Corrigendum to 'optimal saving under Poisson uncertainty' [J. Econ. Theory 87 (1999) 194-217]

The derivation of the Keynes-Ramsey rule in Wälde (1999) contains two errors. Correcting them affects the expression for the Keynes-Ramsey rule in (11) but leaves all other findings of the paper unaffected. It especially does not affect the major finding of the paper, i.e. the dichotomy ingeneral equilibrium between a stochastic and a deterministic regime. As a consequence, the analysis of endogenous business cycles in very tractable models remains entirely valid

Production Technologies in Stochastic Continuous Time Models

Properties of dynamic stochastic general equilibrium models can be revealed by either using numerical solutions or qualitative analysis. Very precise and intuition-building results are obtained by working with models which provide closed-form solutions. Closed-form solutions are known for a large class of models some of which, however, have some undesirable features. This paper offers closed-form solutions for models which are just as tractable but do not suffer from these shortcomings.dynamic stochastic general equilibrium models, closed-form solution, continuous time, jump diffusion

Capital accumulation in a model of growth and creative destruction

Capital accumulation and creative destruction is modeled together with risk-averse households. The novel aspect - risk-averse households - allows to use well-known models not only for analyzing long-run growth as in the literature but also short-run fluctuations. The model remains analytically tractable due to a very convenient property of the household's investment decision in this stochastic continuous-time setup. --Creative destruction,Risk averse households,Capital accumulation,Endogenous fluctuations and growth

Endogenous business cycles and growth

Current explanations why a growing economy necessarily goes through booms and recessions predict countercyclical R&D investment. As this is very controversial from an empirical perspective, a stochastic Poissonmodel of endogenous business cycles and growth is presented where the determinants of the cyclical behaviour of R&D investment are analytically studied. Providing an explicit expression for the expected length of a cycle shows that high frequency fluctuations can indeed be understood by this approach. It is also shown how small technological improvements translate into large aggregate fluctuations. --Endogenous fluctuations and growth,Uncertainty under continuous time

Does trade cause growth? A policy perspective

Several empirical papers have shown that international trade has a positive causal effect on a country's GDP or growth rate. A common conclusion from these results is that a free trade policy will increase a country's GDP. This comment does not dispute the empirical findings per se but questions this conclusion. An example is provided that shows that it is not obvious which policy recommendations can be supported by these empirical findings. --

Egalitarian and elitist education systems as the basis for international differences in wage inequality

This paper investigates one reason why some countries have experienced a strong increase in wage inequality over the last decades while others have not. The explanation is based on the link between the quality of education and induced technological change. A country with qualitatively better-educated skilled workers, relative to unskilled workers, has a higher ratio of human capital to labour than a country where the quality of education is more equal across education levels. These differences lead to different paths of induced technological change across countries, which in turn imply different histories of the distribution of labour income.wage inequality, Quality of education, Elitist and egalitarian education systems, Biased technological change, Distribution of labour income

Trade unions go global!

"Worker movements played a crucial role in making workplaces safer. Workplace safety is costly for firms but increases labour supply. A laissez-faire approach leaving safety of workplaces unknown is suboptimal. Safety standards set by better-informed trade unions are output and welfare increasing. Trade between a country with trade unions (the North) and a union-free country (the South) can imply a reduction in work standards in the North. When trade unions are established in the South, the North, including northern unions, tend to lose. Quantitatively, these effects are small and overcompensated by gains in the South." (Author's abstract, IAB-Doku) ((en))Gewerkschaftspolitik - Internationalisierung, Gewerkschaftspolitik, Arbeitsschutzpolitik, Arbeitsschutz, Arbeitssicherheit, Unfallschutz, Arbeitsunfälle, Kapitalmobilität, gesellschaftliche Wohlfahrt

Globalisation is good for you: Distributional effects of mergers caused by globalisation

Globalisation (in the sense of increased international trade) is usually associated with gains from trade but also distributional effects where e.g. capital owners gain and workers lose, both in real terms. In recent years, globalisation seems to be synonymous to international mergers of firms. This paper shows in a model with Cournot competition that international mergers due to globalisation also imply gains from trade. Under plausible assumptions for capital intensities and in contrast to the usual results, however, both capital owners and workers gain in real terms. This effect is due to the reduction in the consumption good price caused by an increase in competition. --

Estimating Incentive and Welfare Effects of Non-stationary Unemployment Benefits

The distribution of unemployment duration in our equilibrium matching model with spell-dependent unemployment benefits displays a time-varying exit rate. Building on Semi-Markov processes, we translate these exit rates into an expression for the aggregate unemployment rate. Structural estimation using a German micro-data set (SOEP) allows us to discuss the effects of a recent unemployment benefit reform (Hartz IV). The reform reduced unemployment by only 0:3%. Contrary to general beliefs, we find that both employed and unemployed workers gain (the latter from an intertemporal perspective). The reason is the rise in the net wage caused by more vacancies per unemployed worker.Non-stationary unemployment benefits, endogenous effort, matching model, structural estimation, Semi-Markov process

On the Non-Causal Link between Volatility and Growth

A model highlighting the endogeneity of both volatility and growth is presented. Volatility and growth are therefore correlated but there is no causal link from volatility to growth. This joint endogeneity is illustrated by working out the eects through which economies with dierent tax levels dier both in their volatility and growth. Using a continuous-time dynamic stochastic general equilibrium (DSGE) model with plausible parametric restrictions, we obtain closed-form measures of macro volatility based on cyclical components and output growth rates. Given our results, empirical volatility-growth analysis should include controls in the conditional variance equation. Otherwise an omitted variable bias is likely.Tax effects, Volatility measures, Poisson uncertainty, Endogenous cycles and growth, Continuous-time DSGE models