 4-594.
Abstract: This paper deals with the international transmission of the effects of budget deficits on world rates of interest and spending. The model assumes a two-country world within which capital markets are integrated, individuals behave rationally, and the behavior of individuals and governments are governed by temporal and intertemporal budget constraints. Adopting Olivier Blanchard's formulation it is assumed that due to the probability of finite life individuals behave as if their horizon was finite. This formulation generates asimple pattern of aggregate behavior of the two-country world, and it assures that the model is not subject to the Ricardian proposition according to which budget deficits do not matter. It is shown that, for a given time path of government spending, a budget deficit raises world rates of interest and domestic wealth while it lowers foreign wealth. Thus, the deficit is transmitted negatively to the rest of the world. The channel of transmission is the world capital market and the negative transmission results from the higher rate of interest. The paper proceeds with an analysis of balanced-budget changes in government spending. It is shown that a transitory current rise in government spending raises interest rates and lowers domestic and foreign wealth while an expected future rise in government spending lowers interest rates, reduces the value of domestic wealth and raises the value of foreign wealth. The effect of a permanent rise in government spending on the rate of interest depends on whether the domestic economy is a net saver or dissaver in the world economy, i.e., if it has acurrent account surplus or deficit. If the home country runs a current account surplus then a rise in government spending raises world interest rates and lowers domestic and foreign wealth, and if the home country runs a current account deficit then a permanent balanced-budget rise in government spending lowers interest rates and domestic wealth and raises foreign wealth.
Handle: RePEc:nbr:nberwo:1354
Template-Type: ReDIF-Paper 1.0
Title: A Fiscal Framework for Analysis of Interest Rate Behavior in Open Economies
Author-Name: John H. Makin
Note: ME PE
Number: 1355
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1355
File-URL: http://www.nber.org/papers/w1355.pdf
File-Format: application/pdf
Abstract: This paper derives a reduced-form expression for an interestrate in an open economy by incorporating after tax covered interest parity conditions into a simple neo-classical macro model. The result clearly demonstrates that the relationship between an interest rate and variables used to explain it is conditional on income tax rates at home and abroad and presence or absence of capital gains tax treatment of foreign exchange gains or losses. Effects of non-indexation of tax treatment of depreciation and inventories may also play a role. Any change in effective tax rates over a sample period employed to estimate interest rate (or exchange rate) equations may cause deterioration in the fit of a fixed coefficient model. Efforts are underway to employ a random coefficients approach to address this problem.
Handle: RePEc:nbr:nberwo:1355
Template-Type: ReDIF-Paper 1.0
Title: The Asset Price Approach to the Analysis of Capital Income Taxation
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 1356
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1356
File-URL: http://www.nber.org/papers/w1356.pdf
File-Format: application/pdf
Publication-Status: published as Summers, Lawrence H. "The Asset Price Approach to the Analysis of Capital Income Taxation," Issues in Contemporary Macroeconomics and Distribution, ed. George R. Felwil, pp. 429-443. London: Macmillan, 1985.
Abstract: This paper summarizes my recent research directed at the development of an asset price approach to the analysis of capital income taxation. While asset prices play a crucial role in many macroeconomic models, they have been subordinate in most previous efforts to study the effects of capital income taxation on economic behavior. A number of reasons for focusing on the role of asset prices in analyzing public finance questions are discussed. These include the role of asset prices in determining investment decisions, and the fact that changes in asset prices are indicators of the horizontal and vertical equity effects of tax reforms. Recent empirical research in which asset price information is studied in order to measure the effects on economic behavior of tax reforms and to distinguish between alternative models of the effects of capital income taxation is reviewed. Directions for future research in public finance, focusing on asset markets, are also discussed.
Handle: RePEc:nbr:nberwo:1356
Template-Type: ReDIF-Paper 1.0
Title: The Social Security Student Benefit Program and Family Decisions
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Rebecca A. Luzadis
Note: LS
Number: 1357
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1357
File-URL: http://www.nber.org/papers/w1357.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G. and Rebecca A. Luzadis. "The Social Security Student Benefit Program and Family Decisions," Economics of Education Review, Vol. 5 , No. 2, pp. 119-128, April 1986.
Abstract: In 1965 Congress established the Social Security Student Benefit Program which provided benefits for children of deceased, disabled or retired workers,who were enrolled in college full-time and were not married, up until thesemester they turned age 22. The program grew to be a major financial aid program; at its peak in FY 81 it represented about 20% of all federal outlays on student assistance for higher education. The program was terminated for students newly entering college as of May 1, 1982. Somewhat surprisingly, in contrast to the debate that accompanies most social programs, debate over the student benefit program focused on its costs and almost totally ignored the possible effects of the program. Virtually nothing is known about how the program influenced potential recipients decisions to attend college, the quality of the education they received, the amount that recipients' families contributed to the student's education, or recipients' in-school and summer employment.This paper seeks to shed insights into some of these effects, using data from the Social Security Administration's 1973 Survey of Student Beneficiaries the only national survey of participants in the program.
Handle: RePEc:nbr:nberwo:1357
Template-Type: ReDIF-Paper 1.0
Title: The Degree of Fiscal Illusion in Interest Rates: Some Direct Estimates
Author-Name: Joe Peek
Author-Person: ppe90
Author-Name: James A. Wilcox
Note: ME
Number: 1358
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1358
File-URL: http://www.nber.org/papers/w1358.pdf
File-Format: application/pdf
Publication-Status: published as Peek Joe and James A. Wilcox. "The Degree of Fiscal Illusion in Interest Rates: Some Direct Estimates." American Economic Review, Vol. 74, No. 5, ( December 1984), pp.1061 1066.
Abstract: This article demonstrates why the procedures used in previous studies do not permit inference about the relationship between interestrates and taxes. We present a model that leads to direct estimates of the degree to which interest rates respond to changes in tax rates. The empirical results imply that the adjustment of taxable interest rates has been large enough to render after-tax yields impervious to tax rate changes. Further, tax-exempt yields are unaffected by changes in taxrates. Thus, there is no evidence of fiscal illusion in interest rates.
Handle: RePEc:nbr:nberwo:1358
Template-Type: ReDIF-Paper 1.0
Title: Wage Bargaining, Labor Turnover, and the Business Cycle: A Model with Asymmetric Information
Author-Name: Motty Perry
Author-Person: ppe212
Author-Name: Gary Solon
Author-Person: pso215
Note: LS
Number: 1359
Creation-Date: 1984-05
Order-URL: http://www.nber.org/papers/w1359
File-URL: http://www.nber.org/papers/w1359.pdf
File-Format: application/pdf
Publication-Status: published as Perry, Motty and Gary Solon. "Wage Bargaining, Labor Turnover, and the Business Cycle: A Model with Asymmetric Information," Journal of Labor Economics, Vol. 3, No. 4, October 1985, pp. 421-433.
Abstract: This paper presents a wage bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand shocks affect the equilibrium in a way that produces procyclical quits and countercyclical layoffs.These results are obtained without resorting to assumptions of nominal wage rigidity, long-term contracting, or aggregate price misperceptions.
Handle: RePEc:nbr:nberwo:1359
Template-Type: ReDIF-Paper 1.0
Title: Concepts and Measures of Earnings Replacement During Retirement
Author-Name: Michael J. Boskin
Author-Name: John B. Shoven
Note: PE
Number: 1360
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1360
File-URL: http://www.nber.org/papers/w1360.pdf
File-Format: application/pdf
Publication-Status: published as Bodie, Z., J.B. Shoven and D.A. Wise (eds.) Issues in Pension Economics. Chicago: University of Chicago Press, 1987.
Publication-Status: published as Concepts and Measures of Earnings Replacement During Retirement, Michael J. Boskin, John B. Shoven. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: This paper compares the well-being of the Retirement History Survey of the elderly with their own previous levels of income and economic welfare. Traditional replacement rates are calculated, although a number of shortcomings of such measures are discussed. Modifications are made by examining career average rather than peak earnings, by adjusting for the fact that the incomes of the elderly are taxed more lightly, that the elderly do not have dependent children, and that Social Security income in retirement is a safer source ofincome than earnings earlier in life. The fully adjusted total income measures are at least as high for almost all classes of households in the survey as their career average pre-retirement earnings.
Handle: RePEc:nbr:nberwo:1360
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Household Portfolio Allocation
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: ME
Number: 1361
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1361
File-URL: http://www.nber.org/papers/w1361.pdf
File-Format: application/pdf
Publication-Status: published as Hubbard, R. Glenn. "Personal Taxation, Pension Wealth, and Portfolio Composition," Review of Economics and Statistics, vol. 67, No. 1, (Feb. 1985), pp . 53-60.
Abstract: The entitlement to social security retirement benefits is a major component of aggregate household wealth. This paper focuses on the impact of social security annuities on household portfolio allocation, extending existing optimizing models of portfolio allocation to explicitly consider the role of social security. The model is implemented using cross-section data. The partial equilibrium impacts of changes in social security benefits on portfolio choice and composition are small but precisely measured. The general equilibrium impacts on asset markets of a social security policy change (focusing onlinks between social security and dynamic wealth accumulation and between social security benefits and private pension benefits) are generally much larger.
Handle: RePEc:nbr:nberwo:1361
Template-Type: ReDIF-Paper 1.0
Title: Estimation of a Simultaneous Model of Married Women's Labor Force Participation and Fertility in Urban Japan
Author-Name: Tadashi Yamada
Author-Name: Tetsuji Yamada
Note: EH
Number: 1362
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1362
File-URL: http://www.nber.org/papers/w1362.pdf
File-Format: application/pdf
Publication-Status: published as "Fertility and Labor Force Participation of Married Women: An Empirical Evidence from the 1980 Population Census of Japan," Quarterly Review of Economics and Finance (formerly Quarterly Review of Economics and Business), Vol.26, No.2, Summer 1986, pp.35-46
Abstract: A strong and negative correlation between married women's labor force participation and fertility has been witnessed in Japan in past decades. Relative to empirical studies of a traditional single equation on female labor supply, there exist few econometric studies dealing explicitly witha possible interdependency between married women's labor supply and fertility behaviors in urban Japan. Using the recently published 1980 Population Census of Japan, we have estimated a simultaneous-equation model of married women's labor force participation and fertility in urban Japan. Our model shows very satisfactory results to explain the negative correlation between those variables based on a method of 2SLS. Estimated labor supply elasticities for married women with respect to their fertility rates, wife's labor earnings, and male labor earnings are -0.67, 0.23, and -1.76 at the sample means, respectively. On the other hand, estimated elasticities of fertility with respect to married women's labor force participation and family income are -0.31 and 0.23, respectively. We find some of these elasticities for Japanese married women very comparable to those of married women in the United States.
Handle: RePEc:nbr:nberwo:1362
Template-Type: ReDIF-Paper 1.0
Title: Uncertain Lifetimes, Pensions, and Individual Saving
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: PE
Number: 1363
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1363
File-URL: http://www.nber.org/papers/w1363.pdf
File-Format: application/pdf
Publication-Status: published as Hubbard, R. Glenn. "Uncertain Lifetimes, Pensions, and Individual Saving." Issues in Pension Economics, edited by Zvi Bodie, John Shoven and David A. Wise, pp. 175-206. Chicago: University of Chicago Press, 1987.
Publication-Status: published as Uncertain Lifetimes, Pensions, and Individual Saving, R. Glenn Hubbard. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: Attempts to measure the impacts of pensions on household saving have occupied much of the literature in empirical public finance over the past decade. The emphasis here is on the annuity insurance aspects of social security and pensions. A simple life-cycle model is put forth to show that even anactuarially fair, fully funded social security system can reduce individual saving by more than the tax paid. Hence, previous partial equilibrium estimates of the impact of social security on saving drawn solely from consideration of the intergenerational wealth transfer at the introduction of the system are, if anything too small. The large partial equilibrium effects are mitigated when initial endowments are considered. To the extent that the introduction of social security reduces the size of unplanned bequests, its net effect on the consumption of subsequent generations is diminished. The final sections of the paper extend the approach to private pensions and address empirical issues. Using a model specification for individual wealth accumulation from the literature, potential offsets are interpreted according to the presence or absence of a bequest motive and according to the ability of individuals to adjust their participation in private pensions to counteract involuntary changes in social security.
Handle: RePEc:nbr:nberwo:1363
Template-Type: ReDIF-Paper 1.0
Title: Post-Retirement Adjustments of Pension Benefits
Author-Name: Steven G. Allen
Author-Person: pal6
Author-Name: Robert L. Clark
Author-Name: Daniel A. Sumner
Author-Person: psu435
Note: LS PE
Number: 1364
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1364
File-URL: http://www.nber.org/papers/w1364.pdf
File-Format: application/pdf
Publication-Status: published as Allen, Steven G. Robert L. Clark and Daniel A. Sumner. "Post-Retirement Adjustments of Pension Benefits," Journal of Human Resources, Vol. XXI, No. 1, (Winter 1986), pp. 118-137.
Abstract: This paper examines why pension plans increased their liabflities by giving benefit increases to persons no longer working even though almost al lof them were not required to do so by any legally enforceable contract. In our model workers and firms have implicit contracts under which post-retirement increases in benefits are purchased by workers through lower wages or initial benefits. Such arrangements permit both plans and workersto share the risk of uncertain rates of return. They also allow beneficiaries to invest at a higher net rate of return than they could obtain elsewhere because of tax advantages and, in large plans, economies of scale. We also discuss how post-retirement adjustments can be used to influence turnover. Some empirical implications of the model are tested over a sample of beneficiaries of defined benefit plans. The major empirical findings are:(1) There is strong evidence of compensating differentials in final salary and initial pension benefits for beneficiaries receiving post-retirement adjustments.(2) Regardless of how the size of pension plans is measured(beneficiaries, participants, amount of benefits paid), large pension plans provide larger post-retirement benefit increases.(3) Beneficiaries of collectively bargained plans are more likelyto receive benefit increases and, among those receiving benefit increases, receive larger increases.(4) Benefit increases are larger in percentage terms for those who have been retired the longest and for those with the most years of service.
Handle: RePEc:nbr:nberwo:1364
Template-Type: ReDIF-Paper 1.0
Title: Micro-Production Functions Aren't Pretty: Firm-Level and Industry-Level Specification For Inputs and Outputs
Author-Name: Casey Ichniowski
Note: LS
Number: 1365
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1365
File-URL: http://www.nber.org/papers/w1365.pdf
File-Format: application/pdf
Abstract: This study documents extreme variations in productivity within a panel of eleven firms in the same narrowly defined industry classification. Many of the sources of this variation were identified in field investigations of each plant.These investigations in turn allowed for the development of detailed specifications for inputs and outputs using data collected from the sites. The empirical estimates show that, irrespective of the precise functional form adopted, these detailed specifications, particularly those for output heterogeneity, are critical determinants of the performance of plant-level production functions. When the most detailed input and output specifications are used, 95% of the observed variation in plant production is explained. However, when the eleven firms are treated as an industry, less detailed specifications for inputs and outputs are shown to be more appropriate for explaining the variation in industry production.
Handle: RePEc:nbr:nberwo:1365
Template-Type: ReDIF-Paper 1.0
Title: Fuzzy Frontiers of Production: Evidence of Persistent Inefficiency in Safety Expenditures
Author-Name: Casey Ichniowski
Note: LS
Number: 1366
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1366
File-URL: http://www.nber.org/papers/w1366.pdf
File-Format: application/pdf
Abstract: This study documents a strong inverse relationship between accident rates and production in a sample of eleven firms in the same narrowly defined industry classification. Given the detailed set of input controls and controls for plant-specific and time-specific factors used in the analysis, the study argues that a theoretical framework that describes firms as operating on well-defined production frontiers is not adequate for providing an entirely accurate interpretation of the basic empirical finding.Three elaborations to the basic production frontier framework are developed and used to interpret the accident-productivity relationship.
Handle: RePEc:nbr:nberwo:1366
Template-Type: ReDIF-Paper 1.0
Title: Industrial Relations and Economic Performance Grievances and Productivity
Author-Name: Casey Ichniowski
Note: LS
Number: 1367
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1367
File-URL: http://www.nber.org/papers/w1367.pdf
File-Format: application/pdf
Publication-Status: published as Industrial and Labor Relations Review, vo. 40, no. 1, pp. 75-89, October 1986.
Abstract: This study documents a significant inverse relationship between grievance rates and productivity. It is argued in the theoretical model in the paper that this significant inverse relationship reflects greater discrepencies between reported and effective labor hours as grievance rates increase. Agrievance-free plant is some 1.3% more productive and up to i6.y% more profitable than when the plant operates with an average rate of grievances, so that industrial relations performance can critically influence the performance of the firm.
Handle: RePEc:nbr:nberwo:1367
Template-Type: ReDIF-Paper 1.0
Title: Ruling Out Productivity? Labor Contract Pages and Plant Performance
Author-Name: Casey Ichniowski
Note: LS
Number: 1368
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1368
File-URL: http://www.nber.org/papers/w1368.pdf
File-Format: application/pdf
Abstract: This study documents a strong inverse relationship between number of pages of labor contracts in effect and the productivity observed in a sample of ten unionized plants. It is argued that this relationship reflects the productivity-inhibiting effects of increases in the number and complexity of work rules. The study also argues that subsequent research should try to improve the measurement of work rules by considering the substance of the rules and which parameters of a production function the rules are likely to affect.
Handle: RePEc:nbr:nberwo:1368
Template-Type: ReDIF-Paper 1.0
Title: An Examination of Multijurisdictional Corporate Income Taxes Under Formula Apportionment
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: John D. Wilson
Note: PE
Number: 1369
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1369
File-URL: http://www.nber.org/papers/w1369.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Roger and John Wilson "An Examination of Multijurisdictional Corporate Income Taxes Under Formula Apportionment." Econometrica, Vol. 54, No. 6 , (November 1986), pp. 1357-1376.
Abstract: This paper examines how corporate taxation of multijurisdictional firms using formula apportionment affects the incentives faced by individual firms and individual states. We find that formula apportionment creates factor price distortions which vary in general among firms within a state, and in such a way as often to put multistate firms at a competitive advantage. Formula apportionment also creates incentives for cross-hauling of output,with production in low tax rate states more profitably sold in hightax rate states, and conversely. Politically, formula apportionment appears to be very unstable --states face an incentive to shift to some other form of taxation. None of these problems exist when a corporate tax uses separate accounting.
Handle: RePEc:nbr:nberwo:1369
Template-Type: ReDIF-Paper 1.0
Title: Pension Plan Integration as Insurance Against Social Security Risk
Author-Name: Robert C. Merton
Author-Person: pme203
Author-Name: Zvi Bodie
Author-Person: pbo569
Author-Name: Alan J. Marcus
Author-Person: pma1156
Number: 1370
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1370
File-URL: http://www.nber.org/papers/w1370.pdf
File-Format: application/pdf
Publication-Status: published as Merton, Robert C., Bodie, Zvi and Alan J. Marcus. "Pension Plan Integration as Insurance Against Social Security Risk," Issues in Pension Economics,edited by Z. Bodie, J. Shoven, D. Wise, Chicago: UCP, 1987.
Publication-Status: published as Pension Plan Integration As Insurance Against Social Security Risk, Robert C. Merton, Zvi Bodie, Alan Marcus. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: The manifest purposes of integrating an employer-provided pension plan with social security are:(1) to ensure retirement income adequacy for all covered employees; and (2) to ensure retirement income equity, defined as equal total replacement rates for all employees regardless of salary level. The focus of this paper, however, is on an equally important (and perhaps latent) consequence of integration: the alteration of the risk-bearing relationships between employees, employers and the government vis-a-vis social security benefits. The main alteration is that the employer in effect insures his covered employees against adverse changes in their social security retirement benefit. Using the option-pricing methodology of modern contingent claims analysis,we develop a formal model to explore the quantitative aspects of this change.While the focus of the analysis is on full integration, we do explicitly deal with various degrees of partial integration as is currently practiced. We also analyze the effects of a switch from a non-integrated to an equivalent-cost integrated plan when private benefits are fixed in nominal terms and when they are indexed. In this connection we examine how integrated plans are affected when the sponsor makes ad hoc post-retirement benefit increases. We also consider the incentive effects on worker mobility of the adoption of integrated plans. The analysis is also used to highlight what we believe to be important unintended consequences of integrating pension plans with social security.
Handle: RePEc:nbr:nberwo:1370
Template-Type: ReDIF-Paper 1.0
Title: Inventory Fluctuations in the United States Since 1929
Author-Name: Alan S. Blinder
Author-Person: pbl41
Author-Name: Douglas Holtz-Eakin
Note: EFG
Number: 1371
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1371
File-URL: http://www.nber.org/papers/w1371.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. (ed.) The American Business Cycle: Continuity and Change. Chicago: University of Chicago Press, 1986.
Publication-Status: published as Inventory Fluctuations in the United States since 1929, Alan S. Blinder, Douglas Holtz-Eakin. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: It has been known for a long time that inventory fluctuations are of great importance in business cycles. But inventory fluctuations are fundamentally a short-period phenomenon. Consequently, annual data may shed relatively little light on the nature of inventory fluctuations; most of the "action" may be played out within the year. For this reason, economists know precious little about inventory behavior before World War II. This paper seeks to lift this veil of ignorance in two ways. First,we create -- from some admittedly incomplete and imperfect data -- monthly time series on inventory holdings in manufacturing, durable manufacturing,and nondurable manufacturing. To our knowledge, these are the first such series ever made available.(The data are available on request.) Second,we apply to the prewar data certain statistical procedures and models that are in common use with postwar data. In this way, we can address the central issue of the paper: Has inventory behavior changed? While we do not wish to overstate the case, we were struck more by the similarities in inventory behavior between the prewar and postwar periods than by the differences. But the relevant stylized facts and regressing are displayed below, and each reader can make up his or her own mind.
Handle: RePEc:nbr:nberwo:1371
Template-Type: ReDIF-Paper 1.0
Title: Bequests and Social Security With Uncertain Lifetimes
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: EFG
Number: 1372
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1372
File-URL: http://www.nber.org/papers/w1372.pdf
File-Format: application/pdf
Publication-Status: published as Abel, Andrew B. 'Precautionary Saving and Accidental Bequests," American Economic Review, Vol. 75, No. 4, September 1985, pp. 777-791.
Abstract: The fact that consumers do not know in advance the dates at which they will die effects their individual consumption and portfolio decisions. In general, some consumers will end up leaving bequests at death, even if they have no bequest motive, simply because they happen to die at a time when they are holding wealth to provide for their own future consumption. In the model of this paper,consumers who are otherwise identical, die (randomly) at different ages and thus leave bequests of different sizes to their heirs. Therefore, there is intra-cohort variation in wealth and consumption even if all consumers have the same labor income, taxes, and social security benefits. This paper presents explicit steady state distributions for consumption and wealth. The introduction of an actuarially fair social security system reduces steady state private wealth by more than one-for-one so that, even in a fully funded system, national wealth falls. In addition, all central moments of the steady state distributions of consumption and wealth are reduced by actuarially fair social security.
Handle: RePEc:nbr:nberwo:1372
Template-Type: ReDIF-Paper 1.0
Title: Stabilization Policies and the Information Content of Real Wages
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: EFG
Number: 1373
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1373
File-URL: http://www.nber.org/papers/w1373.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua."Stabilization Policies and the Information Content of Real Wages," Economica, Vol. 53, pp. 181-190, 1986.
Abstract: The purpose of this paper is to compare the behavior of an economy subject to labor contracts with an economy where the labor market clears in an auction manner. Such a comparison is intended to reveal the information content of real wages in a flexible economy. The analysis reveals two distinct costs inflicted by nominal contracts and demonstrates that optimal macro policies can eliminate one of them.
Handle: RePEc:nbr:nberwo:1373
Template-Type: ReDIF-Paper 1.0
Title: Excess Reserves in the Great Depression
Author-Name: James A. Wilcox
Note: ME
Number: 1374
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1374
File-URL: http://www.nber.org/papers/w1374.pdf
File-Format: application/pdf
Abstract: This article assesses the extent to which government-administered financial shocks and lower interest rates can account for the massive accumulation of bank excess reserves in the Great Depression. Both factors are shown to be statistically significant. Financial shocks did exert astatistically detectable influence on the demand for excess reserves but those shocks at best can account for a step-like increase in the level of reserves held, an increase which was completed in less than a year. Financial shocks can explain no more than 1 percent of the variation in excess reserves during the Great Depression. We demonstrate that the most statistically appropriate form of the demand function is one which flattened rapidly as interest rates fell. The fall in interest rates can account for 80 percent of the movement of excess reserves during the Great Depression.
Handle: RePEc:nbr:nberwo:1374
Template-Type: ReDIF-Paper 1.0
Title: Optimal Taxation by the Monetary Authority
Author-Name: Carl E. Walsh
Author-Person: pwa23
Note: ME
Number: 1375
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1375
File-URL: http://www.nber.org/papers/w1375.pdf
File-Format: application/pdf
Abstract: Reserve requirements imposed against bank deposits, nominal interest payments on bank reserves (or on base money), and inflation can all be viewed as generating tax effects. Any analysis of optimal monetary policy in a steady-state equilibrium needs to consider the simultaneous choice of all the tax instruments controlled by the monetary authority. Such an analysis is carried out in this paper. It is shown that when the tax system is not indexed, the optimal nominal interest rate on the monetary authority's liabilities is likely to be zero. More importantly, any discussion of the payment of interest on reserves and currency must take into account the nature of the tax system and the rate of inflation in a nonindexed economy.
Handle: RePEc:nbr:nberwo:1375
Template-Type: ReDIF-Paper 1.0
Title: The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Pre-War and Post-War Eras
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: James L. Powell
Note: EFG
Number: 1376
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1376
File-URL: http://www.nber.org/papers/w1376.pdf
File-Format: application/pdf
Publication-Status: published as Bernanke, Ben S. and James L. Powell. "The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Pre-War and Post-War Eras." The American Business Cycle: Continuity and Change, editedby Robert J. Gordon. Chicago: UCP, 1986, pp. 583-621 and 633-637.
Publication-Status: published as The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and Postwar Eras, Ben S. Bernanke, James Powell. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: This paper studies the cyclical behavior of a number of industrial labor markets of the pre-war (1923-1939) and post-war (1954-1982) eras. In the spirit of Burns and Mitchell we do not test a specific structural model of the labor market but instead concentrate on describing the qualitative features of the (monthly, industry-level) data.The two principal questions we ask are: First, how is labor input (as measured by the number of workers, the hours of work, and the intensity of utilization) varied over the cycle ? Second, what is the cyclical behaviorof labor compensation (as measured by real wages, product wages, and real weekly earnings) ? We study these questions in both the frequency domain and the time domain. Many of our findings simply reinforce, or perhaps refine, existing perceptions of cyclical labor market behavior. However, we do find some interesting differences between the pre-war and the post-war periods in ther elative use of layoffs and short hours in downturns, and in the cyclical behavior of the real wage.
Handle: RePEc:nbr:nberwo:1376
Template-Type: ReDIF-Paper 1.0
Title: Estimated Trade-Offs Between Unemployment and Inflation
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG
Number: 1377
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1377
File-URL: http://www.nber.org/papers/w1377.pdf
File-Format: application/pdf
Publication-Status: published as Ray C. Fair, 1984. "Estimated tradeoffs between unemployment and inflation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 57-96.
Abstract: Three models of price and wage behavior are estimated and tested in this paper. Model 1 is one in which the long-run trade-off between unemployment and inflation is in terms of price levels; Model 2 is one in which the trade-off is in terms of rates of change; and Model 3 is one in which there is no long-run trade-off. The evidence favors Model 1 over Models 2 and 3. The comparison between Models 2 and 3 is inconclusive. The short-run trade-offs are greater for Model 1 than for Models 2 and 3. The fact that Model 3 did not do particularly well is evidence against the Friedman-Phelps proposition of no long-run trade-off.
Handle: RePEc:nbr:nberwo:1377
Template-Type: ReDIF-Paper 1.0
Title: Business Cycles Analysis and Expectational Survey Data
Author-Name: Victor Zarnowitz
Note: EFG
Number: 1378
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1378
File-URL: http://www.nber.org/papers/w1378.pdf
File-Format: application/pdf
Abstract: What is the role of foresight, and the significance of the lack of foresight under uncertainty, in the theory of business cycles ? What relevant evidence on these questions can be extracted from the survey data on agents' expectations and experts' forecasts? To provide some answers, the recent work in this area is reviewed in the perspective of economic and doctrinal history. The address proceeds from (1) a discussion of the expectational aspects of modern business cycles theories and (2) a critique of the currently dominant approaches to (3) a summary of the evidence and (4) some illustrations and implications for further analysis. Of the conclusions drawn,perhaps the most general one is that expectations matter a great deal but are not all-important. They may be rational in the sense of effectively using the limited available knowledge and information, but they are also diversified and not always self-validating or stabilizing.
Handle: RePEc:nbr:nberwo:1378
Template-Type: ReDIF-Paper 1.0
Title: The Reaction of Reduced-Form Coefficients to Regime Changes: The Case of Interest Rates
Author-Name: Joe Peek
Author-Person: ppe90
Author-Name: James A. Wilcox
Note: ME
Number: 1379
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1379
File-URL: http://www.nber.org/papers/w1379.pdf
File-Format: application/pdf
Abstract: This study investigates whether the apparent intertemporal instability of a particular reduced-form equation (that for interest rates) can be explained by changing government policy parameters, or regimes, and otherwise stable structural parameters. We hypothesize that major fiscal, monetary, and regulatory policy parameter shifts have been important sources of that instability. Direct tests imply that reduced-form coefficients move by statistically significant and economically meaningful amounts in response to policy parameter change. Allowing for this systematic parameter variation produces greater stability in the remaining parameters. Furthermore, in-sample and out-of-sample forecasts from the proposed model out perform those from the non-responsive parameter specification.
Handle: RePEc:nbr:nberwo:1379
Template-Type: ReDIF-Paper 1.0
Title: Money, The Rate of Devaluation and Interest Rates in a Semi-Open Economy: Colombia 1968-1982
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: ITI IFM
Number: 1380
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1380
File-URL: http://www.nber.org/papers/w1380.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. "Money, The Rate of Devaluation and Interest Rates ina Semi-Open Economy: Colombia 1968-1982." Journal of Money, Credit and Banking, Vol. 17, No. 1, (February 1985), pp. 59-68.
Abstract: In this paper an empirical model for analyzing the behavior of nominal interest rates in a semi-open economy is developed. The model explicitly incorporates both the role of open economy factors (i.e., world interest rates, expected rate of devaluation) and domestic monetary conditions in explaining interest rates movement. The model is tested using quarterly data for Colombia for 1968-1982. The results obtained indicate that the semi-open characterization is adequate for the case of Colombia, and that world interest rates, the rate of devaluation and domestic monetary conditions have affected domestic nominal interest rates during the period under consideration. The results also indicate that unanticipated increases in the nominal quantity of money have exercised a negative effect on nominal interest rates in Colombia.
Handle: RePEc:nbr:nberwo:1380
Template-Type: ReDIF-Paper 1.0
Title: Counterfactuals, Forecasts, and Choice-Theoretic Modelling of Policy
Author-Name: Herschel I. Grossman
Note: EFG
Number: 1381
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1381
File-URL: http://www.nber.org/papers/w1381.pdf
File-Format: application/pdf
Abstract: This paper focuses on the problem of formulating an analysis of economic policy that is consistent with rational expectations. Cooley, LeRoy,and Raymon show that the Lucas and Sargent strategy for econometric policy evaluation is itself vulnerable to the logic of the Lucas critique. The present discussion develops the distinction between counter factuals and forecasts to clarify the nature of the inconsistencies in the Lucas and Sargent strategy. The paper goes on to propose and to illustrate a strategy for positive economic analysis that incorporates choice-theoretical modelling of policy. Such modelling can allow better forecasting, but it also shifts attention away from policy actions and their effects and towards the more fundamental relation between the policymaker's constraints and targets and economic outcomes. The forecasting problem in a choice-theoretic model of policy concerns the effects of hypothetical realizations of variables that determine the policymaker's constraints and targets. The analysis of counter factuals in this context recognizes that the parameters of the policy process are not invariant with respect to the processes that generate these exogenous variables. A program of positive economics that includes choice-theoretic modelling of policy also preserves a distinct role for policy advice as part of the process being modelled.
Handle: RePEc:nbr:nberwo:1381
Template-Type: ReDIF-Paper 1.0
Title: Pricing FHA Mortgage Default Insurance
Author-Name: Donald F. Cunningham
Author-Name: Patric H. Hendershott
Note: ME
Number: 1382
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1382
File-URL: http://www.nber.org/papers/w1382.pdf
File-Format: application/pdf
Publication-Status: published as Housing Finance Review, Vol. 3, No. 4, pp. 373-392, (October 1984).
Abstract: The fair premia on FHA mortgage default insurance contracts are computed under alternative assumptions regarding the expected house price inflation rate and its variance and homeowner's default costs. The contracts considered vary by amortization schedule (15 and 30 year level-payment mortgages and two graduated-payment mortgages) and initial loan-to-value ratio (80 to 95.8percent) .The results indicate a wide variation in fair insurance premia. Because FHA charges all borrowers the same premia, large cross-subsidies exist within the program, with borrower's obtaining low loan-to-value or rapidly amortizing loans subsidizing borrowers with high loan-to-value or negative amortizing loans. Moreover, the movement toward insuring riskier loans --graduated payment, price-level adjusted and adjustable rate -- without increasing insurance premia seems almost certain to lead to significant overall losses for the program.
Handle: RePEc:nbr:nberwo:1382
Template-Type: ReDIF-Paper 1.0
Title: Household Saving: An Econometric Investigation
Author-Name: Patric H. Hendershott
Author-Name: Joe Peek
Author-Person: ppe90
Note: PE
Number: 1383
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1383
File-URL: http://www.nber.org/papers/w1383.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and Joe Peek. "Household Saving: An Econometric Investigation." From The Level and Composition of Household Saving, editedby Patric H. Hendershott, pp. 63-100. Cambridge, MA: Ballinger Publishing Co., 1985.
Abstract: Household or personal saving is recomputed to include net purchases of consumer durables, net contributions to government life insurance and pension reserves, and an adjustment for the inflation premium component in interest income. These adjustments raise the measured household saving rate by nearly 5 percentage points in the 1965-75 period but result in an extremely sharp 7 percentage point decline in the rate between 1975 and the early 1980s. A model of household saving behavior is then presented and estimated using annual data from the 1952-82 period. While saving responds to numerous influences, major swings in the adjusted saving rate -- a significant decline in the 1950s and rebound in the early 1960s, as well as the decline since 1975 -- are largely explained by two variables: the wealth/income ratio and the growth rate of real income.
Handle: RePEc:nbr:nberwo:1383
Template-Type: ReDIF-Paper 1.0
Title: The Heights of Americans in Three Centuries: Some Economic and Demographic Implications
Author-Name: Kenneth L. Sokoloff
Note: DAE
Number: 1384
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1384
File-URL: http://www.nber.org/papers/w1384.pdf
File-Format: application/pdf
Publication-Status: published as Komlos, John (ed.) The biological standard of living on three continents: Further explorations in anthropometric history. Boulder and Oxford: Westview Press, 1995.
Abstract: This paper discusses the potential usefulness of anthropometric measurements in exploring the contributions of nutrition to American economic growth and demographic change. It argues that although the value of height-by-age data to economic historians will ultimately be resolved in the context of investigating specific issues, the early results of the NBER Projecton Long-term Trends in Nutrition, Labor Productivity, and Labor Welfare have been encouraging. Among the most significant findings to date are: (1)that by the time of the Revolution, Americans had attained a mean final height (and net nutritional status) that was very high, one that European populations did not generally reach until the twentieth century; (2) that the variation in stature across occupational classes was much less in the U.S. than in Europe; (3) that natives of the South have been taller than those from other regions of the U.S. since the middle of the eighteenth century, and that their absolute height increased during the antebellum period while mortality was declining there; and (4) that natives of large antebellum cities were much shorter than their country men born in rural areas or in small cities. The paper also examines, in a preliminary fashion, how a newly available data set bears on the hypothesis that a cycle in U.S. final heights began during the antebellum period. The theory might continue to be sustained, but a sample of U.S. Army recruits from 1850 to1855 does not seem to provide much support for it.
Handle: RePEc:nbr:nberwo:1384
Template-Type: ReDIF-Paper 1.0
Title: Investment in Fixed and Working Capital During Early Industrialization: Evidence From U.S. Manufacturing Firms
Author-Name: Kenneth L. Sokoloff
Note: DAE
Number: 1385
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1385
File-URL: http://www.nber.org/papers/w1385.pdf
File-Format: application/pdf
Publication-Status: published as Sokoloff, Kenneth L. "Investment in Fixed and Working Capital During Early Industrialization: Evidence From U.S. Manufacturing Firms." Journal of Economic History, Vol. 44, No. 2, (June 1984), pp. 545-556.
Abstract: This paper utilizes a survey of the US manufacturing firms from 1832 to investigate the structure of manufacturing investment during early industrialization. Although several manufacturing industries, such as cotton textiles, depart from the pattern, most appear to have devoted the hulk of their investments to working capitaL This variation across industries in the composition of capital investmentsis indicative of a more general variation in factor intensities, and bears on the issues of why industries became concentrated in the regions they did, and the degrees to which they were adversely affected by the limited availability of long-term loans. Evidence that most manufacturing industries had quite modest investments in machinery and tools per unit of labor is also presented, serving to undercut the notion that the early period of industrialization was based on a proliferation of new, machinery-intensive technologies
Handle: RePEc:nbr:nberwo:1385
Template-Type: ReDIF-Paper 1.0
Title: Was the Transition from the Artisanal Shop to the Non-Mechanized Fctry Assoc. w/Gains in Effcny?: Evdnc. from the U.S. Mnfctr. Censuses of 1820 & 1850
Author-Name: Kenneth L. Sokoloff
Note: DAE
Number: 1386
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1386
File-URL: http://www.nber.org/papers/w1386.pdf
File-Format: application/pdf
Publication-Status: published as Sokoloff, Kenneth L. "Was the Transition from the Artisanal Shop to the Non-Mechanized Factory Associated with Gains in Efficiency?: Evidence from the Manufacturing Censuses of 1820 and 1850." Expl-orations in Economic History, Vol. 21, No. 4, (October 1984), pp. 351-382.
Abstract: There are few more dramatic episodes in economic history than the displacement of the artisanal shop by the factory during the early stages of the Industrial Revolution as the predominant form of manufacturing organization. Despite the attention this development has received, however, the issues of why and how it occurred remain in dispute. This paper employs recently-collected samples of data on northeastern firms from the 1820 and 1850 Federal Census of Manufactures to investigate this transition in the U.S. context. It argues that the evidence is consistent with the hypothesis that even the early non-mechanized factories enjoyed an efficiency advantage over the traditional artisanal shop organization. The growth of average firm size in nearly all manufacturing industries between 1820 and 1850 indicates a systematic movement toward the factory organizational form. Some shops did survive, but they accounted for only modest shares of industry value added and become increasingly concentrated in areas where the extent of the market was less likely to justify firm expansion. Moreover, the estimation of production functions suggests that the non-mechanized industries were generally characterized by scale economies up to a threshold size similar to that of a small factory.
Handle: RePEc:nbr:nberwo:1386
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Neonatal Mortality Rates in the U.S.: A Reduced Form Model
Author-Name: Hope Corman
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 1387
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1387
File-URL: http://www.nber.org/papers/w1387.pdf
File-Format: application/pdf
Publication-Status: published as Corman, Hope and Michael Grossman. "Determinants of Neonatal Mortality Rates in the U.S.: A Reduced Form Model," Journal of Health Economics, Vol 4 , No. 3, (September 1985), pp. 213-236.
Abstract: The aim of this paper is to contribute to an understanding of the determinants of differences in race-specific neonatal mortality rates among large counties of the U.S. in 1977. After estimating cross-sectional regressions, we apply their coefficients to national trends in the exogenous variables to "explain" the rapid decline in neonatal mortality since 1964. The regressions and the extrapolations point to the importance of abortion availability, neonatal intensive care availability, females schooling levels, and to a lesser extent Medicaid, BCHS projects, and WIC in trends in black neonatal mortality between 1964 and 1977. They also underscore the importance of schooling, neonatal intensive care, abortion, Medicaid, WIC, and to a lesser extent poverty and organized family planning clinics in trends in white neonatal mortality in those years. A particularly striking finding is that the increase in abortion availability is the single most important factor in the reduction in the black neonatal mortality rate. Not only does the growth in abortion dominate other program measures, but it also dominates trends in schooling, poverty,female employment, and physician availability. The actual reduction due to abortion amounts to 1.2 deaths per thousand live births or 10 percent of the observed decline.
Handle: RePEc:nbr:nberwo:1387
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Model of Wage Indexation Provisions in Union Contracts
Author-Name: David Card
Author-Person: pca271
Note: LS
Number: 1388
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1388
File-URL: http://www.nber.org/papers/w1388.pdf
File-Format: application/pdf
Publication-Status: published as Card, David. "An Empirical Model of Wage Indexation Provisions in Union Contracts." Journal of Political Economy, Vol. 94, No. 3, Part 2, pp. S144-S 175, June 1986.
Abstract: Cost of living escalators are an important feature of North American labor contracts. This paper presents a measure of the response of index-linked wage increases to concurrent price increases for a sample of Canadian contracts, and then analyses this response in terms of a simple model of indexation to the aggregate price level. The model highlights the importance of aggregate price movements in conveying information about industry-specific prices. The empirical analysis confirms that industry-specific correlations between input and output prices and the Consumer Price Index are important determinants of the response of wage to prices across index contracts.
Handle: RePEc:nbr:nberwo:1388
Template-Type: ReDIF-Paper 1.0
Title: Debt, Deficits and Finite Horizons
Author-Name: Olivier J. Blanchard
Author-Person: pbl2
Note: EFG
Number: 1389
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1389
File-URL: http://www.nber.org/papers/w1389.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier J. "Debt, Deficits and Finite Horizons," Journal of Political Economy, Vol. 92, No. 2, April 1985, pp. 223-247.
Abstract: Many issues in macroeconomics, such as the level of the steady state interest rate, or the dynamic effects of government deficit finance, depend crucially on the horizon of economic agents. This paper develops a simple analytical model in which such issues can be examined and in which the horizon of agents is a parameter which can be chosen arbitrarily.The first three sections of the paper characterize the dynamics and steady state of the economy in the absence of a government. The focus is on the effects of the horizon index on the economy. The paper clarifies in particular the separate roles of finite horizons and declining labor income through life in the determination of steady state interest rates.The next three sections study the effects and the role of fiscal policy.The focus is on the effects of deficit finance both in closed and open economies. The paper clarifies the respective roles of government spending, deficits and debt in the determination of interest rates.
Handle: RePEc:nbr:nberwo:1389
Template-Type: ReDIF-Paper 1.0
Title: Household Formations
Author-Name: Patric H. Hendershott
Author-Name: Marc Smith
Note: PE
Number: 1390
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1390
File-URL: http://www.nber.org/papers/w1390.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and Marc Smith. "Household Formations." The Leveland Composition of Household Saving, edited by Patric H. Hendershott. Ballinger Publishing Company, (1985).
Abstract: Between 1960 and 1980, the number of households in the U.S. increased by 50 percent and the proportion of the population that were household heads rose from 29.5 to 36.3. While some of this increase was due to the maturing of the"baby boom" population, over half was caused by rising age-specific headship rates. In contrast, between 1980 and 1983, headship rates fell sharply for the under 34 population. This paper explains household formations due to changes in headship rates in terms of changes in real income and the price of privacy.
Handle: RePEc:nbr:nberwo:1390
Template-Type: ReDIF-Paper 1.0
Title: The Role of Consumption in Economic Fluctuations
Author-Name: Robert E. Hall
Note: EFG
Number: 1391
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1391
File-URL: http://www.nber.org/papers/w1391.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E. "The Role of Consumption in Economic Fluctuations." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: UCP, 1986, pp. 237-255 and 265-266.
Publication-Status: published as The Role of Consumption in Economic Fluctuations, Robert E. Hall. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: Consumption and income tend to move together; the correlation of their first differences is about 0.14. In most accounts, the correlation is attributed to the upward slope of the consumption function. When the publicis better off, they consume more. But in the microeconomic theory of the household, income is a variable chosen by the household. Choosing to workmore, and therefore to consume less time away from work, is a sign of diminished well being.The structural relation between earnings and consumption should have a negative slope.The explanation of the observed positive correlation of consumption and income must rest on shifts of the consumption-income relation, not movements along it. An examination of data for the U.S. in the twentieth century shows that the slope of the consumption-income relation has been approximately zero. Shifts in consumer behavior explain the positive observed correlation; they are an important, but not dominant, source of overall fluctuations in the aggregate economy.
Handle: RePEc:nbr:nberwo:1391
Template-Type: ReDIF-Paper 1.0
Title: Are Business Cycles All Alike?
Author-Name: Olivier J. Blanchard
Author-Person: pbl2
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG
Number: 1392
Creation-Date: 1984-06
Order-URL: http://www.nber.org/papers/w1392
File-URL: http://www.nber.org/papers/w1392.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier J. and Mark Watson. "Are All Business Cycles Alike?" The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: University of Chicago Press, 1986, pp. 123-156.
Publication-Status: published as Are Business Cycles All Alike?, Olivier J. Blanchard, Mark W. Watson. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: This paper examines two questions. The first is whether economic fluctuations-business cycles-are due to an accumulation of nall shocks or instead mostly to infrequent large shocks. The paper concludes that neither of these two extreme views accurately characterize fluctuations. The second question is whether fluctuations are due mostly to one source of shocks, for example monetary, or instead to many sources. The paper concludes that evidence strongly supports the hypothesis of many, about equally important, sources of shocks.To analyze the empirical evidence and to reach these conclusions, the paper uses two different statistical approaches. The first is estimation ofa structural model, using a set of just identifying restrictions. The secondis non-structural and may be described as a formalization of the Burns Mitchell techniques. Both approaches are somewhat novel and should be of independent interest.
Handle: RePEc:nbr:nberwo:1392
Template-Type: ReDIF-Paper 1.0
Title: Capital Structure Puzzle
Author-Name: Stewart C. Myers
Note: ME PE
Number: 1393
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1393
File-URL: http://www.nber.org/papers/w1393.pdf
File-Format: application/pdf
Publication-Status: published as Myers, Stewart C. "Capital Structure Puzzle," Journal of Finance, Vol. 39, No. 3, July 1984, pp. 575-592.
Abstract: This paper contrasts the "static tradeoff" and "pecking order" theories of capital structure choice by corporations. In the static tradeoff theory, optimal capital structure is reached when the tax advantage to borrowing is balanced, at the margin, by costs of financial distress. In the pecking order theory, firms preferinternal to external funds, and debt to equity if external funds are needed. Thus the debt ratio reflects the cumulative requirement for external financing. Pecking order behavior follows from simple asymmetric information models. The paper closes with a review of empirical evidence relevant to the two theories.
Handle: RePEc:nbr:nberwo:1393
Template-Type: ReDIF-Paper 1.0
Title: The Development and Role of the National Bureau's Business Cycle Chronologies
Author-Name: Geoffrey H. Moore
Author-Name: Victor Zarnowitz
Note: EFG
Number: 1394
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1394
File-URL: http://www.nber.org/papers/w1394.pdf
File-Format: application/pdf
Publication-Status: published as Moore, Geoffrey and Victor Zarnowitz. "The Development and Role of the National Bureau of Economic Research's Business Cycle Chronologies." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: UCP, 1986, pp. 735-779.
Abstract: A working definition, first formulated in the 1920's by Mitchell and revised in the 1940's, has been in use at the National Bureau for over fifty years and is still employed to identify and date business cycles. The NBER historical chronologies for England, France, and Germany as well as the United States have been intensively in economic research and are widely accepted. The U.S. chronology, which is being updated as promptly as the data allow, also have the important practical function of aiding the analysis of current business conditions and forecasting near-term cyclical developments. This paper discusses the main aspects of the NBER concept of business cycles; the early views and developments bearing on the construction of the chronologies; the problems and procedures involved; the characteristics and dependability of the historical reference dates; and the National Bureau's work in this field since World War II. Some recent uses of the U.S. dates to measure the duration, amplitudes, and diffusion of business expansions and contractions are illustrated. Finally, we show and discuss chronologies of growth cycles,' i.e., trend-adjusted business cycles, for 13 countries in the post-World War II period.
Handle: RePEc:nbr:nberwo:1394
Template-Type: ReDIF-Paper 1.0
Title: Major Changes in Cyclical Behavior
Author-Name: Victor Zarnowitz
Author-Name: Geoffrey H. Moore
Note: EFG
Number: 1395
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1395
File-URL: http://www.nber.org/papers/w1395.pdf
File-Format: application/pdf
Publication-Status: published as Zarnowitz, Victor and Geoffrey Moore. "Major Changes in Cyclical Behavior." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: UCP, 1986, pp. 519-572 and 579-582.
Publication-Status: published as Major Changes in Cyclical Behavior, Victor Zarnowitz, Geoffrey H. Moore. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: Various structural, institutional, and policy changes have contributed to the evolution of business cycles, since World War II business expansions have been much longer and contractions much shorter than before. Over nearly 200 years of U.S. history expansions have been long relative to contractions when prices had upward secular trends, and shorter when price trends were down. The rising price trend since the 1930's fits this pattern, although we find no association between the rate of inflation during each business cycle and the relative duration of the phases. Shifts in the industrial composition of employment, in labor-force participation, and in the distribution of personal income have all contributed to the post-1945 moderation of cyclical amplitudes. The variability of economic change was low by historical standards in both 1948-69 and 1969-81, although the inflation rate was much higher and real growth on the average lower after 1969. The recent long-term inflation is attributable mainly to the new persistence of upward price movements in business cycle contractions rather than to more rapid price increases during expansions. But prices have always been sensitive to the degree of severity of business contractions, and they still are. The same is true of short-terminterest rates, although they became more sensitive during 1949-82 than before. Despite the deep changes in the economy, many basic characteristics of the business cycle remain unchanged, notably the timing relationships among groups of leading and lagging indicators.
Handle: RePEc:nbr:nberwo:1395
Template-Type: ReDIF-Paper 1.0
Title: Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have
Author-Name: Stewart C. Myers
Author-Name: Nicholas S. Majluf
Note: ME
Number: 1396
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1396
File-URL: http://www.nber.org/papers/w1396.pdf
File-Format: application/pdf
Publication-Status: published as Majluf, Nicholas S. and Stewart C. Myers. "Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have," Journal of Financial Economics, Vol. 13, No. 2, 1984, pp. 187-221.
Abstract: This paper considers a firm that must issue common stock to raise cash to undertake a valuable investment opportunity. Management is assumed to know more about the firm's value than potential investors. Investors interpret the firm's actions rationally. An equilibrium model of the issue-invest decision is developed under these assumptions.The model shows that firms may refuse to issue stock, and therefore may pass up valuable investment opportunities.The model suggests explanations for several aspects of corporate financing behavior, including the tendency to rely on internal sources of funds, and to prefer debt to equity if external financing is required. Extensions and applications of the model are discussed.
Handle: RePEc:nbr:nberwo:1396
Template-Type: ReDIF-Paper 1.0
Title: Incentive for the Homogenization of Time Use
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 1397
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1397
File-URL: http://www.nber.org/papers/w1397.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. "Incentives for the Homogenization of Time Use." Economic Incentives, edited by Bela Balassa and Herbert Giersch, pp. 124-139. London: The Macmillan Press Limited, 1986.
Abstract: An increasing variety of phenomena involve the mixing of market work and leisure, or market work and home production, both by individuals and across household members. The growth of vacations, holidays and days absent from work; the rise in part-time employment and the reduction in moonlighting; and the convergence between the sexes of labor - force participation rates and of time spent in household production, are all demonstrated by data for a number of developed countries. This phenomenon, an increasing consumption of mixed leisure, is examined in the context of a model in which the consumption of one commodity reduces the market wage. 14 income dominate substitution effects, as time-series evidence on the demand for leisure suggests they do,higher full incomes will increase the demand for mixed leisure. Similarly, greater differences between tax rates on market work and on mixed leisure will also increase the demand for the latter.Whether the growth of mixed leisure has resulted from changing tax incentives or increased full incomes is not clear, but some weak formal evidence for the latter cause is presented. The implications of expanded consumption of mixed leisure for earnings inequality and for the welfare effects of unemployment are discussed, and some approaches to testing the theory of the demand for mixed leisure are suggested.
Handle: RePEc:nbr:nberwo:1397
Template-Type: ReDIF-Paper 1.0
Title: Economically Sensible Solutions for Linear Rational Expectations Models with Forward and Backward Looking Dynamic Processes
Author-Name: Michael L. Mussa
Note: ITI IFM
Number: 1398
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1398
File-URL: http://www.nber.org/papers/w1398.pdf
File-Format: application/pdf
Abstract: Using variants of a modified version of Dornbusch's model of price level and exchange rate dynamics, it is demonstrated that satisfaction of the formal condition for existence of a unigue non-explosive solution of a linear rational expectations model with forward and backward looking dynamic processes (equality of the number of stable roots with the number of independent backward looking processes) does not guarantee the economic sensibility of this solution, even if one accepts the usual arguments for excluding "speculative babbles" from the solutions of such models. Moreover, satisfaction of the formal condition for existence of an infinity of non-explosive solutions for such rational expectations models (more stable roots than independent backward looking processes) does not assure that any of these solutions is economically sensible.
Handle: RePEc:nbr:nberwo:1398
Template-Type: ReDIF-Paper 1.0
Title: Risk and Return: Consumption versus Market Beta
Author-Name: N. Gregory Mankiw
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG
Number: 1399
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1399
File-URL: http://www.nber.org/papers/w1399.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory and Matthew D. Shapiro. "Risk and Return: Consumption Beta versus Market Beta," Review of Economics and Statistics, Vol. 68, No. 3, August 1986, pp. 452-459.
Abstract: The interaction between the macroeconomy and asset markets is central to a variety of modern theories of the business cycle. Much recentwork emphasizes the joint nature of the consumption decision and the portfolio allocation decision. In this paper, we compare two formulations of the Capital Asset Pricing Model. The traditional CAPM suggests that the appropriate measure of an asset's risk is the covariance of the asset's return with the market return. The consumption CAPM, on the other hand, implies that a better measure of risk is the covariance with aggregate consumption growth. We examine a cross section of 464 stocks and find that the beta measured with respect to a stock market index outperforms the beta measured with respect to consumption growth.
Handle: RePEc:nbr:nberwo:1399
Template-Type: ReDIF-Paper 1.0
Title: Ricardian Consumers With Keynesian Propensities
Author-Name: Robert B. Barsky
Author-Person: pba670
Author-Name: N. Gregory Mankiw
Author-Name: Stephen P. Zeldes
Note: EFG
Number: 1400
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1400
File-URL: http://www.nber.org/papers/w1400.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 76 (September 1986): 676-691.
Abstract: In this paper, we examine Ricardian equivalence of debt and tax finance in a world in which taxes are not lump-sum but are levied on risky labor income. First, we show that the marginal propensity to consume out of a tax cut, coupled with a future income tax increase, is positive under reasonable assumptions regarding preferences toward risk. Second, we document that the degree of income uncertainty facing the typical individual orfamily is large. Third, we show that, for plausible utility function parameters and distributions of future income, the MPC out of a tax cut is quantitatively large. Indeed, the MPC out of a tax cut, coupled with a future income tax increase, can be closer to the Keynesian value that ignores the future tax liabilities than to the Ricardian value that treats future taxes as if they were lump-sum.
Handle: RePEc:nbr:nberwo:1400
Template-Type: ReDIF-Paper 1.0
Title: The Compliance Cost of the U.S. Individual Income Tax System
Author-Name: Joel Slemrod
Author-Person: psl10
Author-Name: Nikki Sorum
Note: PE
Number: 1401
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1401
File-URL: http://www.nber.org/papers/w1401.pdf
File-Format: application/pdf
Publication-Status: published as Slemrod, Joel and Nikki Sorum. "The Compliance Cost of the U.S. Individual Tax System." National Tax Journal, Vol. 37, No. 4, (December 1984), pp. 4 61-474.
Abstract: This paper uses evidence from a survey of Minnesota taxpayers to estimate the magnitude and demographic patterns of the compliance cost of filing federal and state income tax returns. It concludes that in 1982 this cost was between $17 and $27 billion, or from five to seven percent of the revenue raised by the federal and state income tax systems combined. About two billion hours of taxpayer time were spent on filing tax returns, and about $3 billion was spent on professional tax assistance.
Handle: RePEc:nbr:nberwo:1401
Template-Type: ReDIF-Paper 1.0
Title: Nutrition and the Decline in Mortality Since 1700: Some Preliminary Findings
Author-Name: Robert W. Fogel
Note: DAE EH
Number: 1402
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1402
File-URL: http://www.nber.org/papers/w1402.pdf
File-Format: application/pdf
Publication-Status: published as Fogel, Robert William. "Nutrition and the Decline in Mortality since 1700: Some Preliminary Findings," Long-Term Factors in American Economic Growth, Income and Welath Conference Volume 51, ed. by S.L. Engerman and R.E. Gallman, Chicago: UCP (1986).
Publication-Status: published as Nutrition and the Decline in Mortality since 1700: Some Preliminary Findings, Robert W. Fogel. in Long-Term Factors in American Economic Growth, Engerman and Gallman. 1986
Abstract: This paper uses the data in the NBER/CPE pilot sample of genealogies to create a new time series on life expectation in the U.S. since 1720. After attaining remarkably high levels toward the end of the eighteenth century, life expectation as measured by e0(10) began a decline that lasted about 80 years before beginning the new rise with which we have long been familiar. Second, time series on the average adult stature of national populations in North America and Europe are used as a measure of nutritional status. The properties of this measure in the analysis of labor welfare and an explanation for the high correlation between stature and the Cini ratio are discussed.The time series on stature is strongly correlated with the series on e0(10) and other measures of mortality. Third, these correlations are used to estimate the contribution of improvements in nutritional status (not diet alone but diet net of prior claims) to the decline in mortality in Europe and America since 1800. Improvements in nutritional status may have accounted for as ifiuch as four tenths of the decline in mortality rates, but nearly all of this effect was concentrated in the reduction of infant mortality. The new findings are used to resolve several paradoxes and the implication of the findings for the standard-of-living controversy are considered.
Handle: RePEc:nbr:nberwo:1402
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Annuity Insurance on Savings and Inequality
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: John B. Shoven
Author-Name: Avia Spivak
Note: PE
Number: 1403
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1403
File-URL: http://www.nber.org/papers/w1403.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence J., John Shoven and Avia Spivak. "The Impact of Annuity Insurance on Savings and Inequality," Journal of Labor Economics, Vol. 4, No. 3, Part 2, July 1986, pp. S183-S215.
Abstract: This is the first paper to document the effect of health on the migration propensities of African Americans in the American past. Using both IPUMS and the Colored Troops Sample of the Civil War Union Army Data, I estimate the effects of literacy and health on the migration propensities of African Americans from 1870 to 1910. I find that literacy and health shocks were strong predictors of migration and the stock of health was not. There were differential selection propensities based on slave status--former slaves were less likely to migrate given a specific health shock than free blacks. Counterfactuals suggest that as much as 35% of the difference in the mobility patterns of former slaves and free blacks is explained by differences in their human capital, and more than 20% of that difference is due to health alone. Overall, the selection effect of literacy on migration is reduced by one-tenth to one-third once health is controlled for. The low levels of human capital accumulation and rates of mobility for African Americans after the Civil War are partly explained by the poor health status of slaves and their immediate descendants.
Handle: RePEc:nbr:nberwo:1403
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Evaluation of the Disequilibrium Real Wage Rate Hypothesis
Author-Name: Jacques R. Artus
Note: ITI IFM
Number: 1404
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1404
File-URL: http://www.nber.org/papers/w1404.pdf
File-Format: application/pdf
Publication-Status: published as Artus, Jacques R. "The Disequilibrium Real Wage Rate Hypothesis: An Empirical Evaluation." International Monetary Fund Staff Papers, Vol. 31, No. 2 , (June 1984), pp. 249.
Abstract: The rise in the share of labor costs invalue added in many industrial countries during the 1970s and early 1980s has led many observers to conclude that real wages are now too high and a source of "classical" unemployment. These conclusions are not necessarily valid. The increase in the labor share could be warranted by long-run changes in production techniques,in the price of energy, or in the relative availability of labor and capital. This paper uses a production function approach to examine these possibilities.
Handle: RePEc:nbr:nberwo:1404
Template-Type: ReDIF-Paper 1.0
Title: The Impact of OSHA and EPA Regulation on Productivity
Author-Name: Wayne B. Gray
Author-Person: pgr111
Note: LS
Number: 1405
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1405
File-URL: http://www.nber.org/papers/w1405.pdf
File-Format: application/pdf
Publication-Status: published as Gray, Wayne B. "The Impact of OSHA and EPA Regulation on Productivity," Productivity versus OSHA and EPA Regulations, Research of Business Decisions series, No. 86, series ed. Richard N. Farmer, Ann Arbor: UMI Research Press , 1986.
Publication-Status: published as American Economic Review, vol. 77, no. 5, December 1987
Abstract: This paper presents estimates of the impact of OSHA and EPA regulation on productivity. Production information for 1450 manufacturing industries from 1958 to 1980 is merged with measures of regulation, including both information on compliance expenditures by industry and enforcement efforts by OSHA and EPA. Industries that faced higher regulation during the 1970s had significantly lower productivity growth, and a greater productivity slowdown, than industries that faced lower regulation. Under certain assumptions, the regulation is estimated to have reduced average industry productivity growth by .57 percent per year, 39 percent of the average productivity slowdown. These results are robust to variations in the model and the inclusion of other productivity determinants, including poor output growth and dependence on energy. The results also suggest a one-time cost of adjustment to regulation, so the long-run impact nay be less than that estimated here. Both OSHA and EPA are found to target their enforcement effort towards those industries that are doing poorly in meeting the goals of the regulation. However, in the only area where benefits from regulation can be examined, worker injury rates and OSHA safety inspections, no significant benefits are found.
Handle: RePEc:nbr:nberwo:1405
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Determination with Systematic and Unsystematic Policy Regime Changes: Evidence From the Yen/Dollar Rate
Author-Name: John H. Makin
Author-Name: Raymond D. Sauer
Author-Person: psa136
Note: ME ITI IFM
Number: 1406
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1406
File-URL: http://www.nber.org/papers/w1406.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, 1986.
Abstract: This paper presents results of estimating an exchange rate equation in light of theoretical considerations regarding changes in sterilization and intervention policy and tax policy which imply that the coefficients in the equation will not behave as fixed parameters in a given sample period,as standard econometric practice assumes. We compare the results of ordinary least squares and a random coefficients model of the Japanese Yen-- U.S. dollar exchange rate during the floating period of July 1973 through June 1982.When systematic end of year policy changes affecting Japanese reserves are explicitly modeled, both OLS and the random coefficients model show increased explanatory power. The random coefficients model appears to be superior to OLS however; by allowing the coefficients to vary over time as required by the economic theory discussed above, estimates of the mean response coefficients for the floating period all have the hypothesized sign, and explanatory power is sharply increased.
Handle: RePEc:nbr:nberwo:1406
Template-Type: ReDIF-Paper 1.0
Title: Domestic and Foreign Disturbances in an Optimizing Model of Exchange- Rate Determination
Author-Name: Stephen J. Turnovsky
Author-Person: ptu5
Note: ITI IFM
Number: 1407
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1407
File-URL: http://www.nber.org/papers/w1407.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, Vol. 4, No. 1, pp. 151-171,(1985).
Abstract: This paper analyzes the effects of various disturbances of domestic and foreign origin in a small open economy under imperfect capital mobility in which the behavioral relationships are derived from optimization by the private sector. In this model the domestic economy jumps instantaneously to its new equilibrium following a change in either the domestic monetary growth rate or domestic fiscal policy. In response to a disturbance in either the foreign interest rate or inflation rate,the economy undergoes an initial partial jump towards its new equilibrium,which it there after approaches gradually. The implications of these results for exchange rate adjustment and the insulation properties of flexible exchange rates are discussed.
Handle: RePEc:nbr:nberwo:1407
Template-Type: ReDIF-Paper 1.0
Title: The Pricing of Default-Free Mortgages
Author-Name: Stephen A. Buser
Author-Name: Patric H. Hendershott
Note: ME
Number: 1408
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1408
File-URL: http://www.nber.org/papers/w1408.pdf
File-Format: application/pdf
Publication-Status: published as Buser, Stephen A. and Patric H. Hendershott." The Pricing of Default-Free Fixed Rate Mortgages." Housing Finance Review, Vol. 3, No. 4, (October 1984), pp. 405-429.
Abstract: In this paperwe examine the household's option to prepay or call a standard fixed-rate mortgage. Results based on simulation indicate that the value of this option is sensitive to the expected path of interest rates, the variation around that path, risk aversion and refinancing costs. Unfortunately, efforts to estimate the interest rate process (by us and by previous authors) have met with only limited success, and uncertainty exists regarding the degree of risk aversion and the magnitude of refinancing costs.Thus we conclude that the application of contingent-claims methodology to options on bonds is conceptually more difficult and operationally less reliable than is the analogous application to options on stocks.Despite these reservations concerning the use of our model as a technique for absolute valuation, preliminary findings on the effects of changes in mortgage contract design on the value of the prepayment option are encouraging. For example, our estimate of the relative values of the call options on 30- and 15-year mortgages and on level-payment and graduated-payment mortgages appear to be reasonably robust with respect to specifications of the interestrate process and the other parameters.These findings suggest that our model may be of considerable use within the context of relative or comparative valuation.
Handle: RePEc:nbr:nberwo:1408
Template-Type: ReDIF-Paper 1.0
Title: Dissaving After Retirement: Testing the Pure Life Cycle Hypothesis
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Note: PE
Number: 1409
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1409
File-URL: http://www.nber.org/papers/w1409.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas. "Dissaving After Retirement: Testing the Pure Life Cycle Hypothesis," Issues in Pension Economics, ed. by Z. Bodie, J.B. Shoven, D.A. Wise, Chicago: UCP, 1987.
Publication-Status: published as Dissaving after Retirement: Testing the Pure Life Cycle Hypothesis , B. Douglas Bernheim. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: In this paper, we examine several aspects of saving and dissaving after retirement. First, we argue that existing evidence on bequeathable age-wealth profiles is suspect, and provide new evidence based on longitudinal data indicating that significant dissaving may occur,particularly among single individuals and early retirees. Second, we argue that, in the presence of annuities, estimates of dissaving should be adjusted by including the simple discounted value of benefits in total wealth. Such adjustments reveal relatively little dissaving among any group of retirees. Finally, we test the pure life cycle hypothesis by observing the behavioral response of rates of accumulation to involuntary annuitization, and find empirical refutation of life cycle implications.
Handle: RePEc:nbr:nberwo:1409
Template-Type: ReDIF-Paper 1.0
Title: Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?
Author-Name: Katharine G. Abraham
Author-Person: pab32
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS
Number: 1410
Creation-Date: 1984-07
Order-URL: http://www.nber.org/papers/w1410
File-URL: http://www.nber.org/papers/w1410.pdf
File-Format: application/pdf
Publication-Status: published as Abraham, Katherine G. and Lawrence F. Katz. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?" Journal of Political Economy, Vol. 94 , No. 3, (June 1986), pp. 507-522.
Abstract: Recent work by David Lilien has argued that the existence of a strong positive correlation between the dispersion of employment growth rates across sectors (G) and the unemployment rate implies that shifts in demand from some sectors to others are responsible for a substantial fraction of cyclical variation in unemployment. This paper demonstrates that, under certain empirically satisfied conditions, aggregate demand movements alone can produce a positive correlation between G and the unemployment rate. Two tests are developed which permit one to distinquish between a pure sectoral shift interpretation and a pure aggregate demand interpretation of this positive correlation. The finding that G and the volume of help wanted advertising are negatively related and the finding that G is directly associated with the change in unemployment rather than with the level of unemployment both support an aggregate demand interpretation. A proxy for sectoral shifts that is purged of the influence of aggregate demand is then developed. Models which allow sectoral shifts in the composition of demand and fluctuations in the aggregate level of demand to affect the unemployment rate independently are estimated using this proxy. The results support the view that pure sectoral shifts have not been an important source of cyclical fluctuations in unemployment.
Handle: RePEc:nbr:nberwo:1410
Template-Type: ReDIF-Paper 1.0
Title: On the Rationality of Black Youth Unemployment
Author-Name: Harry J. Holzer
Author-Person: pho162
Note: LS
Number: 1411
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1411
File-URL: http://www.nber.org/papers/w1411.pdf
File-Format: application/pdf
Publication-Status: published as Holzer, Harry J. "Are Unemployed Young Blacks Income-Maximizers?" Southern Economic Journal, Vol. 52, No. 1, pp. 777-784, January 1986.
Abstract: In this paper I provide some evidence on the question of whether the behavior of unemployed young blacks, whose reservation wages are relatively high and whose jobless spells are very lengthy, reflect rational maximizing choices. To do this, I use a simple income-maximizing job search model to imply employment probabilities and various elasticities which are compared to those which are actually observed for young blacks.The results show that, for reasonable discount rates, the employment probabilities implied by income-maximization are consistent with those observed for young blacks. The elasticities of reservation wages with respect to nonwage income that are implied by income-maximizing are also consistent with those estimated econometrically for this group. This was true despite the many assumptions embodied in this model whose validity fora sample of low-income youth is highly questionable.The evidence thus suggests that young blacks are making economically rational choices by choosing high reservation wages and lengthy spells without jobs.
Handle: RePEc:nbr:nberwo:1411
Template-Type: ReDIF-Paper 1.0
Title: A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Author-Name: Garth Saloner
Note: EFG
Number: 1412
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1412
File-URL: http://www.nber.org/papers/w1412.pdf
File-Format: application/pdf
Publication-Status: published as Rotemberg and Saloner, American Economic Review, Vol. 76, June 1986, pp. 38 0-407
Abstract: This paper studies implicitly colluding oligopolists facing fluctuating demand. The credible threat of future punishments provides the discipline that facilitates collusion. However, we find that the temptation to unilaterally deflate from the collusive outcome is often greater when demand is high. To moderate this temptation,the optimizing oligopoly reduces its profitability at such times,resulting in lower prices. If the oligopolists' output is an input to other sectors, their output may increase too. This explains the co-movements of outputs which characterize business cycles. The behavior of the railroads in the 1880's, the automobile industry in the 1950's and the cyclical behavior of cement prices and price-cost margins support our theory. (J.E.L. Classification numbers:020, 130, 610).
Handle: RePEc:nbr:nberwo:1412
Template-Type: ReDIF-Paper 1.0
Title: Asset Markets, Tariffs, and Political Risk
Author-Name: Alan C. Stockman
Author-Person: pst94
Author-Name: Harris Dellas
Author-Person: pde139
Note: ITI IFM
Number: 1413
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1413
File-URL: http://www.nber.org/papers/w1413.pdf
File-Format: application/pdf
Publication-Status: published as Stockman, Alan C. and Harris Dellas. "Asset Markets, Tariffs, and Political Risk." Journal of International Economics, Vol. 21, (1986), pp. 199-213.
Abstract: The paper examines a simple model in which exogenous political risk creates uncertainty about tariffs. The model predicts a relation between consumption and tariffs that differs radically from that implied by models without asset markets or political risk. Given the probability distribution of tariffs, domestic consumption and utility (ex post) are lower in states of the world with a domestic tariff and no foreign tariff than with a foreign tariff and no domestic tariff.This conclusion emerges despite the fact that the opposite would be obtained in the absence of asset markets. So economists should not be surprised if observed relations between consumption and tariffs differ from the predictions of static theory in either time-series or cross-sections.
Handle: RePEc:nbr:nberwo:1413
Template-Type: ReDIF-Paper 1.0
Title: Empirical Tests of Alternative Models of International Growth
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI IFM
Number: 1414
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1414
File-URL: http://www.nber.org/papers/w1414.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence J. and Edward E. Leamer. "Empirical Tests of Alternative Models of International Growth," Trade and Structural Change in Pacific Asia, edited by Colin I. Bradford and William H. Branson, pp. 227-269. Chicago: UCP, 1987.
Publication-Status: published as Empirical Tests of Alternative Models of International Growth, Laurence J. Kotlikoff, Edward E. Leamer. in Trade and Structural Change in Pacific Asia, Bradford and Branson. 1987
Abstract: Recent changes in patterns of international trade and growth have rekindled interest in the relationships among trade, growth, and the international distribution of income. Three alternative models can serve as a theoretical foundation for an empirical analysis of these relationships. The first is the standard Heckscher-Ohlin-Samuelson (Ho) trade model with equalnumbers of factors and goods and incomplete specialization. The second model allows complete specialization and more goods than factors. The third model posits short run capital immobility. Each of these models has quite different implications for the determination of wage levels and growth rates.The conclusions that we draw from this research are rather mixed. Each of the models perform well on certain criteria and poorly on others. While the standard HO model clearly fails to satisfy certain cross-equation constraints, national endowments are remarkably good predictors of the locus of international production. There are, however, significant nonlinearities in the relationship between factor allocations and national endowments. Such nonlinearities are predicted by the uneven version of the HO model. At odds with both of these models is our finding that lagged values of inputs providean important explanation of current factor demands. Such correlations are suggested by the adjustment cost model.
Handle: RePEc:nbr:nberwo:1414
Template-Type: ReDIF-Paper 1.0
Title: Modeling the Term Structure of Interest Rates Under Nonseparable Utilityand Duriability of Goods
Author-Name: Kenneth B. Dunn
Author-Name: Kenneth J. Singleton
Author-Person: psi735
Note: EFG ME
Number: 1415
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1415
File-URL: http://www.nber.org/papers/w1415.pdf
File-Format: application/pdf
Publication-Status: published as Dunn, Kenneth B. and Kenneth J. Singleton. "Modeling the Term Structure of Interest Rates Under Nonseparable Utility and Durability of Goods," Journal of Financial Economics, Vol. 17, pp. 27-55, 1986.
Abstract: This paper investigates the term structure relations implied by a two-good model in which goods are durable and the preference function of consimters may be non separable both over time and the decision variables. The parameters characterizing preferences are estimated and the implied restrictions on the comovements of consumptions and the returns from following different investment strategies in bonds are examined. Both the durability of goods (modeled by a linear service technology) and the nonseparability of preferences over services from goods are important factors in explaining the time paths of individual returns. However, substantial evidence against our model is obtained when the restrictions associated with two different investment strategies are studied simultaneously. Specifically, the difference between the sample mean returns are too large relative to the difference between the sample covariances of the returns and the marginal utility from acquiring a unit of the numeraire good. Our findings suggest that these discrepancies are not a consequence of either the relatively small variability in aggregate acquisitions of goods, or our small estimates of relative risk aversion.
Handle: RePEc:nbr:nberwo:1415
Template-Type: ReDIF-Paper 1.0
Title: Notches
Author-Name: Alan S. Blinder
Author-Person: pbl41
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 1416
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1416
File-URL: http://www.nber.org/papers/w1416.pdf
File-Format: application/pdf
Publication-Status: published as Blinder, Alan S. and Harvey S. Rosen. "Notches." American Economic Review , Vol. 75, No. 4, (September 1985), pp. 736-747.
Abstract: Economists have an instinctively negative reaction to any government program that creates a "notch," that is, a discontinuity in a budget constraint. For example, welfare programs like public housing are structured so that a finite lump of benefits is lost all at once when a household's income crosses a certain threshhold. Such notches deserve their bad reputation --they effectively impose a high marginal tax rate over a small income range, which no doubt discourages work and promotes welfare dependency. However,this paper argues that in other contexts, tax and subsidy plans with notches should at least be considered as serious contenders when public policy seeks to encourage or discourage some activity. Using simulations,we show how notch schemes can dominate traditional linear schemes using a standard efficiency criterion.
Handle: RePEc:nbr:nberwo:1416
Template-Type: ReDIF-Paper 1.0
Title: International Policy Coordination in Dynamic Macroeconomic Models
Author-Name: Gilles Oudiz
Author-Name: Jeffrey Sachs
Note: ITI IFM
Number: 1417
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1417
File-URL: http://www.nber.org/papers/w1417.pdf
File-Format: application/pdf
Publication-Status: published as Oudiz, Gilles and Jeffrey Sachs. "Macroeconomic Policy Coordination Among The Industrial Economies," Brookings Papers, 1984, v15(1), 1-64.
Publication-Status: published as Oudiz, Gilles and Jeffrey Sachs. "International Policy Coordination Dynamic Macroeconomic Models." International Economic Policy Coordination, edited by Willem H. Buiter and Richard C. Marston, pp. 274-319, Cambridge University Press (London), 1985
Publication-Status: published as International Policy Coordination in Dynamic Macroeconomic Models, Gilles Oudiz, Jeffrey Sachs. in International Economic Policy Coordination, Buiter and Marston. 1985
Abstract: Recent analyses of the gains to policy coordination have focussed on the strategic aspects of macroeconomic policy making in a static setting. A major theme is that noncooperative policy making is likely to be Pareto inefficient because of the presence of beggar-thy-neighbor policies. This paper extends the analysis to a dynamic setting, thereby introducing three important points of realism to the static game. First, the payoffs to beggar-thy-neighbor policies look very different in one-period and multiperiod games, and thus so do the gains to coordination. Second, we show that policy coordination may reduce economic welfare if governments are nyopic in their policy making, as is sometimes claimed. Third, governments act under a fundamental constraint that they cannot bind the actions of later governments, and we investigate how this constraint alters the gains to policy coordination.
Handle: RePEc:nbr:nberwo:1417
Template-Type: ReDIF-Paper 1.0
Title: Wages and Working Conditions
Author-Name: Henry Saffer
Author-Person: psa935
Note: EH
Number: 1418
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1418
File-URL: http://www.nber.org/papers/w1418.pdf
File-Format: application/pdf
Publication-Status: published as Saffer, Henry. "Wages and Hazardous Working Conditions," Applied Economics, Vol. 18, No. 8, August 1986.
Abstract: This paper presents another extension of the approach initiated by Brown. As in Brown's work, the wage change specification is used to control for bias due to omitted ability data. Then, as in Duncan and Hoimlund's study, working conditions are measured using subjective self?reported data. However, in this paper, working conditions are measured by a single comprehensive variable. This approach eliminates omitted working conditions as a source of bias. The working conditions measure is then treated as an unobserved variable which limits measurement error to an unknown scale factor. The model is estimated using a technique derived by memiya (1978).
Handle: RePEc:nbr:nberwo:1418
Template-Type: ReDIF-Paper 1.0
Title: Raids and Offermatching
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 1419
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1419
File-URL: http://www.nber.org/papers/w1419.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, Edward P. "Raids and Offer-Matching," Research in Labor Economics,ed. Ronald Ehrenberg, Vol. 8, JAI Press, Greenwich, CT. pp. 141-165, 1986
Abstract: Job changes often occur without spells of unemployment. Highly educated workers, for example, rarely suffer unemployment, even though job changes are common. A large proportion of their job switches occur only after the new job is secured. These workers, whose skills and ability levels are less homogeneous, differ from less skilled, perhaps more homogeneous workers who are more likely to experience unemployment in the process of changing jobs. Most research has focused on job changes that imply spells of unemployment. Indeed, the primary rationale behind the earliest papers on search theory was to explain unemployment. But if there exists what some refer to as a "dual labor market," these theories may be most applicable to the secondary workers. This paper attempts to formulate a theory of turnover and wage dynamics that may better describe the primary labor force, defined as those who change jobs without unemployment. In the process, a number of previously unexamined phenomena are explored.
Handle: RePEc:nbr:nberwo:1419
Template-Type: ReDIF-Paper 1.0
Title: Testing the Sorting Model of Education
Author-Name: Andrew Weiss
Note: LS
Number: 1420
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1420
File-URL: http://www.nber.org/papers/w1420.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "A Sorting-Cum-Learning Model of Education"), JPE, Vol. 91,no. 3 (1983): 420-442.
Abstract: Proprietary data for production workeis is analyzed to determine which aspects of productivity are affected by secondary schooling. The measures of productivity explored are: propensity to quit and be absent, phisical oatput per hour, and ability to perform complex tasks. The data suggests that the sorting effect of education is an important determinant of earnings for semi-skilled production workers.
Handle: RePEc:nbr:nberwo:1420
Template-Type: ReDIF-Paper 1.0
Title: The Short-Run Demand for Money: A Reconsideration
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 1421
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1421
File-URL: http://www.nber.org/papers/w1421.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. The Short-Run Demand for Money: A Reconsideration." Journal of Money, Credit and Banking, Vol. 16, No. 4, Part 1, (November 1984),pp. 403-434.
Abstract: The partial-adjustment approach to the specification of the short-run demand for money has dominated the literature for more than a decade. There are three basic problems with this approach. First, the same lag structure is imposed on all variables, and each independent variable enters only as a current value. In contrast a rational individual would respond to different variables (income, interest rates, prices) with quite different lags. Second, when the general price levelis subject to gradual adjustment hut can move quickly in response to supply shocks, the influence of these supply shocks should enter with a negative sign. Third, the estimated equation for real balances may not be a money demand equation at all, but rather its coefficients may represent a shifting mixture of demand and supply responses.The empirical work examines several alternative dynamic specifications, including a generalized partial adjustment framework and the error-correction model. Both of the latter specifications exhibit greater structural stability after 1973 than the standard partial adjustment specification, and the generalized partial adjustment model also yields relatively small errors in post-sample dynamic simulations. Shifts in coefficients as the sample period is extended after 1973 are consistent with the interpretation that the real balance equation no longer traces out structural demand parameters, hut rather a mixture of demand and supply responses.
Handle: RePEc:nbr:nberwo:1421
Template-Type: ReDIF-Paper 1.0
Title: The Open Economy: Implications for Monetary and Fiscal Policy
Author-Name: Rudiger Dornbusch
Author-Name: Stanley Fischer
Note: EFG
Number: 1422
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1422
File-URL: http://www.nber.org/papers/w1422.pdf
File-Format: application/pdf
Publication-Status: published as Dornbusch, Rudiger and Stanley Fischer. "The Open Economy: Implications for Monetary and Fiscal Policy." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: UCP, 1986, pp. 459-501 and 511-516.
Publication-Status: published as The Open Economy: Implications for Monetary and Fiscal Policy, Rudiger Dornbusch, Stanley Fischer. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: The exchange rate has by 1984 become as central to United States economic policy discussions as it has long been in the rest of the world. In this paper we show how the standard closed-economy macroeconomic model -- the Phillips curve augmented IS-LM analysis -- has to be modified for the United States to take account of the economy's international interactions. The only key structural equation that goes unamended is the money demand equation. Foreign prices,foreign activity, and foreign asset yields in the goods and asset markets appearas important determinants of domestic activity, prices, and interest rates. We show that international interactions exert an important effect on the manner in which monetary and fiscal policies operate. The Phillips curve is much steeper under flexible than fixed interest rates. A tight money policy leads to appreciation under flexible rates, and thus to more rapid disinflation. Fiscal expansion, because it induces currency appreciation, is less inflationary under flexible than fixed exchange rates, but it also involves more crowding out. We show that these effects are in practice significantly large for the United States economy.
Handle: RePEc:nbr:nberwo:1422
Template-Type: ReDIF-Paper 1.0
Title: The International Linkage of Real Interest Rates: The European - U.S. Connection
Author-Name: Robert E. Cumby
Author-Person: pcu115
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ITI IFM
Number: 1423
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1423
File-URL: http://www.nber.org/papers/w1423.pdf
File-Format: application/pdf
Publication-Status: published as Cumby, Robert E. and Frederic S. Mishkin. "The International Linkage of Real Interest Rates: The European - U.S. Connection," Journal of International Money and Finance, Vol. 5, March 1986, pp. 5-23.
Abstract: Casual observation indicates that in recent years real interest rates in the United States appear to have risen sharply and have remained high relative to historical standards. Many observers have claimed that these high real rates have been transmitted abroad and have lead to high real rates in the rest of the industrialized countries. Concern over the level of real rates has been widespread in the analyses by economic policymakers both in Europe and in the United States. In this paper we present evidence on several questions regarding the movement in short term real interest rates in eight countries that have been raised by the recent policy debates in Europe and the United States: Have ex ante real rates in the United States and Europe been high during recent years? Has there been a link between U.S. real rates and those in other countries? Can this link be quantified?The basic finding in this paper is that real rates have climbed dramatically from the 1970s to the 1980s in both the European countries and the United States. Indeed, real interest rates in the United States are currently at high levels unprecedented in the post war period, which rival the levels that occurred during the Great Depression. Complaints that real interest rates in the United States are exceedingly high seem to be well justified. There is also strong evidence that there is a positive association between movements in U.S. real rates and those in Europe. However,European real rates typically do not move one-for-one with U.S. real rates,still leaving open the possibility that European monetary policy can influence domestic economic activity.
Handle: RePEc:nbr:nberwo:1423
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Under Dual Exchange Rates
Author-Name: Robert E. Cumby
Author-Person: pcu115
Note: ITI IFM
Number: 1424
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1424
File-URL: http://www.nber.org/papers/w1424.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, vol. 3, no. 2, ppp. 195-208, August 1984.
Abstract: This paper finds that the introduction of dual exchange rates gives the monetary authority greater independence from external constraints than it would otherwise enjoy. The monetary authority is able to influence the level of aggregate demand in the short run and to sterilize the effects of temporary foreign distrubances. In addition, the paper finds that dual rates insulate the domestic economy fully from foreign interest rate changes but do not provide insulation from speculative disturbances.
Handle: RePEc:nbr:nberwo:1424
Template-Type: ReDIF-Paper 1.0
Title: Unobservable Family and Individual Contributions to the Distributions ofIncome and Wealth
Author-Name: J. R. Kearl
Author-Name: Clayne L. Pope
Note: DAE
Number: 1425
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1425
File-URL: http://www.nber.org/papers/w1425.pdf
File-Format: application/pdf
Publication-Status: published as Kearl, J. R. and Clayne L. Pope, "Observable Family and Individual Contributions to the Distributions of Income and Wealth," Journal of Labor Economics, July 1987.
Abstract: This paper uses a data set composed of combinations of full brothers, half brothers as well as fathers and sons to measure the effect of common family background on households'income and wealth. While the data is drawn from a nineteenth century population, the intra-class correlation (after the effects of age, occupation, nativity, residence and duration in the economy have been removed) for income ranges from .13 to .18 which is similar to that found in modern samples. Intra-class correlations for wealth are significantly higher (.18 to .35) than those for income. The addition of fathers' observed characteristics to the sweeping regressions reduces the unobserved common background effect shared by brothers by about twenty percent.The intra-class correlations of half brothers were lower than those observed for full brothers though the small differences between the two groups suggest that fathers played a dominant role in the transmission of the common family effect. Unobserved background was decomposed into individual and family effects by a variance components procedure. The individual effect was dominant for income while the family effect was dominant for wealth.
Handle: RePEc:nbr:nberwo:1425
Template-Type: ReDIF-Paper 1.0
Title: Fixed Investment in the American Business Cycle, 1919-83
Author-Name: Robert J. Gordon
Author-Person: pgo50
Author-Name: John M. Veitch
Note: EFG
Number: 1426
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1426
File-URL: http://www.nber.org/papers/w1426.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. (ed.) The American Business Cycle: Continuity and Change. Chicago: University Chicago Press, 1986.
Publication-Status: published as Fixed Investment in the American Business Cycle, 1919-83, Robert J. Gordon, John Veitch. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: Contributions are made by this paper in three areas, methodological, data creation, and empirical. The methodological section finds that, while structural model building exercises may be useful in suggesting lists of variables that may play an explanatory role in investment equations, they generally achieve identification of structural parameters only by imposing arbitrary and unbelievable simplifying assumptions and exclusion restrictions.The paper advocates a hybrid methodology combining guidance from traditional structural models on the choice and form of explanatory variables to be included, with estimation in a reduced-form format that introduces all explanatory variables and the lagged dependent variable with the same number of unconstrained lag coefficients. The second contribution is the use of a new set of quarterly data for major expenditure categories of GNP extending back to 1919. The data file also contains quarterly data back to 1919 for other variables, including the capital stock, interest rates, the cost of capital including tax incentive effects, a proxy for Tobin's "Q", and the real money supply.The empirical results support the view that there are two basic impulses in the business cycle, real and financial.The real impulse appears in our statistical evidence as an autonomous innovation to investment in structures. We interpret these structures innovations as due in turn to changes in the rate of population growth, episodes of speculation and overbuilding, and Schumpeterian waves of innovation.The financial impulse works through the effect on investment of changes in the money supply, as well as the real interest rate (in the case of postwar investment in durable equipment).There is a strong role for the money supply as a determinant of investment behavior, relative to such other factors as the user cost of capital or Tobin's "Q". The role of the money supply is interpreted as primarily reflecting the banking contraction of 1929-33 and the episodes of credit crunches and disintermediation in the postwar years. Another feature of the empirical work is the attention paid to aggregation. Coefficient estimates are more stable when four types of investment expenditures are aggregated along the structures-equipment dimension than along the household-business dimension. Historical decompositions highlight the role of autonomous innovations in structures investment and in the money supply, and an inspection of residuals suggests that the main autonomous downward shift in spending in 1929-30 was in fixed investment, not nondurable consumption.
Handle: RePEc:nbr:nberwo:1426
Template-Type: ReDIF-Paper 1.0
Title: Borrowing Abroad: The Debtor's Perspective
Author-Name: Richard N. Cooper
Author-Name: Jeffrey Sachs
Note: ITI IFM
Number: 1427
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1427
File-URL: http://www.nber.org/papers/w1427.pdf
File-Format: application/pdf
Publication-Status: published as Cooper, Richard N. and Jeffrey D. Sachs. "Borrowing Abroad: The Debtor's Perspective." International Debt and Developing Countries, edited by Gordon W. Smith and John T. Cuddington. Washington: World Bank Symposium, (March 1985), Washington: D.C.
Abstract: This paper addresses the question of external borrowing from the perspective of the borrowing country. The first section sketches a formal framework for optimal borrowing by a developing country, as seen from the planner's point of view. The next three sections use this framework for the development of three important limits on external borrowing: the problem of solvency, the problem of liquidity and the problem created by the possibility of repudiation. The fifth section relates external borrowing to macroeconomic management of the borrowing country, and the sixth section pulls together the many factors that suggest that external debt of a country should be subject to central management or at least surveillance. Following that, we offer some guidelines for limits to the magnitude of external debt, and then discuss the character or mix of external debt. In an appendix, we present various simulation exercises for optimal debt management in a discrete-time infinite-horizon setting.
Handle: RePEc:nbr:nberwo:1427
Template-Type: ReDIF-Paper 1.0
Title: Securities Activities of U.S. Commercial Bank Affiliates: Lessons from the International Financial Markets
Author-Name: Richard M. Levich
Note: ITI IFM
Number: 1428
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1428
File-URL: http://www.nber.org/papers/w1428.pdf
File-Format: application/pdf
Publication-Status: published as Levich, Richard M. "A View from the International Capital Markets." Deregulating Wall Street: Commercial Bank Penetration of the Corporate Securities Market, edited by Ingo Walter, pp. 255-292. John Wiley Inc., New York , 1985.
Abstract: An issue confronting U.S. policymakers is whether restrictions on securities activities of U.S. commercial banks ought to be abolished within a broader program of banking and financial market deregulation. The Euro-bond market offers an opportunity to examine the performance of a largely unregulated securities market and the behavior of U.S. commercial bank affiliates within that market. In this paper, we present evidence on the development and performance of the Euro-bond market over the last 20 years and then infer the likely consequences if a similar level of deregulation and competition were permitted in the United States. Data on the level of competition is presented along with an analysis of underwriting strategies and innovations that have been pursued in the market. The most serious criticisms concerning Euro-bond market operations--e.g. excessive spreads, conflicts of interest, and the Grey market--are reviewed. Overall, the evidence suggests that the Euro-bond market has experienced dynamic and vigorous growth, resulting in net benefits to both borrowers and lenders without exposing the financial instituitons to significant risks. Large U.S. companies regularly tap the Euro-bond market and capture some of these benefits. Allowing U.S. commercial bank affiliates to compete in the U.S. securities markets could make these benefits more certain and expand their availability toall firms with a minimal increase in risk to the safety and soundness of the banking system.
Handle: RePEc:nbr:nberwo:1428
Template-Type: ReDIF-Paper 1.0
Title: Fiscal policy in open, interdependent economies
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: ITI IFM
Number: 1429
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1429
File-URL: http://www.nber.org/papers/w1429.pdf
File-Format: application/pdf
Publication-Status: published as Buiter, Willem H."Fiscal Policy in Open, Interdependent Economies," Economic Policy in Theory and Practice, eds. A. Razin and E. Sadler, 1987. New York: St. Martins Press, pp. 101-144.
Abstract: The paper studies the effects of alternative financing policies in the open economy.There is a non-trivial role for financial policy because of the failure of first-order debt neutrality due to uncertain private lifetimes. Both the single-country case and the interdependent two-country case are considered. Capital formation is endogenous and there are unified global financial and goods markets determining the interest rate, each country's"Tobin's q" and the terms of trade. The government's present value budget constraint or solvency constraint and the assumption that the interestrate exceeds the growth rate imply that, given spending, current tax cutsimply future tax increases. Such policies boost the outstanding stock of public debt, raise the world interest rate, crowd out capital formation at home and abroad, and lead to a loss of foreign assets. Provided a"supply-side-response-corrected" transfer criterion is satisfied, the terms of trade will improve in the short run and worsen in the long run.
Handle: RePEc:nbr:nberwo:1429
Template-Type: ReDIF-Paper 1.0
Title: 'Precautionary' Saving Revisited: Social Security, Individual Welfare, and the Capital Stock
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: ME
Number: 1430
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1430
File-URL: http://www.nber.org/papers/w1430.pdf
File-Format: application/pdf
Publication-Status: published as Hubbard, R. Glenn and Kenneth L. Judd. "Social Security And Individual Welfare: Precautionary Saving, Liquidity Constraints, And The Payroll Tax," American Economic Review, 1987, v77(4), 630-646.
Abstract: This paper focuses on precautionary saving against uncertain longevity and on the annuity insurance aspects of social security within the life-cycle framework. The principal findings are three. First, the evolution of social security is reviewed in response to missing markets for providing insurance for consumption in the face of lifetime uncertainty. A simple life-cycle model is used to show that even an actuarially fair, fully funded social security system can reducenational saving. Second, to the extent that the introduction of social security reduces the size of accidental bequests, the net effect on the consumption of subsequent generations is diminished. Finally,consideration of the welfare gains from compulsory social security requires an examination of the tradeoff between the benefits to early participants from access to the annuities and the costs to generations that follow of a lower capital stock. Across a range of parameter values, the partial equilibrium impact of social security on consumptionis reversed. The introduction of an explicit bequest motive ivitigates both the initial impact of social security on saving and the long-run welfare loss from the introduction of social security.
Handle: RePEc:nbr:nberwo:1430
Template-Type: ReDIF-Paper 1.0
Title: Tied Wage-Hours Offers and the Endogeneity of Wages
Author-Name: Shelly J. Lundberg
Author-Person: plu82
Note: LS
Number: 1431
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1431
File-URL: http://www.nber.org/papers/w1431.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 67, no. 3 (1985): 405-410.
Abstract: In the standard model of labor supply, each worker is a price taker,where the relevant price is an hourly wage rate which is fixed in the short run, and which does not depend upon the number of hours supplied. With this basic assumption, the wage can be regarded as exogenous for the purpose of estimating a labor supply function. This paper proposes and implements a pair of tests for the exogeneity of wages in a longitudinal labor supply model, and for the particular failure of exogeneity associated with jobs that offer wage-hour packages.The first test is very simple -- it amounts to a test of whether hours Granger -- cause wages at the individual level. The second test involves a simultaneous estimation of labor supply and wage offer equations. Both tests indicate that the offered wage is related to hours worked, though the offer locus is, for this sample, very flat. The principal conclusion is that labor supply equations cannot properly be estimated in isolation from the process generating wages, even when long time series are available on a sample of individuals.
Handle: RePEc:nbr:nberwo:1431
Template-Type: ReDIF-Paper 1.0
Title: Market Demand, Technological Opportunity and Research Spillovers on R&D Intensity and Productivity Growth
Author-Name: Adam B. Jaffe
Author-Person: pja49
Note: PR
Number: 1432
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1432
File-URL: http://www.nber.org/papers/w1432.pdf
File-Format: application/pdf
Publication-Status: published as "Demand and Supply Influences in R&D Intensity and Productivity Growth" Review of Economics and Statistics, vol LXX, no. 3, pp. 431-437, August 1988.
Abstract: This paper uses sales and patent distribution data to establish the market and technological "positions" of firms. A notion of technological proximity of firms is developed in order to quantify potential R&D spillovers. The importance of the position variables and the potential spilover pool in explaining R&D intensity, patent productivity and TFP growth is explored.I find that both technological and market positions are signifi-cant in explaining R&D intensity, and that the technological effects are significant in explaining patent productivity. I cannot distinguish between the two effects in explaining TFP growth. Spillovers are important in all three contexts. Firms in an area where there is a high level of research by other firms do more R&D themselves, they produce more patents per R&D dollar, and their productivity grows faster, even controlling for the increased R&D and patents. These effects are present controlling for both industry and technological position effects.
Handle: RePEc:nbr:nberwo:1432
Template-Type: ReDIF-Paper 1.0
Title: Debt and Taxes in the Theory of Public Finance
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 1433
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1433
File-URL: http://www.nber.org/papers/w1433.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Debt and Taxes in the Theory of Public Finance." Journal of Public Economics, Vol. 28, (1985), pp. 233-245.
Abstract: If a specified amount of government spending must be financed, how should that finance be divided between taxes and government borrowing? In the case of a temporary increase in government spending, it has been argued that debt finance is optimal because the small increments in all future tax rates to finance interest payments involves a smaller excess burden than the single large tax rate increase that would be required to avoid an initial increase in the national debt. This argument ignores the excess burden of debt finance that results if the initial capital stock is smaller than optimal (e.g., because of taxes or capital income).The first section of the present paper shows how the debt-finance advantage of a small increase in tax rates can be explicitly balanced against the disadvantage of the excess burden that arises from additional debt. The analysis shows that, with plausible parameter values, the excess burden of debt finance is likely to outweigh the advantage of avoiding a large single tax change and therefore that financing a temporary increase in government spending by an immediate tax increase is likely to be preferable to debt financing.The second section examines the appropriate response to a permanent increase in government spending and shows that such spending cannot be financed by a permanent increase in government debt. Moreover, whenever the golden rule level of capital intensity is an optimality condition independent of the level of government spending, any increase in government spending should be matched by an equal increase in tax revenue.
Handle: RePEc:nbr:nberwo:1433
Template-Type: ReDIF-Paper 1.0
Title: Can an Increased Budget Deficit Be Contractionary?
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 1434
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1434
File-URL: http://www.nber.org/papers/w1434.pdf
File-Format: application/pdf
Abstract: The present paper shows how a negative fiscal multiplier is possible in a two-sector economy that is otherwise similar to the traditional one-sector Keynesian analysis. The key to this surprising possibility is that an increased budget deficit changes the sectoral balance of demand. A reduction of taxes or an increase in transfer payments raises the demand for consumer goods. At the same time, the rise in the interest rates that results from the deficit causes a fall in the demand for investment goods. In the one-good economy assumed in both Keynesian and monetarist theories, the intersectoral shift of demand is of no consequence. But when consumer goods and investment goods are explicitly distinguished, the change in the sectoral pattern of demand causes separate changes in the prices of the two kinds of goods. As a result, the overall price level can rise even if the total real volume of output declines. The rise in the overall pricelevel implies a reduction in the real value of the money stock. The contractionary effect of the decline in the real money stock can more than offset the direct expansionary effect of the increased deficit. The net effect of the increased deficit can therefore be to reduce real GNP. The paper analyzes the conditions which affect the likelihood that the fiscal multiplier is negative. It is important to distinguish this demand composition reason for a negative multiplier from two other possibilities that have previously been discussed: (1) the adverse effect of budget deficits on business "confidence" and (2) the contraction of current demand that occurs if anticipated future budget deficits raise real long-term interest rates.
Handle: RePEc:nbr:nberwo:1434
Template-Type: ReDIF-Paper 1.0
Title: On the Theory of Optimal Taxation in a Growing Economy
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 1435
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1435
File-URL: http://www.nber.org/papers/w1435.pdf
File-Format: application/pdf
Publication-Status: published as (With J.Green & E.Sheshinski, published as "Inflation and Taxes in a Growing Economy with Debt and Equity Finance"), JPE, Vol. 86, no. 2, Part II (1978): S53-S70.
Abstract: This paper considers the following question: Would a "golden rule" capital accumulation policy of equating the marginal product of capital to the rate of growth of population be appropriate in a mixed economy in which the government does not have direct control over resource allocation but can use distortionary taxes to obtain resources for augmenting the private capital stock? The key result derived hereis that the golden rule level of capital intensity remains optimal if the tax structure that prevails at the equilibrium does not alter the individual labor supply. This is true even if the constancy of labor supply represents a balancing of income effects and substitution effects of a distortionary tax. In contrast, if the form of the tax and the nature of the utility function imply that labor supply is distorted, the optimal capital intensity will in general not correspond to the golden rule level.
Handle: RePEc:nbr:nberwo:1435
Template-Type: ReDIF-Paper 1.0
Title: Adjusting the Gross Changes Data: Implications for Labor Market Dynamics
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: LS
Number: 1436
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1436
File-URL: http://www.nber.org/papers/w1436.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. and Lawrence H. Summers."Adjusting the Gross Change Data: Implications for Labor Market, Dynamics," Econometrica, Vol. 54, No. 6, ( November 1986), pp. 1319-1338.
Abstract: This paper develops a procedure for adjusting the Current Population Survey gross changes data for the effects of reporting errors. The corrected data suggest that the labor market is much less dynamic than has frequently been suggested. Conventional measures sy understate the duration of unemployment by as much as eighty percent and overstate the extent of movement into and out ofthe labor force by several hundred percent. The adjusted data also throw demographic differences in patterns of labor market dynamics into sharp relief.
Handle: RePEc:nbr:nberwo:1436
Template-Type: ReDIF-Paper 1.0
Title: Speculative Attack and the External Constraint in a Maximizing Model of the Balance of Payments
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: ITI IFM
Number: 1437
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1437
File-URL: http://www.nber.org/papers/w1437.pdf
File-Format: application/pdf
Publication-Status: published as "Speculative Attack and the External Constraint in a Maximizing Model ofthe Balance of Payments." From Canadian Journal of Economics, Vol. 19, No. 1, pp. 1-22, (February 1986).
Abstract: This paper analyzes inevitable transitions between fixed and floating exchange-rate regimes in a balance-of-payments model where individual preferences are explicitly specified. The goal is to assessthe analogy between speculative attacks in foreign exchange markets and attacks on official price-fixing schemes in natural resource markets. In discrete time the analogy with resource markets is only partially correct, for in a deterministic model the collapse of a fixed rate may be characterized by two, successive attacks. The two-attack equilibriumis peculiar to discrete-time analysis, however. In the continuous-time limit of discrete-time models there is a single attack timed so as to rule out an anticipated discrete jump in the exchange rate.Balance-of-payments models differ from nonrenewable resource models in that foreign exchange reserves may be borrowed from abroad.The paper therefore asks whether there are limits to central-bank borrowing possibilities. In an idealized world where all private incomeis subject to lump-sum taxation, central-bank reserves can become infinitely negative with no violation of the public sector's intertemporal budget constraint. Nonetheless, a growth rate of domestic credit exceeding the world interest rate, if maintained indefinitely, leads to violation of the constraint in the paper's model.
Handle: RePEc:nbr:nberwo:1437
Template-Type: ReDIF-Paper 1.0
Title: Inter-Country Comparisons of Labor Force Trends and of Related Developments: An Overview
Author-Name: Jacob Mincer
Note: LS
Number: 1438
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1438
File-URL: http://www.nber.org/papers/w1438.pdf
File-Format: application/pdf
Publication-Status: published as Mincer, Jacob. "Inter-Country Comparisons of Labor Force Trends and of Related Developments: An Overview," Journal of Labor Economics, Vol. 3, No. 1, Part 2. 1985
Abstract: This paper is a survey of analyses of women's labor force growth in 12 industrialized countries, originally presented at the conference in Sussex, England in June 1983. The main focus of the conference papers and of the current survey is on growth of the labor force of married women in the years 1960-1980. Trends in fertility, family mobility, and wages also receive attention as related developments. Married women's labor force growth was observed in all countries,expect for the USSR after 1970, when labor force rates of women reached the level of men. Growth rates differ among countries. They apparently respond to growth in real wages and/or to growth in education, but response elasticities differ among countries. Estimates of these elasticities contained in the country paper were helpful in predicting the trends. Other findings include: Ubiquitous declines in fertility and growth of divorce in the 1970s. Both developments are related to longer ran labor force growth. In all countries wages of women were lower than wages of men.The 1960 average gap of 38% narrowed to 29% in 1980. Factors related to these trends, including public policy, are discussed in the survey.
Handle: RePEc:nbr:nberwo:1438
Template-Type: ReDIF-Paper 1.0
Title: Debt Policy and the Rate of Return Premium to Leverage
Author-Name: Alex Kane
Author-Person: pka501
Author-Name: Alan J. Marcus
Author-Person: pma1156
Author-Name: Robert L. McDonald
Note: ME
Number: 1439
Creation-Date: 1984-08
Order-URL: http://www.nber.org/papers/w1439
File-URL: http://www.nber.org/papers/w1439.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Alex, Marcus, Alan J. and Robert L. McDonald. "Debt Policy and the Rate of Return Premium to Leverage," Journal of Financial and Quantitative Analysis, Vol. 20, No. 4, (Dec. 1985), pp. 479-499.
Abstract: Equilibrium in the market for real assets requires that the price of those assets be bid up to reflect the tax shields they can offer to levered firms.Thus there must be an equality between the market values of real assets and the values of optimally levered firms. The standard measure of the advantage to leverage compares the values of levered and unlevered assets, and can be misleading and difficult to interpret. We show that a meaningful measure of the advantage to debt is the extra rate of return, net of a market premium for bankruptcy risk, earned by a levered firm relative to an otherwise-identical unlevered firm. We construct an option valuation model to calculate such a measure and present extensive simulation results. We use this model to compute optimal debt maturities, show how this approach can be used for capital budgeting, and discuss its implications for the comparison of bankruptcy costs versus tax shields.
Handle: RePEc:nbr:nberwo:1439
Template-Type: ReDIF-Paper 1.0
Title: International Policy Coordination in Historical Perspective: A View from the Interwar Years
Author-Name: Barry J. Eichengreen
Author-Person: pei2
Note: ITI IFM
Number: 1440
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1440
File-URL: http://www.nber.org/papers/w1440.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry. "International Policy Coordination in Historical Perspective: A View from the Interwar Years." International Economic Policy Coordination, edited by Willem H. Buiter and RichardC. Marston, pp. 139-178, Cambridge University Press, (London), 1985
Publication-Status: published as (REF) The Disintegration of the World Economy Between the Wars, Thomas, Mark, ed., Edward Elgar, 1995.
Publication-Status: published as International Policy Coordination in Historical Perspective: A View from the Interwar Years, Barry Eichengreen. in International Economic Policy Coordination, Buiter and Marston. 1985
Abstract: This paper examines the international financial relations of the interwar period to see what light this experience sheds on current concerns over international policy coordination. The analysis proceeds in three parts. The first part considers the role for policy coordination as viewed by contemporaries at the start of the period; it takes as a case study the Genoa Economic and Financial Conference of 1922. Efforts at Genoa to coordinate policies ended in failure; the second part therefore considers the effects of noncooperative strategies within the framework of the interwar gold standard. The analytical model developed in this section suggests that the failure to coordinate policies lent a deflationary bias to the world economy which may have contributed to the on set of the Great Depression. The third part asks what policymakers learned from this failure to coordinate policies, taking evidence from the next effort to establish a framework for international financial collaboration: theTripartite Monetary Agreement of 1936.
Handle: RePEc:nbr:nberwo:1440
Template-Type: ReDIF-Paper 1.0
Title: Taxes and Ownership Structure: Corporations, Partnerships and Royalty Trusts
Author-Name: E. Philip Jones
Author-Name: Robert A. Taggart, Jr.
Note: ME
Number: 1441
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1441
File-URL: http://www.nber.org/papers/w1441.pdf
File-Format: application/pdf
Abstract: This paper investigates the effect of taxes on the equilibrium ownership structure of productive assets. Ownership structure includes the traditional choice between debt and equity financing, but also the larger choice between corporate and partnership forms. A key feature of these alternative forms is that corporations are subject to taxation at both the corporate and investor levels, whereas partnerships are not. At the same time, depreciation and interest tax shields are taken at the corporate tax rate for corporate assets and at investors' tax rates for partnership assets. We find that assets endowed with excess non-interest tax deductions are best held in partnership form by high tax bracket investors. Assets whose allowed deductions are low enough to generate a net tax liability in corporate formare best held as partnerships by low tax bracket investors. All other assets are held in the corporate sector and are financed in a manner consistent with Miller's(1977) capital structure equilibrium.We argue that our analysis illuminates the tax aspects of such transactionsas mergers and sales or spin-offs of corporate assets to partnerships and royalty trusts. We also show that our results afford a simple characterization of the lease or buy decision.
Handle: RePEc:nbr:nberwo:1441
Template-Type: ReDIF-Paper 1.0
Title: Theories of Wage Rigidity
Author-Name: Joseph E. Stiglitz
Note: EFG
Number: 1442
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1442
File-URL: http://www.nber.org/papers/w1442.pdf
File-Format: application/pdf
Publication-Status: published as Stiglitz, Joseph E. "Theories of Wage Rigidity. "Keynes' Economic Legacy: Contemporary Economic theories, ed James L. Butkiewicz, Kenneth J. Koford,and Jeffrey B. Miller, pp. 153-206. New York: Praeger Publishers, 1986.
Abstract: This paper considers two sets of theories attempting to explain wage rigidities and unemployment: implicit contract theory and the efficiency wage theory. The basic thesis of the paper is that the former set of theories do not provide a convincing explanation of the kind of wage rigidity which is associated with cyclical unemployment,while the latter theories do. Several of the more recent versions of implicit contract theory are considered: implicit contracts with asymmetric information may give rise to over employment rather than underemployment, and the forms of contracts to be expected, were asymmetric information considerations paramount, are not observed.Other versions of the asymmetric information implicit contract model, explicitly long term in nature, may give rise to full employment. One version of implicit contract theory which does give rise to lay-offs arises when search is costly and cannot be monitored. But even this extension does not explain certain important features of observed patterns of unemployment. In contrast, the efficiency wage models not only provide an explanation of the existence of unemployment equilibrium in competitive economies, but they also provide part of the explanation of the observed patterns of unemployment. They also explain why different firms may pay similar workers different wages, why wages may be sticky, why firms maynot loose much if they fail to adjust their wages, and why, when they adjust their wages optimally, they adjust them slowly.The policy implications of the efficiency wage model are markedly different from those of models in which wages are absolutely rigid aswell as from those in which unemployment arises from asymmetric information.
Handle: RePEc:nbr:nberwo:1442
Template-Type: ReDIF-Paper 1.0
Title: Are Tax Cuts Really Expansionary?
Author-Name: N. Gregory Mankiw
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: EFG PE
Number: 1443
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1443
File-URL: http://www.nber.org/papers/w1443.pdf
File-Format: application/pdf
Publication-Status: published as Mankiw, N. Gregory Mankiw and Lawrence H. Summers. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Vol. 18(November 1986): 415-429.
Abstract: In this paper, we re-examine the standard analysis of the short-run effect of a personal tax cut. If consumer spending generates more money demand than other components of GNP, then tax cuts may, by increasing the demand for money, depress aggregate demand. We examine a variety of evidence and conclude that the necessary condition for contractionary tax cuts is probably satisfied for the U.S. economy.
Handle: RePEc:nbr:nberwo:1443
Template-Type: ReDIF-Paper 1.0
Title: Are Business Cycles Symmetric?
Author-Name: J. Bradford De Long
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: EFG
Number: 1444
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1444
File-URL: http://www.nber.org/papers/w1444.pdf
File-Format: application/pdf
Publication-Status: published as "Are Business Cycles Symmetrical?" From The American Business Cycle: Con-tinuity and Change, edited by Robert J. Gordon, pp. 166-178. Chicago: University of Chicago Press, (1986).
Abstract: This note shows that contrary to widespread belief there is little evidence that the business cycle is asymmetric. Using American data for the pre- and post-war periods and data on five other major OECD nations for the post-war period, we are unable to support the hypothesis that contractions are shorter and sharper than expansions. We conclude that there is not much basis for preferring some version of traditional cyclical techniques to more modern statistical methods.
Handle: RePEc:nbr:nberwo:1444
Template-Type: ReDIF-Paper 1.0
Title: The Use of Expected Future Variables in Macroeconometric Models
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG
Number: 1445
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1445
File-URL: http://www.nber.org/papers/w1445.pdf
File-Format: application/pdf
Publication-Status: published as Cowles Foundation Discussion Papers. no 718
Abstract: A more sophisticated expectational hypothesis than is traditionally used in the specification of macroeconometric models is tested in this paper. Economic agents are assumed to use a vector of variables Z(t) in forming their expectations for periods t+l and beyond. These expectations may or may not be rational in the Muth sense. The results provide some evidence in favor of the more sophisticated hypothesis, but they are not strong enough to allow much weight tobe put on the hypothesis as yet. The evidence in favor of the hypothesis is strongest for households' response to future wages and prices in their consumption and labor supply decisions and for the Fed's response to future inflation rates.The sensitivity of the policy properties of my macroeconometric model to the more sophisticated hypothesis is also examined in the paper. The properties are not sensitive for a policy action in which government expenditures are changed. They are somewhat sensitive for an action in which personal tax rates are changed. In the latter case the properties are also sensitive to whether or not the policy action is anticipated.
Handle: RePEc:nbr:nberwo:1445
Template-Type: ReDIF-Paper 1.0
Title: Retail Pricing and Clearance Sales
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 1446
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1446
File-URL: http://www.nber.org/papers/w1446.pdf
File-Format: application/pdf
Publication-Status: published as The American Economic Review, Vol. 76, Number 1, pages 14-32, March 1986.
Abstract: Sellers of new products are faced with having to guess demand conditions to set price appropriately. But sellers are able to adjust price over time and to learn from past mistakes. Additionally, it is not necessary that all goods be sold with certainty. It is sometimes better to set a high price and to risk no sale. This process is modeled to explain retail pricing behavior and the time distribution of transactions. Prices start high and fall as afunction of time on the shelf. The initial price and rate of decline can be predicted and depends on thinness of the market, the proportion of customers who are "window shoppers," and other observable characteristics. In a simplecase, when prices are set optimally, the probability of selling the product is constant over time. Among the more interesting predictions is that women's clothes may sell for a higher average price than men's clothes, given similar cost, even in a competitive market. Another is that the initial price level and the rate of price decline are positively related to the probability of selling the good. Other observable relationships are discussed.
Handle: RePEc:nbr:nberwo:1446
Template-Type: ReDIF-Paper 1.0
Title: New Estimates of the Value of Federal Mineral Rights and Land
Author-Name: Michael J. Boskin
Author-Name: Marc S. Robinson
Author-Name: Terrance O'Reilly
Author-Name: Praveen Kumar
Note: PE
Number: 1447
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1447
File-URL: http://www.nber.org/papers/w1447.pdf
File-Format: application/pdf
Publication-Status: published as Boskin, Michael J., Marc S. Robinson, Terrence O'Reilly, and Praveen Kumar."New Estimates of the Value of Federal Mineral Rights and Land." American Economic Review, Vol. 75, No. 5, (December 1985), pp. 923-936.
Abstract: We calculate a time series of the value of federal mineral rights in oil and natural gas by using various estimates of proven and unproven reserves and time series on federal government royalties and bonus payments. We also present estimates of the components of the revaluation of this series through time.The results are striking. Federal mineral rights are the single largest item in a complete balance sheet of the federal government, dominating the total value of tangible capital or financial assets. In 1981, for example, we estimate that the value of federal oil and gas rights exceeded $800 billion, which was larger than the privately held national debt. The paper also presents estimates of various confidence bounds on the value of oil and natural gas. The methodology can be extended to other minerals, although we have not done so; our estimate is a lower bound on the total value of all mineral rights.The paper also expands and extends previous estimates of the value of federal land. New data, and attention to the detailed decomposition of federal land holdings by type, lead to substantially larger estimates of the value of federal land than have been presented in previous research. Our estimate is that by 1981, the total value of federal land was $175 billion.
Handle: RePEc:nbr:nberwo:1447
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Long-Run Relationship Between Interest Rates and Inflation: A Response to McCallum
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: EFG ME
Number: 1448
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1448
File-URL: http://www.nber.org/papers/w1448.pdf
File-Format: application/pdf
Publication-Status: published as Summers, Lawrence H. "Estimating the Long-Run Relationship between Interest Rates and Inflation." From Journal of Monetary Economics, Vol. 18, No. 1, pp. 77-86, (July 1986).
Abstract: This note demonstrates that Bennett McCallum's recent critique of low frequency estimates of macro-economic relationships is of little empirical significance. It also demonstrates that readily available and frequently used techniques can be used to diagnose the problem McCallum raises. Finally, it shows that the standard critique of expectational distributed lags is not warranted once the role of learning by economic agents is recognized.
Handle: RePEc:nbr:nberwo:1448
Template-Type: ReDIF-Paper 1.0
Title: Relative Factor Price Changes and Equity Prices
Author-Name: Peter J. Elmer
Author-Name: Patric H. Hendershott
Note: ME
Number: 1449
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1449
File-URL: http://www.nber.org/papers/w1449.pdf
File-Format: application/pdf
Abstract: This paper suggests that the decline in equity prices, and thus in Tobin's average q, during the 1970s may be attributable to changes in expected relative factor prices. More specifically, q is shown to be a negative function of the extent to which current relative factor price expectations differ from those when capital was put in place. Because relative factor prices became more volatile after 1967, the observed decline in average q, and thus in stock prices, can be explained by the "relative price" hypothesis.
Handle: RePEc:nbr:nberwo:1449
Template-Type: ReDIF-Paper 1.0
Title: The Changing Cyclical Variability of Economic Activity in the United States
Author-Name: J. Bradford De Long
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: EFG ME
Number: 1450
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1450
File-URL: http://www.nber.org/papers/w1450.pdf
File-Format: application/pdf
Publication-Status: published as From The American Business Cycle: Continuity and Change, edited by Robert J. Gordon, pp. 679-719 AND 732-734. Chicago: University of Chicago Press, 1986.
Publication-Status: published as The Changing Cyclical Variability of Economic Activity in the United States, J. Bradford DeLong, Lawrence H. Summers. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: This paper examines the changing cyclical variability of economic activity in the United States. It first shows that the decline in variability since World War II cannot be explained by changes in the composition of economic activity or by the avoidance of financial panics. We then show that increased automatic stabilization by the government, and the increased availability of private credit after World War II combined to stabilize consumption and reduce the variability of aggregate demand. The main argument of the paper holds that greater price rigidity in recent times may have contributed to economic stability by preventing destabilizing deflations and inflations. Empirical evidence is presented to support this proposition.
Handle: RePEc:nbr:nberwo:1450
Template-Type: ReDIF-Paper 1.0
Title: Financial Intermediation in the United States
Author-Name: Benjamin M. Friedman
Note: ME
Number: 1451
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1451
File-URL: http://www.nber.org/papers/w1451.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "Financial Intermediation in the United States." Handbook for Banking Strategy, edited by Richard C. Aspinwall and Robert A. Eisenbeis, pp. 3-32. New York: John Wiley & Sons,1985.
Abstract: The principal rationales that give rise to financial intermediation are benefits of size and specialization, the diversification of specific asset risks, and the pooling of even broader classes of risk. Each is a significant factor in accounting for the U.S. economy's reliance on intermediation. In addition, since World War II a further important factor has been the economy's continual shift away from government debt toward the debt of private nonfinancial entities including individuals and businesses. Non financial investors (primarily individuals) have exhibited a strong preference for holding the debt of these nonfinancial borrowers via financial intermediaries rather than directly. As the U.S. economy's reliance on financial intermediaries overall has increased during the post-war period, some specific kinds of intermediary institutions have grown more rapidly than others. Commercial banks have about held their own in relative terms, while steadily shifting their basic business back toward lending activities and away from securities investments. Nonbank deposit intermediaries have grown in relation to overall economic and financial activity, as the growth of savings and loan associations has more than offset the (relative) decline of mutual savings banks. Among private nondeposit intermediaries, life insurance companies have declined in relative terms while both public and private sector pension funds have shown exceptionally rapid growth. Finally, the federal government's participation in the financial intermediation process in the United States has also increased rapidly during these years, in part as a result of the pressures created by the economy's shift to private instead of government debt.
Handle: RePEc:nbr:nberwo:1451
Template-Type: ReDIF-Paper 1.0
Title: Unionism Comes to the Public Sector
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 1452
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1452
File-URL: http://www.nber.org/papers/w1452.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. "Unionism Comes to the Public Sector." Journal of Economic Literature, Vol. 24, (March 1986), pp. 41-86.
Abstract: This paper argues that public sector labor relations is best understood in a framework that focuses on unions' ability to shift demand curves rather than to raise wages, as is the case in the private sector. It reviews the public sector labor relations literature and finds that: (i) public sector unionism has flourished as a result of changes in laws; (2) the effects of public sector unions on wages are likely to have been underestimated; (3) public sector unions have a somewhat different effect on wage structures than do private sector unions; (4) compulsory arbitration reduces strikes with no clearcut impact on the level of wage settlements; (5) public sector unions have diverse effects on non-wage outcomes as do private sector unions. In terms of evaluating public sector unionism, the paper argues that by raising both the cost of public services (taxes) and the amount of services public sector unionism involves a different welfare calculus than private sector unionism.
Handle: RePEc:nbr:nberwo:1452
Template-Type: ReDIF-Paper 1.0
Title: The Causes of Inflation
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG
Number: 1453
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1453
File-URL: http://www.nber.org/papers/w1453.pdf
File-Format: application/pdf
Publication-Status: published as Mishkin, Frederic H. "The Causes of Inflation," Price Stability and Public Policy, Federal Reserve Bank of Kansa City, 1984, pp. 1-24, Kansas City.
Publication-Status: published as Frederic S. Mishkin, 1984. "The causes of inflation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-32.
Abstract: This paper attempts to provide a perspective on the causes of inflation by exploring why sustained inflations occur and the role of monetary policy in the inflation process. The conclusion reached in this paper is that in the last ten years there has been a convergence of views in the economics profession on the causes of inflation. As long as inflation is appropriately defined to be a sustained inflation, macro-economic analysis, whether of the monetarist or Keynesian persuasion, leads to agreement with Milton Friedman's famous dictum, "Inflation is always and everywhere a monetary phenomenon." However, the conclusion that inflation is a monetary phenomenon does not settle the issue of what causes inflation because we also need to understand why inflationary monetary policy occurs. This paper also examines this issue and it finds that the underlying cause of inflationin the United States has been accommodating monetary policy geared to achieving a high employment target. The role of expectations has been important in the inflationary process so that to prevent the resurgence of inflation at a minimum cost in terms of unemployment and output loss, monetary policy must be both non-accommodating and credible.
Handle: RePEc:nbr:nberwo:1453
Template-Type: ReDIF-Paper 1.0
Title: Patents and R&D: Is There A Lag?
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Zvi Griliches
Author-Name: Jerry A. Hausman
Author-Person: pha893
Note: PR
Number: 1454
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1454
File-URL: http://www.nber.org/papers/w1454.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Bronwyn H., Zvi Griliches and Jerry A. Hausman. "Patents and R&D: Is There A Lag?" International Economic Review, Vol. 27, No. 2, June 1986, pp . 265-284.
Abstract: This paper extends earlier work on the RID to patents relationship (Pakes-Griliches 1980, and Hausman, Hall, and Griliches,1984) to a larger but shorter panel of firms. The focus of the paper is on solving a number of econometric problems associated with the discreteness of the dependent variable and the shortness of the panel in the time dimension. We compare weighted nonlinear least squares as wellas Poisson-type models as solutions to the former problem. In attempting to estimate a lag structure on R&D in the absence of a sufficient history of the variable, we take two approaches: first, we use the conditional version of the negative binomial model, and second, we estimate the R&D variable itself as a low order stochastic process and use this information to control for unobserved R&D. R&D itself turns out to befairly well approximated by a random walk. Neither approach yields strong evidence of a long lag. The available sample, though numerically large, turns out not to be particularily informative on this question. It does reconfirm, however, a significant effect of R&D on patenting (with most of it occuring in the first year) and the presence of rather wide and semi-permanent differences among firms in their patenting policies.
Handle: RePEc:nbr:nberwo:1454
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Covariates of Historical Heights
Author-Name: James Trussell
Author-Name: Kenneth W. Wachter
Note: DAE
Number: 1455
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1455
File-URL: http://www.nber.org/papers/w1455.pdf
File-Format: application/pdf
Abstract: Data on human height can provide an index that may measure more accurately changes in the standard of living than the more conventional real wage index. Height data, like those on real wages, are relatively abundant and extend back to the seventeenth century. In a previous paper, we developed and tested procedures for estimating the mean and standard deviation of the distribution of human height when the sample is distorted to an unknown extent by missing observations at lower heights. The purpose of this analysis is to extend our techniques so that the covariates of height can be estimated. Such an extension is necessary when trying to draw inferences about the causes of shifts over time in the height distribution so that changes in sample composition can be controlled.
Handle: RePEc:nbr:nberwo:1455
Template-Type: ReDIF-Paper 1.0
Title: The Capital Inflows Problem Revisited: A Stylized Model of Southern Cone Disinflation
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: ITI IFM
Number: 1456
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1456
File-URL: http://www.nber.org/papers/w1456.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice. "The Capital Inflows Problem Revisited: A Stylized Model of Southern Cone Disinflation,"Review of Economic Studies, October 1985.
Abstract: In the late 1970s countries in Latin America's Southern Cone attempted to lower domestic inflation rates through the progressive reduction of a preannounced rate of exchange-rate devaluation. The stabilization programs gave rise to massive capital inflows, real exchange-rate appreciation, and current-account deficits. This paper develops a stylized intertemporal framework in which the effects of a preannounced exchange-rate oriented disinflation scheme can be studied. It is shown that even when agents have perfect foresight and markets clear continuously, the "capital inflows" problem and the associated real appreciation may result.While unanticipated, permanent inflation changes are neutral in the paper,anticipated inflation is neutral only in exceptional circumstances. A preannounced disinflation operates by altering the path of an expenditure -based real domestic interest rate that depends on expected changes in the prices of liquidity services and nontradable consumption goods. Alternatively, by raising future real balances, anticipated disinflation may cause an incipient change in the time path of consumption's marginal utility, leading agents to revise consumption plans. It is noteworthy that disinflation's long-run effect on the real exchange rate more than reverses its short-run effect. If disinflation occasions a real appreciation on impact, say, the relative price of tradables must rise in the long run so that the economy can service the additional external debt incurred in the transition period.
Handle: RePEc:nbr:nberwo:1456
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Content Protection
Author-Name: Michael L. Mussa
Note: ITI IFM
Number: 1457
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1457
File-URL: http://www.nber.org/papers/w1457.pdf
File-Format: application/pdf
Publication-Status: published as Salvatore, Dominick (ed.) Protectionism and world welfare. Cambridge; New York and Melbourne: Cambridge University Press, 1993.
Abstract: In a model that allows smooth substitution between domestic and imported inputs, content protection distorts inout choice but does not force a divergence between price and unit production cost. Content protection biases gains intechnical efficiency away from those saving domestic input and toward those saving imported input. By increasing derived demand for the domestic input,a marginally effective content requirement benefits suppliers of this input. Increases in the content requirement above the marginally effective level increase such benefits to suppliers of the domestic input provided that the price elasticity of demand for the final product is less than a critical value. The consequences of content protection are not materially affected by monopoly in the domestic final product market or monopsony in the domestic input market unless such monopoly or monopsony are created by content protection. The situation of a monopolistic supplier of the domestic input is enhanced by content protection.
Handle: RePEc:nbr:nberwo:1457
Template-Type: ReDIF-Paper 1.0
Title: The Adjustment Process and the Timing of Trade Liberalization
Author-Name: Michael Mussa
Note: ITI IFM
Number: 1458
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1458
File-URL: http://www.nber.org/papers/w1458.pdf
File-Format: application/pdf
Abstract: This paper examines the appropriate time path of the tariff rate for a small open economy that has decided to move from protection of import competing industries to free trade. Adjustment costs for moving resources to alternative uses do not provide a rationale for gradual adjustment of the tariff rate because in the absence of distortions, rational optimizing agents will make socially appropriate investment decisions with respect to adjustment when they are qiven correct price signals. Some distortions of the adjustment process imply the desirability of gradual adjustment of the tariff rate to slow adjustment, but other distortions imply the desirability of subsidizing imports in the short run in order to speed movement of resources out of previously protected industries. Concern with the income redistribution effects of reductions in the tariff rate(which usually injure owners of factors in previously protected industries) does provide a general rationale for a gradual move to free trade. The influence of the unemployment consequences of tariff reduction on the appropriate path of commercial policy depends on the nature and shape of the respone of the rate of resource reallocation to the level of unemployment in previously protected industries.
Handle: RePEc:nbr:nberwo:1458
Template-Type: ReDIF-Paper 1.0
Title: An Analysis of the Health and Retirement Status of the Elderly
Author-Name: Robin C. Sickles
Author-Person: psi296
Author-Name: Paul J. Taubman
Note: EH
Number: 1459
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1459
File-URL: http://www.nber.org/papers/w1459.pdf
File-Format: application/pdf
Publication-Status: published as Sickles, Robin C. and Paul J. Taubman. "An Analysis of the Health and Retirnt Status of the Elderly," Econometrica, Vol. 54, No. 6, Nov. 1986, pp. 133 9-1356.
Abstract: in this paper we specify and estimate a structural limited dependent variable model with which we study both the health and retirement status of the elderly. Standard linear estimators, which assume that these variable sare continuous, are not appropriate and categorical estimation techniques are preferred. Our model differs from previous work in that we have longitudinal data and random effects that are correlated over time for different individuals. The problem is made more complicated because there is sample truncation, which could potentially bias coefficient estimates, since approximately twenty percent of the individuals in our sample die. We outline the full information maximum likelihood estimator for such a model and implement it in our empirical analysis. With our structural estimates we analyze, among other things, the degree to which endogeneously determined health status affects the probability of retirement and how changes in social security benefits and eligibility for transfer payments modify both healthiness and the demand for leisure.
Handle: RePEc:nbr:nberwo:1459
Template-Type: ReDIF-Paper 1.0
Title: An Examination of Aggregate Price Uncertainty in Four Countries and SomeImplications for Real Output
Author-Name: Richard T. Froyen
Author-Name: Roger N. Waud
Note: ME EFG
Number: 1460
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1460
File-URL: http://www.nber.org/papers/w1460.pdf
File-Format: application/pdf
Publication-Status: published as Froyen, Richard T. and Roger N. Waud. "An Examination of Aggregate Price Uncertainty in Four Countries and Some Implications for Real Output," International Economic Review, Vol. 28, No. 2, June 1987, pp. 353-372.
Abstract: This study constructs measures of aggregate price uncertainty for four industrialized countries (Canada, West Germany, Great Britain, and the United States) and attempts to assess the extent to which more rapid and more variable price changes appear to have contributed to increased aggregate price uncertainty. For this purpose we examine the relationship across countries and through time between the rate of inflation, inflation variability, and our measures of price uncertainty. In addition we use our measures of price uncertainty to examine the hypothesis, variously put forward by Marshall, Keynes, Milton Friedman, and Okun, that higher aggregate price uncertainty is likely tor esult in lower real output and higher unemployment. Our results suggest that the higher and more variable inflation of the 1970s did increase uncertainty about the aggregate price level in Canada, Great Britain and the United States, but the evidence for West Germany would not sustain such a conclusion. Finally,we did find evidence of a significant negative output effect of aggregate price uncertainty for Canada and the United Kingdom, but not for the United States or West Germany.
Handle: RePEc:nbr:nberwo:1460
Template-Type: ReDIF-Paper 1.0
Title: A General Equilibrium Model of Taxation That Uses Micro-Unit Data: Withan Application to the Impact of Instituting a Flat-Rate Income Tax
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 1461
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1461
File-URL: http://www.nber.org/papers/w1461.pdf
File-Format: application/pdf
Publication-Status: published as Slemrod, Joel. "A General Equilibrium Model of Taxation the Uses Micro-Unit Data: With An Application to the Impact of Instituting a Flat-Rate Income Tax," New Development in Applied General Equilibrium Analysis, ed. by J. Piggott and J. Whalley. Cambridge: Cambridge University Press, 1985.
Publication-Status: published as Slemrod, Joel. "A General Model Of The Behavioral Response To Taxation," International Tax and Public Finance, 2001, v8(2,Mar), 119-128.
Abstract: This paper develops a methodology in integrating the information from a micro-unit data file of tax returns into the framework of a general equilibrium model of taxation with endogenous financial behavior. It discusses how the available information on capital income flows can be used to impute portfolios to households, and how these portfolios and the other observed characteristics of the households can be made consistent with expected utility maximization. In order to illustrate the value of this methodology, it is applied to a study of the general equilibrium impact of instituting a flat-rate income tax system. The analysis reveals that there would be substantial changes in the pattern of rates of return and the distribution of asset ownership.The sectoral allocation of capital does not, though, change substantially. The micro-unit data base shows that, in general, lower-income households are worse off and the higher-income households are better off, although there is substantial dispersion of welfare change within income groups. Because these results rest on a very simple model of the economy and a particular data imputation procedure and parameterization, they should not be taken literally as a guide to policy decisions. Nevertheless, they do indicate that substantial insight can be provided by integrating micro-unit data with general equilibrium tax modeling.
Handle: RePEc:nbr:nberwo:1461
Template-Type: ReDIF-Paper 1.0
Title: The Persistence of Volatility and Stock Market Fluctuations
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: ME
Number: 1462
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1462
File-URL: http://www.nber.org/papers/w1462.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. and Lawrence H. Summers, "The Persistence of Volatility and Stock Market Fluctuations," American Economic Review, December 1986, pp. 1142-1151.
Abstract: This paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices. It demonstrates that volatility is only weakly serially correlated, implying that shocks to volatility do not persist. These shocks can therefore have only a small impact on stockmarket prices, since changes in volatility affect expected required rates of return for relatively short intervals. These findings lead us to be skeptical of recent claims that the stock market's poor performance during the 1970's can be explained by volatility-induced increases in risk premia.
Handle: RePEc:nbr:nberwo:1462
Template-Type: ReDIF-Paper 1.0
Title: Host-Country Regulation and Other Determinants of Overseas Operations ofU.S. Motor Vehicle and Parts Companies
Author-Name: Ksenia Kulchycky
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI IFM
Number: 1463
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1463
File-URL: http://www.nber.org/papers/w1463.pdf
File-Format: application/pdf
Abstract: The likelihood that a U.S. auto company will carry out some manufacturing operations in a country is a function mainly of market characteristics such as aggregate and per capita income, but that likelihood is increased by the imposition of local content requirements. The entry of U.S. parts producers into manufacturing in a host country is determined mainly by market size and by the presence of U.S. auto producers and is therefore indirectly promoted by local content rules. The scale of production by individual auto producers does not appear to be increased by a country's imposition of local content requirements and may even be reduced, with the results that inefficiently small operations proliferate. The scale of U.S. parts company production depends on market size and the extent of U.S. auto company activity.The combination of induced entry of auto and parts producers with no effect or a negative effect on the scale of their individual operations suggests that countries imposing these restrictions do raise the aggregate level of local auto and parts production. However, they presumably pay some penalty in terms of sub-optimal scale and consequently high costs of production.
Handle: RePEc:nbr:nberwo:1463
Template-Type: ReDIF-Paper 1.0
Title: Export Subsidies and International Market Share Rivalry
Author-Name: James A. Brander
Author-Person: pbr168
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: ITI IFM
Number: 1464
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1464
File-URL: http://www.nber.org/papers/w1464.pdf
File-Format: application/pdf
Publication-Status: published as Brander, James A. and Barbara J. Spencer. "Export Subsidies and International Market Share Rivalry," Journal of International Economics, Vol. 18, No. 1-2, (Feb. 1985), pp. 83-100.
Abstract: Countries often perceive themselves as being in competition with each other for profitable international markets. In such a world export subsidies can appear as attractive policy tools, from a national point of view, because they improve the relative position of a domestic firm in noncooperative rivalries with foreign firms, enabling it to expand its market share and earn greater profits. In effect, subsidies change the initial conditions of the game that firms play. The terms of trade move against the subsidizing country, but its welfare can increase because, under imperfect competition, price exceeds the marginal cost of exports. International noncooperative equilibriumis characterized by such subsidies on the part of exporting nations, even though they are jointly suboptimal.
Handle: RePEc:nbr:nberwo:1464
Template-Type: ReDIF-Paper 1.0
Title: International Comparison of the Sources of Productivity Slowdown 1973 1982
Author-Name: John F. Helliwell
Author-Person: phe368
Author-Name: Peter Sturm
Author-Name: Gerard Salou
Note: ITI IFM
Number: 1465
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1465
File-URL: http://www.nber.org/papers/w1465.pdf
File-Format: application/pdf
Publication-Status: published as Helliwell, John F., Peter H. Sturm, and Gerard Salou. "International Comparison of the Sources of Productivity Slowdown 1973-1982." European Economic Review, Vol. 28, 1-2 (1985), pp. 157-191.
Abstract: This paper uses an integrated model of aggregate supply to analyze the post-1973 slowdown in productivity growth in the seven major OECD economies. Factor substitution, unexpected demand changes, profitability, and inventory disequilibrium all contribute to the explanation, which is based on a three-factor nested aggregate production function, including energy, and postulating Harrod-neutral disembodied technical progress. The model is first applied separately to the seven countries assuming constant (though country-specific) rates of technical progress. This model provides empirical evidence that this rate of progress has in fact slowed down for several of the faster-growing countries, even after adjusting for factor substitution and cyclical factors. The model is therefore re-estimated, and the sources of productivity decline recalculated, on the hypothesis that rates of efficiency growth in other countries are converging to those in the United States.
Handle: RePEc:nbr:nberwo:1465
Template-Type: ReDIF-Paper 1.0
Title: Argentina Since Martinez De Hoz
Author-Name: Rudiger Dornbusch
Note: ITI IFM
Number: 1466
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1466
File-URL: http://www.nber.org/papers/w1466.pdf
File-Format: application/pdf
Publication-Status: published as di Tella, Guido and Carlos Rodriguez (eds.) Argentina, 1946-83: The economic ministers speak. New York: St. Martin's Press, 1990.
Abstract: The paper reviews macroeconomic events and policies in Argentina in the period 1981-1984. In that period inflation,that had decelerated to less than 100 percent, resumed and reached irore than 600 percent in mid-1984. The real exchange rate that had appreciated in the policy of disinflation depreciated sharply and, in the end-phase, real wages grew more than forty percent. These events, by Northern-Atlantic standards, are dramatic and the paper attempts to sort out the main issues and connections. Special attention is paid to the role of the real exchange rate and its relation to real wages, the determinants of the black market premium for foreign exchange, and to the budget.
Handle: RePEc:nbr:nberwo:1466
Template-Type: ReDIF-Paper 1.0
Title: How Long is a Spell of Unemployment?: Illusions and Biases in the Use of CPS Data
Author-Name: Nicholas M. Kiefer
Author-Name: Shelly J. Lundberg
Author-Person: plu82
Author-Name: George R. Neumann
Note: LS
Number: 1467
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1467
File-URL: http://www.nber.org/papers/w1467.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Business and Economic Statistics, Vol. 3, no. 2 (April 1985): pp. 118-128.
Abstract: Most data used to study the durations of unemployment spells come from the Current Population Survey, which is a point-in-time survey and gives an incomplete picture of the underlying duration distribution. We introduce a new sample of completed unemployment spells obtained from panel data and apply CPS sampling and reporting techniques to replicate the type of data used by other researchers. Predicted duration distributions derived from this CPS-like data are then compared to the actual distribution. We conclude that the best inferences that can be made about unemployment durations using CPS-like data are seriously biased.
Handle: RePEc:nbr:nberwo:1467
Template-Type: ReDIF-Paper 1.0
Title: Wealth and Portfolio Composition: Theory and Evidence
Author-Name: Mervyn A. King
Author-Name: Jonathan I. Leape
Note: PE
Number: 1468
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1468
File-URL: http://www.nber.org/papers/w1468.pdf
File-Format: application/pdf
Publication-Status: published as King, Mervyn and Jonathan I. Leape. "Wealth And Portfolio Composition: Theory And Evidence," Journal of Public Economics, 1998, v69(2,Aug), 155-193.
Abstract: In this paper, we examine a new survey of 6,010 U.S. households and estimate a model for the allocation of total net worth among different assets. The paper has three main aims. The first is to investigate the extent to which a conventional portfolio choice model can explain the differences in portfolio composition among households. Our survey data show that most households hold only a subset of the available assets. Hence we analyze a model in which investors choose to hold incomplete portfolios. We show that the empirical specification of the joint discrete and continuous choice that characterizes household portfolio behavior is a switching regressions model with endogenous switching. The second aim is to examine the impact of taxes on portfolio composition. The survey contains a great deal of information on taxable incomes and deductions which enable us to calculate rather precisely the marginal tax rate facing each household.The third aim is to estimate wealth elasticities of demand for a range of assets and liabilities. We test the frequently made assumption of constant relative risk aversion.
Handle: RePEc:nbr:nberwo:1468
Template-Type: ReDIF-Paper 1.0
Title: Expected Future Tax Policy and Tax-Exempt Bond Yields
Author-Name: James M. Poterba
Author-Person: ppo19
Note: ME PE
Number: 1469
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1469
File-URL: http://www.nber.org/papers/w1469.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. "Explaining the Yield Spread between Taxable and Tax-exempt Bonds: The Role of Expected Tax Policy," Studies in State and Local Public Finance, ed. Harvey S. Rosen, pp. 5-49, Chicago: UCP, 1986.
Publication-Status: published as Poterba, James M. and Kim S. Rueben. "Fiscal News, State Budget Rules, And Tax-Exempt Bond Yields," Journal of Urban Economics, 2001, v50(3,Nov), 537-562.
Abstract: This paper tests several competing models of municipal bond market equilibrium. It analyzes the influence of changes in both personal and corporate tax reforms on the yield spread between taxable and tax-exempt interest rates. The findings suggest that changes in personal income tax rates have pronounced effects on long-term municipal interest rates, but small effects on short-maturity yields. Corporate tax reforms, however, affect both long- and short-term yields. These results are inconsistent with the view that the relative yields on taxable and tax-exempt bonds are set by banks and insurance companies which are taxed at the corporate rate. They support the more traditional view that banks are the primary holders of short-term muncipal securities, while households are the principal investors in the long-term municipal market. This view suggests that proposals to reform municipal financing policies by increasing the use of short-term borrowing, or issuing long-term floating-rate debt, could reduce the real cost of municipal borrowing.
Handle: RePEc:nbr:nberwo:1469
Template-Type: ReDIF-Paper 1.0
Title: Developing Country Debt and the Market Value of Large Commercial Banks
Author-Name: Steven C. Kyle
Author-Name: Jeffrey Sachs
Note: ITI IFM
Number: 1470
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1470
File-URL: http://www.nber.org/papers/w1470.pdf
File-Format: application/pdf
Abstract: The effect on commercial banks of exposure to large amounts of developing country debt has been a topic of increasing concern in recent years. Fear of default on the part of the debtor countries has led to fears for the solvency of the creditor banks since in many cases the total of outstanding exposure to risky debtors exceeds the entire capital base of the banks involved. The paper presents a first effort towards measuring the effects of LDC debt exposure on the market value of large commercial value banks in the United States. Our results indicate that exposure to developing country debt has exerted a measurable and significant negative effect on the ratio of market to book value for these banks.
Handle: RePEc:nbr:nberwo:1470
Template-Type: ReDIF-Paper 1.0
Title: Comparable Worth in the Public Sector
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Robert S. Smith
Note: LS
Number: 1471
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1471
File-URL: http://www.nber.org/papers/w1471.pdf
File-Format: application/pdf
Publication-Status: published as Ehrenberg, Ronald G. and Robert S. Smith."Comparable Worth Wage Adjustmentand Female Employment in the Public Sector," Journal of Labor Economics, Vol. 5, No. 1, January 1987, pp. 43-62.
Publication-Status: published as Ehrenberg, Ronald G. and Robert S. Smith. "Comparable Worth in the Public Sector," Public Sector Payrolls, ed David A. Wise, Chicago: UCP, 1987.
Publication-Status: published as Comparable Worth in the Public Sector, Ronald G. Ehrenberg, Robert S. Smith. in Public Sector Payrolls, Wise. 1987
Abstract: Proponents of comparable worth assert that within a firm jobs can be valued in terms of the skill, effort and responsibility they require, as well as the working conditions they offer, and that jobs that are of comparable worth to the firm should receive equal compensation. After documenting the major push that has occurred for comparable worth in the state and local sector, Section II of our paper discusses the case for and against comparable worth from the perspective of analystical economists.The reminder of the paper is empirical in nature and focuses on issues that arise when one attempts to implement comparable worth. Section III addresses attempts by various states to infer if comparable worth "wage gaps" exist from job evaluation studies they have conducted and tests how sensitive their results are to the statistical methods used to infer discrimination. Section IV estimates whether male/female comparable worth wage gaps nay partially be compensating differentials for differences in opportunity for occupational nobility. Finally Section V presents estimates of systems of demand curves for state and local government employees and tests whether within occupational groups male/female substitution occurs as male/female wage rates change and whether substitution occurs across occupations as occupational wages change. These estimates are then used to simulate what the likely effect of a comparable worth wage policy would be on employment of females in the state and local sector.
Handle: RePEc:nbr:nberwo:1471
Template-Type: ReDIF-Paper 1.0
Title: Pay Differences Between Women's and Men's Jobs: The Empirical Foundations of Comparable Worth Legislation
Author-Name: George E. Johnson
Author-Name: Gary Solon
Author-Person: pso215
Note: LS
Number: 1472
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1472
File-URL: http://www.nber.org/papers/w1472.pdf
File-Format: application/pdf
Publication-Status: published as Johnson, George and Gary Solon. f"Estimates of the Direct Effects of Comparable Worth Policy," American Economic Review, Vol. 76, No. 5, Dec. 1986, pp 1117-1125.
Abstract: Civil rights legislation of the 1960s made it illegal foran employer to pay men and women on different bases for the same work or to discriminate against women in hiring, job assignment, or promotion. Two decades later, however, the ratio of women's to men's earnings has shown little upward movement. Furthermore, major sex differences in occupational distribution persist with predominantly female jobs typically paying less than predominantly male jobs. This negative relationship between wage rates and femaleness of occupatiop has stimulated efforts, in both the judicial and political arenas, to establish "comparable worth" procedures for setting wage rates.This paper etimates the relationship between wages and femaleness of occupation and finds that it is indeed negative even after controlling for relevant worker and job characteristics. The magnitude of the relationship, however, implies a surprisingly small effect for a comprehensive comparable worth policy. The estimates indicate that, even if comparable worth succeeded in eliminating this negative relationship, the disparity between mean male and female wages would be reduced by well under ten percent of its current magnitude.
Handle: RePEc:nbr:nberwo:1472
Template-Type: ReDIF-Paper 1.0
Title: Rules versus Discretion
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG
Number: 1473
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1473
File-URL: http://www.nber.org/papers/w1473.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Robert J. "Recent Developments in the Theory of Rules versus Discretion." Economic Journal, Supplement, (1985), pp. 23-37.
Abstract: Under a discretionary regime the monetary authority makes no commitments about future money and prices. Then, if surprise inflation conveys economic benefits and if people form expectations rationally, it turns out that the equilibrium involves high and variable monetary growth and inflation. Moreover, since the high rate of inflation is anticipated there are no benefits from inflation surprises. The implementation of an enforced rule can lower the mean rate of inflation while delivering the same average amount of inflation surprises, namely zero. Using these results as a background, the paper discusses alternative monetary rules, including quantity versus price rules and a prescription for stablilizing nominal GNP. This discussion touches on the distinction between positive and normative economics, which leads to a pessimistic appraisal of the role for economists' policy advice.
Handle: RePEc:nbr:nberwo:1473
Template-Type: ReDIF-Paper 1.0
Title: Part-time Employment of Married Women and Fertility in Urban Japan
Author-Name: Tadashi Yamada
Author-Name: Tetsuji Yamada
Note: LS
Number: 1474
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1474
File-URL: http://www.nber.org/papers/w1474.pdf
File-Format: application/pdf
Publication-Status: published as Yamada, Tadashi and Tetsuji Yamada. "Part-Time Employment of Married Womenin Urban Japan," The Quarterly Review of Economics and Business, Vol. 27, No. 1, Spring 1987, pp. 41-50.
Abstract: Previous studies of female labor force participation in Japan often show that the estimates of female wage rates are "negative" in their single-equation models of labor supply. Based on the common belief that the substitution effect dominates the income effect for female labor supply, to disentangle the problem of the inconsistency is, therefore, necessary for the purpose of predicting the behavior of female labor supply and for guiding policy actions. In this paper, we have estimated a logit model of married women's part-time employment and a fertility equation in the context of a simultaneous-equation model. By specifically differentiating part-time employed married women from full-time employed married women,we find that the structural coefficients of the part-time labor supply are significantly different from those of the full-time labor supply in terms of elasticity. However, contrary to the result of married women's full-time employment, we find little interdependency between married women's decisions to work as part-time employees and their fertility in urban Japan.
Handle: RePEc:nbr:nberwo:1474
Template-Type: ReDIF-Paper 1.0
Title: Testing Deviations From Purchasing Power Parity (PPP)
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI IFM
Number: 1475
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1475
File-URL: http://www.nber.org/papers/w1475.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua. "Testing Deviations from Purchasing Power Parity," Journal of International Money and Finance, Vol. 5, No. 1, (March 1986), pp. 25-35.
Abstract: The purpose of this paper is to study analytically how the presence of transportation costs in a model of deviations from PPP affects the testing procedure of the PPP hypothesis The analysis shows that in the presence of transportation costs traditional regression analysis will tend to reject the PPP hypothesis even if goods markets are well arbitraged, because the values of the regression coefficients are affected systematically by considerations that are independent of the degree to which markets are arbitraged. Thus, the content of the ppp approach cannot be tested satisfactorily without considering the systematic effects of transportation costs and other costs of goods arbitrage.
Handle: RePEc:nbr:nberwo:1475
Template-Type: ReDIF-Paper 1.0
Title: Brothers and Sisters in the Family and the Labor Market
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Zvi Griliches
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: LS
Number: 1476
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1476
File-URL: http://www.nber.org/papers/w1476.pdf
File-Format: application/pdf
Publication-Status: published as Bound, John, Zvi Griliches and Bronwyn H. Hall. "Wages, Schooling and IQ of Brothers and Sisters: Do the Family Factors Differ?" International Economic Review, Vol. 27, No. 1, (February 1986), pp. 77-105.
Abstract: This paper investigates the relationship between earnings, schooling, and ability for young men and women who entered the labor force during the late 60s and 70s. The emphasis is on controlling for both observed and unobserved family characteristics, extending a framework developed earlier by Chamberlain and Griliches (1975) to the analysis of mixed-sex pairs of siblings. Using the National Longitudinal surveys of Young Men and Young Women, which drew much of the sample from the same households, we were able to construct a sample containing roughly 1500 sibling pairs.For several reasons, particularly the need to have data on two siblings from the same family, only one third of these pairs had complete data; this fact led us to develop new methods of estimating factor models, which combines the data for several "unbalanced" covariance matrices. We use the data on different kinds of sibling pairs (male-male, female-female, and male-female) together with these new methods to investigatethe question of whether family background, ability, or 'IQ" are the same thing for males and females, in the sense that they lead to similar consequences for success in schooling and in the market place. With a simple two factor model to explain wages, schooling and IQ scores, we are able to test whether these factors are the same across siblings of different sexes and whether the loadings on the two factors are similar. The conclusion is that the unobservable factors appear to be the same and play the same role in explaining the IQ and schooling of these siblings, while there remains evidence of differences once they enter the labor market.
Handle: RePEc:nbr:nberwo:1476
Template-Type: ReDIF-Paper 1.0
Title: Pension Inequality
Author-Name: Edward P. Lazear
Author-Person: pla64
Author-Name: Sherwin Rosen
Note: LS
Number: 1477
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1477
File-URL: http://www.nber.org/papers/w1477.pdf
File-Format: application/pdf
Publication-Status: published as Bodie, Z., J.B. Shoven and D.A. Wise (eds.) Issues in Pension Economics. Chicago: University of Chicago Press, 1987.
Publication-Status: published as Pension Inequality, Edward P. Lazear, Sherwin Rosen. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: Pensions may contribute to male/female or black/white inequality to the extent that white males are more likely to receive pensions than are other groups. Conditional on receiving pensions, the value of pension benefits varies because white males have the highest level of expected tenure atretirement. By using a combination of the Current Population Survey and the 1980 Banker's Trust Corpprate Pension Plan Study, we find that the existence of pension plans contributes to black/white inequality but leaves male/female inequality unchanged among whites. Even though females are less likely tor eceive pensions than males, those females who do receive pensions enjoy generous ones. Among blacks, pensions exacerbate sex differences because black women are only about 75% as likely to receive pensions as black males.
Handle: RePEc:nbr:nberwo:1477
Template-Type: ReDIF-Paper 1.0
Title: Change and Progress in Contemporary Mortgage Markets
Author-Name: Edward J. Kane
Author-Person: pka853
Note: ME
Number: 1478
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1478
File-URL: http://www.nber.org/papers/w1478.pdf
File-Format: application/pdf
Publication-Status: published as Kane, Edward J. "Change and Progress in Contemporary Mortgage Markets," Housing Finance Review, Vol. 3, July 1984, pp. 257-284.
Abstract: Changes in political attitudes toward subsidizing mortgage loans and in technologies for transacting mortgage loans and for pooling and refinancing individual mortgage contracts threaten to remake the face of U.S. mortgage markets. This paper focuses on economic-efficiency benefits embodied in narrowed interest-rate spreads and on distributional effects for different market participants created by three categories of change: changing strategies for controlling implicit federal guarantees; continuing evolution in the character of mortgage-backed securities; and expanding electronic mortgage-application networks. It proves instructive to classify these effects further according to whether they are transitional or permanent in nature and whether they are technologically driven or filtered through the political process.The analysis emphasizes that technological change is reducing the controllability of aggregate subsidies associated with long standing patterns of providing implicit and explicit federal guarantees for the liabilities of important mortgage-market participants and discusses several proposals for bringing the market value of these guarantees back under administrative control.
Handle: RePEc:nbr:nberwo:1478
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Specific-Factors Model of International Trade
Author-Name: Jonathan Eaton
Author-Person: pea5
Note: ITI IFM
Number: 1479
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1479
File-URL: http://www.nber.org/papers/w1479.pdf
File-Format: application/pdf
Publication-Status: published as Eaton, Jonathan. "A Dynamic Specifif-Factors Model of International Trade," Review of Economic Studies, Vol. LIV(2), No. 178, (April 1987), pp. 325-33 8.
Abstract: In a dynamic economy land and capital serve not only as factors of production but as assets which individuals use to transfer income from workinq periods to retirement. Static models of international trade based on the specific-factors model incorporate only the first of these. Once the second is recognized the supply of capital and evaluation of land can be derived from underlying intertemporal optimization behavior.Changes in the terms of trade and in the endowments of fixed factors do not necessarily have the same effects on factor prices and the composition of output as they do in the static specific-factors model. Changes in these variables affect both total savings and the amount of savings that is diverted toward investment in land. Results derived from the traditional static model are more likely to emerge when the sector using land as a factor of production has a higher labor share than the sector using capital. In this case the land-using sector dominates factor markets more than asset markets.
Handle: RePEc:nbr:nberwo:1479
Template-Type: ReDIF-Paper 1.0
Title: Money Growth Variability and Money Supply Interdependence Under InterestRate Control: Some Evidence For Canada
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Ehsan U. Choudhri
Author-Person: pch482
Author-Name: Anna J. Schwartz
Note: IFM
Number: 1480
Creation-Date: 1984-09
Order-URL: http://www.nber.org/papers/w1480
File-URL: http://www.nber.org/papers/w1480.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael, Ehsan U. Choudhri and Anna J. Schwartz. "The Behavior of Money Stock Under Interest Rate Control: Some Evidence for Canada," Journal of Money, Credit , and Banking, Vol. 19, May 1987, pp. 181-197.
Abstract: Canada, like many countries, has recently experienced difficulties in achieving money growth stability and money supply independence. Based on the buffer-stock view of money-holding as well as the credit market approach to the money supply, this paper suggests that the problems have arisen from the Bank of Canada suse of an interestrate control mechanism.The paper argues that: (1) The short-run behavior of Canadian money grow this influenced by demand shifts in the Canadian credit market.(2)Movements in U.S. interest rates relative to the controlled Canadian interest rates are a key source of these shifts.The paper presents evidence on Canadian money supply and demand functions consistent with the foregoing explanation.
Handle: RePEc:nbr:nberwo:1480
Template-Type: ReDIF-Paper 1.0
Title: The New View of the Property Tax: A Reformulation
Author-Name: Peter M. Mieszkowski
Author-Person: pmi759
Author-Name: George R. Zodrow
Author-Person: pzo28
Note: PE
Number: 1481
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1481
File-URL: http://www.nber.org/papers/w1481.pdf
File-Format: application/pdf
Publication-Status: published as Regional Science and Urban Economics, Vol. 16, no. 3, (August 1986): pp. 309-327.
Abstract: The"new view" of the property tax is reformulated within the context of a model with interjurisdictional competition, endogenous local public services, individuals who are segregated into homogeneous communities according to tastes for local public services, a simple form of land use zoning, and a political or constitutional constraint on the use of head taxes by local governments. Expressions for the "profits tax" and"excise tax" effects of the property tax are derived. The effects of a "consumption distortion" away from government services due to local reluctance to tax mobile capital are also examined.
Handle: RePEc:nbr:nberwo:1481
Template-Type: ReDIF-Paper 1.0
Title: Money, Credit and Interest Rates in the Business Cycle
Author-Name: Benjamin M. Friedman
Note: ME
Number: 1482
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1482
File-URL: http://www.nber.org/papers/w1482.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "Money, Credit and Interest Rates in the Business Cycle." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: UCP, 1986, pp. 395-438 and 456-458.
Publication-Status: published as Friedman, Benjamin M. and Kenneth N. Kuttner. "Money, Income, Prices, And Interest Rates," American Economic Review, 1992, v82(3), 472-492.
Abstract: Fluctuations of business activity in the United States clearly have their monetary and financial side, but these aspects of U.S. economic fluctuations exhibit few quantitative regularities that have persisted unchanged across spans of tine over which the nation's financial markets have themselves undergone significant change. The evidence on monetary and financial aspects of U.S. business cycles assembled in this paper shows major differences among the pre WorldWar I, inter-war, and post World War II periods, and between the first and second halves of the post-war period. Evidence suggesting changes fromone period to another repeatedly emerges, regardless of whether the method of analysis is simple or sophisticated, regardless of whether the underlying data are annual or quarterly, and regardless of whether the relationships under study are bivariate or multivariate. Moreover, the differences between one period and another are significant not just statistically but also economically, in the sense of major differences in the magnitude and timing of cyclical movements.The paper's main message, therefore, is a warning against accepting too readily - either as a matter of positive economics or for policy purposes -the appearance of simple and eternal verities in much of the existing literature of monetary and financial aspects of business fluctuations. More complicated models involving many variables and/or nonlinear relationships may have remained stable, but the evidence clearly shows that simple linear relationships among only a few such variables have not.
Handle: RePEc:nbr:nberwo:1482
Template-Type: ReDIF-Paper 1.0
Title: The Inflationary Process in Israel: Shocks and Accommodation
Author-Name: Michael Bruno
Author-Name: Stanley Fischer
Note: EFG
Number: 1483
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1483
File-URL: http://www.nber.org/papers/w1483.pdf
File-Format: application/pdf
Publication-Status: published as Bruno, Michael and Stanley Fischer. "The Inflationary Process in Israel: Shocks and Accomodation," The Israeli Economy, Yoram Ben-Poralt (editor), Cambridge: Harvard University Press, 1986.
Abstract: The rate of inflation in Israel increased from 8 percent in 1965 to 300-400 percent in the first half of 1984. The inflationary process until 1977 was not qualitatively different from that in the OECD countries, but after the financial liberalization of 1977 the economy appeared to move into a new era in which the inflation rate seemed capable only of rising. Our explanation of the inflationary process is that because of institutional adaptations, and as a result of accommodating monetary and fiscal policies, the stabilizing forces in the economy are so weak that the inflation rate is in a meta-stable equilibrium. We ascribe the apparent asymmetry of the inflation to the expansionary underlying thrust of monetary and fiscal policy. We develop an analytical framework that assigns roles to indexation, to the financial structure, and to the exchange rate system in determining the dynamics of the economy. We place very little blame for the inflation on wage indexation, which has been incomplete, but we regard the extensive indexation of the returns on financial assets, and the steady shift out of nominal assets, as major contributing factors, for the economy is now left with virtually no nominal anchor. The paper concludes with a brief discussion of alternative stabilization plans, arguing that a successful stabilization program will have to be comprehensive and rapid.
Handle: RePEc:nbr:nberwo:1483
Template-Type: ReDIF-Paper 1.0
Title: A Stochastic Model of Investment, Marginal q and the Market Value of theFirm
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: EFG
Number: 1484
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1484
File-URL: http://www.nber.org/papers/w1484.pdf
File-Format: application/pdf
Publication-Status: published as Abel, Andrew B. "A Stochastic Model of Investment, Marginal q and the Market Value of the Firm," International Economic Review, Vol. 26, No. 2, June 1985, pp. 305-322.
Abstract: This paper presents closed-form solutions for the investment and valuation of a competitive firm with a Cobb-Douglas production function and a constant elasticity adjustment cost function in the presence of stochastic prices for output and inputs. The value of the firm is a linear function of the capital stock. The optimal rate of investmentis an increasing function of the slope of the value function with respect to the capital stock (marginal q). A mean preserving spread of the distribution of future price increases investment. An increase in the scale of the random component of a price can increase, decrease or not affect the rate of investment depending on the sign of the covariance of this price with a weighted average of all prices.
Handle: RePEc:nbr:nberwo:1484
Template-Type: ReDIF-Paper 1.0
Title: The Incidence of the Local Property Tax: A Re-evaluation
Author-Name: Peter M. Mieszkowski
Author-Person: pmi759
Author-Name: George R. Zodrow
Author-Person: pzo28
Note: PE
Number: 1485
Creation-Date: 1984-10
Order-URL: http://www.nber.org/papers/w1485
File-URL: http://www.nber.org/papers/w1485.pdf
File-Format: application/pdf
Abstract: The article identifies the key assumptions that underlie competing theories of the incidence of the local property tax. We conclude that the"benefit view" which maintains that the property tax system is equivalent to a set of non-distortionary user changes is correct only under very restrictive assumptions. Only when communities adopt a set of exact, binding zoning requirements will a distortionary tax be transformed into a lump-sum tax. We argue that within jurisdiction heterogeneity of house and firm typeis very unlikely and that the burden of a property tax that is distortionary at the margin falls on the owners of capital.
Handle: RePEc:nbr:nberwo:1485
Template-Type: ReDIF-Paper 1.0
Title: Rational and Self-Fulfilling Balance-of-Payments Crises
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: ITI IFM
Number: 1486
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1486
File-URL: http://www.nber.org/papers/w1486.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice. "Rational and Self-Fulfilling Balance-of-Payments Crises ." American Economic Review, Vol. 76, No. 1, (March 1986), pp. 72-81.
Abstract: The recent balance-of-payments literature shows that-speculative attacks on a pegged exchange rate must sometimes-occur if the path of the rate is riot to offer abnormal profit opportunities. Such attacks are fully rational, as they reflect the market's response to a regime breakdown that is inevitable.This paper shows that, given certain expectations about policy, balance-of-payments crises can also be purely self-fulfilling events. In such cases even a permanently viable regime maybreak down, and the economy will possess multiple equilibria corresponding to different subjective assessments of the probability of collapse. The behavior of domestic interest rates and foreign reserves will naturally reflect the possibility of a speculative attack. Work on foreign-exchange crises derives from the natural-resource literature initiated by Salant and Henderson (1978),where the definition of "abnormal" profit opportunities is straightforward. Because the definition is not always straight-forward in a monetary context, this paper also shows how crises occur in a discrete-time stochastic monetary model when an eventual breakdown is inevitable.
Handle: RePEc:nbr:nberwo:1486
Template-Type: ReDIF-Paper 1.0
Title: The Value of Intermediate Targets in Implementing Monetary Policy
Author-Name: Benjamin M. Friedman
Note: ME
Number: 1487
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1487
File-URL: http://www.nber.org/papers/w1487.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "The Value of Intermediate Targets in Implementing Monetary Policy." Price Stability and Public Policy, pp. 169-191. Kansas City MO: Federal Reserve Bank of Kansas City, 1984.
Abstract: This paper reports empirical results indicating that there is no compelling evidence in favor of singling outany one variable as "the intermediate target" of monetary policy. Of the variables considered here - including money (M1), credit, a long-term interest rate, and whichever of either reserves or a short-term interest rate the Federal Reserve System does not set directly by open market operations -- most do contain at least some statistically significant information about the future growth of nominal income, real income, or prices. In most cases, however, this information is significant statistically but not economically. In other words, the reduction in forecasting error gained from using this information is typically too small to be of great moment in a policy context. The papers principal conclusion, therefore, is to cast doubt on the practice of designating specific financial variables as intermediate targets of monetary policy. To the extent that such targets are necessary for independent reasons, however, the strength of this conclusion varies from one potential intermediate target to another. Among the variables considered here, credit growth and the long-term interest rate appear to offer the best prospects of providing information that would be useful in formulating and implementing monetary policy. Although the empirical results reported here rely on an econometric model that is extremely compact and simple, the method of analysis suggested in this paper is more general. Its key contribution is to use a structural model to address questions for which the previous literature has relied on nonstructural methods. The application of this method of analysis to one small, simple model here need be no more than an illustration. Applying it to a larger and more complex model would be a straightforward extension of this research.
Handle: RePEc:nbr:nberwo:1487
Template-Type: ReDIF-Paper 1.0
Title: The General Basis of Arbitrator Behavior: An Empirical Analysis of Conventional and Final-Offer Arbitration
Author-Name: Henry S. Farber
Author-Name: Max H. Bazerman
Note: LS
Number: 1488
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1488
File-URL: http://www.nber.org/papers/w1488.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, Vol. 54, No. 4, pp. 819-844, July 1986. (partial due to printing error)
Publication-Status: published as Econometrica Vol. 54, No. 6, November 1986, pp. 1503-1528. (full text)
Abstract: A general model of arbitrator behavior in conventional and final-offer arbitration is developed that is based on an underlying notion of an appropriate award in a particular case. This appropriate award is defined as a function of the facts of the case independently of the offers of the parties. In conventional arbitration the arbitration award is argued to be a function of both the offers of the parties and the appropriate award. The weight that the arbitrator puts on the appropriate award relative to the offers is hypothesized to be a function of the quality of the offers as measured by the difference between the offers. In final-offer arbitration itis argued that the arbitrator chooses the offer that is closest to the appropriate award.The model is implemented empirically using data gathered from practicing arbitrators regarding their decisions in twenty-five hypothetical cases. The estimates of the general model strongly support the characterizations of arbitrator behavior in the two schemes. No substantial differences were found in the determination of the appropriate award implicit in the conventional arbitration decisions and the determination of the appropriate award implicitin the final-offer decisions.
Handle: RePEc:nbr:nberwo:1488
Template-Type: ReDIF-Paper 1.0
Title: Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: David Card
Author-Person: pca271
Note: LS
Number: 1489
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1489
File-URL: http://www.nber.org/papers/w1489.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley and David Card. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," Review of Economics and Statistics, Vol. 67, No. 4, pp. 648-660, November 1985.
Abstract: In this paper we set out some methods that utilize the longitudinal structure of earnings of trainees and a comparison group to estimate the effectiveness of training for the 1976 cohort of CETA trainees. By fitting a components-of-variance model of earnings to the control group, and posing a simple model of program participation, we are able to predict the entire earnings histories of the trainees. The fit of these predictions to the pre-training earnings of the CETA participants provides a test of the model of earnings generation and program participation and simple check on the corresponding estimate of the effectiveness of training.Two factors appear to have a critical influence on the size of the estimated training effects: the time of the decision to participate in training and the presence or absence of individual-specific trends in earnings. We find considerable evidence that trainee earnings contain permanent, transitory,and trend-like components of selection bias. We are less successful in distinguishing empirically between alternative assumptions on the timing of the participation decision. If earnings in the year prior to training are the appropriate selection criterion, however, our estimate of the training effect for adult male CETA participants is about 300 dollars per year. Our estimates for female CETA participants are larger, and less sensitive to alternative models of program participation.
Handle: RePEc:nbr:nberwo:1489
Template-Type: ReDIF-Paper 1.0
Title: Credibility and Monetary Policy
Author-Name: Bennett T. McCallum
Note: EFG
Number: 1490
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1490
File-URL: http://www.nber.org/papers/w1490.pdf
File-Format: application/pdf
Publication-Status: published as McCallum, Bennett T. "Credibility and Monetary Policy." Price Stability and Public Policy, pp. 105-128. Kansas City, MO: Federal Reserve Bank of Kansas City, (1984).
Publication-Status: published as Bennett T. McCallum, 1984. "Credibility and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 105-135.
Abstract: The purpose of this paper is to describe and evaluate the most important existing ideas concerning credibility of monetary policy, with special emphasis given to matters pertaining to the U.S. economy and the practices and procedures of the Fed. The main discussion begins with Fellner's hypothesis that the costs of a disinflationary episode will be smaller when the public believes that the disinflation will in fact be carried out. This hypothesis has been challenged recently by several writers; an evaluation of their evidence is attempted and some new results presented. Next, the discussion turns to positive analyses of the monetary policy-making process. Models developed by Barro and Gordon and others are examined, the object being to develop an understanding of why certain features of monetary policy tend to prevail. The main implications of this analysis are then used to consider various strategies for obtaining a type of policy behavior that might produce better macroeconomic results--less inflation with no more unemployment--than the U.S. has experienced in the recent past. Particular proposals touched upon include the adoption of a commodity-money standard, a balanced-budget amendment, a legislated monetary rule, a nominal GNP target, and the absorption of the Fed into the Treasury.
Handle: RePEc:nbr:nberwo:1490
Template-Type: ReDIF-Paper 1.0
Title: Improvements in Macroeconomic Stability: The Role of Wages and Prices
Author-Name: John B. Taylor
Author-Person: pta174
Note: EFG
Number: 1491
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1491
File-URL: http://www.nber.org/papers/w1491.pdf
File-Format: application/pdf
Publication-Status: published as Taylor, John B. "Improvements in Macroeconomic Stability: The Role of Wages and Prices." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: University of Chicago Press, 1986, pp. 639-659 and 676-677.
Publication-Status: published as Improvements in Macroeconomic Stability: The Role of Wages and Prices, John B. Taylor. in The American Business Cycle: Continuity and Change, Gordon. 1986
Abstract: This paper compares macroeconomic performance in the United States from 1891 through 1914 with the period after the Second World War by estimating reduced form autoregressions for prices, wages and output, by looking at their moving average representations, and by giving them simple structural interpretations. The results show that the impulses to the economic system were smaller in the later period, but the propagation mechanisms are much slower and more drawn out. The smaller shocks are therefore translated into larger and more prolonged fluctuations in output and inflation than would occur if the earlier dynamics were applicable in the later period. A tentative explanation for the changes in the dynamics is a slower speed of wage and price adjustment combined with a different accommodative stance for the monetary system.
Handle: RePEc:nbr:nberwo:1491
Template-Type: ReDIF-Paper 1.0
Title: Looking for the News in the Noise - Additional Stochastic Implications of Optimal Consumption Choice
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: EFG
Number: 1492
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1492
File-URL: http://www.nber.org/papers/w1492.pdf
File-Format: application/pdf
Publication-Status: published as "Looking for the News in the Noise. Additional Stochastic Implications of Optimal Consumption Choice." From Annales D'Economie et de Statistique, Vol. 9, pp. 29-46, (1988).
Publication-Status: published as Laurence J. Kotlikoff & Ariél Pakes, 1988. "Looking for the News in the Noise. Additional Stochastic Implications of Optimal Consumption Choise," Annals of Economics and Statistics, GENES, issue 9, pages 29-46.
Publication-Status: published as Kotlikoff & Pakes, 1988. "Looking for the News in the Noise. Additional Stochastic Implications of Optimal Consumption Choice," Annales d'Économie et de Statistique, .
Abstract: In neoclassical models of consumption choice under earnings uncertainty changes in consumption programs from one period to the next are determined by new information received about future earnings over the period. This proposition suggests testing the neoclassical model by ascertaining whether new earnings information explains consumption choice through time. It also suggests that actual consumption choices imbed extractable information about the extent and time resolution of earnings uncertainty. This paper derives a fairly general theoretical relationship between properly defined innnovations in consumption (noise) and revisions in expectations of lifetime earnings (news). It also clarifies the relationship between testing for the theoretical determinants of consumption and standard Euler tests that focus on theoretical nondeterminants of consumption. The chief prediction of the paper's theoretical results, that noise exactly equals news, is tested using aggregate time series data on consumption and earnings. We find that new earnings information explains only a very small fraction of the variance of aggregate consumption innovations. On the other hand, the extent of suboptimal consumption choice appears to be of little economic significance.
Handle: RePEc:nbr:nberwo:1492
Template-Type: ReDIF-Paper 1.0
Title: Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity
Author-Name: Takatoshi Ito
Note: ME ITI IFM
Number: 1493
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1493
File-URL: http://www.nber.org/papers/w1493.pdf
File-Format: application/pdf
Publication-Status: published as The Review of Economics and Statistics, Vol. LXX, No. 2, (May 1988), pp. 29 6-305.
Abstract: In this paper, a vector autoregression model (VAR) is proposed in order to test uncovered interest parity (UIP) in the foreign exchange market. Consider a VAR system of the spot exchange rate (yen/dollar), the domestic (US) interest rate and the foreign (Japanese) interest rate, describing the interdependence of the domestic and international financia lmarkets. Uncovered interest parity is stated as a null hypothesis that the current difference between the two interest rates is equal to the difference between the expected future (log of) exchange rate and the (log of) current spot exchange rate. Note that the VAR system will yield the expected future spot exchange rate as a k-step ahead unconditional prediction. Hence, the null hypothesis is stated as nonlinear cross-equational restrictions for the three-equation VAR system. Then UIP is tested by the Wald test between the unrestricted and restricted systems. A test of UIP with a maintained hypothesis of covered interest parity, becomes a hypothesis test of efficiency without risk premium, that is,the forward exchange rate isthe unbiased predictor of the future spot exchange rate, and information is efficiently used in its prediction. Our results are compared to the efficiency test with a single equation using the Hansen-Hodrick procedure for the same data set.
Handle: RePEc:nbr:nberwo:1493
Template-Type: ReDIF-Paper 1.0
Title: Imports as a Cause of Injury: The Case of the U.S. Steel Industry
Author-Name: Gene M. Grossman
Author-Person: pgr21
Note: ITI IFM
Number: 1494
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1494
File-URL: http://www.nber.org/papers/w1494.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Gene M."Imports as a Cause of Injury: The Case of the U.S. Steel Industry," Journal of International Economics, Vol. 20, No. 3/4, pp.201-22 4, May 1986.
Abstract: Recently, the United States International Trade Commission conducted a Section 201 or "escape clause" hearing to determine whether imports have been the most significant cause of injury to the U.S. steel industry. This paper suggests a methodology for conducting the necessary analysis for such determinations, and applies it to the case of the steel industry. First, a reduced-form equation for steel industry employment is derived and estimated. The equation specifies industry employment as a function of the price of imported steel, the price of energy, the price of iron ore, a time trend, real income and (in one variant) the wage rate in the steel industry. The estimated coefficients are used to perform counter factual simulations, which allow us to attribute changes in industry employment to their proximate causes. The analysis reveals that for the period from 1976 to 1983, a secular shift away from employment in the steel industry has been the most important cause of injury. For the shorter period from 1979 to 1983, secular shift and import competition are roughly equal in importance, with the latter being entirely the result of the substantial appreciation of the U.S. dollar during this period.
Handle: RePEc:nbr:nberwo:1494
Template-Type: ReDIF-Paper 1.0
Title: The Costs of Worker Displacement
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS ITI IFM
Number: 1495
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1495
File-URL: http://www.nber.org/papers/w1495.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. "The Costs of Worker Displacement," Quarterly Journal of Economics, Vol. 102, 1987, Vol. 102, No. 1, (February 1987), pp. 51-75.
Abstract: This study defines the nature of worker displacement and develops a mechanism for inferring the amount of losses caused by displacement in away that is tied to economic theory. Data from the Panel Study of Income Dynamics are first used to identify the characteristics of displaced workers. After a demonstration that usual methods of evaluating workers' losses cannot provide correct measures of the cost to society, a game--theoretic model determining the amount of firm -- specific investment in workers is developed. As workers'and firms' horizons decrease, such investment will be reduced; this will be exhibited in a flattening of the wage-tenure profile as the date of displacement approaches. Examination of the profile thus provides a test whether firms and workers have good information about impending displacement. Using the PSID data for workers displaced between 1977 and 1981, the study shows there is no significant flattening of the wage-tenure profile in the entire sample. (However, some flattening does occur among unionized workers, and also among workers who are laid-off permanently from a plant that remains open.) This suggests that workers are surprised by displacement, for they continue investing in firm-specific human capital up to the time of displacement. The present value of the worker's share of the lost returns on this investment is around $7000 (1980 dollars) under intermediate assumptions about the real rate of discount, depreciation on such investment and the effect of tenure on the rate of voluntary separation.
Handle: RePEc:nbr:nberwo:1495
Template-Type: ReDIF-Paper 1.0
Title: Planned and Unplanned Bequests
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Paul L. Menchik
Author-Person: pme216
Note: LS
Number: 1496
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1496
File-URL: http://www.nber.org/papers/w1496.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. and Paul L. Menchik. "Planned and Unplanned Bequests," Economic Inquiry, Vol. 25, No. 1, January 1987, pp. 55-66.
Abstract: We make the distinction between bequests that are planned as part of some lifetime optimization stemming from a bequest motive, and those that are unplanned and result when the date of death differs from what the consumer might forecast. Lifetime optimization should lead to a negative effect or no effect of the expected horizon on the size of the bequest, and to a negative relation between unexpectedly long life and the bequest. Using data on wealthy decedents and their parents, we form measures of the expected horizon based on parents' longevity. There is no relation between unexpectedly early or late death and the bequest, but a significant positive relation between the bequest and the length of the horizon. Several explanations for this unforeseen result are offered, including the inference that uncertainty about length of life is important in studying bequest behavior.
Handle: RePEc:nbr:nberwo:1496
Template-Type: ReDIF-Paper 1.0
Title: Real Balances, the Exchange Rate and Indexation: Real Variables in Disinflation
Author-Name: Stanley Fischer
Note: EFG
Number: 1497
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1497
File-URL: http://www.nber.org/papers/w1497.pdf
File-Format: application/pdf
Publication-Status: published as Fischer, Stanley. "Real Balances, the Exchange Rate and Indexation: Real Variables in Disinflation," Quarterly Journal of Economics, Vol. 103, No. 1, pp. 27-50, (February 1988).
Abstract: The recent appreciation of the dollar is widely believed to have reduced the output costs of the disinflation. But there remains the question of whether those early gains have to be repaid when the exchange rate depreciates.The first question taken up is the effect of real exchange rate appreciation on the sacrifice ratio, or output cost, of disinflation. There is no unambiguous presumption that exchange rate appreciation reduces the sacrifice ratio. The direct favorable effects of cheaper imports on consumer prices, on the prices of imported inputs, and on wage demands, may be outweighed by the unemployment resulting from the reduced demand for exports. In the second part of the paper I examine the affects of wage indexation on the sacrifice ratio. Economists have argued that wage indexation speeds up disinflation; policymakers take the opposite view. The distinction between ex ante and ex post indexing, defined in the paper, explains these different views. Ex ante wage indexation speeds up disinflation. With expost indexation the real wage automatically rises when the inflation rate falls. Even so, ex post indexing may speed up disinflation. But there has to be subsequent downward adjustment of the wage if long-term unemployment is to be prevented.
Handle: RePEc:nbr:nberwo:1497
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Economic Recovery in the 1930s
Author-Name: Barry J. Eichengreen
Author-Person: pei2
Author-Name: Jeffrey Sachs
Note: ITI IFM
Number: 1498
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1498
File-URL: http://www.nber.org/papers/w1498.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry and Jeffrey Sachs. "Exchange Rates and Economic Recovery in the 1930s," Journal of Economic History, Vol. XLV, No. 4, (December 1 985), pp. 925-946.*Reprinted in Depressions & New Deal, Burwood, Stephen, ed., Garland, 1989.
Publication-Status: published as *Reprinted in The Disintegration of the World Economy Between the Wars, Thomas, Mark, ed., Edward Elgen, 1995.
Abstract: Currency depreciation in the 1930s is almost universally dismissed or condemned. It is credited with providing little if any stimulus for economic recovery in the depreciating countries and blamed for transmitting harmful beggar-thy-neighbor impulses to the rest of the world econonv. In this paper we argue for a radically different interpretation of exchange-rate policy in the 1930s . We document first that currency depreciation was beneficial for the initiating countries. It worked through both the standard supply- and demand-side channels suggested by modern variants of the Keynesian model. We show next that there can in fact be no presumption that currency depreciation inthe 1930s was beggar-thy-neighbor policy. Rather, an empirical analysis of the historical record is needed to determine whether the impact on other countries was favorable or unfavorable. We conclude provisionally on the basis of this analysis that the foreign repercussions of individual devaluations were in fact negative -that the depreciations considered were beggar-thy-neighbor. As we point out, however, this finding does not support the conclusion that competitive devaluations taken by a group of countries were without benefit for the system as a whole. We argue to the contrary that similar policies, had they been even more widely adopted, would have hastened recovery from the Great Depression.
Handle: RePEc:nbr:nberwo:1498
Template-Type: ReDIF-Paper 1.0
Title: Rent-Seeking and Trade Policy: An Industry Approach
Author-Name: Robert E. Baldwin
Note: ITI IFM
Number: 1499
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1499
File-URL: http://www.nber.org/papers/w1499.pdf
File-Format: application/pdf
Publication-Status: published as Robert Baldwin, 1984. "Rent-seeking and trade policy: An industry approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 120(4), pages 662-677, December.
Publication-Status: published as in "Economic Incentives: Conference Proceedings," (International Economic Association) Bela Balassa, Herbert Giersch (Eds.): Palgrave Macmillan, 1986.
Abstract: The model of rent-seeking presented in this paper is consistent with the observation that labor and management in an industry almost always adopt the same position concerning the desirability of import protection versus trade liberalization. The paper also discusses the size of the returns to rent-seeking relative to the costs of lobbying, factors influencing the type of government assistance sought by an industry, and ways in which the benefits and costs of protection can be made more widely known to both the industries concerned and the general public.
Handle: RePEc:nbr:nberwo:1499
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Analysis and Microeconomic Analyses of Labor Supply
Author-Name: Orley Ashenfelter
Author-Person: pas9
Note: LS
Number: 1500
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1500
File-URL: http://www.nber.org/papers/w1500.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley, 1984. "Macroeconomic analyses and microeconomic analyses of labor supply," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 117-156, January.
Publication-Status: published as Ashenfelter, Orley. "Macroeconomic Analyses and Microeconomic Analyses of Labor Supply," Carnegie-Rochester Conference Series on Public Policy, vol. 21 (1984), pp. 117-156, North Holland.
Abstract: This paper reports on the current status of the microeconomic research on labor supply behavior. The purpose is to direct attention to microeconomic research that may be helpful in the continuing evaluation of aggregate models designed to explain the dynamic behavior of wages, employment and unemployment. The approach is hopelessly empirical, and the emphasis throughout is on models specified completely enough to allow confrontation with the kind of data actually available.The first part of the paper is addressed to microeconomists, however. It is a brief attempt to provide a sketch of the stylized facts that aggregate models of the labor market are meant to address. These include (1) the serial "persistence" in the change in unemployment (or employment),(2) the absence of persistence in the change in the real wage rate, and (3) the continued existence of a negative correlation between nominal price changes and unemployment rates.The microeconomic (longitudinal) data turn out to be difficult to square up with the simplest life-cycle models of labor supply. Contrary to the predictions of the models, the data indicate that (1) average hours and average real wages move in the same direction only some of the time, and that (2) the within life-cycle, person-specific correlation between hours and wages is negative. The microeconomic (experimental) data indicate other puzzles. More elaborate models incorporating measurement error, non-separable preferences, and unanticipated wage movements may explain these findings, but they are also likely to contain parameters that are noteasily identified with the kind of data actually available. Perhaps an alternative approach may be more fruitful in reconciling the long run determination of hours worked by worker preferences with the short run interaction of observed employment and earnings.
Handle: RePEc:nbr:nberwo:1500
Template-Type: ReDIF-Paper 1.0
Title: His and Hers: Gender Differences in Work and Income, 1959-1979
Author-Name: Victor R. Fuchs
Author-Person: pfu157
Note: LS
Number: 1501
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1501
File-URL: http://www.nber.org/papers/w1501.pdf
File-Format: application/pdf
Publication-Status: published as Fuchs, Victor R. "His and Hers: Gender Differences in Work and Income, 195 9-1979." Journal of Labor Economics, Vol. 4, No. 3, Part 2 (July 1986), pp. S245-S272.
Abstract: This paper describes changes in hours of work and income between 1959 and 1979 of women and men ages 25-64. It includes attempts to measure and value nonmarket production and leisure as well as market work, to take account of possible income-sharing within households, and to allow for economies of scale in household production. The most important empirical result is that, relative to men, women's access to goods and services and leisure was lower in 1979 than in 1959. Changes in hourly earnings, hours of work, and household structure contributed to this result. The sex differential in hourly earnings is explored in detail.
Handle: RePEc:nbr:nberwo:1501
Template-Type: ReDIF-Paper 1.0
Title: The Analysis of Union Behavior
Author-Name: Henry S. Farber
Note: LS
Number: 1502
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1502
File-URL: http://www.nber.org/papers/w1502.pdf
File-Format: application/pdf
Publication-Status: published as Farber, Henry S. "The Analysis of Union Behavior," from the Handbook of Labor Economics, Vol. II, Chapter 18, ed. by Ashenfelter and Layard, North Holland Publishing Co., 1986, pp. 1039-1089.
Abstract: There is now a substantial body of economic research that models the behavior of labor unions as maximization of a well defined objective function. This paper presents both a selective critical survey of this literature and a preliminary consideration of some important problems that have not been addressed in the literature to date. Particular emphasis is on work that is operational in the sense that it has an empirical component or is amenable to empirical implementation. Topics surveyed include 1) the general economic modus operandi of labor unions in the U.S. economy; 2) the structure of bargaining and the efficiency of labor contracts; 3) the bargaining process as it relates to the identification of union objectives; and 4) empirical studies of union objectives. While much is learned from the existing literature, it is argued that amore general political/ economic model of union behavior is needed. This model would derive the objective function of the union in a consistent fashion from the preferences of the workers and union leaders through a well defined political process. Three important issues that are central to the development of such a model are addressed: 1) The determination of the size of the union and the rules used for the allocation of scarce union jobs;. 2) the aggregation of preferences when workers are heterogeneous; and 3) the union leadership asan entity capable of pursuing its own goals.
Handle: RePEc:nbr:nberwo:1502
Template-Type: ReDIF-Paper 1.0
Title: Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence
Author-Name: Victor Zarnowitz
Note: EFG
Number: 1503
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1503
File-URL: http://www.nber.org/papers/w1503.pdf
File-Format: application/pdf
Publication-Status: published as Zarnowitz, Victor. "Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence." Journal of Economic Literature, Vol . 23, No. 2, (June 1985), pp. 523-580.
Publication-Status: published as Victor Zarnowitz, 1992. "Recent Work on Business Cycles in Historical Perspective," NBER Chapters, in: Business Cycles: Theory, History, Indicators, and Forecasting, pages 20-76 National Bureau of Economic Research, Inc.
Abstract: This survey outlines the evolution of thought leading to the rrecent delopments in the study of business cycles.The subject is almost coextensive with short-term macrodynamics and has a large interface withmeconomics of growth, money, inflation, and expectations.The coverage is therefore both very extensive , and selective. The paper first summarizes the "stylized facts" that ought to be explained by the theory.This part discusses the varying dimensions of business cycles; their timing, amplitude, and diffusion features; some international aspects; and recent changes. The next part is a review of the literature on "self-sustaining" cycles. It notes some of the older theories and proceeds to more recent models driven by changes in investment, credit, and price-cost-profit relations. These models are mainly endogenous and deterministic.Exogenous factors and stochastic elements gain importance in the part on the modern theories of cyclical response to monetary and real disturbances.The early monetarist interpretations of the cycle are followed by the newer equilibrium models with price misperceptions and intertemporal substitution of labor. Monetary shocks continue to be used but the emphasis shifts from nominal demand changes and lagged price adjustments to informational lags and supply reactions. Various problems arise, revealed by intensive testing and criticisms.This prompts new attempts to explain the persistence of'cyclical movements and the roles of uncertainty and financial instability, real shocks,and gradual price adjustments. One conclusion is that business cycle research will profit most from (a)the updating of findings from the historical and statistical studies, and (b)using the results to eliminate inconsistencies with the evidence and to move toward a realistic synthesis of the surviving elements of the extant theories.
Handle: RePEc:nbr:nberwo:1503
Template-Type: ReDIF-Paper 1.0
Title: The Resolution of the Labor Scarcity Paradox
Author-Name: John A. James
Author-Person: pja276
Author-Name: Jonathan S. Skinner
Author-Person: psk23
Note: DAE
Number: 1504
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1504
File-URL: http://www.nber.org/papers/w1504.pdf
File-Format: application/pdf
Publication-Status: published as James, John A. and Jonathan S. Skinner. "The Resolution of the Labor Scarcity Paradox," Journal of Economic History, Vol. 45, No. 3, (September 1985) pp. 513-540.
Abstract: This paper reconciles the apparently contradictory evidence about American and British technology in the first half of the nineteenth century. Past studies have focused on the writings of a number of distinguished British engineers, who toured the United States during the 1850s and commented extensively on the highly mechanized state of the manufacturing sector. Other studies, however, have marshalled evidence that the interest rate was higher, and the aggregate manufacturing capital stock was lower, in the United States relative to Britain. We resolve this paradox by noting that British engineers were most impressed by only a few industries which relied on skilled workers. Using the 1849 Census of Manufactures, we estimate separate production functions for the skilled sector and for the remaining, less skilled manufacturing sector. We find strong relative complementarity between capital and natural resources in the skilled sector, and relative substitutability between skilled labor and capital. Using these parameters in a computable general equilibrium model of the U.S. and British economies indicates greater capital intensity (or labor scarcity) in the skilled manufacturing sector, but overall capital scarcity and higher interest rates, in the U.S. relative to Britain.
Handle: RePEc:nbr:nberwo:1504
Template-Type: ReDIF-Paper 1.0
Title: Seigniorage, Inflation, and Reputation
Author-Name: Herschel I. Grossman
Author-Name: John B. Van Huyck
Note: ME
Number: 1505
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1505
File-URL: http://www.nber.org/papers/w1505.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Herschel I. and John B. Van Huyck. "Seigniorage, Inflation, and Reputation," Journal of Monetary Economics, Vol. 18, No. 1, July 1986, pp. 21-31.
Abstract: This paper derives a reputational equilibrum for inflation in a model in which the government obtains valuable seigniorage by issuing fiat money in echange for real resources. One insightful result is that , with contemporaneous perceptionof actual government behavior and immediate adjustment of real cash balences to new information , the Friedman elasticity solution for maximal seigniorage is the reputatoinal equilibrium. More generally , the analysis shows that the objective of maximal seigniorage produces an equilibrium inflation rate equal either to a generalization of the Friedman elasticity solution or to the rate at which the government discounts future seigniorage adjusted for the growth rate, whichever is larger. Thus, the model formalizes the conjecture that epizodes of inflation rates in excess of the Friedman solution are attributable to high discounts rates for future seigniorage. Adding aversion to high expected inflation to the model, this analysis also rationalizes the observation that inflation rates are usually less than Friedman's elasticity solution.
Handle: RePEc:nbr:nberwo:1505
Template-Type: ReDIF-Paper 1.0
Title: International Coordination in the Design of Macroeconomic Policy Rules
Author-Name: John B. Taylor
Author-Person: pta174
Note: EFG
Number: 1506
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1506
File-URL: http://www.nber.org/papers/w1506.pdf
File-Format: application/pdf
Publication-Status: published as Taylor, John B. "International Coordination in the Design of Macroeconomic Policy Rules," European Economic Review, North Holland, Vol. 28, Nos. 1-2 ,(June-July 1985), pp. 53-81.
Abstract: The paper examines international issues that arise in the design and evaluation of macroeconomic policy rules. It begins with a theoretical investigation of the effects of fiscal and monetary policy in a two-country rational expectations model with staggered wage and price setting and with perfect capital mobility. The results indicate that with the appropriate choice of policies and with flexible exchange rates, demand shocks need not give rise to international externalities or coordination issues. Price shocks, however, do create an externality, and this is the focus of the empirical part of the paper. Using a simple 7 country model -- consisting of Canada, France, Germany, Italy,Japan, the United Kingdom, and the United States -- optimal cooperative and non-cooperative (Nash) policy rules to minimize the variance of output and inflation in each country are calculated. The cooperative policies are computed using standard dynamic stochastic programming techniques and the non-cooperative policies are computed using an algorithm developed by Finn Kydland. The central result is that the cooperative policy rules for these countries are more accommodative to inflation than the non-cooperative policy rules.
Handle: RePEc:nbr:nberwo:1506
Template-Type: ReDIF-Paper 1.0
Title: The Order of Liberalization of the Current and Capital Accounts of the Balance of Payments
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: ITI IFM
Number: 1507
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1507
File-URL: http://www.nber.org/papers/w1507.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. "The Order of Liberalization of the Current and Capital Accounts of the Balance of Payments," Economic Liberalization in Developing Countries, eds. A.C. Choksi and D. Papageorgious, Oxford: Basi Blackwell , 1986.
Abstract: The opening up of an economy to the rest of the world has generally been considered an integral part of economic reform aimed at increasing the role of markets. Until recently, however, very little discussion was devoted to the order in which the capital and current account should be liberalized indeveloping countries.This paper deals with several aspects of the order of liberalization. The different arguments usually given to advocate a particular ordering are critically reviewed. Then a three-good two-factor model is used to analyze the effects of alternative ordering on production and income distribution. A two-period model of a small economy is also used to investigate the welfare effects of opening the capital account in the presence of distortions. While the discussion does not yield a theorem regarding the appropriate order of liberalization, there are strong presumptions that it is more prudent to liberalize the current account first.
Handle: RePEc:nbr:nberwo:1507
Template-Type: ReDIF-Paper 1.0
Title: A Defense of Traditional Hypotheses About the Term Structure of InterestRates
Author-Name: John Y. Campbell
Author-Person: pca54
Note: ME
Number: 1508
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1508
File-URL: http://www.nber.org/papers/w1508.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. "A Defense of Traditional Hypotheses about the Term Structure of Interest Rates," Journal of Finance, Vol. 41, No. 1, March 1986), pp. 183-193.
Abstract: Expectations theories of asset returns may be interpreted as stating either that risk premia are zero, or that they are constant through time. Under the former interpretation, different versions of the expectations theory of the term structure are inconsistent with one another, but I show that this does not necessarily carry over to the constant risk premium interpretation of the theory. Furthermore, I argue that differences among expectations theories are of 'second order" in a precise mathematical sense. I present an approximate linearized framework for analysis of the term structure in which these differences disappear, and I test its accuracy in practice using data from the CRSP government bond tapes.
Handle: RePEc:nbr:nberwo:1508
Template-Type: ReDIF-Paper 1.0
Title: Bond and Stock Returns in a Simple Exchange Model
Author-Name: John Y. Campbell
Author-Person: pca54
Note: ME
Number: 1509
Creation-Date: 1984-11
Order-URL: http://www.nber.org/papers/w1509
File-URL: http://www.nber.org/papers/w1509.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. "Bond and Stock Returns in a Simple Exchange Model," Quarterly Journal of Economics," Vol. 101, No. 4, (November 1986) pp. 785-803.
Abstract: In this paper I analyze a simple "representative agent" exchange model of general equilibrium, and derive closed form solutions for returns on stocks and real and nominal bonds. The model restricts the representative agent's utility function to be time-separable with isoelastic period utility, and the endowment to be conditionally lognormal. These assumptions allow me to examine a general stationary stochastic process for the log of the endowment. Money and nominal prices are modelled by means of a Clower constraint. Risk premia on stocks and real and nominal discount bonds are simple functions of the coefficient of relative risk aversion, the variance of the innovation to the log endowment, and the weights in the moving average representation of the log endowment. One-period holding premia on real bonds may be positive or negative, but the limit as maturity increases is positive. When the money supply is deterministic, stocks and nominal bonds are perfect substitutes. Their expected returns to maturity are higher than those on real bonds of equal maturity, but need not be higher over other holding periods. Nominal interest rates vary positively with prices (the "Gibson paradox") if the coefficient of relative risk aversion is greater than one. In the last section of the paper I consider random shocks to the agent's utility function. These shocks may generate risk premia even when the agent is risk-neutral.
Handle: RePEc:nbr:nberwo:1509
Template-Type: ReDIF-Paper 1.0
Title: The Incentive Effects of Private Pension Plans
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: David A. Wise
Author-Person: pwi45
Note: LS
Number: 1510
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1510
File-URL: http://www.nber.org/papers/w1510.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence and David A. Wise. "The Incentive Effects of Private Pension Plans," Issues in Pension Economics, ed. Z. Bodie, J.B. Shoven, D.A . Wise, Chicago: UCP, 1987. Pp. 283-336.
Publication-Status: published as The Incentive Effects of Private Pension Plans, Laurence J. Kotlikoff, David A. Wise. in Issues in Pension Economics, Bodie, Shoven, and Wise. 1987
Abstract: The proportion of workers covered by pensions has increased very substantially over the past two or three decades, and in particular the number of older workers with pensions continues to increase. During the same period,and especially in the past decade, the labor force participation of older workers has declined dramatically. These two trends may well be related. This paper examines the incentive effects of private pensions. We find that the provisions of pension plans provide very substantial incentives to terminate work at the current job after the age of early retirement and even greater incentives to leave after the age of normal retirement. It is not unusual for the reduction in pension 'benefit accrual after these retirement ages to equal the equivalent of a 30 percent reduction in wage earnings. In addition to a potentially large impact on labor force participation of older workers, pension plan provisions are likely to have important effects on labor mobility of younger workers.
Handle: RePEc:nbr:nberwo:1510
Template-Type: ReDIF-Paper 1.0
Title: Life Cycle Annuity Valuation
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Note: PE
Number: 1511
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1511
File-URL: http://www.nber.org/papers/w1511.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas. "The Economic Effects of Social Security: Toward a Reconciliation of Theory and Measurement," Journal of Public Economics, Vol. 33, no. 3, pp. 273-304, 1987.
Abstract: In this paper, we argue that actuarial valuation of annuity benefit streams is theoretically inconsistent with the assumption of pure lifecycle motives. Instead, we show that the simple discounted value of future benefits (ignoring the possibility of death) is often a good approximation to the relevant concept of value. This observation motivates a re-examination of existing empirical evidence concerning the effects of Social Security on personal savings, retirement, and the distribution of wealth, as well as the proper computation of age-wealth profiles. The conceptual points raised here are also relevant for evaluating the relative merits of wage and consumption taxes. In each case,we argue that the use of simple, rather than actuarial discounting of survival-contingent income streams dramatically alters the conclusions of previous studies.
Handle: RePEc:nbr:nberwo:1511
Template-Type: ReDIF-Paper 1.0
Title: Foreign-Owned Land
Author-Name: Jonathan Eaton
Author-Person: pea5
Note: ITI IFM
Number: 1512
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1512
File-URL: http://www.nber.org/papers/w1512.pdf
File-Format: application/pdf
Publication-Status: published as From The American Economic Review, Vol. 78, No. 1, pp. 76-88, (March 1988).
Abstract: Land and capital serve not only as factors of production but as assets which households use as stores of value. Standard trade models typically recognize only the first role. In its role as an asset land reduces the amount of national savings available for capital investment. Foreign investment affects the national economy through both asset markets and factor markets. When the share of labor in the land-using sectoris large relative to the labor share in the capital-using sector, factor-market effects are likely to dominate. In this case a drop in the price of the agricultural good or a rise in the land-labor ratio attracts foreign investment, while a drop in the world interest rate raises the welfare of a capital-importing country. If the share of labor in the land-using sector is smaller, however, asset-market effects dominate. These results are then likely to be reversed. Even when trade in claims on land equalizes the domestic and world interest rates, a tax on land raises steady-state welfare.
Handle: RePEc:nbr:nberwo:1512
Template-Type: ReDIF-Paper 1.0
Title: R & D Activities and the Technology Game: A Dynamic Model of U.S.-JapanCompetition
Author-Name: Ryuzo Sato
Note: PR
Number: 1513
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1513
File-URL: http://www.nber.org/papers/w1513.pdf
File-Format: application/pdf
Abstract: This paper presents an international comparison of R&D activities in basic and applied research. The commonly-held view that Japan is not spending much on basic technology development cannot be empirically substantiated from the study of the historical trends. However, the fact that in the U.S.A. the largest proportion of industrial R&D expenditures is spent on the defense and aero-space related industries (60%) ,while Japan is spending the largest proportion (60%) on the chemical, electronics, communication and automobile industries, may indicate that in effect Japan emphasizes the development of applied technology.The second part of the paper is to show how two countries, one with heavy R&D activities in basic technology (the U.S.A.)and the other with heavy R&D activities in applied technology(Japan), can compete in the world market with their productivity differences in basic and applied fields. A simple model of differential game is presented to explain how Japan can increase the market share by utilizing both the informational and productivity efficiencies.
Handle: RePEc:nbr:nberwo:1513
Template-Type: ReDIF-Paper 1.0
Title: Pricing and Location of Physician Services in Mental Health
Author-Name: Richard G. Frank
Note: EH
Number: 1514
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1514
File-URL: http://www.nber.org/papers/w1514.pdf
File-Format: application/pdf
Publication-Status: published as Frank, Richard G. "Pricing and Location of Physician Services in Mental Health." Economic Inquiry, Vol. 23, No. 1, (January 1985), pp. 115-133.
Abstract: Puzzling results of a positive association between the number of physicians per capita and the level of fees for physician services have been reported in the literature. These results may be due to misspecification of econometric models and use of data aggre-gated across medical specialties. It is hypothesized that the unusual results would not persist with a carefully specified econometric model for a single medical specialty. A general model of pricing and location of physician's services is applied to the market for psychiatrist's services. The results imply that the market for psychiatrist's services operates in a manner consistent with the predictions of the competitive model.
Handle: RePEc:nbr:nberwo:1514
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Assimilation on the Earnings of Immigrants: A Reexamination of the Evidence
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 1515
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1515
File-URL: http://www.nber.org/papers/w1515.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants." Journal of Labor Economics, Vol. 3, No. 4, (October 1985( , pp. 463-489.
Abstract: This paper reexamines the empirical basisfor two "facts" which seem to be found in most cross-section studies of immigrant earnings: (1) the earnings of immigrants grow rapidly as they assimilate into the U.S.; and (2) this rapid growth leads to many immigrants overtaking the earnings of the native-born within 10-15 years after immigration. Using the 1970 and 1980 U.S.Censuses, this paper studies the earnings growth experienced by specific immigrant cohorts during the 1970-1980 period. It is found that within-cohort growth is significantly smaller than the growth predicted by cross-section regressions for most immigrant groups. This differentialis consistent with the hypothesis that there has been a secular decline in the "quality" of immigrants admitted to the United States.
Handle: RePEc:nbr:nberwo:1515
Template-Type: ReDIF-Paper 1.0
Title: The Distribution of Prizes in a Match-Play Tournament with Single Eliminations
Author-Name: Sherwin Rosen
Note: LS
Number: 1516
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1516
File-URL: http://www.nber.org/papers/w1516.pdf
File-Format: application/pdf
Abstract: This paper begins to study the reward-incentive structure in sequential knock-out or elimination tournaments with matched, pairwise comparisons among players at each stage. The prize structure required to elicit constant expected quality of play in all matches throughout the tournament is characterized for competition among equally talented (or perfectly handicapped), players.The incentive maintaining prize structure is shown to concentrate' extra weight on the top ranking prize, a phenomenon observed in most tournaments. More can be said. Prizes that maintain performance incentives at all stages award a constant increment for each match won up to the last stage; and an amount greater than this for the player who wins the final match. Players' incentives to perform in early rounds are propelled by the probability of achieving higher ranks and surviving to later stages where rewards are larger. These continuation options are played out in the final match, so it is only the difference between winning and losing prizes in the finals that controls incentives there. Many athletic tournaments are structured in the manner analyzed here,but the general framework ultimately may have application to certain career games as well. More generally, a tournament structure may he viewed as a statistical, experimental design problem.The prize structure interacts with the design in providing incentives for the best players to survive to the finals and win the top prizes.
Handle: RePEc:nbr:nberwo:1516
Template-Type: ReDIF-Paper 1.0
Title: Trade and Financial Interdependence Under Flexible Exchange Rates: The Pacific Area
Author-Name: Jorge Braga de Macedo
Author-Person: pbr373
Note: ITI IFM
Number: 1517
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1517
File-URL: http://www.nber.org/papers/w1517.pdf
File-Format: application/pdf
Publication-Status: published as de Macedo, Jorge Braga. "Trade and Financial Interdependence Under Flexible Exchange rates: The Pacific Area." Pacific Growth and Financial Interdependence, edited by Augustine H. H. Tan and Basant Kapur, pp. 277-291. Sydney, Australia: Allen Unwin Australia Pty Ltd, 1986.
Abstract: This paper analyses policy interdependence under flexible exchange rates and its implications for middle-income countries in the Pacific area. In the first part of the paper, the consequences of strategic behavior among industrial countries are illustrated by means of a simple diagram. It is argued that in the absence of incentives to coordinate macroeconomic policies among major countries, exchange rates will tend to be volatile. Evidence on the world value of the dollar in the flexible rate period is then presented and interpreted.The second part describes exchange rate policies in the Pacific area. It is found that the widespread policy of pegging to the U.S. dollar has implied occasional large devaluations against the numeraire (Korea, Taiwan, Thailand, Philippines and Indonesia). An alternative, which requires higher Pacific trade and financial interdependence than the one prevailing during the last decade, would be a joint float along the lines of the policies seemingly pursued by Malaysia and Singapore.The two-country macroeconomic model presented in the Appendix can be used to assess the costs and benefits of policy coordination both at the world and at the regional level.
Handle: RePEc:nbr:nberwo:1517
Template-Type: ReDIF-Paper 1.0
Title: Anticipated Budget Deficits and the Term Structure of Interest Rates
Author-Name: Daniel Valente Dantas
Author-Name: Rudiger Dornbusch
Note: EFG
Number: 1518
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1518
File-URL: http://www.nber.org/papers/w1518.pdf
File-Format: application/pdf
Abstract: This paper investigates the implications of government deficits in an overlapping generations consumption loan model with longterm assets. The only asset in the economy is a real consol issued by the government and serviced by lumpsum taxes on the young. We explore here the time path of short and longterm interest rates following the announcement of a future,transitory budget deficit under two alternative assumptions. In one case the deficit arises from transitory government spending, in the other case from a transfer.We show that a deficit policy ultimately raises longterm interest rates and lowers consol prices. The exact shape of the path of short-term rates depends on the source of the deficit and on the saving response to interestrates. In general, though, the term structure will be v-shaped. The interest of the model resides in the fact that the prices of longterm assets link the current generations to future disturbances. Because future disturbances affect future interest rates they affect the current value of debt outstanding and hence equilibrium short-term rates. The exact manner in which the disturbances are transmitted to prior periods depends on the extent to which consumers substitute easily across time or, on the contrary, have a strong preference for consumption smoothing.
Handle: RePEc:nbr:nberwo:1518
Template-Type: ReDIF-Paper 1.0
Title: The Economic Effects of the Corporate Income Tax: Changing Revenues and Changing Views
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: ME
Number: 1519
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1519
File-URL: http://www.nber.org/papers/w1519.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. "The Economic Effects of the Corporate Income Tax: Changing Revenues and Changing Views," Financing Corporate Capital Formation, B . Friedman (ed). Chicago: UCP, 1986, pp. 107-121.
Publication-Status: published as The Economic Effects of the Corporate Income Tax: Changing Revenues and Changing Views, Alan J. Auerbach. in Financing Corporate Capital Formation, Friedman. 1986
Abstract: This paper reviews recent empirical research studying the impact of the U.S. corporate income tax on the behavior of firms. Four areas are discussed:(1) The extent to which dividend taxation imposes a "double tax" on corporate source earnings;(2) The historical impact of tax incentives on the incentives to investand the value of corporate equity;(3) The effects of limited loss offset provisions on the incentives to invest in risky assets; and(4) The determinants of corporate leverage.
Handle: RePEc:nbr:nberwo:1519
Template-Type: ReDIF-Paper 1.0
Title: Implications of Government Deficits for Interest Rates, Equity Returns and Corporate Financing
Author-Name: Benjamin M. Friedman
Note: ME
Number: 1520
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1520
File-URL: http://www.nber.org/papers/w1520.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "Implications of Government Deficits for Interest Rates, Equity Returns and Corporate Financing," Financing Corporate Capital Formation, B. Friedman (ed) Chicago: UCP, 1986, pp. 67-89.
Abstract: How the financing of government budget deficits affects the structure of expected asset returns depends on assets' relative substitutabilities in investors' aggregate portfolio, and these substitutabilities in turn depend on how investors perceive the risks associated with the respective assets' returns. The empirical results reported in this paper, based on three different ways of representing investors' risk perceptions, consistently indicate that government deficit financing raises expected debt returns relative to expectedequity returns, regardless of the maturity of the government's financing. More specifically, financing government deficits by issuing short-term debt lowers the return on long-term debt, and lowers the return on equity by even more, relative to the return on short-term debt. Financing deficits by issuing long-term debt raises the return on long-term debt, but lowers the return on equity, again in comparison to the return on short-term debt. The indicated magnitudes of these effects differ according to the method used to represent investors' risk perceptions, but the qualitative results are consistent throughout. Moreover, many of the indicated magnitudes are large enough to matter economically. These results imply that continuing large government deficits at full employment lead to market incentives for individual business corporations to emphasize reliance on equity (including retentions), and reduce reliance on debt, in comparison with the composition of corporate financing that would prevail in the absence of the need to finance the government budget deficit.
Handle: RePEc:nbr:nberwo:1520
Template-Type: ReDIF-Paper 1.0
Title: Debt and Equity Returns Revisited
Author-Name: Patric H. Hendershott
Note: ME
Number: 1521
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1521
File-URL: http://www.nber.org/papers/w1521.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H., "Debt and Equity Returns Revisited," Financing Corporate Capital Formation, B. Friedman (ed), Chicago, University of Chicago Press, (1986), pp. 35-50.
Publication-Status: published as Debt and Equity Returns Revisited, Patric H. Hendershott. in Financing Corporate Capital Formation, Friedman. 1986
Abstract: This paper examines semiannual ex post returns on corporate equities and bonds and six-month Treasury bills over the 1953-84 period with special emphasis on whether returns so far in the 1980s have been usual relative to the previous quarter century. The performance of the equity and bond markets in the 1980s has not been at all unusual, with equity returns being driven by the business cycle and bond returns by unexpected changes in new issue Treasury bond rates. Real six-month Treasury rates have averaged 5½ percentage points,far above the 2 percentage point average since 1953 but about the same as in the 1926-30 period. On an after-tax (roughly 40 percent) basis,however, real bill rate have been in line with the 1950s and 1960s, but significantly above the abnormally low rates in the 1970s.
Handle: RePEc:nbr:nberwo:1521
Template-Type: ReDIF-Paper 1.0
Title: Valuing Financial Flexibility
Author-Name: Scott P. Mason
Note: ME
Number: 1522
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1522
File-URL: http://www.nber.org/papers/w1522.pdf
File-Format: application/pdf
Publication-Status: published as Mason, Scott P. "Valuing Financial Flexibility," Financing Corporate Capital Formation, B. Friedman (ed). Chicago: UCP, 1986, pp. 91-106.
Publication-Status: published as Valuing Financial Flexibility, Scott P. Mason. in Financing Corporate Capital Formation, Friedman. 1986
Abstract: Two facts that corporations, underwriters and investors have been forced to confront are increased capital market volatility and increased complexity in the design of securities. However, these two facts, increased volatility and increased complexity, are not unrelated. Virtually all of the complexity in securities can be viewed as the inclusion of different options in a straight debt contract. Given the fact that the value of options is driven most significantly by volatility, the advantage of including options, i.e. financial flexibility, in securities has increased with increased market volatility. This would appear to explain why corporate issuers and institutional investors have shown substantial interest in securities which improve their flexibility in volatile markets. Therefore, techniques which can consistently reflect the role of volatility in the value of options or flexibility, should be of interest to issuers, underwriters, and investors.This paper summarizes the results of some research by Jones, Masonand Rosenfeld (MR), (1984), and presents some new results, which test the ability of a CCA model based on Black and Scholes' option pricingprinciples to predict the market price of callable corporate debt, andtherefore, the price of such common debt covenants as call provisions andcall protection, In addition, some numerical CCA results are reportedwhich demonstrate the impact of changing interest rate volatility on the value of call provisions and call protection.
Handle: RePEc:nbr:nberwo:1522
Template-Type: ReDIF-Paper 1.0
Title: Have U.S. Corporations Grown Financially Weak?
Author-Name: Robert A. Taggart, Jr.
Note: ME
Number: 1523
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1523
File-URL: http://www.nber.org/papers/w1523.pdf
File-Format: application/pdf
Publication-Status: published as Taggart, Robert A., Jr. "Have U.S. Corporations Grown Financially Weak?" Financing Corporate Capital Formation, edited by Benjamin M. Friedman. Chicago: UCP, 1986, pp. 13-33.
Publication-Status: published as Have U.S. Corporations Grown Financially Weak?, Robert Taggart, Jr. in Financing Corporate Capital Formation, Friedman. 1986
Abstract: The feelingis widespread that the financial strength of U.S. corporations has eroded over the past twenty years. This trend is often blamed on some combination of the tax system, inflation and overly optimistic assessments of business risk.This paper examines recent corporate financing developments from along-run perspective. It is concluded that these developments appear less dangerous when viewed in the context of the twentieth century as a whole than when viewed in the context of the post-World War II years. A second major conclusion is that powerful corrective mechanisms are at work to keep corporate financial positions from becoming too risky. These forces have been particularly noticeable over the past ten years. Third, the effects on business financing of the tax system, inflation and business risk are difficult to trace in the aggregate data, and these effects may be less straightforward than has commonly been thought. Finally, it is argued that the degree of economic instability and the relative level of federal government borrowing will be key determinants of future corporate financing patterns.
Handle: RePEc:nbr:nberwo:1523
Template-Type: ReDIF-Paper 1.0
Title: Tax Reform and Housing
Author-Name: Patric H. Hendershott
Author-Name: David C. Ling
Author-Person: pli857
Note: PE
Number: 1524
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1524
File-URL: http://www.nber.org/papers/w1524.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and David C. Ling. "Tax Reform and Housing." Proceedings of the 77th Annual Conference of the National Tax Association - Tax Institute of America, pp. 170-178. Columbus OH: NTA-TIA, 1985.
Abstract: Current tax law provides tax advantages to owner-occupied housing that increase with a household's income. This well understood fact has led to periodic proposals to substitute a tax credit equal to, say, 25 percent of housing-related expenses for their current deductibility. Because all of the tax reforms considered in this paper (Hall-Rabushka, Kemp-Kasten and Bradley-Gephardt) move toward a flat rate schedule, they all will sharply reduce the tax-advantages of owner-occupied housing to higher income households relative to lower income households. In fact, our analysis suggests that all reforms will lower the price of obtaining housing services from owner-occupied housing for these households and raise it for higher-income households. The "breakeven" income at which the price of these housing services would be unchanged is about $55,000 for Kemp-Kasten and Hall-Rabushka probably $10,000 less for Bradley-Gephardt. The price of renting housing should rise under all reforms, probably by 5 to 10 percent. In combination with the decline in the price of obtaining housing services for middle and lower income households, this should give a signficant boost to homeownership. Under Kemp-Kasten, ownership rates will rise for four-member households with AGI (as renters) of under $60,000; for higher income households ownership could decline marginally. The breakeven income level is roughly $40,000 for Bradley-Gephardt and $35,000 or Hall-Rabushka.
Handle: RePEc:nbr:nberwo:1524
Template-Type: ReDIF-Paper 1.0
Title: Pricing Rate Caps on Default-Free Adjustable-Rate Mortgages
Author-Name: Stephen A. Buser
Author-Name: Patric H. Hendershott
Author-Name: Anthony B. Sanders
Author-Person: psa474
Note: ME
Number: 1525
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1525
File-URL: http://www.nber.org/papers/w1525.pdf
File-Format: application/pdf
Publication-Status: published as Stephen A. Buser & Patric H. Hendershott & Anthony B. Sanders, 1985. "Pricing Life-of-Loan Rate Caps on Default-Free Adjustable-Rate Mortgages," Real Estate Economics, vol 13(3), pages 248-260.
Abstract: A model is developed and utilized in this paper to value a life of loan interest rate cap on an ARM that reprices monthly. The value of the cap is seen to depend importantly on both the slope of the term structure and the variance of the one month rate. However, the cap value is not sensitive to the source of the slope of the term structure -- what precise combination of interest rate expectations and risk aversion determined the slope. This insensitivity is fortunate because of the great difficulty of knowing at any point in time why the term structure is what it is. Given the variation in the slope of the term structure and the variance of the one month rate that occurred over the 1979-84 period, the addition to the coupon rate on a one-month ARM that lenders should have charged for a 5 percent life of loan cap has ranged from 5 to 40 basis points.
Handle: RePEc:nbr:nberwo:1525
Template-Type: ReDIF-Paper 1.0
Title: Capital Flows, the Current Account, and the Real Exchange Rate: Consequences of Liberalization and Stabilization
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: ITI IFM
Number: 1526
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1526
File-URL: http://www.nber.org/papers/w1526.pdf
File-Format: application/pdf
Publication-Status: published as Obstfeld, Maurice. "Capital Flows, the Current Account, and the Real Exchange Rate: Consequences of Stabilization and Liberalization," Economic Adjustment and the Real Exchange Rates in Developing Countries, edited by S. Edwards and Liquat Ahamed. Chicago: UCP, 1986.
Abstract: This paper develops a dynamic framework in which macroeconomic liberalization and stabilization measures of the type recently seen in Latin America can be studied. The model is sufficiently general to cover both polar cases of a closed capital account and free private capital mobility, so the effects of liberalizing external asset trade can be studied. Capital-account liberalization leads to an initial period of real appreciation, but a long-run real depreciation; and the economy passes through alternating phases of boom and slump in the process. Devaluation is found to be nonneutral even in the long run and possibly contractionary in the short run. In contrast, a change in the rate of exchange depreciation is neutral, even with sticky prices, when capital is fully mobile. When capital is immobile, a disinflationary reduction inthe rate of exchange-rate crawl has effects that are the opposite of those arising from capital-account opening. The model suggests that capital-account liberalization, rather than disinflation, played a part in causing the massive real exchange-rate appreciation that accompanied recent Latin American programs of economic reform.
Handle: RePEc:nbr:nberwo:1526
Template-Type: ReDIF-Paper 1.0
Title: The International Transmission of Fiscal Expenditures and Budget Deficits in the World Economy
Author-Name: Jacob A. Frenkel
Author-Name: Assaf Razin
Author-Person: pra388
Note: ITI IFM
Number: 1527
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1527
File-URL: http://www.nber.org/papers/w1527.pdf
File-Format: application/pdf
Publication-Status: published as Frenkel, Jacob A. and Assaf Razin. "The International Transmission And Effects Of Fiscal Policies," American Economic Review, 1986, v76(2), 330-335.
Publication-Status: published as Frenkel, Jacob A. and Assaf Razin. "The International Transmission of Fiscal Expenditures and Budget Deficits in the World Economy," Economic Policyin Theory and Practice, ed. Assaf Razin and Efraim Sadka, (Sept. 1986). Macmillan.
Abstract: This paper analyses the effects of fiscal policies on rates of interest and wealth in the world economy. Uncertainty concerning the length of life yields an equilibrium in which private and social rates of discount differ and budget deficits exert real effects. It is shown that a current budget deficit(resulting from a tax cut) raises world rates of interest. On the other hand the direction of the effect of an expected future deficit on the short-term rate of interest depends on whether the country is having a surplus or a deficit inits current account of the balance of payments. If it runs a deficit in the current account then the short-term rate of interest rises and vice versa; the future rate of interest, however, must rise. It is also shown that budget deficits raise domestic wealth and lower foreign wealth and thus result in a negative transmission. In the long run, a higher steady-state value of government debt raises the steady-state world rate of interest but its effect on the long-run value of foreign wealth is ambiguous. The effects of changes in government spending depend on both the timing and the patterns of spending. A transitory (balanced-budget) rise in current government spending raises the current rate of interest and lowers domestic and foreign wealth while a transitory future rise in government spending lowers the current rate of interest, lowers domestic wealth and raises foreign wealth. A permanent rise in government spending lowers the rate of interest if the current account of the balance of payments is in deficit, and vice versa. Finally, the model is generalized to a multi-commodity world and the impact of policies are shown to depend on comparison among various spending and saving propensities of private sectors and of governments.
Handle: RePEc:nbr:nberwo:1527
Template-Type: ReDIF-Paper 1.0
Title: Causal Relationships between Infant Mortality and Fertility in Developedand Less Developed Countries
Author-Name: Tadashi Yamada
Note: EH
Number: 1528
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1528
File-URL: http://www.nber.org/papers/w1528.pdf
File-Format: application/pdf
Publication-Status: published as Yamada, Tadashi. "Causal Relationships between Infant Mortality and Fertility in Developed and Less Developed Countries," Southern Economic Journal, Vol. 52, No. 1, October 1985, pp. 364-370.
Abstract: This paper is a study of the dynamic relationships between two demographic variables--the infant mortality rate and the fertility rate-- using time series methodology. I believe that I have shown that infant mortality and fertility are not independent but rather are jointly determined. Also, i believe that I have shown that a decline in infant mortality that is due to an increase in per capita real income triggers a subsequent decline in fertility.This dynamic nexus between changes in infant mortality and fertilitylies at the heart of the so-called "demographic transition."
Handle: RePEc:nbr:nberwo:1528
Template-Type: ReDIF-Paper 1.0
Title: Discrete Devaluation as a Signal to Price Setters
Author-Name: Louka T. Katseli
Note: ITI IFM
Number: 1529
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1529
File-URL: http://www.nber.org/papers/w1529.pdf
File-Format: application/pdf
Publication-Status: published as Katseli, Louka T. "Discrete Devaluations as a Signal to Price Setters: Suggested Evidence from Greece," Economic Adjustment and Exchange Rates in Developing Countries, edited by S. Edwards and Liquat Ahamed. Chicago: UCP ( 1986)
Abstract: The central hypothesis of this paper is that both the extent and speed of adjustment of the real exchange rate is affected by the way the central bank manages the nominal exchange rate. Specifically, a large discrete adjustment of the nominal exchange rate is more likely to result in fast adjustment of prices as opposed to a policy of smooth and continuous crawling peg. In the context of a monopolistic price adjustment framework, it is shown that a discrete and unexpected devaluation of the exchange rate shortens implicit price contracts and increases the rate of price adjustment in the nontraded goods sector, because firms tend to strengthen their expectations about an overall increase in costs and about an aggregate as opposed to a local shift in the demand curve for the firm's output. A discrete change in the exchange rate acts as an "information signal" that leads to fast overall adjustment of nontraded goods prices. The hypothesis is tested and not rejected at the macro, sectoral and firm level using macro and microdata on Greek prices prior to and after the January 1983 discrete devaluation.
Handle: RePEc:nbr:nberwo:1529
Template-Type: ReDIF-Paper 1.0
Title: Asset Returns, Discount Rate Changes and Market Efficiency
Author-Name: Michael Smirlock
Author-Name: Jess B. Yawitz
Note: ME
Number: 1530
Creation-Date: 1984-12
Order-URL: http://www.nber.org/papers/w1530
File-URL: http://www.nber.org/papers/w1530.pdf
File-Format: application/pdf
Publication-Status: published as Smirlock, Michael and Jess B. Yawitz. "Asset Returns, Discount Rate Changend Market Efficiency," Journal of Finance, September 1985.
Abstract: The primary purpose of this paper is to reconcile the previous findings of discount rate endogeneity with the presence of discount rate announcement effects in securities markets. The crux of this reconciliation is the dictinction between "technicral" discount rate changes that are endogenous and "non-technical" changes which contain some informative policy implications. In essence, we attempt to separate expected discount rate changes from unexpected changes, or equivalently, the expected component of discount rate changes from the unexpected component. If markets are efficient, the former should have no announcement effects while the latter may be associated with an announcement effect. Accordingly, the focus of the empirical analysis is on the interaction between discount rate exogeneity, the specific monetary policy regime, and announcement effects. In addition, we examine whether the behaviorof these markets in the post-announcement period is consistent with the rapid price adjustment implied by market efficiency.
Handle: RePEc:nbr:nberwo:1530