A New Keynesian model with staggered price and wage setting under learning

This paper provides a study of the implications for economic dynamics when the central bank sets its nominal interest rate target in response to variations in wage inflation. I provide results on the existence, uniqueness, and stability under learning of rational expectations equilibrium for alternative specifications of the manner in which monetary policy responds to economic shocks when nominal rigidities are present. Monopolistically competitive producers set prices via staggered price contracts, and households set nominal wages in the same fashion. In this setting, the conditions for determinacy and learnability of rational expectations equilibrium differ from a model where only prices are sticky. I find that when the central bank responds to wage and price inflation and to the output gap, a Taylor principle for wage and price inflation arises that is related to stability under learning dynamics. In other words, a moderate reaction of the interest rate to wage inflation helps to avoid instability under learning and indeterminacy.     

Business cycles and wage rigidity

In this paper, we analyze the impact of downward wage rigidity on the labor market dynamics. We shows that imposing downward wage rigidity in a matching model with cyclical fluctuations in productivity, endogenous match-destruction, and on-the-job search, quits are procyclical and layoffs countercyclical. Using the European Community Household Panel (ECHP), we provide evidence that downward wage rigidity is empirically relevant in ten European countries. Finally, we show that layoffs are countercyclical and quits are procyclical, as predicted by the model.     

Heterogeneous wage setting and endogenous macro volatility

In order to strengthen the debate on the foundations of aggregate business cycles, the science of macroeconomics has recently benefited from a series of contributions that emphasize the complex nature of collective human action. Progressively, agent heterogeneity, local interaction, sentiment formation and out-of-equilibrium dynamics are becoming central pieces on the analysis of short-term business fluctuations. This paper offers a contribution to this new literature by exploring a macro framework where endogenous fluctuations emerge regardless from the occurrence of shocks to technology or preferences. The proposed setting separates firms into two groups, which follow different wage setting strategies. The firms may systematically change from one class of wage setters to the other following local interaction rules and by making a global assessment of the profitability of each of the wage setting alternatives. Under reasonable parameterizations, long-term large periodicity cycles are generated; these cycles might constitute a meaningful component of the observed output gap and price level volatility, a component that complements the typical view on exogenous disturbances over an otherwise stable economy.     

The New Keynesian Phillips Curve and staggered price and wage determination in a model with firm-specific labor

We develop a DSGE model with firm-specific labor where wage and price setting are subject to Calvo-type staggering. This is in general an intractable problem due to complicated intertemporal dependencies between price and wage decisions. However, the problem is significantly simplified if we, in line with empirical evidence, assume that prices can be changed whenever wages are. We show that the price- and wage-setting relationships are substantially altered by the introduction of firm-specific labor. Specifically, the inflation response is substantially dampened, whereas the wage inflation response is increased as compared to models with freely mobile labor. These distinctive features of the model with firm-specific labor are supported by empirical evidence from a structural VAR.     

Politics in wage setting: does government colour matter?

This paper studies the relationship between wage formation and the political colour of the government in an economy with a centralized wage bargaining system. Ideological, organizational and personal ties between the central trade union and the social democratic political party suggest that the trade union may behave significantly different in wage negotiations under a social democratic than under a conservative government. Using time series data for Norway, we estimate that changing from a conservative to a social democratic central government significantly reduces manufacturing wages and makes wages more responsive to unemployment. This result is consistent with a wage bargaining model augmented by political preferences of the union leaders and suggests that the effect of bargaining coordination depends on the political colour of the government. The estimated effects are both robust with respect to model specification and stable over time. We are grateful to Fredrik Wulfsberg, participants at seminars in Trondheim and Oslo, and an anonymous referee for valuable comments.     

Investment limit cycles in a socialist economy

The present paper generalizes a linear cycle model of the socialist economy studied in Simonovits (1990): the two equations describing the reproduction of the tensions are retained, while the two linear reaction equations are confined to the interval of lower and upper bounds; outside these intervals the decisions are given by the corresponding bounds (cf. Hicks, 1950).The main result is the following: If a certain linear system of equations and inequalities has a solution, then there exists a limit cycle with period 4, the amplitude of which is independent of the initial states.     

Can a minimum wage increase employment and reduce prices in a neoclassical perfect information economy?

This paper investigates the possibility that the imposition of a minimum wage increases employment in the affected sector, measured in terms of hours of work, and lowers product prices. Unlike related prior theoretical research, I consider a neoclassical perfect information economy. Both labor and product markets are assumed to be perfectly competitive. Workers choose the number of hours of work and their effort level. Workers can potentially, but not necessarily, differ in their preferences over income, leisure, and effort. Effort is perfectly observable by the employers. The general framework that highlights the channels through which a minimum wage can increase employment and reduce prices is introduced and necessary and sufficient conditions derived. The paper also develops a number of comparative statics and some illustrative examples. The results provide a simple theoretical foundation that explains some recent findings of the empirical literature on minimum wages. Auxiliary results help explain the effects of minimum wage on the entire wage distribution in a way that is consistent with empirical findings. Finally, welfare analysis shows that worker welfare and employment tend to go in opposite directions; in particular, if employment increases after the imposition of the minimum wage, worker welfare will be reduced, though not necessarily vice versa (the opposite is true for consumer welfare). Strikingly, if a minimum wage increases worker welfare, the chief beneficiaries are not the affected workers but those with incomes that exceed the minimum wage.     

Taxation in an economy with private provision of public goods

This paper analyses the effects of taxation and subsidies in an economy with private provision of a public good. It is shown that in a situation where all individuals contribute, taxation affects the equilibrium allocation if and only if at least one individual's voluntary contribution to the public good has an impact on the aggregate tax payments of the others. We then consider linear nonneutral tax-subsidy schemes and analyse efficiency and uniqueness of the resulting Nash equilibria. We show that an efficient Nash equilibrium, where all individuals contribute, will in general not be unique, and establish a non-uniformity property which a tax-subsidy scheme must fulfil in order to induce a unique interior equilibrium that is efficient. Throughout the paper it is assumed that individuals fully understand and take into account the government's budget constraint. Received: 3 November 1997 / Accepted: 23 March 1999     

An equilibrium existence result for an economy with land

This research uses a different set of assumptions for land than those used in the standard general equilibrium framework. In particular, land is modelled explicitly as a subset of the plane with anything immobile, from flowers and trees to houses, embedded in it. There is a finite number of consumers with preference orderings over land parcels satisfying certain axioms along with endowments of land that partition this subset of the plane. Allowing for recombinations of parcels, the main result demonstrates the existence of prices in L¹ and a partition of land among consumers so that the land market clears.     

Symmetry-based inference in an instrumental variable setting

We describe exact inference based on group-invariance assumptions that specify various forms of symmetry in the distribution of a disturbance vector in a general nonlinear model. It is shown that such mild assumptions can be equivalently formulated in terms of exact confidence sets for the parameters of the functional form. When applied to the linear model, this exact inference provides a unified approach to a variety of parametric and distribution-free tests. In particular, we consider exact instrumental variable inference, based on symmetry assumptions. The unboundedness of exact confidence sets is related to the power to reject a hypothesis of underidentification. In a multivariate instrumental variables context, generalizations of Anderson–Rubin confidence sets are considered.     

Non-cooperative pollution control in an inter-jurisdictional setting

This paper examines various circumstances under which decentralized pollution policies can be efficient both in federal settings and in multi-region settings with labor mobility. We consider a model in which pollution control policies are set by regional governments non-cooperatively and pollution damages are borne by the residents of all regions. We characterize the efficiency of pollution policies, and of population allocation among regions, in a variety of scenarios, including when pollution policies are enacted before interregional transfers are determined by the federal government and before migration occurs; when migration decisions are taken before policy decisions; in the absence of a central government if regional governments can make voluntary interregional transfers; when decisions over pollution control policies are followed by voluntary contributions by regions to a national public good; when regions can commit to matching the abatement efforts of each other; and when regions can commit to specific levels of abatement contingent on the emissions of other regions not exceeding some maximum level.     

Equilibrium price dynamics in an overlapping-generations exchange economy

An extension to the Yaari (1965)–Blanchard (1985) continuous time overlapping generations model for an endowment Arrow–Debreu economy with an age-structured population is presented. It is proved that Arrow–Debreu equilibrium prices are represented by a double linear integral equation, and depend on the age-distributions of population and endowments. For an economy with a balanced growth, and logarithmic utility, we prove that bubbles may exist if endowments are distributed earlier than some critical age.     

Men's wage inequality in Serbia's transition

Wage inequality is considered to have been quite compressed in socialist economies. In this paper I analyse how men's wage inequality has changed during the period of transition to a market economy in Serbia, a country which has experienced a particularly dramatic transition. Changes in the distribution of earnings are examined using the Lemieux (2002) decomposition methodology and five annual Labour Force Surveys (2001–2005). I find that the change in wage inequality is mostly driven by changes in wage premiums, while the effect of changes in the composition of the labour force is very small. Isolating the effect of the emerging private sector reveals that changes in the private sector size and wage premium account for an average 25 per cent of the changes in inequality during this period. Moreover, the minimum wage is found to exert a dampening effect on wage inequality.     

Gender differences in early-career wage growth

In Finnish manufacturing, the gender wage gap more than doubles during the first ten years in the labour market. This paper studies the factors contributing to the gender gap in early-career wage growth. The analysis shows that the size of the gender gap in average wage growth varies with mobility status, the gap being higher with employer changes compared to wage growth within firms. Several explanations for the gender gap in wage growth based on human capital theory and theory of compensating wage differentials are considered. However, much of the gap in wage growth remains unexplained. The distributional analysis of the wage growth shows that the female wage penalty increases significantly as we move along the conditional wage growth distribution, the increase being stronger with employer changes compared to within-firm wage growth.     

Fiscal policies and business cycles in an enlarged euro area

This paper compares the cyclical properties of fiscal policies across the 12 original eurozone countries and the future members from Central and Eastern Europe. For the sample period 1995–2005, the fiscal balance exhibits less inertia and is more counter-cyclical in Central and Eastern European countries than in members of the eurozone. The main differences arise from the revenue side. Differences in the formation of fiscal policy between current and future eurozone countries decrease over time. Both autonomous and counter-cyclical fiscal policies have little or no effect on cyclical variability in the eurozone countries, while such policies appear to be effective in Central and Eastern European countries.     

Estimating distributions of potential outcomes using local instrumental variables with an application to changes in college enrollment and wage inequality

This paper extends the method of local instrumental variables developed by Heckman and Vytlacil [Heckman, J., Vytlacil E., 2005. Structural equations, treatment, effects and econometric policy evaluation. Econometrica 73(3), 669–738] to the estimation of not only means, but also distributions of potential outcomes. The newly developed method is illustrated by applying it to changes in college enrollment and wage inequality using data from the National Longitudinal Survey of Youth of 1979. Increases in college enrollment cause changes in the distribution of ability among college and high school graduates. This paper estimates a semiparametric selection model of schooling and wages to show that, for fixed skill prices, a 14% increase in college participation (analogous to the increase observed in the 1980s), reduces the college premium by 12% and increases the 90–10 percentile ratio among college graduates by 2%.     

Monetary policy and asset prices in an open economy

This paper examines whether central banks should respond to asset price fluctuations in a two-country sticky price model. We compare a monetary policy rule that targets both domestic asset prices and foreign asset prices with several alternative monetary policy rules. This paper shows that this policy rule can produce preferable outcomes because the domestic central bank incorporates important information that both domestic and foreign asset prices possess into its monetary policy. Our model suggests that central banks should consider both domestic and foreign asset prices in a two country framework with asset price fluctuations.     

A method for estimating the timing interval in a linear econometric model, with an application to Taylor's model of staggered contracts

This paper describes and implements a procedure for estimating the timing interval in any linear econometric model. The procedure is applied to Taylor's model of staggered contracts using annual averaged price and output data. The fit of the version of Taylor's model with serially uncorrelated disturbances improves as the timing interval of the model is reduced.     

循环经济：与自然和谐的经济发展模式

循环经济是通过将经济活动按照自然生态系统的模式,组成"资源-产品-再生资源"的物质反馈式循环过程,使经济活动对自然环境的影响降低到最小程度,在物质不断循环的基础上实现资源的最大化利用,促进社会经济的可持续发展.发展循环经济是人类社会发展的必然选择.在我国高速的经济增长中,资源短缺和环境污染的问题非常严重,因而发展循环经济具有重要意义.发展循环经济是一项涉及各行各业、千家万户的事业,需要政府、企业和社会各界的共同努力,增强全社会的资源忧患意识和节约资源、保护环境的责任意识,构建资源节约型、环境友好型社会.