Housing Activity and Consumer Spending

The current expansion has seen record-high levels of transactions in housing, extraordinary growth in the aggregate value of owner-occupied housing, and large increases in the amount of funds realized from the refinancing of mortgage debt. Many analysts thus have pointed to the strong housing market and rising home prices as a major pillar supporting recent economic growth and have expressed concern that a contraction in housing activity and values could pose a significant risk to consumer spending and real economic growth. This paper explores the channels by which the housing market may affect consumer spending and assesses the potential risk from a softening in the housing market. Our assessment is that while a housing slowdown by itself may slow consumer spending some, it is probably insufficient to precipitate a downturn without some additional shocks outside of the sector. JEL Classification E21,R21     

Optimal growth with many consumers

A method is described for constructing all Pareto-optimal allocations for a dynamic economy with many heterogeneous consumers, under certainty, in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time. Optimal (perfect foresight competitive equilibrium) allocations are obtained through the study of a dynamic program. For an economy with one consumption good, sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth. For a two-person exchange economy, sufficient conditions are given for the global asymptotic stability of the unique interior stationary point.     

Evaluating small firm performance in local context: A case study of manufacturers in Columbus,Ohio

This research approaches corporate restructuring from a place-based perspective, departing from firm or industry-specific analysis and focusing instead on the performance and problems of a local economy. The study systematizes data from a survey of small manufacturing firms in Columbus, Ohio, offering a methodology that can be used for comparative analyses of sectors within or among communities.We link the performance of firms and local context using a sampling strategy that represents local industry mix. We recognize the multidimensional character of performance and employ several indicators, stated in both static and dynamic terms. We use these indicators to identify patterns of firm performance, relative to both national and local standards. Discriminant analyses reveal variables that account for differences among groups of firms, identified by level of performance, industry, and mode of labor-management relations.Results indicate that small manufacturers in Columbus are relatively uncompetitive. The few high performing firms are investing more in labor than in capital, but most firms are investing more in capital than labor. These findings are consistent with American corporate tradition that deemphasizes workers. Effective restructuring entails more than technical change, which enables competitiveness but does not itself engender it.This project was funded by the Ohio State University Committee on Urban Affairs, #724520.     

THE TREATMENT OF PENSIONS AND INSURANCE IN NATIONAL ACCOUNTS*

In the course of the nearly two decades since the revised SNA was developed, the role of pensions and insurance in the developed western economies has been significantly altered. The United Nations System of National Accounts (SNA) is not fully consistent in its treatment of pension and insurance transactions. This paper examines whether, in view of the changed institutional context, a modification of the SNA treatment of this complex of flows would be desirable. It investigates the impact on household income and saving of adopting a somewhat more consistent transactor/transaction approach for all pension and insurance transactions. Four main topics are covered: (1) social security, (2) private pensions, (3) life insurance, and (4) casualty insurance. Each is considered in terms of the treatment of contributions, the treatment of benefits, and the handling of reserves and the income generated by them. The same sorts of problem arise in all four cases.     

Invoking Satan or the Ethics of the Employment Contract*

ABSTRACT Studies of mergers of organizations focus upon the financial and economic outcomes, with little attention paid to the effect on the people working in the merging organizations. This paper reports the findings of a study of the impact on managers of an organizational merger. Rather than the cool calculations of accountants and economists and the rational application of a managerial logic, we found the impact on these managers was upon their emotions, which seemed sometimes too buffeted to allow them to continue in their work. A narrative analysis of the stories told by these managers suggested they experienced their involvement with the merging organizations as akin to a Faustian contract, whereby they had sold their souls to the organizational devil and were now reaping the costs. When we came to write this paper we found that using the usual rubrics of academic writing suppressed the sheer emotionality of their experiences. We have therefore followed the imperative of our conclusions, and written our analysis in the form of a play, based upon Christopher Marlowe's Dr Faustus, which allows us to use our interviewees’ own words to illustrate the impact of the merger. The play is, of course, in the format of a tragedy: it has four main characters – the narrator, the manager, Faustus and Mephistopheles – and five acts. We use the Prologue to insert our own words, where we argue for a turn away from the ‘hard’ school of human resource management towards one that is ethically informed. Programme notes contain the technical details which justify our research methods. We remain totally unapologetic for intruding emotions into the rational world of academia.     

Optimal fiscal and monetary policy in an economy without capital

This paper is concerned with the structure and time-consistency of optimal fiscal and monetary policy in an economy without capital. In a dynamic context, optimal taxation means distributing tax distortions over time in a welfare-maximizing way. For a barter economy, our main finding is that with debt commitments of sufficiently rich maturity structure, an optimal policy, if one exists, is time-consistent. In a monetary economy, the idea of optimal taxation must be broadened to include an ‘inflation tax’, and we find that time-consistency does not carry over. An optimal ‘inflation tax’ requires commitment by ‘rules’ in a sense that has no counterpart in the dynamic theory of ordinary excise taxes. The reason time-consistency fails in a monetary economy is that nominal assets should, from a welfare-maximizing point of view, always be taxed away via an immediate inflation in a kind of ‘capital levy’. This emerges as a new possibility when money is introduced into an economy without capital.