The Impact of Unemployment Insurance on the Job Match Quality: A Quantile Regression Approach

This paper investigates the impact of unemployment insurance (UI) generosity on the distribution of the match starting wage and tenure. We show evidence of a positive shift in the location (mean) and scale (variance) of both variables: more generous UI increases expected starting wage and tenure, and this impact is greater at the highest quantiles. In this sense, more generous UI reduces the thickness of the lower tail of match quality (shorter and lower paid jobs), and, at the same time, increases the quality of matches available to all workers (the location effect on match duration and wages). These results can be seen as favorable evidence of match quality gains from UI generosity.The authors would like to thank Pedro Portugal, José A. F. Machado, Francisco Lima and an anonymous referee for helpful comments and discussions, as well as participants at the following conferences: ESPE – Paris, EEA – Amsterdam, LACEA – Paris and IV Brucchi Luchino – Milan. We are also grateful to Marianne Bertrand for providing a file used to construct the simulated unemployment insurance benefits. Opinions expressed herein do not necessarily reflect the views of the Banco de Portugal.     

Robust estimation of models of Engel curves

Both standard and robust methods are used here to estimate models of Engel curves for three household commodities, namely, food, transport, and tobacco and alcohol in Canada. The income elasticities of demand computed from the various methods differ significantly for the transport and tobacco-alcohol consumption where there are obvious outliers and zero expenditures problem. Robust estimators point to lower income elasticities and have better performance than the standard LS and Tobit estimator. These results are analyzed in the light of the information on finite-sample performance obtained in a previous Monte Carlo study. First version received: July 2000/Final version received: July 2001 RID="*" ID="*"  I wish to thank Victoria Zinde-Walsh, John Galbraith, Clint Coakley, two anonymous referees and an associate editor for helpful comments. I would also like to thank Anastassia Khouri for kindly providing the 1992 Family Expenditure Survey of Canada data.     

Consumption,wealth and business cycles in Germany

This paper studies the long-run relationship between consumption, asset wealth and income—the consumption–wealth ratio—based on German data from 1980 to 2003. We find that departures from this long-run relationship mainly predict adjustments in income. The German consumption–wealth ratio also contains considerable forecasting power for a range of business cycle indicators, including the unemployment rate. This finding is in contrast to earlier studies for some of the Anglo-Saxon economies that have shown that the consumption–wealth ratio reverts to its long-run mean mainly through subsequent adjustments in asset prices. While the German consumption wealth ratio contains little information about future changes in German asset prices, we report that the U.S. consumption–wealth ratio has considerable forecasting power for the German stock market. One explanation of these findings is that in Germany—due to structural differences in the financial and pension systems—the share of publicly traded equity in aggregate household wealth is much smaller than in the Anglo-Saxon countries. We discuss the implications of our results for the measurement of a potential wealth effect on consumption. The views expressed in this paper are those of the authors and do not reflect the position of the Deutsche Bundesbank. We gratefully acknowledge comments and suggestions from an anonymous referee as well as from Heinz Herrmann, Helmut Lütkepohl, the editor, Baldev Raj, Burkhard Raunig, Monika Schnitzer, Harald Uhlig and Christian Upper. We also benefitted from comments by seminar participants at the ECB, the Deutsche Bundesbank, the CESifo Macro, Money and International Finance Area Conference 2005, the EEA 2005 annual congress and at the 2005 IAEA Meetings. Last but not least, we would like to thank Mark Weth for very useful information concerning the construction of the financial wealth data. Hoffmann’s work on this paper is also part of the project The International Allocation of Risk funded by Deutsche Forschungsgemeinschaft in the framework of SFB 475. Responsibility for any remaining errors and shortcomings is entirely our own.     

Canadian wage controls in an eclectic model of wage determination

Using a model of wage determination that allows for wage inertia, price expectational and price catch-up influences and quarterly data on annual wage change in new major Canadian settlements for 1967–1987, this paper shows that the Anti-Inflation Board (AIB) wage control programme has a much larger wage restraining influence than is estimated in previous studies. In contrast, the Six and Five wage control programme exerts only a modest restraining influence. Both results are of special interest because the wage determination model used here allows for not only the direct effect of wage controls, but also the indirect wage restraining effect of controls operating through lagged wage changes. We would like to thank two anonymous referees and the editor of this Journal for helpful comments on the work reported in this paper. We also want to acknowledge with thanks the very able research assistance provided by James Chu, Ann Holmes, and Graham Voss and the financial assistance provided by Career Access and Challenge grants from Employment and Immigration Canada and University of Victoria Faculty Research Grants.     

Income distribution dynamics of urban residents: The case of China (1995–2004)

Using a 1995–2004 panel data of Chinese urban residents, we investigate the dynamics of income distribution in cities. According to Kernel estimates of the relative income distribution of Chinese cities, we find that: (1) the national across-city distribution of per capita GDP exhibits an apparent unique-peak distribution in 1995 and an “emerging multiple-peak” one in 2004; (2) for prefecture-level cities, income distribution has evolved to an “apparent multiple-peak” distribution from a unique-peak one; (3) the income distribution of county-level cities maintains a unique-peak curve; (4) most of the income dynamics of urban residents originates from prefecture-and-higher-level cities. We sample three representative provinces and study the urban income dynamics respectively. The analysis suggests that within a single province, urban income distribution evolves from unique-peak to twin-peak curve; while among provinces, income convergence is evident for urban residents. In addition, we measure the incidence of poverty in cities based on our income dynamics analysis, and find that the ratios of people living below absolute poverty line have been decreasing at cities of all levels.     

Do former athletes make better managers? Evidence from a partially adaptive grouped-data regression model

The goal of this paper is to introduce a partially adaptive estimator for the grouped-data regression model based on an error structure described by a mixture of two normal distributions. The model we introduce is easily estimated by maximum likelihood using the EM algorithm adapted from the work of Bartolucci and Scaccia (Comput Stat Data Anal 48:821–834, 2005). The partially adaptive estimator is applied to data used by Long and Caudill (Rev Econ Stat 73:525–531, 1991) to examine the impact of intercollegiate athletics on income. We estimate a variation of the original regression model and find that there is a considerable financial advantage for those male athletes now working in business management. This finding is consistent with the idea that athletes acquire team-building and organizational skills that are helpful in business.     

FACTORS IN CANADA-UNITED STATES REAL INCOME DIFFERENCES

This paper is a part of a larger study of economic growth in Canada, following the methods developed by Edward Denison in his book The Sources of Economic Growth in the United States and the publication Why Growth Rates Differ. The new material in this paper relates to Canada and the Canadian/U.S. comparison, while the material on Northwest Europe is drawn from the Brookings study. The present paper sets out the results to date on the differences in real output per employed person between Canada and the United States for one year, 1960. At this stage in our research the results indicate that the level of real output per employed person in Canada was about 20 per cent lower than in the United States in that year. On the basis of historical output data, it would appear that this margin of difference in Canadian/U.S. product levels has persisted throughout the present century. The central part of this paper examines the significance of differences in factor inputs in Canada and the United States and their contribution to the difference in income. The level of inputs per employed person in Canada accounts for only about 2 percentage points of the income difference between Canada and the United States. These results indicate that the overwhelming part of the difference in output per employed person between the two countries reflects the differences in output in relation to total factor inputs, rather than the magnitude of other factor inputs used in combination with labour. This result is consistent with earlier studies by Denison and others which have indicated the crucial importance of output in relation to total factor inputs, both in output growth over time and intercountry comparisons of output level. The body of the paper can give only brief attention to the numerous conceptual and statistical questions that arise in such a wide-ranging study, and the authors do not pretend to have tackled, let alone resolved, all of the wide range of problems related to this study. Nor do they claim any high degree of precision for the results, especially in the light of the statistical limitations of the basic data.     

An empirical analysis of income disparity and consumption in China

Using China’s provincial data from 1991 to 2005, this paper analyzes the impact of urban income disparity on their consumption based on static and dynamic panel data models and state space model. The GMM and Kalman Filter methods are used in the estimation and the variables such as income and price are controlled. The empirical results show that the elasticity of permanent income to consumption is much higher than that of temporary income; and the impact of income disparity on consumption is negative and substantial. A rise of 0.01 in the absolute value of Gini coefficient will cause a reduction of 0.35% in consumption on average. The effects fluctuate with the change of economic structure, consumption expectation and economic cycle. In the beginning years of 1990s, it is positive to enlarge income disparity moderately for consumption. It is the year of 1996 that the negative effect first appears in China. During 1998–2004, an increase of 0.01 to the absolute value of Gini coefficient will result in the reduction of consumption to fluctuate between 0.37% and 0.54%. In order to enlarge domestic demand and promote consumption, the focus should be the improvement of permanent income instead of temporary income, and the vigorous policies to reduce income disparity.     

Post‐secondary attendance by parental income in the U.S. and Canada: Do financial aid policies explain the differences?

We examine the extent to which tuition and needs‐based aid policies explain important differences in the relationship between family income and post‐secondary attendance relationships between Canada and the U.S. Using data from recent cohorts, we estimate substantially smaller attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, cognitive achievement, and local‐residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low‐income youth than are Canadian policies. Equalizing these policies across Canada and the U.S. would likely lead to a greater difference in income‐attendance gradients.     

Model selection when estimating and predicting consumer demands using international,cross section data

This paper assesses the ability of five structural demand systems to predict demands when estimated with cross sectional data spanning countries with widely varying per capita expenditure levels. Results indicate demand systems with less restrictive income responses are superior to demand systems with more restrictive income effects. Among the least restrictive demand systems considered, An Implicitly, Directly Additive Demand System (AIDADS) and Quadratic Almost Ideal Demand System (QUAIDS) seem roughly tied for best, while the Quadratic Expenditure System (QES) is a close second. Given differences in the characteristics of AIDADS and QUAIDS, it is concluded the former is better suited to instances where income exhibits wide variation and the latter to cases when prices exhibit considerable variation. First Version Received: November 2000/Final Version Received: February 2002 RID="*" ID="*"  The authors acknowledge the insightful comments of two journal referees and Baldev Raj. Bettina Aten kindly provided the data used in this study. Any errors or omissions remain the responsibility of the authors. Partial financial support of the United States Department of Agriculture – National Research Initiative Grant #97-35400-4752 and the Purdue Research Foundation is gratefully acknowledged. An expanded version of this paper is available from the authors upon request. RID="**" ID="**"  Contact author     

SOME COMPARISONS OF THE CANADIAN-U.S. INCOME DISTRIBUTIONS

This paper compares the income distribution of Canada and the United States as well as other characteristics of the population such as the labour force and income trends in the two countries in the post-war years. In both countries family income distributions show similar degrees of inequality and similar movements in real incomes through time. However, an examination of Canadian data suggests that differences do exist in underlying patterns. For example, there are greater earnings differentials between skilled and unskilled workers in Canada than in the United States while on the other hand in the United States greater differences exist between family incomes with heads in different age groups than is the case in Canada.     

Human capital and economic growth revisited: A dynamic panel data study

This paper examines the role of human capital on economic growth by using a large panel of data including 93 countries. Given the cross-sectional character in most of the relevant studies, there is a possibility that when the long-run dynamics are considered, education might not be a significant determinant of growth. Following a dynamic panel data approach, the analysis indicates that education has, indeed, a significant and positive long-run effect on economic growth. Moreover, the size of this effect is stronger as the level of education (primary, secondary, and tertiary) increases. This has a straightforward policy implication that governments taking actions towards an expansion of their higher education may well expect larger gains in terms of higher economic growth in their countries. This is a revised version of a paper presented at the Fifty-first International Atlantic Economic Conference, Athens, Greece, March 13–20, 2001, and also at the conference on Post-Euro Era at the University of Ioannina, Greece, January 27–28, 2000. The authors would like to thank participants in both conferences and, in particular, Nick Apergis for his comments and useful suggestions on earlier drafts. The authors remain responsible for any shortcomings of the paper.     

Spatial analysis of urban growth in Spain, 1900–2001

The purpose of this paper is to improve the knowledge of the Spanish urban system. We study the evolution of population growth among the group of 722 municipalities included in the Spanish urban areas over the period 1900–2001. A spatial SUR model is estimated for Zipf’s law and shows the existence of two main phases: divergence (1900–1980) and convergence (1980–2001). Then, the cross-sectional distribution of urban population is characterized by means of nonparametric estimations of density functions and the growth process is modeled as a first-order stationary Markov chain. Spatial effects are finally introduced within the Markov chain framework using regional conditioning. This analysis shows a low interclass mobility, i.e., a high-persistence of urban municipalities to stay in their own class from one decade to another over the whole period, and the influence of the geographical environment on urban population dynamism. Previous versions of this paper were presented at the 45th Congress of the European Regional Science Association (Vrije Universiteit, Amsterdam, Netherlands, August 23–27, 2005) and at the International Workshop on Spatial Econometrics and Statistics (Rome, Italy, May 25–27, 2006). We would like to thank two anonymous referees, M. Bosker, P. Cheshire, A. Carrington, B. Fingleton, R. Guillain, E. Lopez-Bazo, J. Paelinck and the other participants of these meetings for their valuable comments. Coro Chasco acknowledges financial support from the Spanish Ministry of Education and Science SEJ2006-14277-C04-01. The usual disclaimers apply.     

Cointegration and causality in the exports-GDP nexus: The post-war evidence for Canada

This paper tests for unit roots, cointegration, and Granger-causality in the exports-GDP nexus in Canada 1947–96, using both bivariate and trivariate models. Contrary to previous studies we cannot conclude that economic growth is either export-led, or output-driven, but rather that strong bi-directional causality exists between Canadian exports and GDP, and the GDP of its main trading partner, the United States. First version received: April 1998/final version received: March 1999     

A multi-agent bilateral bargaining model with endogenous protocol

People do bargain over how to bargain. We examine the role of individuals’ ability to pursue certain bargaining protocols in a multi-agent bilateral bargaining model. Bargaining protocols are not completely settled, but will emerge endogenously in equilibrium. We show that players’ ability to partially influence bargaining protocols plays a crucial role in determining equilibrium outcomes. When discounting is not too high, there are multiple subgame perfect equilibria, including inefficient ones. As the number of players increases, both the set of discount factors that support multiple equilibrium outcomes and the set of the first proposing player’s equilibrium payoffs expand. The maximum loss of efficiency increases with respect to the discount factor. We would like to thank Hongbin Cai, John Conlon, Andrew Daughety, Taiji Furusawa, Byoung Heon Jun, Akira Okada, Ping Wang, and two anonymous referees for their comments and suggestions. Both authors gratefully acknowledge financial support from the Social Sciences and Humanities Research Council of Canada.     

Sunspot Fluctuations in Two-sector Economies with Heterogeneous Agents

We study a two-sector model with heterogeneous agents and borrowing constraint on labor income. We show that the relative capital intensity difference across sectors is crucial for the conditions required to get indeterminacy and endogenous fluctuations. The main result shows that when the consumption good is sufficiently capital intensive, local indeterminacy arises while the elasticities of capital–labor substitution in both sectors are slightly greater than unity and the elasticity of the offer curve is low enough. Locally indeterminate equilibria are thus compatible with a low elasticity of intertemporal substitution in consumption and a low elasticity of the labor supply. As recently shown in empirical analysis, these conditions appear to be in accordance with macroeconomic evidences. We would like to thank R. Becker, J.P. Drugeon and an anonymous referee for useful comments and suggestions. The current version also benefited from a presentation at the conference “Public Economic Theory 04”, Beijing, August 2004.     

Political Measures for Strategic Environmental Policy with External Effects

This paper investigates an environmental policy designed to reduce the emission of pollutants under uncertainty, with the agent problem as an optimal stopping problem. We first analyze the two cases in which there are one agent and two competing agents by following Ohyama and Tsujimura (2005). When we consider a model of strategic agents, we need to analyze the external economic effect that is peculiar to an agent’s environmental policy implementation. Then, to improve and resolve these external effects, we examine three alternative political measures, comprising an environmental subsidy, an environmental tax and an emission trading system. The results of the analysis indicate that the environmental subsidy and environmental tax promote environmental policy. However, they do not create an incentive to be the leader. On the other hand, an emissions trading system not only promotes environmental policy but also creates an incentive for leadership.This paper was previously circulated under the title “Political Measures for Strategic Environmental Policy with Induced Effects”. The authors would like to thank Masaaki Kijima for helpful comments. The authors would also like to thank Alistair Munro and two anonymous referees providing detailed comments and suggestions. This research was partially supported by Daiwa Securities Group Inc. The second-named author was partially supported by the Ministry of Education, Culture, Sports, Science and Technology, Grant-in-Aid for Scientific Research (B) (2), 16310118.     

The incidence of income taxes on high earners in Canada

This article explores the “brain drain” explanation for the concentration of incomes in Canada during the past 30 years, namely, that high-skilled Canadians make use of high salaries on offer in the United States to extract higher salaries at home. If this is the case, then for a given level of US salaries, the threat to accept outside offers should be more credible when the Canadian dollar is depreciating against the US dollar, and weaker when the Canadian dollar is appreciating. The data are broadly consistent with this claim: income concentration worsened during the depreciations of the 1980s and 1990s, and eased when the Canadian dollar began to appreciate in value. The article develops a simple two-parameter model based on the propositions that high earners in Canada can use US salaries to bargain for higher salaries, and that Canadian high earners can shelter part of their income from personal income taxes. It also offers some preliminary evidence about the parameter values consistent with available data. The results suggest that higher top marginal personal income tax rates may potentially accentuate top-end after-tax income inequality. If high earners are able to use their bargaining power to extract pay increases to offset higher tax rates, then the burden of increased personal income taxes will be deflected elsewhere, and may even have the perverse effect of making the after-tax income distribution more unequal than it was before.