Estimating intergenerational distribution preferences

Resource management decisions influence not only the output of the economy but also the distribution of utility between groups within the community. The theory of cost benefit analysis provides a means of incorporating distributional changes into the decision making calculus through the application of distributional or welfare weights. However, this practice has not been widely adopted in part due to difficulties in the estimation of distributional weights. This paper addresses this problem by using the stated preference method of choice modelling to estimate distributional weights suitable for inclusion in a cost benefit analysis framework. The findings of a choice modelling experiment designed to estimate community preferences with respect to intergenerational utility distribution illustrate the potential of this method in addressing distributional issues.     

US oil consumption,oil prices,and the macroeconomy

Since the oil price shock of 1973–74, researchers have waged an intense debate regarding the connection between the U.S. energy sector and national income. Studies examining the relationship between oil prices, oil consumption, and real output have produced remarkably mixed results. In particular, the two most widely cited investigations by Darby and Hamilton come to dramatically different conclusions concerning the effect of oil shocks on economic activity. To date, however, studies of this issue have been either correlation based and thus void of causality inferences, have used overly restrictive bivariate causality techniques, or covered periods that exclude major oil price disruptions. This paper analyzes a quarterly multivariate VAR model to investigate the existence and direction of causality between oil prices, oil consumption, real output, and several other key macroeconomic policy variables. Among the key findings is that oil price shocks are not a major cause of U.S. business cycles. Moreover, our findings also suggest that both oil prices and real output cause significant changes in oil consumption without feedback. These results support the contention that a systematic U.S. conservation policy would not significantly impair real economic activity.     

Steepness and deepness in the Australian macroeconomy

This study uses nonparametric tests - the triples test and the BDS test, to examine whether key Australian macroeconomic aggregates exhibit nonlinearities and important ‘steepness’ and ‘deepness’ asymmetries at the business cycle frequency., Evidence is found of nonlinearities but there is little evidence of deepness in the Australian macroeconomy., However, there is evidence of steepness, especially concerning labour market variables, as well as both the CPI and M3., The evidence suggests that unemployment (employment) rises (falls) rapidly in recessions and only recovers slowly over time., Also, positive asymmetries in M3 are reflected in similar asymmetries in the CPI but not in output, consumption or investment.     

Quasi-linear preferences in the macroeconomy: Indeterminacy,heterogeneity and the representative consumer

We use aggregation theory to investigate the link between one-consumer and multi-consumer economies under a quasi-linear class of preferences. Our study is carried out in the context of the neoclassical growth model. The quasi-linear preferences considered are additive in consumption and leisure and linear in leisure. We first show that in a homogeneous agents economy, the individual hours worked are not uniquely determined. We then demonstrate that the indeterminacy can be resolved by introducing heterogeneity. For example, idiosyncratic shocks to productivities or imperfect substitutability of labor restore the uniqueness of equilibrium. As a special case, our analysis includes the indivisible labor model by Hansen (1985).JEL Classification: C73, D90, E21We are grateful to Morten Ravn for his guidance. We have benefited from the comments of an anonymous referee, Jordi Caballé, Finn Kydland, Franck Portier, Michael Reiter, Xavier Sala-i-Martin, William Schworm and Andrew Scott. Any remaining errors are ours. This research was supported by the Instituto Valenciano de Investigaciones Económicas and the Ministerio de Ciencia y Tecnología de España, the Ramón y Cajal program, and BEC 2001-0535.     

Education cost, intergenerational mobility, and income inequality

Using a modified version of the Maoz and Moav [Maoz, Y. D. and Moav, O., 1999. Intergenerational mobility and the process of development. Economic Journal 109(458) 677-697] model, we show that the dynamics of income inequality and intergenerational mobility, and the effects of technological changes on inequality, depend crucially on the share of education cost in income.     

The yield curve and the macroeconomy: Evidence from Turkey

This paper contributes to the literature on the relationship between the yield curve and macroeconomic variables by focusing on an emerging market case: Turkey. The most important result of the paper is that the relationship between the yield curve and macroeconomic variables is significantly affected by the change in monetary policy which is associated with the implementation of inflation targeting (IT) regime. While before the IT regime the yield curve is affected to some extent by macroeconomic variables, after the IT regime, it is mainly driven by macroeconomic variables. We also find that central bank has gained ability to affect the entire yield curve with the IT regime. The other important result is that in addition to inflation and real activities, the exchange rates also play an important role in the yield curve dynamics in Turkey.     

Social class, family background, and intergenerational mobility

This research examines the various approaches taken by economists and sociologists for analyzing intergenerational mobility. Social mobility models based on social classes arising from an occupational classification scheme are analysed. A test for the statistical validity of classification schemes is proposed and tested using Danish sample survey data that was first collected in 1976 and augmented in 2000. This is referred to as a homogeneity test and is a likelihood ratio test of a set of linear restrictions which define social classes. For Denmark it is shown that this test fails for an Erikson-Goldthorpe classification system, raising doubts about the statistical validity of occupational classification systems in general. We also estimate regression models of occupational earnings, household earnings, and educational attainment using family background variables as covariates controlling for unobservables, measurement error, and simultaneous equation bias. In these models homogeneity tests are also rejected. We conclude from these results that the individual's family background has a small but significant impact on lifetime chances which is not captured by the Erikson-Goldthorpe classification scheme.     

Decreasing fertility,economic growth and the intergenerational wage gap

Persistent low fertility rates lead to lower population growth rates and eventually also to decreasing population sizes in most industrialized countries. There are fears that this demographic development is associated with declines in per capita GDP and possibly also increasing inequality of the wage distribution. We investigate whether this is true in the context of neoclassical growth models, augmented with endogenous fertility decisions and endogenous educational decisions. Furthermore we allow for imperfect substitutability across workers of different age in the production process and learning by doing effects as well as human capital depreciation. In particular, we assess the intergenerational wage redistribution effects which follow after a demographic change to persistent low fertility rates.     

The nonlinear multidimensional relationship between stock returns and the macroeconomy

We use nonparametric dimension-reduction methods to extract from a set of 15 macroeconomic variables the risk factors that are priced in the stock market. The dominant factor moves with the business cycle but, because it is a nonlinear function of observed macroeconomic variables, it captures a rich set of interactions. Low-credit risk and low-inflationary expectations have a greater positive effect on stock returns when leading macroeconomic indicators are high relative to current economic activity, i.e. early in the business cycle as the economy emerges from recession. High-stock returns also arise in periods when the economy is booming relative to its leading indicators, but such periods tend to portend crashes.     

Oil and the macroeconomy: using wavelets to analyze old issues

We use (cross) wavelet analysis to decompose the time–frequency effects of oil price changes on the macroeconomy. We argue that the relation between oil prices and industrial production is not clear-cut. There are periods and frequencies where the causality runs from one variable to the other and vice-versa, justifying some instability in the empirical evidence about the macroeconomic effects of oil price shocks. We also show that the volatility of both the inflation rate and the industrial output growth rate started to decrease in the decades of 1950 and 1960.     

Uncertainty and the macroeconomy: evidence from an uncertainty composite indicator

This article proposes a uncertainty composite indicator (UCI) based on three distinct sources of uncertainty (namely financial, political, and macroeconomic) for the US economy on the period 1985–2015. For that, we use a dynamic factor model, summarizing efficiently six individual uncertainty proxies, namely two macroeconomic and financial uncertainty factors based on the unpredictability, a measure of (micro)economic uncertainty, the implied volatility index, the corporate bond spreads, and an index of economic policy uncertainty. We then compare the effects of uncertainty on economic activity when the UCI is used instead of individual uncertainty proxies in structural VAR models. The interest of our UCI is to synthesize theses effects within one measure of uncertainty. Overall, the UCI was able to account for the most important dynamics of uncertainty which play an important role in business cycles.     

Endogenous capital market imperfections, human capital, and intergenerational mobility

In this paper, capital market imperfections are endogenized considering an adverse selection problem between banks and borrowers. We develop a growth model with linear OLG wealth dynamics, where agents are heterogeneous in terms of observable wealth and ability, which is private information. We show that banks react to this informational asymmetry by granting higher loans to talented borrowers. This, in turn, helps poor and talented agents to become educated and catch up with the rich agents. Furthermore, the credit market friction leads to greater human capital accumulation.     

Workplace adjustment and intergenerational differences between matures, boomers, and xers

The authors explored the factors influencing occupational adjustment related to workplace stress among 413 nurses at a Midwestern pediatric hospital. Among critical factors found in responses to their questionnaire and follow-up focus groups were differences in work adjustment and intergenerational conflicts. Both real and perceived workplace stress can manifest itself both fiscal and human costs by increasing turnover, absenteeism and worker's compensation claims as well as "faulty products and negative behaviors." Baby boomers (those born between 1946 and 1964) and Generation Xers (those born between 1965 and 1981) reported quite different issues and perceptions of occupational stress.     

Real estate markets and the macroeconomy: A dynamic coherence framework

This paper analyzes the dynamic interactions between real estate markets, in the US and the UK and their macroeconomic environments. We apply a new approach based on a dynamic coherence function (DCF) to study these interactions bringing together different real estate markets (the securitized market, the commercial market and the residential market). The results suggest that there is a common trend that drives the different real estate markets in the UK and the US, particularly in the long run, since they have a similar shape of the DCF. We also find that, in the US, wealth and housing expenditure channels are very conductive during real estate crises. However, in the UK, only the wealth effect is significant as a transmission channel during real estate market downturns. In addition, real estate markets in the UK and the US react differently to institutional shocks. This brings some insights on the conduct of monetary policy in order to avoid disturbances in real estate markets.     

Environmental quality indicators: Background,principles and examples from Norway

The need for a simple and general overview of the development in the state of the environment has led to work on environmental indicators in several countries and international organizations. Except for the basic common requirement of providing an overview, the works vary a great deal with regard to final aim, target groups, classification and, hence, choice of indicators. This paper gives an overview of the work carried out in the Central Bureau of Statistics of Norway within this field, with emphasis on the basic principles behind the choice of indicators. A hierarchical system of indicator sets is proposed, and examples of indicators are presented. Also, a brief overview of work carried out elsewhere is included.     

Social security and intergenerational equity

This paper considers the implications of social security for intergenerational equity. It shows that a balanced-budget unfunded system can be optimal even in a dynamically efficient economy without uncertainty and externalities. The relevant criteria for the optimality of the public transfer program are equity among generations and time consistency. The scheme can survive adverse shocks if the well-being of the elderly at each point in time is sufficiently valued.     

Voter turnout and intergenerational redistribution

Electoral reforms that lead to reduced turnout modify the composition of the electorate, potentially overrepresenting specific interests in policy implementation. Intergenerational redistribution tilts in favor of the elderly when they are sufficiently numerous, but in favor of the young rich otherwise. We exploit a natural experiment provided by the repeal of compulsory voting in Austrian parliamentary elections to study how exogenous turnout decline affects intergenerational redistribution through pro-young public education spending in Austrian municipalities. Empirically, education spending falls when the proportion of elderly voters exceeds 21% of the electorate, but rises when the proportion of elderly voters is below this threshold.     

Dynamic efficiency and intergenerational altruism

Can dynamic inefficiency that may occur in societies populated by non-altruistic agents be removed by introducing intergenerational altruism? Although the answer seems to be negative, this paper shows, by means of a simple example, that the presence of an arbitrarily low proportion of altruists can be sufficient to prevent a society from reaching a non-Pareto optimal equilibrium. Intergenerational transfers from the old to the young can therefore provide an alternative—to public debt, fiat money or money bubbles which transfer goods from the young to the old—solution to the dynamic efficiency problem.