On Custom

Custom is a key factor for economic performance. Social and economic institutions build on it. The purpose of this paper is to reflect on the motivational force of custom per se, as brought about by history. History creates entitlements, and these influence behavior. Custom is thus understood as a set of behavioral dispositions inherited from the past. In this, the present considerations deviate from earlier approaches that take custom as being stabilized by external rewards and sanctions alon

Estimating the Smoothing Parameter in the So-Called Hodrick-Prescott Filter

This note gives a fairly complete statistical description of the Hodrick-Prescott Filter (1997), originally proposed by Leser (1961). It builds on an approach to seasonal adjustment suggested by Leser (1963) and Schlicht (1981, 1984). A moments estimator for the smoothing parameter is proposed that is asymptotically equivalent to the maximum-likelihood estimator, has a straightforward intuitive interpretation and is more appropriate for short series than the maximum-likelihood estimator. The method is illustrated by an application and several simulations

Selection Wages: An Illustration

Offering higher wages may enable firms to attract more applicants and screen them more carefully. If firms compete in this way in the labor market, "selection wages" emerge. This note illustrates this wage-setting mechanism. Selection wages may engender unconventional results, such as a pre-tax wage compression induced by the introduction of a progressive wage tax

Trend Extraction From Time Series With Structural Breaks and Missing Observations

Trend extraction from time series is often performed by using the filter proposed by Leser (1961), also known as the Hodrick-Prescott filter. Practical problems arise, however, if the time series contains structural breaks (as produced by German unification for German time series, for instance), or if some data are missing. This note proposes a method for coping with these problems

Reference Group Behaviour and Economic Incentives

These notes, published in 1981, introduce the concept of the social multiplier: If the behavior of agents is positively influenced by what members of their reference group do, this enhances the power of economic incentives

A Variant of Uzawa's Theorem

Uzawa (1961) has shown that balanced growth requires technological progress to be strictly Harrod neutral (purely labor-augmenting). This paper offers a slightly more general variant of the theorem that does not require assumptions about savings behavior or factor pricing and is much easier to prove

A Robinsonian Approach to Discrimination

Bei der Festsetzung des Lohnsatzes für eine bestimmte Tätigkeit wird die Unternehmung den Lohnsatz weder unnötig hoch wählen noch so gering , dass es unwahrscheinlich wird, eine geeignete Arbeitskraft zu finden. So werden die Lohnsätze unter Berücksichtigung ihres Einflusses auf die Wahrscheinlichkeit einer erfolgreichen Stellenbesetzung optimal fixiert. Wenn Indikatoren wie Geschlecht oder Rasse typischerweise mit unterschiedlichem Angebotsverhalten verknüpft sind, wird die Lohnsetzung der Unternehmung zu Diskriminierung gemäß diesen Indikatoren führen. Der Ansatz kann als eine moderne Neuformulierung der Diskriminierungstheorie von Joan Robinson verstanden werden. Er führt zu mathematisch identischen Gleichgewichtsbedingungen, allerdings mit abweichender Interpretation und unter Vermeidung einiger Schwierigkeiten des ursprünglichen Ansatzes. Innerhalb des entwickelten Rahmens lässt sich die Möglichkeit langfristig anhaltender Diskriminierung aufweisen und so ein Beitrag zur Erklärung eines Phänomens leisten, das für andere Ansätze (Joan Robinson's eingeschlossen) gewisse Schwierigkeiten biete