Social Security as a Financial Asset: Gender-Specific Risks and Returns

Social Security is a financial asset whose 'purchase' is compulsory for most working individuals; the return during the individual's working lifetime is related to the rate of change of aggregate labor income. If an individual's labor income is strongly related to aggregate labor income, then the Social Security asset is a particularly unattractive asset. In this situation, the individual would benefit from a reformed Social Security system that would permit investment of retirement funds in other financial assets. This paper investigates how this aspect of Social Security risk varies across groups of individuals who differ according to gender; education; race; and age. The main finding is that there are important differences across groups in this component of Social Security risk, as captured by the sensitivity of individual-level income growth to changes in the SSWI. This element of risk is most important for women, especially women who are young-to-middle aged and with more education. This analysis suggests that women would have more to gain, compared with men, from a reformed Social Security system.

Robust determinants of bilateral trade

What are the policies and country-level conditions which best explain bilateral trade flows between countries? As databases expand, an increasing number of possible explanatory variables are proposed that influence bilateral trade without a clear indication of which variables are robustly important across contexts, time periods, and which are not sensitive to inclusion of other control variables. To shed light on this problem, we apply three model selection methods – Lasso reguarlized regression, Bayesian Model Averaging, and Extreme Bound Analysis -- to candidate variables in a gravity models of trade. Using a panel of 198 countries covering the years 1970 to 2000, we find model selection methods suggest many fewer variables are robust that those suggested by the null hypothesis rejection methodology from ordinary least squares

What determines bilateral trade flows?

This paper undertakes an exhaustive search for robust determinants of international trade, where "robustness" is tested using three popular empirical methods. The paper is frankly atheoretical: our goal is solely to establish statistically robust relationships. Along the way, however, we relate our results to the empirical results obtained by prior researchers and to the received theory of international trade. We find that robust variables include a measure of the scale of factor endowments; fixed exchange rates; the level of development; and current account restrictions. Variables that are robust under certain methods and sample periods include exchange rate volatility, an index of sectoral similarity, and currency union. However, the estimated coefficient on currency union is much smaller than estimates obtained by prior researchers.Business cycles ; Trade

Variable Factor Utilization and International Business Cycles

When an economic boom produces high output, employment, and investment in the United States, there is usually a simultaneous boom in other industrialized countries. But, why? Answering this question is a central goal of international macroeconomics. However, multi-country dynamic equilibrium models have struggled with two major problems. The first difficulty is that the productivity shocks required by the model are implausibly large and volatile. Second, these models have difficulty explaining why factor inputs move together so closely across countries: realistic international comovement of business cycles requires implausibly high cross-country correlations of productivity shocks. This paper builds a model in which the utilization rates of capital and labor can be varied in response to shocks. We find that variable factor utilization is quite successful in (i) reducing the required size of productivity shocks; and (ii) increasing international comovement of factor inputs, with most of the improvement stemming from variable capital utilization.

Determinants of business cycle comovement: a robust analysis

This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are “robust” in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find that bilateral trade is robust. However, two variables that the literature has argued are important for business cycles - industrial structure and currency unions - are found not to be robust.Business cycles ; Trade

The Effects of Variable Capital Utilization on the Measurement and Properties of Sectoral Productivity: Some International Evidence

This paper explores how accounting for variations in factor utilization rates alters the empirical characteristics of productivity residuals in the United States and Canada. Using data on 19 manufacturing industries, we study the behavior of productivity using three proxies for capital services. We find that adjusting for cyclical movements in capital utilization alters many of the empirical characteristics of productivity, both within and across countries.

Trade structure, industrial structure, and international business cycles

This paper examines the extent to which the composition of a country's production and trade differs among its trade partners. For example, does the US export the same bundle of goods to the UK as it does to Japan? If we find high dispersion in a country's export and import bundles with its various trading partners, can this be linked to identifiable country characteristics? These findings are important for two reasons. First, they enrich our empirical understanding of the nature of trade. Second, they will stand as a guide for further development of economic theories of the international transmission of business cycles.Trade ; Industrial organization (Economic theory) ; Business cycles

Determinants of Business Cycle Comovement: A Robust Analysis

This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are robust' in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find that bilateral trade is robust. However, two variables that the literature has argued are important for business cycles industrial structure and currency unions are found not to be robust.