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A Framework for Analyzing Language and Welfare
Get PDFThe paper proposes a general model that will encompass trade and social benefits of a common language, a preference for a variety of languages, the fundamental role of translators, an emotional attachment to maternal language, and the threat that globalization poses to the vast majority of languages. With respect to people’s emotional attachment, the model considers minorities to suffer losses from the subordinate status of their language. In addition, the model treats the threat to minority language as coming from the failure of the parents in the minority to transmit their maternal language (durably) to their children. Some familiar results occur. In particular, we encounter the usual social inefficiencies of decentralized solutions to language learning when the sole benefits of the learning are communicative benefits (though translation intervenes). However, these social inefficiencies assume a totally different air when the con-sumer gains of variety are brought in. One fundamental aim of the paper is to bring together contributions to the economics of language from labor economics, network externalities and international trade that are typically treated separately
On the causes of the African Slave Trade
Get PDFThis paper offers an integrated analysis of the forces shaping the emergence of the African slave trade over the early modern period. We focus our attention on two questions. First, why most of the increase in the demand for slaves during this period came exclusively from western Europeans. Second, and of most relevance for present-day development outcomes, why was the overwhelming majority of slaves of African origin. Technological differences in manufacturing technology, the specificities of sugar (and other crops’) production, and the cultural fragmentation of the African
continent all play a role in the analysis. Supporting evidence for each of our claims is provided from a broad corpus of relevant literature
Handling the endogeneity of income to health using a field experiment in Taiwan
Get PDFThis paper uses an exogenous increase in income for a specific sub-group in Taiwan to explore the extent to which higher income leads to higher levels of health and wellbeing. In 1995, the Taiwanese government implemented the Senior Farmer Welfare Benefit Interim Regulation (SFWBIR) which was a pure cash injection, approximately US$110 (£70) per month in 1996, to
senior farmers. A Difference-in-differences (DiD) approach is used on survey data from the Taiwanese Health and Living Status of Elderly in 1989 and 1996 to evaluate the short term effect
of the SFWBIR on self-assessed health, depression, and life satisfaction. Senior manufacturing workers are employed as a comparison group for the senior farmers in the natural experiment because their demographic backgrounds are similar. This paper provides evidence that the
increase in income from the SFWBIR significantly improved the mental health of senior farmers by reducing the scale of depression (CES-D) by 1.718, however, it had no significant short term impact on self-assessed health or life satisfaction
Fiscal Policy and Learning
Get PDFUsing the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall within empirical bounds reported in the literature (in sharp contrast to the implausibly low values under RE). Effectiveness of fiscal policy is demonstrated during times of economic stress like the recent Great Recession. Finally it is shown how learning can lead to dynamics empirically documented during episodes of
'fiscal consolidations.
A New Model Of Trend Inflation
Get PDFThis paper introduces a new model of trend (or underlying) inflation. In contrast to many earlier approaches, which allow for trend inflation to evolve according to a random walk, ours is a bounded model
which ensures that trend inflation is constrained to lie in an interval. The
bounds of this interval can either be fixed or estimated from the data. Our model also allows for a time-varying degree of persistence in the transitory
component of inflation. The bounds placed on trend inflation mean that standard econometric methods for estimating linear Gaussian state space models cannot be used and we develop a posterior simulation algorithm for estimating the bounded trend inflation model. In an empirical exercise with CPI inflation we find the model to work well, yielding more sensible measures
of trend inflation and forecasting better than popular alternatives such as the
unobserved components stochastic volatility model
Time is Running Out: The 2°C Target and Optimal Climate Policies
Get PDFThe quintessence of recent natural science studies is that the 2 degrees C target can only be achieved with massive emission reductions in the next few years. The central twist of this paper is the addition of this limited time to act into a non-perpetual real options framework
analysing optimal climate policy under uncertainty. The window-of-opportunity
modelling setup shows that the limited time to act may spark a trend reversal in the
direction of low-carbon alternatives. However, the implementation of a climate policy is evaded by high uncertainty about possible climate pathways
Marx: From Hegel and Feuerbach to Adam Smith
Get PDFThis paper discusses the development of Marx’s thought over a period of something like fifteen months, between the spring of 1843 and the autumn of 1844. The focus of the paper is Marx’s first encounter with classical political economy as he found it in the Wealth of Nations. The outcome of this encounter was presented by Marx in his Economic and Philosophical Manuscripts of 1844. It is argued here that in the classical theory, with which he had hitherto been largely unfamiliar, Marx found all the elements he needed to synthesise the philosophical standpoint he had developed in the preceding months with political economy. The Manuscripts represent the first crucial stage in the development of this synthesis. This first encounter of Marx with classical political economy, and his first steps in the development of his synthesis, have received hardly any attention in the literature. The present paper seeks to fill this gap
Time Horizons And Smoothing In The Bank Of England’s Reaction Function: The Contrast Between The Standard GMM And Ex Ante Forecast Approaches
Get PDFThe monetary policy reaction function of the Bank of England is estimated by the standard GMM approach and the ex-ante forecast method developed by Goodhart (2005), with particular attention to the horizons for inflation and output at which each approach gives the best fit. The horizons for the ex-ante approach are much closer to what is implied by the Bank’s view of the transmission mechanism, while the GMM approach produces an implausibly slow adjustment of the interest rate, and suffers from a weak instruments problem. These findings suggest a strong preference for the ex-ante approach
Financial health, exports, and rm survival: Evidence from UK and French firms
Get PDFWe use firm level data to assess the role of exporting in the link between financial
health and rm survival. The data are for the UK and France. We examine whether
fi rms at diff erent stages of export activity (starters, exiters, continuers, switchers) react di fferently to changes in financial variables. In general, export starters and exiters experience much stronger adverse e ffects of fi nancial constraints for their survival prospects. By contrast, the exit probability of continuous exporters and export switchers is less negatively a ffected by financial characteristics. These relationships between exporting, finance and survival are broadly similar in the British and French sub-samples
Stock Market Reaction to Fed Funds Rate Surprises: State Dependence and the Financial Crisis
Get PDFThis paper examines the impact of Federal Funds rate (FFR) surprises on stock returns in the United States over the period 1989-2009, focusing on the impact of the recent financial crisis. We find that prior to the crisis, stock prices increased as a response to unexpected FFR cuts. State dependence is also identified with stocks exhibiting larger increases when interest rate easing coincided with recessions, bear stock markets, and tightening credit market conditions. However, an important structural shift took place during the financial crisis, which changed the stock market response to FFR shocks, as well as the nature of state dependence. Specifically, during the crisis period stock market participants did not react positively to unexpected FFR cuts. Our results highlight the severity of the recent financial turmoil episode and the ineffectiveness of conventional monetary policy close to the zero lower bound for nominal interest rates