Over het sociaal-economische gemenebest

Summary The title of this essay reflects the responsibility that people share in today's society for the outcome of the economic process to be efficient and equitable for everybody.Overcoming both the pursuit of Economic Welfarism and the separation of Efficiency and Equity, in welfare economics one has to look to a general understanding of the maintenance and furtherance of welfare on the physical, subjective and ethical levels. For that purpose, a recognition of the pluriformity of the ingredients of welfare is necessary. External effects, ecological problems and the scale of private, mixed and public goods, fall into that pattern.Openbare les, gegeven bij de aanvaarding van het ambt van gewoon lector in de staathuishoudkunde aan de Vrije Universiteit to Amsterdam op 22 september 1972.     

On the theory of macroeconomic policy

Summary Jan Tinbergen originated the theory of policy in the 1950s. Here I apply it to contemporary macroeconomics. The two standard instruments of short-run demand management cannot achieve the two usual targets, full employment and price stability. With respect to those goals, these two instruments are collinear, except for small and transient effects on foreign exchange rates. But the mix of fiscal and monetary policies, relative to one another, does have important effects on the composition of national output, as between investment and consumption.I point out that policy-makers, like portfolio managers, should diversify the instruments they use when they are uncertain of their effects. I discuss some pitfalls in the empirical estimation of policy effects, especially possible misinterpretations of simple correlations, and I note that policy rules cannot be invariant to changes in macroeconomic structure. I argue that policy rules should involve responses to new information and in practice allow discretion. Finally, I suggest that Tinbergen's theory of policy needs to be extended to policy coordination among nations.Third Tinbergen Lecture delivered on October 20, 1989, in Utrecht for the Royal Netherlands Economic Association.     

Mode of payment in household expenditures

Summary We have studied the choice of mode of payment from a 1987 Dutch household survey. The institutional arrangements of a transaction are a major determinant for the mode of payment, and so is the amount involved. A 10% increase in the sum paid usually leads to a reduction of about 1.3% to 2.3% in the incidence of currency use.Based on De keuze van een betaalmiddel (The Choice of Mode of Payment), (SEO, Amsterdam, 1989), which reports research commissioned by the Postbank, Amsterdam.     

Overshooting,reform and retreat of the welfare state

Summary The paper discusses various reforms that may lower the costs of the contemporary welfare state, including a shift from taxes to actuarially fair, although still compulsory, insurance premia; wider use of co-insurance,etc. It is also suggested that social security entitlements are made more robust against political interventions by moving them outside of the government budget. Freer competition is suggested in the provision of social services. Reform of the political process is also discussed to avoid an overshooting of the welfare state in the sense that imperfections in the political process result in excessive welfare state spending.Seventh Tinbergen Lecture delivered on October 1, 1993 at De Nederlandsche Bank, Amsterdam for the Royal Netherlands Economic Association. I Am grateful for comments on an early draft of this paper by Thorvaldur Gylfason, Torsten Persson, Agnar Sandmo, Karl Gustaf Scherman, Lars E.O. Svensson, Paul Söderlind and Lars Söderström.     

Policies for economic growth

Summary The old growth theory of the 1950s led to certain conclusions about the sorts of economic policies that would promote economic growth, and also about their limitations. The new growth theory of the 1980s makes much stronger assumptions and leads to correspondingly stronger conclusions about the scope of growth-promoting policy. This article argues that: (1) empirical work so far has neither confirmed nor denied the strong assumptions underlying the new theory; (2) the theory is worth pursuing because of its intrinsic interest and the possibilities it opens up; (3) whatever the final verdict on the new theory, both theory and evidence support the belief that significant long-run gains, even if not permanent changes in the growth rate, can be achieved by increased investment in the broadest sense, including human capital, technological knowledge, and industrial plant and equipment.Fifth Tinbergen Lecture delivered on October 4, 1991, in Amersfoort for the Royal Netherlands Economic Association     

Strategic Interaction in the Dutch Market for Consumer Magazines

Information goods such as newspapers and magazines have a number of distinct economic characteristics such as a high fixed cost – low marginal (variable) cost structure and the possibility to subsidize content through selling advertising space. We develop a simple one-shot duopoly model that analyses strategic interaction in a market with such features. We focus on the firms best responses and test the theoretical predictions of the model empirically by panel regression techniques using a balanced panel data set of 60 Dutch consumer magazines over the period 1991–1998. Our 3SLS estimation results confirm the prediction of our model that the Dutch market for consumer magazines is characterized by strategic complementarity between magazine and ad prices.     

Minimum wage rates and unemployment in The Netherlands

Summary A static limited dependent variable model is formulated to analyse the Dutch labour market from an individual's viewpoint. Results suggest that high minimum labour costs are an important source of unemployment. Secondly, the reduced-form participation equation is replaced by a neoclassical labour supply equation. Thus, also the effect of high minimum wage rates on employment through labour supply is taken into account. Supply appears to be forward bending and participation is insensitive with respect to unemployment benefits. Simulations suggest that the effect of lowering the productivity threshold by reducing before-tax minimum wages dominates supply effects.The author wishes to thank Geert Joosten, Arie Kapteyn, Peter Kooreman, Bertrand Melenberg, Viji Narendranathan and Theo Nijman for helpful comments and the Netherlands Central Bureau of Statistics for providing the data. The views expressed in this paper do not necessarily reflect the policies of the CBS.     

Tax Level and Tax Internalization Effects on Union Wage Bargaining

High taxes and generous social benefits are often blamed for causing unemployment. The conventional view is that if taxes on labour are (too) high, jobs will be lost and that generous social benefits will exert an upward pressure on unions' wage claims. In the case where unions co-ordinate their wage bargaining strategy, this need not be the case. A simple model is used to illustrate the effects of the tax rate level and tax internalization on unions' wage bargaining strategy. A high marginal tax rate along with endogeneity of the average tax rate shifts the union's trade-off between wages and employment in favour of the latter. These shifts may have contributed to the success of the so-called polder model or tulip model of the Netherlands.     

Game equilibrium modelling

Summary Non-cooperative game theory has in recent years become one of the main tools in the social sciences and economics. It deals with decision problems of more than one (rational) player. The actions of those players result in outcomes that are the best that may have happened to a player, given the actions of the other players. This is precisely the content of the 'Nash equilibrium' concept. It would be nice when each game had a unique Nash equilibrium. Unfortunately, both non-existence and multiple equilibria occur. An important role in game theory is played by the information available to the players. Among the economic applications are: the Theory of Industrial Organisation, Bargaining and the Economic Theory of Information.Comments by Eric van Damme and Casper de Vries on an earlier draft of this paper have greatly improved the presentation. I have benefited from the comments of the editor and an anonymous referee ofDe Economist. For all omissions, all possible errors and the revealed views in this paper, I alone am responsible.     

De Theorie van de Inkomensverdeling en het welzijn van de huisvrouw

Summary The author presents some comments on the discussion between Mrs. Bruyn-Hundt and Prof. Tinbergen inDe Economist, 1973, nr. 6. In analysing the welfare of housewives, the nature of the family and of the raising of children, which is one of the ultimate aimes of human life, should be taken into account. Before deciding if, and to what extent, the unpaid services of housewives and other members of the family should be included in the national income, a production boundary within households should be defined. It is doubtful whether the inclusion of unpaid domestic services in the definition of national income is very useful for purposes of economic analysis.     

Testing Korteweg's rational expectations model for a small open economy

Summary Korteweg extended the Barro, Lucas, Sargent, Wallace type of rational expectations model to a small open economy. This paper tests Korteweg's model with Dutch data. A major error in the specification and estimation is pointed out and corrected: the differenced expected variables are not defined consistently. This error implies that Korteweg's and Bomhoff's previous empirical results on the model are invalid. The test results for the corrected model indicate that this model has to be rejected for The Netherlands. The restrictions implied by an extremely simple empirical alternative are, however, not rejected.I would like to thank Dr. Th.E. Nijman, Professors F. van der Ploeg, W.H. Buiter and J.J.M. Theeuwes and Dr. A. J. de Zeeuw for their stimulus and helpful comments on previous versions of this paper, and Professor P. Korteweg for his open-minded attitude towards this research. Responsibility for the contents remains, of course, with the author. Financial help, from the Stichting Bekker-La Bastide-Fonds and the Stichting A.A. van Beek-Fonds is gratefully acknowledged.     

Post- war European economic development as an out of equilibrium growth path. The case of the Netherlands

The paper examines a number of aspects of post-war economic development of the Netherlands in the light of recent out of equilibrium growth theory. It contains a comparison of the stylized facts of the long run performance of the economies of the United States and the Netherlands which suggests that the US has been on an equilibrium growth path for more than a century, but that the Netherlands followed a radically different growth path, especially after 1945. It is attempted to explain this erratic behaviour of the investment ratio and the wage share after 1945 by examining two aspects more in detail: the financing of the acceleration of growth after 1945 and the phase of too rapid growth during the 1950s and 1960s, when the growth of the demand for labour tended to be higher than the increase in its supply.     

Differentiation of Skills, Firms’ Recruitment Strategy and Unemployment Benefits in an Efficiency Wage Model

It is well known that the recruitment strategy of firms depends on the state of the labour market. In order to account for this fact, we build a matching model where the differentiation of skills is explicit. Along the line of Salop (1979b) workers and firms are distributed on the same circle and the distance between two points on this circle measures the mismatch between a firm and a worker. Another feature of this model concerns wage setting. In a natural way, wages are subject to the constraint that good workers (i.e. workers who are not too far on the circle) prefer to keep their job. In addition, on a suggestion by Phelps (1992), we assume that workers who quit their job are not eligible to unemployment insurance. Two main results are established. First, the lower the tightness of the labour market the more stringent the requirements of firms are. Second, as a consequence of the incentive constraint, unemployment benefits appear to raise employment.     

De Europese Economische Gemeenschap en de Minder Ontwikkelde Wereld Buiten de Geassocieerde Landen

Voordracht gehouden op 2 november 1963 te Amsterdam voor de postdoctorale leergang Externe economische betrekkingen van de E.E.G. De tekst is op enkele plaatsen bijgewerkt.     

Europe’s Demographic Deficit A Plea For A Child Pension System

Summary This paper considers the economic implications of the stalling birth rates and demographic development in Europe. To remedy for this it proposes a child pension system. This system allows additional pension facilities depending on the number of children raised. It should be a PAYG pension financed with an income tax. The main motivation for this is that parents have invested resources which also benefit society.18th Tinbergen Lecture, Amsterdam, October 22, 2004Ifo Institute for Economic Research at the University of Munich.I am grateful to Lans Bovenberg and Peter Cornelisse for useful conversations about the Dutch pension system and Tinbergens views on children and pensions. I thank Robert Koll, Regina von Hehl and Elsita Walter for careful research assistance, and Tobias Seidel, Michael Stimmelmayr, Martin Werding and Markus Zimmer for useful comments.     

Forward exchange,short term capital flows and monetary policy

Summary This paper re-examines the relationships between short term capital flows and monetary policy, in the light of a new theoretical approach of the forward exchange market. They contend that the traditional forward exchange market theory is a misleading one as it fails to give all the importance it deserves to the distinction between covered and uncovered exchange transactions and to the actual role of the arbitrageurs. As a consequence of this analysis, they demonstrate that the problem of monetary management in an open economy must be dealt with in a way different from what has been usual, and they conclude that monetary policy, central banks' intervention on the foreign exchange market and direct controls on capital movements can still have some efficiency in the struggle against inflation, either of the domestic or the imported type.     

Public pensions and political decision-making

Summary A simple decision-making model regarding the financing method and benefit level of a public old age pension is developed. In line with existing literature, the decision-making process is supposed to be in the form of direct democracy, initially, In order to apply the model to a situation of a representative democracy, to wit the Netherlands, five social groups are considered which may be assumed to influence the decisions taken by the government organization. The empirical results show unanimous support for the PAYG system actually chosen at the start of the pension scheme in 1956. The results are highly suggestive, furthermore, as regards the fact that the financing method of the pension scheme has recently become a parliamentary issue. If one endorses the view that long-term considerations should be given a more preeminent place in this context, which would demand a change of the decision-making structure in favour of the young, then the political support for such a change would seem to be present at the moment.The research reported in this paper is part of the project Economic Policy and Conflicts of Interests of the University of Amsterdam (PEPCI paper 85.03). Helpful comments by Professor P. Hennipman and by participants in the workshop on The Origin and Future of Social Security Schemes at the Wissenschaftszentrum Berlin, December 13–14, 1984, in particular by Professor Charles Blankart, are gratefully acknowledged.     

The perspective of the SDR's position in monetary reserves on the robustness of optimal portfolio results

Summary To gain an empirical impression of the SDR's attractiveness as a reserve asset, an amended mean-variance analysis is applied to official reserves. The main amendments bear upon the choice of the numeraire and the rejection of both the capital market line and the effective yield's positive marginal utility-frequently assumed in empirical analysis. Comparison of the outcome with that recently obtained by Ben-Bassat shows a large sensitivity of optimal portfolio results for slight differences in assumptions. A second, substantial kind of sensitivity of an asset's position in a portfolio appears to ensue from the influence of other competing functions of reserves.The authors are Professor and Assistant Professor of International Economics, University of Amsterdam, The Netherlands. The research of the second author was financially supported by the Netherlands organization for the advancement of pure research (Z.W.O.), no. 46-108. This research is part of the project Exchange-rate and monetary policy in international dependence. The paper was presented earlier at the conference Research in international finance, Jouyen-Josas, France (June 19 and 20, 1986). Computational assistance by Jeannette Capel, Reiner Gratama, and Martin O. Nijkamp and comments by an anonymous referee are gratefully acknowledged.     

Cash Management, Payment Patterns and the Demand for Money

We analyse cash management and payments behaviour using 1990–1994 panel data for Dutch households. The results largely confirm the transactions demand for money theory, including an income elasticity of substantially less than one, and they are consistent with the hypothesis of technology resulting in households' economizing on currency balances. The results indicate up to 40 per cent lower transactions balances in the future, which is affirmed by direct questioning on future expectations. The effect on total money outstanding is considerably lower, due to significant amounts of missing money in hoards, which are insensitive to new developments in the payments system.     

Interpretation of error covariances with nonrandom data: An empirical illustration of returns to college education

Conclusion This paper reviews two models of selectivity and gives an interpretation of the covariance terms that are particular to self-selectivity models. While the second model examined in this paper has been discussed elsewhere, the estimates presented for the first model have not been discussed in previous papers. More importantly though, the paper proposes an hypothesis about the expected relationship between error covariances. According to this hypothesis, if all individuals who are faced with the choice between two regimes (1 and 2) choose the regime which yields a maximum value, then the expected relationship between covariances is ₁ < ₂ . If all individuals choose that regime which yields a minimum value, then the expected relationship between covariances is ₁ > ₂ . This relationship holds for a very general class of selectivity models, so long as individuals are choosing between regimes by comparing the expected value (to them) of each regime.This paper was written while I was working under the professional development program at CNA.