Demography and pollution

In this paper, we consider an OG model with endogenous fertility and pollution externalities. We assume that pollution lowers the productivity. In the long run, under dominant income (substitution) effects, a raise in the cost of rearing children, increases (decreases) consumption and decreases (increases) pollution. In the short run, under dominant income effects, a sufficiently low pollution elasticity of labor productivity promotes deterministic cycles through a Hopf bifurcation jointly with expectations-driven fluctuations.     

Optimal Dynamic Taxation with Distinctive Forms of Social Status Attainment

We examine the role of both consumption‐ and wealth‐induced social comparisons in setting dynamic optimal income taxation. Under complete information, state‐invariant labor income taxes are used to remedy the externality caused by consumption‐induced social comparisons, while state‐contingent capital income taxes are used to remedy the externalities caused by both consumption‐ and wealth‐induced social comparisons. Under incomplete information, distinct types of agents are subject to an identical marginal capital income tax, which removes social comparisons. To solve the information problem, low‐productivity agents could be subject to a lower marginal labor tax than high‐productivity agents, which contradicts the traditional result in the Mirrlees–Stiglitz models.     

Consumption externalities with endogenous time preference

This paper shows that in a model with inelastic labor supply, consumption externalities have impacts on stationary consumption and capital. The key element in observing the effects of consumption externalities on stationary consumption and capital is the endogeneity of the time preference rate, which depends on future-oriented resources rather than on private consumption. We conclude that when individuals experience jealousy, they become more impatient, leading to a lower level of capital stock and a higher level of consumption relative to those of the social optimum, while when they experience admiration, these relationships are reversed. We examine an optimal tax policy that replicates the socially optimal path in the centrally planned economy. Finally, using numerical analysis we explore how this economy evolves through time.      

CONSUMPTION AND LEISURE EXTERNALITIES, ECONOMIC GROWTH AND EQUILIBRIUM EFFICIENCY

This paper analyzes the effects of consumption and leisure externalities on growth and welfare in a two‐sector endogenous growth model with human capital accumulation. Both types of externalities are shown to affect the long‐run equilibrium and optimal growth rates in a rather different way. The relationship between the steady state of the market and the centrally planned economy is also analyzed. The optimal growth path can be decentralized by resorting to consumption or labor income taxation, whereas capital income should be untaxed. Numerical simulations suggest that growth and welfare effects of mild consumption and leisure externalities may be quantitatively important.     

Productivity growth and agricultural out-migration in the United States

In the 20th century U.S., the average annual decline in the relative farm share of employment was 3.6%. Despite this rapid reallocation of labor, a large wage gap persisted between the farm and non-farm sectors that declined only slowly over time. We develop a model of farm out-migration with three driving forces: (i) absolute farm productivity growth in conjunction with subsistence food consumption, (ii) relative farm productivity growth in conjunction with a low elasticity of substitution between farm and non-farm goods, and (iii) endogenously declining wage gaps. Quantitative features of the model accord well with the U.S. experience during this period.     

A Gendered Model of the Peasant Household: Time poverty and Farm Production in Rural Mozambique

Using insights from a case study on the allocation of labor in subsistence households in Mozambique, this study develops a conceptual framework for examining linkages between time poverty and farm production. An unexpected event such as a health crisis increases the demand for labor provided by women, thus making them more time poor. The model and numerical simulations show that a deterioration in a woman's time constraint will have an adverse effect on agricultural output of the household. This occurs because most women respond to an increase in household work by reducing their work hours on the farm and by reducing their leisure time. The latter outcome is expected to have a negative effect on women's physical and mental health, which will then cause a decline in their productivity on the farm.     

The effects of consumption externalities in an R&D-based growth model with endogenous skilled and unskilled labor supply

We examine the roles of consumption externalities in a variety-expansion growth model. By assuming that the R&D sector is more skilled labor intensive than the consumption goods sector, we extend the model of Doi and Mino (J Econ Dyn Control 32:3055?C3083, 2008) so that both the skilled and unskilled labor supplies are endogenously determined through the skill acquisition process. We show that some results of Doi and Mino are influenced by our modification. For example, in contrast to Doi and Mino who show that the R&D subsidy can have a negative growth effect in the presence of consumption externalities, we show that the R&D subsidy has unambiguously positive growth effects, regardless of the presence of consumption externalities. Further, it is shown that the presence of consumption externalities influences various aspects of the economy including the wage inequality and the incentive of skill acquisition.     

Consumption externalities, production externalities, and efficient capital accumulation under time non-separable preferences

The effects of consumption and production externalities on economic performance under time non-separable preferences are examined both theoretically and numerically. We show that a consumption externality alone has long-run distortionary effects if and only if labor is supplied elastically. With fixed labor supply, it has only transitional distortionary effects. Production externalities always generate long-run distortions, irrespective of labor supply. The optimal tax structure to correct for the distortions is characterized. We compare the implications of this model with those obtained when the consumption externality is contemporaneous. While some of the long-run effects are robust, there are also important qualitative and quantitative differences, particularly along transitional paths.     

Stabilization policy and indeterminacy in a small open economy

This paper studies the (de)stabilizing effects of income tax rules in a two-sector small open economy with production externalities. The paper shows that in the model with positive sector-specific externalities in the investment sector and negative sector-specific externalities in the consumption sector (or positive aggregate investment externalities), a regressive income tax rule can stabilize such an economy against indeterminacy, whereas a progressive income tax rule can increase the tendency for indeterminacy to occur. This paper also studies two variants that consider an imperfect world bond market and an endogenous labor supply, respectively, and shows that the qualitative results stated above remain valid. Moreover, increasing the level of sector-specific investment externalities can decrease (increase) the minimal level of tax progressivity required for indeterminacy if the investment externalities are below (above) a certain critical value and if the negative externalities in the consumption sector are taken as given.     

The Financial Resource Curse*

In this paper, we present a model of the financial resource curse (i.e., episodes of abundant access to foreign capital coupled with weak productivity growth). We study a two‐sector (i.e., tradable and non‐tradable) small open economy. The tradable sector is the engine of growth, and productivity growth is increasing with the amount of labor employed by firms in the tradable sector. A period of large capital inflows, triggered by a fall in the interest rate, is associated with a consumption boom. While the increase in tradable consumption is financed through foreign borrowing, the increase in non‐tradable consumption requires a shift of productive resources toward the non‐tradable sector at the expenses of the tradable sector. The result is stagnant productivity growth. We show that capital controls can be welfare‐enhancing and can be used as a second‐best policy tool to mitigate the misallocation of resources during an episode of financial resource curse.     

Intra-household labor supply,migration, and subsistence constraints in a risky environment: Evidence from rural El salvador

We investigate the use of intra-household labor allocation as a means of risk coping when subsistence constraints matter in rural El Salvador. We show that households increase the labor supply of its male members to the family farm and abroad in the US after being subjected to adverse agricultural productivity shocks. The latter is the result of a standard substitution effect, whereas the former is the result of subsistence concerns. Theoretically, these results are not at odds with each other if these events differentially impacted rich and poor households. We also show that the earthquakes of 2001 resulted in large reductions in the number of female members who were sent abroad and large increases in hours of domestic labor supplied by female members. We argue that this result is a consequence of subsistence motives because female labor supply at home increased despite lower remuneration.     

Increasing Returns,Financial Capital Mobility and Real Exchange Rate Dynamics*

The late 1990s saw a US IT investment boom, large capital flows into the USA and an appreciation of the US$. At the time, this appeared to be driven by expectations of continued IT‐related knowledge spillover externalities and associated productivity and profit growth. Using a two‐region dynamic general equilibrium model with externalities, we find a once‐off productivity shock leads to capital inflow and a real appreciation only in the short term. In the long term, capital flows stabilise and the real exchange rate depreciates. For a single shock to trigger long‐term growth in capital flows requires unrealistically large externalities.     

Trade,environment, and income inequality: An optimal taxation approach

In a small open economy, how should a government pursuing both environmental and redistributive objectives design domestic taxes when redistribution is costly? And how does trade liberalization affect the economy's levels of pollution and inequalities, when taxes are optimally and endogenously adjusted? Using a general equilibrium model under asymmetric information with two goods, two factors (skilled and unskilled labor), and pollution, this paper characterizes the optimal mixed tax system (nonlinear income tax and linear commodity and production taxes/subsidies) with both production and consumption externalities. While optimal income taxes are not directly affected by environmental externalities, conditions are derived under which under‐ or over‐internalization of social marginal damage is optimal for redistributive considerations. Assuming that redistribution operates in favor of the unskilled workers and that the dirty sector is intensive in unskilled labor, simulations suggest that trade liberalization involves a clear trade‐off between the reduction of inequalities and the control of pollution when the source of externality is only production; this is not necessarily true with a consumption externality. Finally, an increase in the willingness to redistribute income toward the unskilled results paradoxically in less pollution and more income inequalities.     

GOVERNMENT SPENDING,ENTRY, AND THE CONSUMPTION CROWDING‐IN PUZZLE

This article documents empirically that net firm entry robustly rises after a U.S. government spending expansion. We use this new finding to test the empirical validity of various model features that have been proposed to generate consumption crowding‐in after positive expenditure shocks. Endogenous‐entry models typically fail to generate the observed joint increase in consumption and entry. Model features that dampen the wealth effect, such as rule‐of‐thumb households or complementarity between labor and consumption in preferences, tend to reduce entry. We show that utility‐ or productivity‐enhancing public spending can reconcile the model with our documented fact and performs well empirically.     

Convergence speed and preference externalities in a one-sector model with elastic labor supply

In a one-sector model with elastic labor supply where consumption and leisure externalities are incorporated, we examine the impact of preference externalities on convergence speed.     

Social Security Systems,Human Capital,and Growth in a Small Open Economy

We consider a small open economy in which the level of public education funding is determined by popular vote. We show that growth can be enhanced by the introduction of pay‐as‐you‐go pensions even if the growth rate of aggregate wages falls short of the interest rate. The reason is that the pay‐as‐you‐go (PAYG) system allows future retirees to partially internalize positive externalities of public education due to the positive effect of higher future labor productivity on their pension benefits. The majority support for education funding will be especially strong when the PAYG benefit formula is flat, i.e., progressively redistributive. If a flat benefit PAYG pension system is in place then the economy will achieve the highest growth rate relative to the alternative pension system designs. While such PAYG pension system may be opposed by the majority of working individuals due to inferior returns to their pension contributions relative to a funded scheme, it is likely to be politically sustained by a coalition of older individuals and lower income workers.     

Will the consumption externalities' effects in the Ramsey model please stand up?

According to the prior literature, in a Ramsey model, consumption externalities have no impact on steady state behavior, once labor supply is exogenous. In contrast, this paper argues that — in the presence of technical change — consumption externalities always affect steady state behavior, via their impact on the elasticity of marginal utility of consumption.     

偏向性技术变迁、习惯形成与中国经济周期特征——基于RBC模型的实证分析

本文构建了一个同时引入偏向性技术变迁与中性技术冲击的包含居民消费的习惯形成的随机动态一般均衡模型,并以此模型为基础,对1979-2009年间中国宏观经济进行实证检验。研究表明:模型的预测结果与中国的特征事实较一致;对中国宏观经济的解释力要强于未包含劳动的RBC模型、包含资本劳动的可分劳动RBC模型、引入居民消费的习惯形成的可分劳动RBC模型,说明这一模型更符合中国经济的特征事实;与正的中性技术冲击具有正财富效应相反,正的偏向性技术变迁冲击具有明显的负财富效应特征;我国1979-2007年间推行的降低劳动弹性的偏向性技术变迁工业化发展战略促进了我国居民消费的增加、资本积累与GDP产出的提高,故而认为,这个战略是成功的。     

The Role of Agricultural Productivity on Structural Change

Many authors have estimated and found that the productivity growth in agriculture is higher than that in non‐agriculture in today's richest countries. Several papers suggested that growth in agricultural productivity was essential for today's richest countries to take off early. However, few articles noticed that growth in agricultural productivity is critical in driving structural change in today's richest countries. This paper studies a two‐sector neoclassical growth model with subsistence agricultural consumption and shows that growth in agricultural productivity plays a more important role than growth in non‐agricultural productivity in governing massive structural change in today's richest countries.     

Life expectancy and economic development: Evidence from microdata

This study examines the effect of life expectancy on fertility, education, and labor force participation. Using birth and sibling histories from the Demographic Health Surveys conducted in sub‐Saharan Africa, I construct a time series of age‐specific birth rates and mortality rates at the country‐region level. I use these data to test the implications of a general equilibrium model linking life expectancy to fertility, human capital, and labor supply. My results suggest that increases in life expectancy reduce fertility, increase education, and increase labor force participation. Overall, my empirical results suggest that in sub‐Saharan Africa, increases in life expectancy will have a positive impact on growth through fertility, education, and labor supply but that the effect will be small. My results also rule out the possibility that recent shocks to adult mortality in high HIV prevalence countries will reduce fertility, increase labor productivity, and lead to faster growth.