Back to Basics: Remittances in the Keynesian Macroeconomic Framework

This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income.     

Stuck in the middle: Impacts of grade configuration in public schools

We examine the implications of separating students of different grade levels across schools for the purposes of educational production. Specifically, we find that moving students from elementary to middle school in 6th or 7th grade causes significant drops in academic achievement. These effects are large (about 0.15 standard deviations), present for both math and English, and persist through grade 8, the last year for which we have achievement data. The effects are similar for boys and girls, but stronger for students with low levels of initial achievement. We instrument for middle school attendance using the grade range of the school students attended in grade 3, and employ specifications that control for student fixed effects. This leaves only one potential source of bias–correlation between grade range of a student's grade 3 school and unobservable characteristics that cause decreases in achievement precisely when students are due to switch schools–which we view as highly unlikely. We find little evidence that placing public school students into middle schools during adolescence is cost-effective.     

The rhetorical fantasy of energy transitions: implications for energy policy and analysis

This article explores the rhetoric of four energy transitions. It begins by summarising research on the intersection of fantasy, technology and the sociology of expectation. It then looks at how ideas of progress, modernity, cheapness, abundance and hope influence the way society perceives new energy technologies, causing them to overestimate benefits and underestimate challenges. Our rhetorical analysis finds in case studies of steam engines, gasoline automobiles, hydroelectric dams and nuclear reactors that newly ‘discovered’ sources of energy or newly invented technologies are always assumed to provide infinitely abundant energy and to have the potential to create positive utopian changes in society. We conclude by noting the salient implications of these rhetorical themes for energy planners, analysts and scholars.     

Trading spaces: Calculating embodied Ecological Footprints in international trade using a Product Land Use Matrix (PLUM)

Nations import and export biophysical resources. With many ecosystems worldwide under mounting stress, countries may be increasingly interested in knowing the extent and origin of their ecological imports and dependencies. In this paper the Ecological Footprint is used as a tool to measure the biophysical (as opposed to financial) value of international trade flows. This paper attempts to answer the following question: How large of an Ecological Footprint does a given country exert inside the borders of each of its trading partners? Records in the UN COMTRADE bilateral trade database are multiplied by a matrix of per-product Footprint yield coefficients to translate from values in dollars and tonnes to units of hectares. The results show that the largest interregional flows are from Latin to North America, and from North America to Asia-Pacific. Grouping countries by GDP, high and middle income countries appear in Footprint terms to trade predominantly with other high and middle income countries and much less with low income countries.     

Information in stock prices: the case of the 2016 U.S. presidential election

On the day before the 2016 U.S. presidential election, the odds of Hillary Clinton winning the presidency, according to political prediction markets, were above 90%. Surprisingly, Donald Trump won the Electoral College handily. In this study, we examine how movements in specific stock prices foreshadowed the eventual outcome. Specifically, we conduct a series of standard event-study tests focused on pharmaceutical companies, which became a focal point during the presidential campaign. Results show that while stocks of pharmaceutical companies significantly underperformed the market prior to the election, prices substantially increased beginning three days before the election outcome. This increase is both statistically significant and economically meaningful and robust to various event-study methodologies. These results suggest that some sectors of the stock market seemed to anticipate the election outcome.     

Solving the Misesian migration conundrum

This paper reviews Ludwig Von Mises’ concerns surrounding unrestricted immigration and relates them to the current debate surrounding immigrants’ impact on destination countries’ institutions. It then outlines a policy of generally unrestricted immigration with selective restrictions that addresses Mises’ concerns and concerns about destination country institutions, while still achieving the majority of the economic gains that unrestricted immigration is forecast to achieve.

     

Regulation and taxation: A complementarity

I show how quantity regulation can lower elasticities and thereby increase optimal tax rates. Such regulation imposes regulatory incentives for particular choice quantities. Their strength varies between zero (laissez faire) and infinite (command economy). In the latter case, regulation effectively eliminates any intensive behavioral responses to taxes; a previously distortionary tax becomes a lump sum. For intermediate regulation (where some deviation is feasible), intensive behavioral responses are still weaker than under zero regulation, and so quantity regulation reduces elasticities, thereby facilitating subsequent taxation. I apply this mechanism to labor supply and present correlational evidence for this complementarity: hours worked in high-regulation countries are compressed, and these countries tax labor at higher rates.     

Quantitative growth effects of subsidies in a search theoretic R&D model

Should government subsidize R&D and does it matter how these subsidies are allocated? We examine these questions in a dynamic model where R&D is described as sequential sampling from a distribution of new ideas. Successful discoveries affect future available resources and incentives for further R&D. Consequently, there may be under-investment in R&D. We study the effect of government interventions aimed at fostering growth through R&D. Calibrating the model with aggregate data from the Israeli business sector allows us to quantitatively compare two forms of support resembling those actually used to encourage R&D in the Israeli business sector: (i) an unrestricted subsidy that may be used at the recipients' discretion to finance R&D or other investments, (ii) a subsidy earmarked by the government for R&D activities only. While there is no theoretical way to determine which of the two subsidies will have a greater impact on search for new ideas and growth, we find that in the calibrated economy both subsidies have a significant but similar impact on the economy's output and TFP growth rates. Accordingly, in the case of the Israeli business sector, the incentives to conduct R&D were sufficiently strong, and no R&D-specific encouragement was needed. However, a sensitivity analysis reveals that for economies characterized by other parameter values this result may not be true. Correspondence to: B. Bental     

The response of vital rates to harvest fluctuations in pre-industrial Sweden

This study examines whether there was a Malthusian equilibrium mechanism in Sweden in the pre-industrial period. A unique data set on harvests, deaths, marriages and births going back to 1630 is used to calculate cumulative elasticities of vital rates with respect to harvest. While earlier studies have mostly focused on the impact of real wage, this study uses the calorie content of per capita harvests as an indicator of living standards. It finds that there indeed was a response of vital rates to harvest fluctuations, but there were important structural breaks. While positive checks attenuated after 1720, preventive checks were strengthened. After 1870 preventive checks disappeared, and possibly also positive checks. The results are robust to different models and trend specifications, with one crucial difference: while the distributed lag model shows that positive checks were significant up to 1920, the SVAR model shows that positive checks disappeared after 1870.