In this paper, the role of matching efficiency (equivalently, mismatch) at the aggregate level in driving unemployment fluctuations is estimated using a TVP-SVAR model. Modelling mismatch at the aggregate level sidesteps the problematic implicit assumption of orthogonality of sources of mismatch at disaggregated levels (industrial, occupational, geographical, etc.) and is not sensitive to the level of disaggregation by construction. Observing that estimated aggregate matching efficiency lags business cycles, I identify a structural shock to aggregate matching efficiency using standard timing restrictions. Based on impulse response analysis and forecast error variance decompositions, I conclude that the matching efficiency shock explains no more than 20% of the variation in unemployment in the United States between 1967-2013, whereas aggregate shocks explain well above 70% of unemployment fluctuations. Related, the rise in the unemployment rate during the Great Recession is dominated by a slump in aggregate demand rather than driven by structural factors.
{"title":"How Structural Is Unemployment in the United States?","authors":"Yuelin Liu","doi":"10.2139/ssrn.2546651","DOIUrl":"https://doi.org/10.2139/ssrn.2546651","url":null,"abstract":"In this paper, the role of matching efficiency (equivalently, mismatch) at the aggregate level in driving unemployment fluctuations is estimated using a TVP-SVAR model. Modelling mismatch at the aggregate level sidesteps the problematic implicit assumption of orthogonality of sources of mismatch at disaggregated levels (industrial, occupational, geographical, etc.) and is not sensitive to the level of disaggregation by construction. Observing that estimated aggregate matching efficiency lags business cycles, I identify a structural shock to aggregate matching efficiency using standard timing restrictions. Based on impulse response analysis and forecast error variance decompositions, I conclude that the matching efficiency shock explains no more than 20% of the variation in unemployment in the United States between 1967-2013, whereas aggregate shocks explain well above 70% of unemployment fluctuations. Related, the rise in the unemployment rate during the Great Recession is dominated by a slump in aggregate demand rather than driven by structural factors.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"80 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125918205","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The General Theory showed that the main determinant of the level of output and of employment at any point of time was the level of effective demand. It did so in an environment of uncertainty using analysis in historical time. Unfortunately, most of Keynes’s insights were soon lost to the profession. This paper considers why this occurred. The most concerted and sustained attack on Keynes’s position was by Milton Friedman. Friedman argued that his work on permanent income as the major determinant of consumption invalidated Keynes use of the consumption function in The General Theory, with important implications for the multiplier and the efficacy of fiscal policy. The attack by the conservative right wing in America on Lorie Tarshis’s excellent 1947 Keynesian textbook , also played an important part in the dilution of the Keynesian message as did the resultant rise to dominance of Samuelson’s Economics: An Introductory Analysis. Given the great influence of Samuelson and the increasing tendency of American economics to dominate English language economics this contributed decisively to the undermining of Keynes’s theory and policy.
{"title":"The Attacks on the General Theory: How Keynes's Theory Was Lost","authors":"G. Harcourt, Peter Kriesler, J. Nevile","doi":"10.2139/ssrn.2850798","DOIUrl":"https://doi.org/10.2139/ssrn.2850798","url":null,"abstract":"The General Theory showed that the main determinant of the level of output and of employment at any point of time was the level of effective demand. It did so in an environment of uncertainty using analysis in historical time. Unfortunately, most of Keynes’s insights were soon lost to the profession. This paper considers why this occurred. The most concerted and sustained attack on Keynes’s position was by Milton Friedman. Friedman argued that his work on permanent income as the major determinant of consumption invalidated Keynes use of the consumption function in The General Theory, with important implications for the multiplier and the efficacy of fiscal policy. The attack by the conservative right wing in America on Lorie Tarshis’s excellent 1947 Keynesian textbook , also played an important part in the dilution of the Keynesian message as did the resultant rise to dominance of Samuelson’s Economics: An Introductory Analysis. Given the great influence of Samuelson and the increasing tendency of American economics to dominate English language economics this contributed decisively to the undermining of Keynes’s theory and policy.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125062405","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the impact of the provision of public transport infrastructure on the cost structure of the Australian economy within a context that recognises industry agglomeration externalities. The paper extends the symmetric generalised quadratic cost functionby incorporating public transportation capital as an external input and adapting the spatial econometric techniques to an industrial context to allow for industry spillovers in the cost analysis. Using industry level data over the period 1990-2010, the paper finds that while public transport has a productive effect in reducing the cost of production, neglecting interindustry spillovers has noticeably overestimates this effect.
{"title":"Transport Infrastructure Investment and Interindustry Spillovers: The Effects on the Cost Structure of Australian Industries","authors":"Amani Elnasri","doi":"10.2139/ssrn.2432802","DOIUrl":"https://doi.org/10.2139/ssrn.2432802","url":null,"abstract":"This paper examines the impact of the provision of public transport infrastructure on the cost structure of the Australian economy within a context that recognises industry agglomeration externalities. The paper extends the symmetric generalised quadratic cost functionby incorporating public transportation capital as an external input and adapting the spatial econometric techniques to an industrial context to allow for industry spillovers in the cost analysis. Using industry level data over the period 1990-2010, the paper finds that while public transport has a productive effect in reducing the cost of production, neglecting interindustry spillovers has noticeably overestimates this effect.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"54 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114542023","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There is substantial experimental and empirical evidence to suggest that individual behaviour in bilateral or small-group interactions is affected by social norms. Further, social norms vary according to context. Previous research largely focuses on norms of fairness, not norms per se. We design an experiment to decouple norm-adherence from fairness. We find that (a) a group norm evolves and individuals cluster more tightly around it as they learn the average behaviour of the group, (b) actions further from this norm in a self-serving direction are less acceptable by others, and (c) when an agent is moved to a group with a different norm, s/he conforms quickly to the new norm.
{"title":"Conforming to Group Norms: An Experimental Study","authors":"G. Bose, E. Dechter, L. Ivancic","doi":"10.2139/ssrn.2427573","DOIUrl":"https://doi.org/10.2139/ssrn.2427573","url":null,"abstract":"There is substantial experimental and empirical evidence to suggest that individual behaviour in bilateral or small-group interactions is affected by social norms. Further, social norms vary according to context. Previous research largely focuses on norms of fairness, not norms per se. We design an experiment to decouple norm-adherence from fairness. We find that (a) a group norm evolves and individuals cluster more tightly around it as they learn the average behaviour of the group, (b) actions further from this norm in a self-serving direction are less acceptable by others, and (c) when an agent is moved to a group with a different norm, s/he conforms quickly to the new norm.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"115 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130184246","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I propose a nonparametric iid bootstrap procedure for the empirical likelihood, the exponential tilting, and the exponentially tilted empirical likelihood estimators that achieves sharp asymptotic refinements for t tests and confidence intervals based on such estimators. Furthermore, the proposed bootstrap is robust to model misspecification, i.e., it achieves asymptotic refinements regardless of whether the assumed moment condition model is correctly specified or not. This result is new, because asymptotic refinements of the bootstrap based on these estimators have not been established in the literature even under correct model specification. Monte Carlo experiments are conducted in dynamic panel data setting to support the theoretical finding. As an application, bootstrap confidence intervals for the returns to schooling of Hellerstein and Imbens (1999) are calculated. The returns to schooling may be higher.
{"title":"Asymptotic Refinements of a Misspecification-Robust Bootstrap for GEL Estimators","authors":"Seojeong Lee","doi":"10.2139/ssrn.2393191","DOIUrl":"https://doi.org/10.2139/ssrn.2393191","url":null,"abstract":"I propose a nonparametric iid bootstrap procedure for the empirical likelihood, the exponential tilting, and the exponentially tilted empirical likelihood estimators that achieves sharp asymptotic refinements for t tests and confidence intervals based on such estimators. Furthermore, the proposed bootstrap is robust to model misspecification, i.e., it achieves asymptotic refinements regardless of whether the assumed moment condition model is correctly specified or not. This result is new, because asymptotic refinements of the bootstrap based on these estimators have not been established in the literature even under correct model specification. Monte Carlo experiments are conducted in dynamic panel data setting to support the theoretical finding. As an application, bootstrap confidence intervals for the returns to schooling of Hellerstein and Imbens (1999) are calculated. The returns to schooling may be higher.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"55 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115450830","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
C. Freedman, G. Harcourt, Peter Kriesler, J. Nevile
The paper considers Keynes’s major contributions before "The General Theory", namely "A Tract on Monetary Reform" and "A Treatise on Money", and shows that they were close to the views which Friedman would later develop. However, "The General Theory of Employment, Interest and Money" represented a major challenge to the orthodoxy of the time, and it was to this that Friedman radically objected. We identify the main areas in which Keynes departed from the mainstream theory of the time, and show how Friedman attempted to undermine each of Keynes’s major contributions and the extent to which he was successful. Friedman regarded Keynes’s contributions as detrimental to, and a definitive step backward for, the economics profession.
{"title":"Milton Friedman: Constructing an Anti-Keynes","authors":"C. Freedman, G. Harcourt, Peter Kriesler, J. Nevile","doi":"10.2139/SSRN.2374956","DOIUrl":"https://doi.org/10.2139/SSRN.2374956","url":null,"abstract":"The paper considers Keynes’s major contributions before \"The General Theory\", namely \"A Tract on Monetary Reform\" and \"A Treatise on Money\", and shows that they were close to the views which Friedman would later develop. However, \"The General Theory of Employment, Interest and Money\" represented a major challenge to the orthodoxy of the time, and it was to this that Friedman radically objected. We identify the main areas in which Keynes departed from the mainstream theory of the time, and show how Friedman attempted to undermine each of Keynes’s major contributions and the extent to which he was successful. Friedman regarded Keynes’s contributions as detrimental to, and a definitive step backward for, the economics profession.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126764997","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides methodologies for evaluating consumer benefits of infrastructure services using potentially observable information. We define benefit measures for consumers and, using general principles from the index number literature, derive alternative first and second order approximations to these measures under the assumption of fixed prices for market goods and services. We then describe how the benefit measures and their associatedapproximations can be used in quantifying the economic benefits when prices are allowed to change endogenously as the provision of infrastructure services changes. In addition, under quite unrestrictive assumptions, a measure of welfare change based only on potentially observable data is derived.
{"title":"Consumer Benefits of Infrastructure Services","authors":"Carmit M. Schwartz, W. Diewert, Kevin J. Fox","doi":"10.2139/ssrn.2414181","DOIUrl":"https://doi.org/10.2139/ssrn.2414181","url":null,"abstract":"This paper provides methodologies for evaluating consumer benefits of infrastructure services using potentially observable information. We define benefit measures for consumers and, using general principles from the index number literature, derive alternative first and second order approximations to these measures under the assumption of fixed prices for market goods and services. We then describe how the benefit measures and their associatedapproximations can be used in quantifying the economic benefits when prices are allowed to change endogenously as the provision of infrastructure services changes. In addition, under quite unrestrictive assumptions, a measure of welfare change based only on potentially observable data is derived.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"40 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127100514","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides a framework for discussing the validity of computer simulation models of market phenomena. It defines functional complexity and derives measures of this for a well known agent-based simulation model and suggests methods to overcome the obstacle of complexity in validating such models.
{"title":"Validation and Functional Complexity","authors":"R. Marks","doi":"10.2139/ssrn.2342868","DOIUrl":"https://doi.org/10.2139/ssrn.2342868","url":null,"abstract":"This paper provides a framework for discussing the validity of computer simulation models of market phenomena. It defines functional complexity and derives measures of this for a well known agent-based simulation model and suggests methods to overcome the obstacle of complexity in validating such models.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127165486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The pioneers of dynamic Keynesian economics, Harrod and Kalecki, began with an analysis of the trade cycle, but are remembered for their contributions to growth theory. Unlike most twentieth century growth theory, they both had a major focus on disequilibrium situations and an examination of this aspect of their theory is the purpose of this paper. Harrod distinguished three stages in his dynamic analysis. The first was the derivation of the fundamental equation and consequent theorems. Fundamental meant underlying: even apart from random factors the equation may never hold exactly in real life. In the second stage, detailed analysis was made of the factors (in addition to the fundamental equation) which have a systematic effect on the path the economy follows. The final stage is policy prescriptions. Except in his 1936 book on the trade cycle, Harrod did relatively little “second stage” work but this did not stop him putting forward policy prescriptions. This three stage structure of analysis contributed to the widespread misunderstanding of the nature of his fundamental equation leading to a widely accepted view of a Harrod growth model which was completely different to what Harrod thought he was putting forward. Kalecki, on the other hand, rejected what Harrod had called “first stage analysis” as being of little interest. His main criticisms of growth theory were aimed at, what he saw, as the vacuousness of such theorising. Instead, his work concentrated on second and third stage analysis, that is, in attempting to understand the non-equilibrium, dynamics of the economy with a view towards policy prescription. For this reason, Kalecki’s contribution was less open to misunderstanding than was Harrod’s.
{"title":"Escaping from a Blind Alley: Disequilibrium in the Dynamic Analysis of Harrod and Kalecki","authors":"Peter Kriesler, J. Nevile","doi":"10.2139/ssrn.1313071","DOIUrl":"https://doi.org/10.2139/ssrn.1313071","url":null,"abstract":"The pioneers of dynamic Keynesian economics, Harrod and Kalecki, began with an analysis of the trade cycle, but are remembered for their contributions to growth theory. Unlike most twentieth century growth theory, they both had a major focus on disequilibrium situations and an examination of this aspect of their theory is the purpose of this paper. Harrod distinguished three stages in his dynamic analysis. The first was the derivation of the fundamental equation and consequent theorems. Fundamental meant underlying: even apart from random factors the equation may never hold exactly in real life. In the second stage, detailed analysis was made of the factors (in addition to the fundamental equation) which have a systematic effect on the path the economy follows. The final stage is policy prescriptions. Except in his 1936 book on the trade cycle, Harrod did relatively little “second stage” work but this did not stop him putting forward policy prescriptions. This three stage structure of analysis contributed to the widespread misunderstanding of the nature of his fundamental equation leading to a widely accepted view of a Harrod growth model which was completely different to what Harrod thought he was putting forward. Kalecki, on the other hand, rejected what Harrod had called “first stage analysis” as being of little interest. His main criticisms of growth theory were aimed at, what he saw, as the vacuousness of such theorising. Instead, his work concentrated on second and third stage analysis, that is, in attempting to understand the non-equilibrium, dynamics of the economy with a view towards policy prescription. For this reason, Kalecki’s contribution was less open to misunderstanding than was Harrod’s.","PeriodicalId":180753,"journal":{"name":"UNSW: Economics (Topic)","volume":"110 5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129730908","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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