Do gender and age impact the time‐varying Okun's law? Evidence from South Korea

This study investigates the time‐varying Okun's law for different age and gender cohorts in South Korea over the 1980–2014 period. We found that the absolute value of the estimated Okun coefficients for all age cohorts and both genders become larger in a recession than in an expansion. We also found that the youth cohort (15–24 years old) for both genders is more sensitive to a negative economic impact than are older cohorts. These differences imply that when policymakers try to find a way of reducing the unemployment rate, they should consider differences in behaviour among these groups. Furthermore, the policies should be combined with age‐specific policies.     

The price relationship between organic and non-organic vegetables in the U.S.: evidence from Nielsen scanner data

This study investigates price relationships between organic and conventional carrots, tomatoes, and lettuce in the U.S. utilizing Nielsen scanner data from 2006–2015. We employ a threshold vector error correction model (TVECM), threshold vector autoregressive model (TVAR), and threshold cointegration test to test whether market integration exists between organic and conventional vegetables as well as the existence of asymmetric price transmission. The results find positive long-run relationships between organic and conventional prices of carrots and tomatoes and show the existence of asymmetric price transmission in price pairs of lettuce and tomatoes. Our findings suggest that the price relationship between organic and conventional vegetables varies by characteristics, such as shelf life, volatility in the price premium, and substitutability.     

Sources of fluctuations in hours worked for Canada,Germany, Japan and the U.S.: a sign restriction VAR approach

This study empirically examines the sources of fluctuations in hours worked in Canada, Germany, Japan and the U.S. It is particularly motivated by Galí’s (1999) VAR study, which demonstrates that a positive technology shock reduces hours worked, at least in the short run. However, in the present study, a technology shock is identified without recourse to Galí’s long-run restriction, which has been subject to active controversy. Furthermore, this study uncovers other important sources of fluctuations in hours worked to reflect the concern, raised by numerous studies, that technology shocks leave most variations in hours worked unexplained. Specifically, there are six shocks underlying our model, and they are identified using a set of sign restrictions. The empirical results confirm that in all four countries, a positive technology shock significantly reduces hours worked. This technology shock, along with labor supply and demand shocks, accounts for most of the short-term variations in hours worked. As the forecasting horizon increases, technology and demand shocks become less important, whereas labor supply shocks contribute to explaining the bulk of long-run variations in hours worked. Finally, the empirical relevance of Galí’s long-run identification restriction is tested and the results are related to those obtained using the sign restriction model.     

Predicting bid prices by using machine learning methods

It is well-known that empirical analysis suffers from multicollinearity and high dimensionality. In particular, this is much more severe in an empirical study of itemized bids in highway procurement auctions. To overcome this obstacle, this article employs the regularized linear regression for the estimation of a more precise interval for project winning bids. The approach is put to the test using empirical data of highway procurement auctions in Vermont. In our empirical analysis, we first choose a set of crucial tasks that determine a bidder’s bid amounts by using the random forest variable selection method. Given the selected tasks, project bid forecasting is conducted. We compare our proposed methodology with the least square linear model based on the bias and the standard root mean square error of the bid estimates. There is evidence supporting that the suggested approach provides superior forecasts for an interval of winning bids over the competing model. As far as we know, this article is the first attempt to provide reference bids of highway construction contracts.     

2018 KLEIN LECTURE: INDIVIDUAL AND AGGREGATE LABOR SUPPLY IN HETEROGENEOUS AGENT ECONOMIES WITH INTENSIVE AND EXTENSIVE MARGINS

We study business cycle fluctuations in heterogeneous agent general equilibrium models featuring intensive and extensive margins of labor supply. A nonlinear mapping from time devoted to work to labor services generates operative extensive and intensive margins. Our model captures the salient features of the empirical distribution of hours worked, including how individuals transit within this distribution. We study how various specifications influence labor supply responses to aggregate technology shocks and find that abstracting from intensive margin adjustment can have large effects on the volatility of aggregate hours even if fluctuations along the intensive margin are small.     

FINANCIAL DEVELOPMENT ON GROWTH CONVERGENCE

This paper investigates whether the impacts of financial development on growth convergence vary with the stage of real development. We implement this analysis through the instrumental variable threshold regression approach proposed by Caner and Hansen. Our empirical evidence shows that financial intermediary development leads to long‐run convergence in growth of both economic activity and productivity. Moreover, such convergence‐enhancing effects of financial intermediation are stronger for less‐developed countries than for the more industrialized. In addition, the data reveal that stock market development assists growth convergence only in low‐income countries.     

Inflation and the finance–growth nexus

This paper re-investigates whether there exist inflation thresholds in the finance–growth linkage. By applying the Caner and Hansen's (2004) instrumental-variable threshold regression approach to the dataset of Levine et al. (2000), we find strong evidence of a nonlinear inflation threshold in the relationship, below which financial development exerts a significantly positive effect on economic growth, while, above which, the growth effect of finance appears to be insignificant. Furthermore, we also find a positive and significant relationship between finance and productivity for inflation rates below the threshold level, but no such relationship is detected for inflation rates above the critical level. This result suggests that finance influences growth mainly through the productivity channel.     

Nonlinear dynamics in exchange rate deviations from the monetary fundamentals: An empirical study

This paper reexamines empirical performance of the monetary exchange rate model with nonlinear dynamics of exchange rate deviation from the monetary fundamentals. First, we apply unit root test of Park and Shintani (2005) to post-Bretton Woods exchange rate data and able to reject the null of unit root deviation from monetary fundamentals against alternative hypothesis of nonlinear stationary process for deutschemark, pound, and Swiss franc. Our empirical results find that exchange rates show high degree of mean-reversion with larger deviation and long periods of overvaluation and undervaluation of dollar. We also find empirical evidence of predictability of the monetary fundamentals at longer horizons.     

Left-side Relatively Weak Increases in Risk and Their Comparative Statics

This paper proposes a new concept, a left-side relatively weak increase in risk (L-RWIR) order, that extends the definition of a relatively weak increase in risk (RWIR) order. We show that, for the class of linear payoffs, one can obtain an appealing comparative statics result for L-RWIR shifts imposing additional restrictions on risk preferences of a risk-averse decision maker.JEL classification: D81.revised version received October 10, 2003Acknowledgements The authors would like to thank an anonymous referee for insightful comments and useful suggestions.     

Estimating Willingness to Pay for Improved Drinking Water Quality Using Averting Behavior Method with Perception Measure

This paper suggests an application of an averting behaviormethod to reconcile inconsistent public activity with objectiveenvironmental risk. In Korea, an historically polluted watersupply has created citizen resistance to using tap water. Koreansperceive low quality levels for tap water, although objectivelymeasured data show that the pollution levels are lower than theacceptable risk. We hypothesized that the irrational aversion tousing tap water is a consequence of inconsistencies between theobjectively measured and perceived pollution levels. We introducethe perception averting behavior method, in which we add aperception measure unit to the conventional averting behaviormethod. We found that the perception measure provided a validexplanation for citizens' aversion to using tap water in Korea.