Fertility,Taxation and Family Policy*

Historically, there is clear evidence of an inverse relationship between female labour supply and fertility. However, the relationship across countries is now positive. Countries like Germany and Italy, with the lowest fertility, also have the lowest female participation rates. This paper analyses the extent to which this can be explained by public policy, in particular taxation and the system of child support. The results suggest that countries which have individual rather than joint taxation, and which support families through child care facilities rather than child payments, are likely to have both higher female labour supply and higher fertility.     

Teams,Teamwork and Absence*

We argue that firms with interdependent worker productivity, team production, have a higher cost of absence and, as a consequence, spend additional resources on monitoring absence. As a result, firms with team production should have lower absence rates. We estimate the determinants of absence for blue‐collar workers using a sample of German manufacturing establishments. Workplace teams are used as a proxy for team production. The estimates reveal that firms with teams have lower absence rates, as do smaller establishments. The size effect, however, is unique to establishments with teams, which fits prior theoretical work that has not been previously tested.     

Global instability in experimental general equilibrium: the Scarf example

Scarf (Int. Econ. Rev. 1 (1960) 157) proposed a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around, rather than converges to, the competitive equilibrium. Hirota (Int. Econ. Rev. 22 (1981) 461) characterized the price paths. We explore the predictions of Scarf's model in a non-tatonnement experimental double auction. The average transaction prices in each period do follow the path predicted by the Scarf and Hirota models. When the model predicts convergence the data converge; when the model predicts orbits, the data orbit in the direction predicted by the model. Moreover, we observe a weak tendency for prices within a period to follow the path predicted by the model.     

Money growth volatility and the demand for money in Germany: Friedman’s volatility hypothesis revisited

Money Growth Volatility and the Demand for Money in Germany: Friedman’s Volatility Hypothesis Revisited. — Recently, the Bundesbank claimed that monetary targeting has become considerably more difficult by the increased volatility of short-term money growth. The present paper investigates the impact of German money growth volatility on income velocity and money demand in view of Friedman’s money growth volatility hypothesis. Granger-causality tests provide some evidence for a velocity/volatility linkage. However, the estimation of volatility-augmented money demand functions reveals that — in contrast to Friedman’s hypothesis — increased money growth volatility lowered the demand for money.     

General‐to‐Specific Model Selection Procedures for Structural Vector Autoregressions*

Structural vector autoregressive (SVAR) models have emerged as a dominant research strategy in empirical macroeconomics, but suffer from the large number of parameters employed and the resulting estimation uncertainty associated with their impulse responses. In this paper, we propose general‐to‐specific (Gets) model selection procedures to overcome these limitations. It is shown that single‐equation procedures are generally efficient for the reduction of recursive SVAR models. The small‐sample properties of the proposed reduction procedure (as implemented using PcGets) are evaluated in a realistic Monte Carlo experiment. The impulse responses generated by the selected SVAR are found to be more precise and accurate than those of the unrestricted VAR. The proposed reduction strategy is then applied to the US monetary system considered by Christiano, Eichenbaum and Evans (Review of Economics and Statistics, Vol. 78, pp. 16–34, 1996) . The results are consistent with the Monte Carlo and question the validity of the impulse responses generated by the full system.     

Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms*

This paper uncovers an increasing proportion of quoted UK companies omitting cash dividends. Using a large panel of quoted UK firms, we estimate panel data probit models for the incidence of dividend omissions and cuts as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These variables account for most of the increase in omission since 1995. There is relatively little evidence to link this to the major tax reform of 1997 that abolished tax refunds on dividend income payable to tax‐exempt institutions. Significant persistence effects indicate companies are slow to adjust their balance sheets through their dividend.     

MEASURING THE OPERATIONAL EFFICIENCY OF COMMERCIAL BANKS IN NAMIBIA

This paper examines the efficiency of commercial banks in Namibia using the standard econometric frontier approach. Although two aspects of efficiency (scale and scope) receive our attention, the emphasis is on the latter which pertains to whether a firm produces as efficiently as it possibly can, given its size. Our results indicate that substantial economies of scale exist in commercial banking in Namibia. This will tend to suggest that commercial banks in Namibia can increase their efficiency by increasing their current scale of operation. The results for scope economies show that the current level of input combination does not make for maximum efficiency as sufficient scope exists for a more efficient combination of inputs. We believe this will reduce operating costs in the industry and stimulate efficiency.     

Intertemporal substitution and the liquidity effect in a sticky price model

The liquidity effect, defined as a decrease in nominal interest rates in response to a monetary expansion, is a major stylized fact of the business cycle. This paper first confirms that, with separable preferences, a low degree of intertemporal substitution in consumption is a necessary condition for the existence of the liquidity effect. In contrast to this result, in a model with non-separable preferences and capital accumulation it takes an implausibly high elasticity of intertemporal substitution to produce a liquidity effect. The robustness of these results to alternative degrees of nominal rigidities, capital adjustment costs and stochastic monetary processes is also analysed. We conclude that price stickiness, by itself, does not guarantee the existence of a liquidity effect.     

Interest rate corridors and reserves

This paper evaluates reserves regimes versus interest rate corridors, which have become competing frameworks for monetary policy implementation. Rate corridors, relying on lending and deposit facilities to create ceilings and floors for overnight interest rates, evince mixed results on controlling volatility. Reserve requirements allow period-average smoothing of interest rates but, even if remunerated, are subject to reserve avoidance activities. A system of voluntary, period-average reserve commitments could offer equivalent rate-smoothing advantages. If central banks created symmetric opportunity costs of meeting or falling short of period-average reserve requirements (or commitments), they could achieve flat reserve demand on settlement day.     

The future of social security

We analyze the effect of the projected demographic transition on the political support for social security, and equilibrium outcomes. Embedding a probabilistic-voting setup of electoral competition in the standard OLG model with capital accumulation, we find that intergenerational transfers arise in the absence of altruism, commitment, or trigger strategies. Closed-form solutions predict population ageing to lead to higher social security tax rates, a rising share of pensions in GDP, but eventually lower social security benefits per retiree. The response of equilibrium tax rates to demographic shocks reduces old-age consumption risk. Calibrated to match features of the U.S. economy, the model suggests that, in response to the projected demographic transition, social security tax rates will gradually increase to 16%. Other policies that distort labor supply will become less important; labor supply therefore will rise, in contrast with frequently voiced fears.