Unemployment dynamics in an OLG economy with public pensions

Pension benefits in old age establish a disincentive to save in youth, thereby yielding lower levels of capital stock and the wage rate. As a result, the trade union has an incentive to change the composition of its two targets: employment and the wage rate. This paper develops a model that includes employment effects of public pensions via capital accumulation and union wage setting. Within this framework, we consider how contribution rates to the pension system influence the level and time path of the unemployment rate. It is demonstrated that (1) a higher contribution rate results in a lower unemployment rate, and (2) the economy with a high (low) contribution rate experiences monotone convergence towards (oscillatory convergence towards or a period-2 cycle around) the steady state. The author would like to thank an anonymous referee, Kazutoshi Miyazawa, and seminar participants at Osaka University for their useful comments and suggestions, and Masako Ikefuji and Hiroaki Yamagami for their research assistance. Financial support from the Japan Society for the Promotion of Science (JSPS) through a Grant-in-Aid for Young Scientists (B) (No.17730131), the Asahi Glass Foundation, the Japan Economic Research Foundation and the 21st Century COE Program (Osaka University) is gratefully acknowledged. All remaining errors are mine.     

Environmental tax policy in a model of growth cycles

Summary. The purpose of this paper is to consider environmental taxation which would control emissions of firms in a model of growth cycles. In the model presented below, the economy may experience two phases of growth and environmental quality: “the no-innovation growth regime” and “the innovation-led growth regime”. Aggregate capital and environmental quality remain constant in the no-innovation growth regime, while they perpetually increase in the innovation-led growth regime. The paper shows that the tax plays a key role in determining whether the economy stably converges to one of the two regimes or fluctuates permanently between them. It also shows that there is a critical level of the tax and that the economy obtains higher growth rates of capital and environmental quality by raising (or reducing) the tax if the initial tax is below (or above) the critical level. Received: April 2, 2001; revised version: March 21, 2002 RID="*" ID="*" This research reported here was conducted within the research project “Project on Intergenerational Equity” at Institute of Economic Research, Hitotsubashi University. I am deeply grateful to an anonymous referee for his or her insightful comments, which greatly improved the paper. I also thank Hiroshi Honda, Yasuo Maeda, Yuji Nakayama, and participants in workshops at Hitotsubashi University, Kyoto University, Nagoya University, Osaka University, University of Tsukuba, Yokohama National University, and University of Tokyo for their valuable comments and suggestions. Any remaining errors are mine.     

Pairs trading under transaction costs using model predictive control

Model predictive control with proportional transactions costs provides a good approximation to the optimal trading strategy     

REDISTRIBUTIVE POLITICS AND GOVERNMENT DEBT IN A BORROWING‐CONSTRAINED ECONOMY

We develop a two‐period, three‐class of income model where low‐income agents are borrowing constrained because of capital market imperfections, and where redistributive expenditure is financed by tax and government debt. When the degree of capital market imperfection is high, there is an ends‐against‐the‐middle equilibrium where the constrained low‐income and the unconstrained high‐income agents favour low levels of government debt and redistributive expenditure; these agents form a coalition against the middle. In this equilibrium, the levels of government debt and expenditure might be below the efficient levels, and the spread of income distribution results in a lower debt‐to‐GDP ratio.     

Non‐compliance with the Minimum Wage Law when Completely New Minimum Wage Laws Are Established: The Case of South Africa

Abstract: Using the case of South Africa, we study compliance with the minimum wage law when completely new minimum wage levels are established. By even the best estimate, the compliance rate in South Africa would not exceed 40 per cent for the agricultural sector and 30 per cent for the domestic worker sector. The compliance rates by subpopulation groups reveal that the compliance rate is low where the cost to comply with the minimum wage law is high, implying that government inspections are not done where they are likely to have the highest payoff. However, if the government tries to enforce the policy more strictly, the poor/less skilled would be adversely affected.     

Factor-Market Distortions, Dynamic Stability, and Paradoxical Comparative Statics

In the late 1960s and early 1970s there was a strong revival of interest in the role of factor-market distortions in those branches of our subject which rely on the Lerner–Samuelson two-by-two model of production. Among the legacies from that period were several comparative statical propositions which seemed counterintuitive or paradoxical. However, the revival lost momentum when confronted with Neary's observation that the major paradoxes are associated with unstable equilibria and therefore rarely observed. On the other hand, there are now seen to be several errors in Neary's analysis. For example, in the important case of a closed economy (and, by interpretation, in the case of a large open economy) he overlooked the fact that paradoxes can be associated with stable equilibria.     

The impacts of robotization on macro and sectoral economies within a world econometric model

A world model of industry and trade is developed to evaluate the probable global impact of robotization on the macro and sectoral economies. It is found that robotization in Japan and Korea has a positive impact on their economic growth, whereas robotization in the United States apparently has a negative impact on economic growth. It is also found that the international impacts of robotization in Japan are negative for the United States, but positive for the Korean economy.     

Incorporating choice dynamics in models of consumer behavior

This paper presents a framework for organizing and discussing factors influencing consumer choice dynamics, how these factors may be incorporated into models of buyer behavior and problems that may arise in estimating such models. The paper identifies research issues and delineates possible approaches. Proceedings of Session on Choice Dynamics at the Banff Symposium on Consumer Decision-Making and Choice Behavior. All authors share equally in content and remaining errors.     

Consumption externalities and the effects of international income transfers on the global environment

In this paper, we extend the standard model of private provision of public goods by including consumption externalities to characterize a situation in which economic activities pollute the environment. We consider a case in which there are an industrial country which can afford to invest in the environment and a developing country which cannot. Then, we show that international income transfers in both directions can improve the global environmental quality as well as the welfare of each country. We also show that the results have important implications for policies such as official development assistance or the assignment of tradable emission permits.