Can productive government spending be a source of equilibrium indeterminacy?

This paper presents an examination of the interaction between indeterminacy and productive government spending financed by taxes in a one-sector growth model. In the paper, we show that the possibility of indeterminacy is positively affected by dependence on income tax financing and is negatively affected by consumption tax financing. Under balanced budget rules, a key determinant for indeterminacy is a revenue source for providing public services (i.e. income tax financing) rather than the presence of productive government spending.     

Can sustainable consumption be learned? A model of cultural evolution

This paper shows how sustainable consumption patterns can spread within a population via processes of social learning even though a strong individual learning bias may favor environmentally harmful products. We present a model depicting how the biased transmission of different behaviors via individual and social learning influences agents' consumption behavior. The underlying learning biases can be traced back to evolved cognitive dispositions. Challenging the vision of a permanent transition toward sustainability, we argue that “green” consumption patterns are not self-reinforcing and cannot be “locked in” permanently.     

Can a brain drain be good for growth in the source economy?

"This paper analyzes the interaction between income distribution, human capital accumulation and migration. It shows that when migration is not a certainty, a brain drain may increase average productivity and equality in the source economy even though average productivity is a positive function of past average levels of human capital in an economy. It is also shown how the temporary possibility of emigration may permanently increase the average level of productivity of an economy."     

Can welfare be measured with a preference-satisfaction index?

Welfare in economics is generally conceived of in terms of the satisfaction of preferences, but a general, comparable index measure of welfare is generally not taken to be possible. In recent years, in response to the usage of measures of subjective well-being as indices of welfare in economics, a number of economists have started to develop measures of welfare based on preference-satisfaction. In order to evaluate the success of such measures, I formulate criteria of policy-relevance and theoretical success in the context of preference-satisfaction measures of welfare. I present a detailed case study of the methodological choices put forward in a prominent generalized proposal for measuring welfare through preferences recently published in the American Economic Review. I contrast this with an alternative welfare measure which also uses preferences to weight aspects of welfare: the ICECAP-A measure. I assess the methodology of both approaches in detail and argue that the two goals of a preference measure of welfare can only be satisfied at the expense of making a measure prohibitively costly.     

Can consumption of convenience products reveal the opportunity cost of time?

I examine how people’s consumption of time-saving products can be used to estimate the shadow value of time. I use a household production model to motivate an empirical approach that can be implemented using survey data.     

Can economic causes of tropical deforestation be identified at a global level?

This paper contributes to the literature on the macro-scale economic determinants of the increase in global forest depletion, by performing a regression analysis based on a panel dataset for fifty tropical countries over an eighteen-year period. While the initial findings appear at first to confirm a common causality pattern of selected macroeconomic variables in influencing tropical deforestation, subsequent statistical tests question the significance of the results. More specifically, testing for autocorrelation, which has been downplayed in previous studies, appears to represent a critical issue. When the initial results are corrected for autocorrelation, the significance of the parameters declines substantially below statistically acceptable levels. The implications are twofold. First, regression analyses that seek to explain deforestation at the global level need to be carefully scrutinised and checked to ensure that they meet standard statistical tests. Second, tropical deforestation might ultimately depend upon case-specific factors and further research may render more effective policy suggestions if conducted at a more disaggregated, local level.     

Is dynamic general equilibrium a theory of everything?

Should we interpret the contributions of Edward C. Prescott and his collaborators, especially Finn Kydland and Rajnish Mehra, to dynamic general equilibrium as just a mathematical restatement of pre-Keynesian business cycle theory in the language of Arrow and Debreu? This essay advances the contrary view that Prescott has been laying the foundations for a theory of everything in macroeconomics that will stretch well beyond the frictionless environments treated in its early version. A theory of everything is an attempt to explain key empirical observations in nearly every subfield of macroeconomics from a simple, logically coherent conceptual platform with a minimum of institutional detail. After reviewing the current state of Prescott’s agenda, we examine several examples of dynamic equilibrium in economies with constant returns to scale, complete markets, idiosyncratic productivity shocks, and limited capital mobility. These examples suggest that the Solow residual controls the entire path of aggregate output if redefined more broadly to include financial, distributional and institutional variables; that the discount factor used in pricing streams of income will shift autonomously over time in response to endogenous changes in the set of unconstrained asset traders; and that a dynamic general equilibrium model with substantive frictions in financial markets goes some distance towards a joint account of well-known empirical anomalies in growth, business cycles, and asset returns.     

Experts with a conflict of interest: a source of ambiguity?

We present an experimental design where uncertainty is generated from the advice of experts with conflicts of interest. In this experiment clients are faced with a variant of a multi-armed bandit problem with a random end-time. On the known arm (the “task screen”), clients can earn a certain payment per completion of a decoding task. However, clients may also opt for the unknown arm where they earn an uncertain amount if they end the experiment on this “expert screen”. The amount is uncertain to the clients because the value is being communicated through an “expert” with conflicted incentives. A control session provides for direct transmission of the value to the clients. Our results show that ambiguity aversion is alive-and-well in this environment. Also, when we vary the wage rate on the known arm we find that higher opportunity cost clients are less likely to heed the advice of conflicted experts.     

Can sticky consumption cause business cycles?

Sticky aggregate consumption is a demonstrable phenomenon in economies throughout the world, but to our knowledge it has not yet been incorporated into capital structure macroeconomics. Doing so suggests an explanation for business cycles. On the heels of a technological advance, sticky consumption facilitates increased savings and lower real interest rates. These lower rates lead to accelerating elongations in the capital structure. Even though such elongations facilitate more rapid economic growth, if duplicative overinvestment in research and development occurs, economic contraction will follow the exposure of such error.     

Tradable pollution permits in dynamic general equilibrium: Can optimality and acceptability be reconciled?

In this paper we study the dynamic general equilibrium path of an economy and the associated optimal growth path in a two-sector overlapping generation model with a stock pollutant. A sector (power generation) is polluting, and the other (final good) is not. Pollution is regulated by tradable emission permits. The issue is to see whether the optimal growth path can be replicated in equilibrium with pollution permits, given that some permits must be issued free of charge for the sake of political acceptability. We first analyze the many adverse impacts of free allowances, and then we propose a policy rule that allows optimality and acceptability to be reconciled.     

Labor or consumption taxes? An application with a dynamic general equilibrium model with heterogeneous agents

This study analyzes the effects of tax reform that shifts tax burden from labor to consumption. In this context, I also deal with the issue of progressivity. Even though this kind of tax policy change has recently gained popularity, its positive effects are debatable while the offsetting effect of a consumption tax on labor supply makes the net output change rather ambiguous. I examine these effects using a dynamic general equilibrium model with heterogeneous agents. The model is calibrated to fit certain characteristics of the Finnish economy. In addition to output and employment effects, I study the tax reform's effect on income and wealth distribution. First, I find that eliminating progressivity in labor taxation increases output via increase in capital accumulation that comes, however, in expense of slightly more inequality. Then, tax reform that replaces progressive labor taxes with a flat-rate consumption tax leads to a significant rise in capital accumulation, a negligible change in labor supply and gross labor income distribution, but a relatively considerable increase in wealth concentration.     

Is food consumption a good proxy for nondurable consumption?

This paper examines whether there is a discrepancy in estimating the elasticity of intertemporal substitution using food consumption instead of nondurable consumption data. We show that a discrepancy exists and that the discrepancy increases as nondurable consumption increases.     

Can below-replacement fertility be desirable?

In this paper, we challenge the widespread notion that replacement level fertility is the most desirable level of fertility both for countries currently above and below this level. We discuss possible alternative criteria for choosing one fertility level over another. In accordance with earlier studies, we focus on age dependency as the sole criterion. But we do so by relaxing the strong assumption that all individuals of a given age are equal in terms of their economic contribution to society and introduce education as probably the most relevant observable source of population heterogeneity. Our criterion variable is the education-weighted support ratio and we perform thousands of alternative simulations for different constant levels of fertility, starting from empirically given populations. If education is assumed to present a cost at young age and results in higher productivity during working age, then for most countries the desirable long-term total fertility rate turns out to be well below replacement level.     

Will China’s population aging be a threat to its future consumption?

ABSTRACT

Based on the household level survey data, the paper makes a projection on China’s household consumption in 2049 with reasonable assumptions of disposable income, demographic structure, urbanization rate and total population in 2049. The results show that at annual income growth rates of 3%, 4% and 5%, China’s total household consumption in 2049 will be 71.0, 97.8 and 133.8 trillion CNY, respectively, 3.1~5.8 times of the total household consumption in 2015. Moreover, our projection shows that even excluding the income growth effect, the future consumption increased by rapid urbanization is much larger than the consumption depressed by the demographic change. The result highlights that as long as the Chinese government can successfully eliminate institutional constraints imposed on rural-urban migration, such as Hukou system or residency permits in the urban areas, population aging would not be a major threat to its future development.     

Can Darwinism be ��Generalized�� and of what use would this be?

It has been suggested that, by generalizing Darwinian principles, a common foundation can be derived for all scientific disciplines dealing with evolutionary processes, especially for evolutionary economics. We show, however, that in the development of evolutionary biology, the abstract principles of so-called “Generalized Darwinism” have not been crucial for distinguishing Darwinian from non-Darwinian approaches and, hence, cannot be considered genuinely Darwinian. Moreover, we wonder what can be gained by invoking the abstract principles of Generalized Darwinism given that they do not suffice to substantiate an explanation of actual evolutionary processes. To that end, specific hypotheses are required. They neither follow from the suggested abstract principles, nor are they more easily found on that basis. Accordingly, we find little evidence in the literature for the claim that generalized Darwinian principles enhance the explanatory power of an evolutionary approach to economics.