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 householdÕs investment decision in this stochastic continuous-time setup. Classification-E32, O41, O31creative destruction, risk averse households, capital accumulation, endogenous fluctuations and growth

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 effects through which economies with different tax levels differ both in their volatility and growth. Using a continuous-time DSGE model with plausible parametric restrictions, we obtain closedform 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

Matching and Saving in Continuous Time: Proofs

This paper provides the proofs to the analysis of a continuous time matching model with saving in Bayer and Wälde (2010a). The paper proves the results on consumption growth, provides an existence proof for optimal consumption and a detailed derivation of the Fokker-Planck equations.continuous time uncertainty, Fokker-Planck equations, existence proof

How Bad is Globalization for Labour Standards in the North?

We analyse a world consisting of "the North" and "the South" where labour standards in the North are set by trade unions. Standards set by unions tend to increase output and welfare. There are no unions in the South and work standards are suboptimal. Trade between these two countries can imply a reduction in work standards in the North. Moreover, 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. The existing empirical literature tends to support our findings.occupational health and safety, trade unions, international trade, welfare

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

How Trade Unions Increase Welfare

Historically, worker movements have played a crucial role in making workplaces safer. Firms traditionally oppose better health standards. According to our interpretation, workplace safety is costly for .firms but increases average health of workers and thereby aggregate labour supply. A laissez-faire approach in which firms set safety standards is suboptimal as workers are not fully informed of health risks associated with jobs. Safety standards set by better-informed trade unions are output and welfare increasing.occupational health and safety, trade unions, welfare

Applied Intertemporal Optimization

This textbook provides all tools required to easily solve intertemporal optimization problems in economics, finance, business administration and related disciplines. The focus of this textbook is on 'learning through examples' and gives a very quick access to all methods required by an undergraduate student, a PhD student and an experienced researcher who wants to explore new fields or confirm existing knowledge. Given that discrete and continuous time problems are given equal attention, insights gained in one area can be used for learning solutions methods more quickly in other contexts. This step-by-step approach is especially useful for the transition from deterministic to stochastic worlds. When it comes to stochastic methods in continuous time, the applied focus of this book is the most useful. Formulating and solving problems under continuous time uncertainty has never been explained in such a non-technical and highly accessible way.Intertemporal optimization, maximization, discrete time, continuous time, certainty, uncertainty, inserting, Lagrange, Hamiltonian, Dynamic Programming, Bellman equation, Ito's Lemma, Brownian motion, Poisson process, natural volatility

Climate change affects vegetation differently on siliceous and calcareous summits of the European Alps

The alpine life zone is expected to undergo major changes with ongoing climate change. While an increase of plant species richness on mountain summits has generally been found, competitive displacement may result in the long term. Here, we explore how species richness and surface cover types (vascular plants, litter, bare ground, scree and rock) changed over time on different bedrocks on summits of the European Alps. We focus on how species richness and turnover (new and lost species) depended on the density of existing vegetation, namely vascular plant cover. We analyzed permanent plots (1 x 1 m) in each cardinal direction on 24 summits (24 x 4 x 4), with always four summits distributed along elevation gradients in each of six regions (three siliceous, three calcareous) across the European Alps. Mean summer temperatures derived from downscaled climate data increased synchronously over the past 30 years in all six regions. During the investigated 14 years, vascular plant cover decreased on siliceous bedrock, coupled with an increase in litter, and it marginally increased on higher calcareous summits. Species richness showed a unimodal relationship with vascular plant cover. Richness increased over time on siliceous bedrock but slightly decreased on calcareous bedrock due to losses in plots with high plant cover. Our analyses suggest contrasting and complex processes on siliceous versus calcareous summits in the European Alps. The unimodal richness-cover relationship and species losses at high plant cover suggest competition as a driver for vegetation change on alpine summits