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The added value from a general equilibrium analyses of increased efficiency in household energy use
Get PDFThe aim of the paper is to identify the added value from using general equilibrium techniques to consider the economy-wide impacts of increased efficiency in household energy use. We take as an illustrative case study the effect of a 5% improvement in household energy efficiency on the UK economy. This impact is measured through simulations that use models that have increasing degrees of endogeneity but are calibrated on a common data set. That is to say, we calculate rebound effects for models that progress from the most basic partial equilibrium approach to a fully specified general equilibrium treatment. The size of the rebound effect on total energy use depends upon: the elasticity of substitution of energy in household consumption; the energy intensity of the different elements of household consumption demand; and the impact of changes in income, economic activity and relative prices. A general equilibrium model is required to capture these final three impacts
How private is private information? The ability to spot deception in an economic game
Get PDFWe provide experimental evidence on the ability to detect deceit in a buyer-seller game with asymmetric information. Sellers have private information about the buyer's valuation of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary (1) whether or not the buyer can interrogate the seller, and (2) the contextual richness of the situation. We find that the buyers' prediction accuracy is above chance levels, and that interrogation and contextual richness are important factors determining the accuracy. These results show that there are circumstances in which part of the information asymmetry is eliminated by people's ability to spot deception
Overtime Working and Contract Efficiency
Get PDFWe present a wage-hours contract designed to minimize costly turnover given investments in specific training combined with firm and worker information asymmetries. It may be optimal for the parties to work ‘long hours’ remunerated at premium rates for guaranteed overtime hours. Based on British plant and machine operatives, we test three predictions. First, trained workers with longer tenure are more likely to work overtime. Second, hourly overtime pay exceeds the value of marginal product while the basic hourly wage is less than the value of marginal product. Third, the basic hourly wage is negatively related to the overtime premium
Genuine savings and future well-being in Germany, 1850-2000
Get PDFGenuine Savings (GS), also known as ‘net adjusted savings’, is a composite indicator of the sustainability of economic development. Genuine Savings reflects year-on-year changes in the total wealth or capital of a country, including net investment in produced capita, investment in human capital, depletion of natural resources, and damage caused by pollution. A negative Genuine Savings rate suggests that the stock of national wealth is declining and that future utility must be less than current utility, indicating that economic development is non-sustainable (Hamilton and Clemens, 1999). We make use of data over a 150 year period to examine the relationship between Genuine Savings and a number of indicators of well-being over time, and compare the relative changes in human, produced, and components of natural capital over the period. Overall, we find that the magnitude of genuine savings is positively related to changes in future consumption, with some evidence of a cointegrating relationship. However, the relationships between genuine savings and infant mortality or average heights are less clear
Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels
Get PDFIn contrast to previous results combining all ages we find positive effects of comparison income on happiness for the under 45s, and negative effects for those over 45. In the BHPS these coefficients are several times the magnitude of own income effects. In GSOEP they
cancel to give no effect of effect of comparison income on life satisfaction in the whole sample, when controlling for fixed effects, and time-in-panel, and with flexible, age-group dummies. The residual age-happiness relationship is hump-shaped in all three countries.
Results are consistent with a simple life cycle model of relative income under uncertainty
The Optimal Distribution of the Tax Burden over the Business Cycle
Get PDFThis paper analyses optimal income taxes over the business cycle
under a balanced-budget restriction, for low, middle and high income
households. A model incorporating capital-skill complementarity in
production and differential access to capital and labour markets is developed to capture the cyclical characteristics of the US economy, as well as the empirical observations on wage (skill premium) and wealth inequality. We .nd that the tax rate for high income agents is optimally the least volatile and the tax rate for low income agents the least countercyclical. In contrast, the path of optimal taxes for the middle income group is found to be very volatile and counter-cyclical. We
further find that the optimal response to output-enhancing capital equipment technology and spending cuts is to increase the progressivity of income taxes. Finally, in response to positive TFP shocks, taxation becomes more progressive after about two years
A Consistent Nonparametric Bootstrap Test of Exogeneity
Get PDFThis paper proposes a novel way of testing exogeneity of an explanatory
variable without any parametric assumptions in the presence of a "conditional"
instrumental variable. A testable implication is derived that if an explanatory
variable is endogenous, the conditional distribution of the outcome given the
endogenous variable is not independent of its instrumental variable(s). The test
rejects the null hypothesis with probability one if the explanatory variable is
endogenous and it detects alternatives converging to the null at a rate n..1=2:We
propose a consistent nonparametric bootstrap test to implement this testable
implication. We show that the proposed bootstrap test can be asymptotically
justi.ed in the sense that it produces asymptotically correct size under the null
of exogeneity, and it has unit power asymptotically. Our nonparametric test
can be applied to the cases in which the outcome is generated by an additively
non-separable structural relation or in which the outcome is discrete, which has
not been studied in the literature
Did Keynes in the General Theory significantly misrepresent J S Mill?
Get PDFIt has been alleged that J M Keynes, quoting in the General Theory a
passage from J S Mill's Principles, misunderstood the passage in
question and was therefore wrong to cite Mill as an upholder of the
'classical' proposition that 'supply creates its own demand'. We believe
that, although Keynes was admittedly in error with respect to, so-to-say,
the 'letter' of Mill's exposition, he did not mislead readers as to the
'substance' of Mill's conception. The purpose of this paper is to
demonstrate that J S Mill did indeed stand for a 'classical' position,
vulnerable to Keynes's critique as developed in the General Theory.
[This is a revised version of an earlier working paper: 'Keynes, Mill and
Say's Law', Strathclyde Papers in Economics, 2000/11
Personal Indebtedness, Spatial Effects and Crime
Get PDFThere is a long and detailed history of attempts to understand what causes crime. One of the most prominent strands of this literature has sought to better understand the relationship between economic conditions and crime. Following Becker (1968), the economic argument is that in an attempt to maintain consumption in the face of unemployment, people may resort to sources of illicit income. In a similar manner, we might expect ex–ante, that increases in the level of personal indebtedness would be likely to provide similar incentives to engage in criminality. In this paper we seek to understand the spatial pattern of property and theft crimes using a range of socioeconomic variables, including data on the level of personal indebtedness
Infrequent Fiscal Stabilization
Get PDFThis paper studies discretionary non-cooperative monetary and fiscal policy stabilization in a New Keynesian model, where the fiscal policymaker uses a distortionary taxe as the policy instrument and operates with long periods between optimal time-consistent adjustments of the instrument. We demonstrate that longer fiscal cycles result in stronger complementarities
between the optimal actions of the monetary and fiscal policymakers. When the fiscal cycle is not very long, the complementarities lead to expectation traps. However, with a sufficiently long fiscal cycle — one year in our model — no learnable time-consistent equilibrium exists. Constraining the fiscal policymaker in its actions may help to avoid these adverse effects