10 Aralık 2012 Pazartesi
Unstable matching functions in search theory
The matching function is at the heart of many of labor search models. It has been estimated many times, with a striking empirical regularity: the coefficient that represents matching efficiency appears to decline over time. While it may make sense to see less efficient matching in times of structural change, as it may be happening with the last recession, one would not suspect this over longer samples. Why would labor market performance deteriorate when the information revolution should have reduced matching frictions?
Friedrich Poeschel thinks this is at least in part due to omitted variable bias in the estimation of the matching function. The extant literature relies too much on stocks and neglects various flows, in particular vacancy creation and job seekers beyond the unemployed. Of course, it is not that easy to find such series, or reliable ones. Thus, Poeschel constructs such series from US data using a model of labor market flows. Then, he estimates the matching function using the traditional set variables and then augmenting it with flow variables on the labor supply side. Half of the downward trend in the matching efficiency is taken care of by the new variables. The trend completely disappears once vacancy dynamics are also included. That is reassuring, and maybe one can obtain improving matching efficiency once we get our hands on better data for this.
Friedrich Poeschel thinks this is at least in part due to omitted variable bias in the estimation of the matching function. The extant literature relies too much on stocks and neglects various flows, in particular vacancy creation and job seekers beyond the unemployed. Of course, it is not that easy to find such series, or reliable ones. Thus, Poeschel constructs such series from US data using a model of labor market flows. Then, he estimates the matching function using the traditional set variables and then augmenting it with flow variables on the labor supply side. Half of the downward trend in the matching efficiency is taken care of by the new variables. The trend completely disappears once vacancy dynamics are also included. That is reassuring, and maybe one can obtain improving matching efficiency once we get our hands on better data for this.
9 Aralık 2012 Pazar
Fiscal Cliff Fact of the Day
As reported in the NY Times:
Even if Republicans were to agree to Mr. Obama’s core demand — that the top marginal income rates return to the Clinton-era levels of 36 percent and 39.6 percent after Dec. 31, rather than stay at the Bush-era rates of 33 percent and 35 percent — the additional revenue would be only about a quarter of the $1.6 trillion that Mr. Obama wants to collect over 10 years.
7 Aralık 2012 Cuma
How Japan financed WWII
71 years today, Japan attacked Pearl Harbor and opened a new front in its global war. Why would a relatively small country take on a much larger adversary when it is already stretched with other wars and occupations? In particular, how do you find the resources to wage such wars, and by resources I mean not just the financing but also the physical resources?
Gregg Huff and Shinobu Majima offer part of the answer by looking at the financing of the Japanese occupation of Southeast Asia. Japan had a strategy that invading troops needed to be self-sufficient. This means that they had to either confiscate (tax) or acquire goods through money creation. To a large extend, the latter was performed through the issuance of military scrip, which is unbacked military notes, along with bilateral clearing arrangements with the occupied countries. This allowed not only to finance local occupation but also transfer substantial resources to Japan, in the case of Indochina up to a third of its GDP.
You would think that money creation on such a massive scale would create hyperinflation or at least high inflation. That does not seem to be the case, at least in the sense that the price levels increased as much as the money supply. One could have expected that given the circumstances inflation would have been significantly higher than money growth if market participants were forward-looking and money velocity would increase (think of hyperinflation à la Cagan). Huff and Majima trace this missing hyperinflation to the fact that money was needed to act as a medium of exchange and store of value, despite very substantial seigniorage taxes. There was not viable alternative, in part because of Japanese coercion. I think this would not have worked in more modern economies where more assets are available.
Gregg Huff and Shinobu Majima offer part of the answer by looking at the financing of the Japanese occupation of Southeast Asia. Japan had a strategy that invading troops needed to be self-sufficient. This means that they had to either confiscate (tax) or acquire goods through money creation. To a large extend, the latter was performed through the issuance of military scrip, which is unbacked military notes, along with bilateral clearing arrangements with the occupied countries. This allowed not only to finance local occupation but also transfer substantial resources to Japan, in the case of Indochina up to a third of its GDP.
You would think that money creation on such a massive scale would create hyperinflation or at least high inflation. That does not seem to be the case, at least in the sense that the price levels increased as much as the money supply. One could have expected that given the circumstances inflation would have been significantly higher than money growth if market participants were forward-looking and money velocity would increase (think of hyperinflation à la Cagan). Huff and Majima trace this missing hyperinflation to the fact that money was needed to act as a medium of exchange and store of value, despite very substantial seigniorage taxes. There was not viable alternative, in part because of Japanese coercion. I think this would not have worked in more modern economies where more assets are available.
6 Aralık 2012 Perşembe
Good weather and absenteeism
Ah, the weather is so nice outside, yet I am stuck inside working. If only I could take a vacation day. But wait, I could declare myself sick for a day, would not need a doctor's note because it is just a day, and enjoy life! Well, this is not that easy in my case, as I still need to get the work done, but the temptation is there. And many likely cross that line.
Jingye Shi and Mikal Skuterud use absenteeism data for Canada and find indeed that good weather encourages people to take sick leaves. Given the harsh winter climate in Canada, they limit the analysis to non-winter months and indoor workers, so that the temptations are maximized. Yes, they find that short-term "sickness" increases with good weather, but strangely it affects more workers who do not enjoy sick pay benefits or are on probation. The authors suggest this is because they cannot capture some implicit agreement that one can use short sick leaves for other purposes. That does not convince me.
Jingye Shi and Mikal Skuterud use absenteeism data for Canada and find indeed that good weather encourages people to take sick leaves. Given the harsh winter climate in Canada, they limit the analysis to non-winter months and indoor workers, so that the temptations are maximized. Yes, they find that short-term "sickness" increases with good weather, but strangely it affects more workers who do not enjoy sick pay benefits or are on probation. The authors suggest this is because they cannot capture some implicit agreement that one can use short sick leaves for other purposes. That does not convince me.
Kaydol:
Kayıtlar (Atom)
10 Aralık 2012 Pazartesi
Unstable matching functions in search theory
The matching function is at the heart of many of labor search models. It has been estimated many times, with a striking empirical regularity: the coefficient that represents matching efficiency appears to decline over time. While it may make sense to see less efficient matching in times of structural change, as it may be happening with the last recession, one would not suspect this over longer samples. Why would labor market performance deteriorate when the information revolution should have reduced matching frictions?
Friedrich Poeschel thinks this is at least in part due to omitted variable bias in the estimation of the matching function. The extant literature relies too much on stocks and neglects various flows, in particular vacancy creation and job seekers beyond the unemployed. Of course, it is not that easy to find such series, or reliable ones. Thus, Poeschel constructs such series from US data using a model of labor market flows. Then, he estimates the matching function using the traditional set variables and then augmenting it with flow variables on the labor supply side. Half of the downward trend in the matching efficiency is taken care of by the new variables. The trend completely disappears once vacancy dynamics are also included. That is reassuring, and maybe one can obtain improving matching efficiency once we get our hands on better data for this.
Friedrich Poeschel thinks this is at least in part due to omitted variable bias in the estimation of the matching function. The extant literature relies too much on stocks and neglects various flows, in particular vacancy creation and job seekers beyond the unemployed. Of course, it is not that easy to find such series, or reliable ones. Thus, Poeschel constructs such series from US data using a model of labor market flows. Then, he estimates the matching function using the traditional set variables and then augmenting it with flow variables on the labor supply side. Half of the downward trend in the matching efficiency is taken care of by the new variables. The trend completely disappears once vacancy dynamics are also included. That is reassuring, and maybe one can obtain improving matching efficiency once we get our hands on better data for this.
9 Aralık 2012 Pazar
Fiscal Cliff Fact of the Day
As reported in the NY Times:
Even if Republicans were to agree to Mr. Obama’s core demand — that the top marginal income rates return to the Clinton-era levels of 36 percent and 39.6 percent after Dec. 31, rather than stay at the Bush-era rates of 33 percent and 35 percent — the additional revenue would be only about a quarter of the $1.6 trillion that Mr. Obama wants to collect over 10 years.
7 Aralık 2012 Cuma
How Japan financed WWII
71 years today, Japan attacked Pearl Harbor and opened a new front in its global war. Why would a relatively small country take on a much larger adversary when it is already stretched with other wars and occupations? In particular, how do you find the resources to wage such wars, and by resources I mean not just the financing but also the physical resources?
Gregg Huff and Shinobu Majima offer part of the answer by looking at the financing of the Japanese occupation of Southeast Asia. Japan had a strategy that invading troops needed to be self-sufficient. This means that they had to either confiscate (tax) or acquire goods through money creation. To a large extend, the latter was performed through the issuance of military scrip, which is unbacked military notes, along with bilateral clearing arrangements with the occupied countries. This allowed not only to finance local occupation but also transfer substantial resources to Japan, in the case of Indochina up to a third of its GDP.
You would think that money creation on such a massive scale would create hyperinflation or at least high inflation. That does not seem to be the case, at least in the sense that the price levels increased as much as the money supply. One could have expected that given the circumstances inflation would have been significantly higher than money growth if market participants were forward-looking and money velocity would increase (think of hyperinflation à la Cagan). Huff and Majima trace this missing hyperinflation to the fact that money was needed to act as a medium of exchange and store of value, despite very substantial seigniorage taxes. There was not viable alternative, in part because of Japanese coercion. I think this would not have worked in more modern economies where more assets are available.
Gregg Huff and Shinobu Majima offer part of the answer by looking at the financing of the Japanese occupation of Southeast Asia. Japan had a strategy that invading troops needed to be self-sufficient. This means that they had to either confiscate (tax) or acquire goods through money creation. To a large extend, the latter was performed through the issuance of military scrip, which is unbacked military notes, along with bilateral clearing arrangements with the occupied countries. This allowed not only to finance local occupation but also transfer substantial resources to Japan, in the case of Indochina up to a third of its GDP.
You would think that money creation on such a massive scale would create hyperinflation or at least high inflation. That does not seem to be the case, at least in the sense that the price levels increased as much as the money supply. One could have expected that given the circumstances inflation would have been significantly higher than money growth if market participants were forward-looking and money velocity would increase (think of hyperinflation à la Cagan). Huff and Majima trace this missing hyperinflation to the fact that money was needed to act as a medium of exchange and store of value, despite very substantial seigniorage taxes. There was not viable alternative, in part because of Japanese coercion. I think this would not have worked in more modern economies where more assets are available.
6 Aralık 2012 Perşembe
Good weather and absenteeism
Ah, the weather is so nice outside, yet I am stuck inside working. If only I could take a vacation day. But wait, I could declare myself sick for a day, would not need a doctor's note because it is just a day, and enjoy life! Well, this is not that easy in my case, as I still need to get the work done, but the temptation is there. And many likely cross that line.
Jingye Shi and Mikal Skuterud use absenteeism data for Canada and find indeed that good weather encourages people to take sick leaves. Given the harsh winter climate in Canada, they limit the analysis to non-winter months and indoor workers, so that the temptations are maximized. Yes, they find that short-term "sickness" increases with good weather, but strangely it affects more workers who do not enjoy sick pay benefits or are on probation. The authors suggest this is because they cannot capture some implicit agreement that one can use short sick leaves for other purposes. That does not convince me.
Jingye Shi and Mikal Skuterud use absenteeism data for Canada and find indeed that good weather encourages people to take sick leaves. Given the harsh winter climate in Canada, they limit the analysis to non-winter months and indoor workers, so that the temptations are maximized. Yes, they find that short-term "sickness" increases with good weather, but strangely it affects more workers who do not enjoy sick pay benefits or are on probation. The authors suggest this is because they cannot capture some implicit agreement that one can use short sick leaves for other purposes. That does not convince me.
Kaydol:
Kayıtlar (Atom)