Public vs Private Schooling in an Endogenous Growth Model

I present an overlapping generations model, with formal education as the engine of growth, close to Glomm and RaviKumar (1992). Contrary to Glomm and Ravikumar, I Show that public schooling, when compared to a private system, may stimulate economic growth.

The stability properties of goodwin's growth cycle model

It is known that Goodwin.s Predator-Prey model suffers from structural instability. In its pure form the model has a neutral equilibrium. Ploeg (1985) showed that if the hypothesis of fixed proportions technology was relaxed then the equilibrium would become stable. We show here that the equilibrium becomes unstable when some sort of endogenous cyclical labour productivity is considered. Then we will study the consequences of considering both effects concluding that the stabilizing effect of considering a flexible technology is much stronger than the destabilizing effect of endogenizing labour productivity.Economic Policies Research Unit - (NIPE

OPEC’s oil exporting strategy and macroeconomic (in)stability

Aguiar-Conraria and Wen (2008) argued that dependence on foreign oil raises the likelihood of equilibrium indeterminacy (economic instability) for oil importing countries. We argue that this relation is more subtle. The endogenous choices of prices and quantities by a cartel of oil exporters, such as the OPEC, can affect the directions of the changes in the likelihood of equilibrium indeterminacy. We show that fluctuations driven by self-fulfilling expectations under oil shocks are easier to occur if the cartel sets the price of oil, but the result is reversed if the cartel sets the quantity of production. These results offer a potentially interesting explanation for the decline in economic volatility (i.e., the Great Moderation) in oil importing countries since the mid-1980s when the OPEC cartel changed its market strategies from setting prices to setting quantities, despite the fact that oil prices are far more volatile today than they were 30 years ago.>Organization of Petroleum Exporting Countries ; Petroleum industry and trade

What impact will Portugal’s election have on the country’s economy?

Portugal held elections on 4 October, with the governing centre-right coalition winning the election, but losing its absolute majority in parliament. Luís Aguiar-Conraria assesses what the result of the election could mean for the country’s economy, which was one of the worst hit during the Eurozone crisis. He argues that while the potential for another election to be held in the short-term could pose a problem, there is nevertheless reason for cautious optimism about Portugal’s economic future in the short to medium term

A note on oil dependence and economic instability

We show that dependence on foreign energy can increase economic instability by raising the likelihood of equilibrium indeterminacy, hence making fluctuations driven by self-fulfilling expectations easier to occur. This is demonstrated in a standard neoclassical growth model. Calibration exercises, based on the estimated share of imported energy in production for several countries, show that the degree of reliance on foreign energy for many countries can easily make an otherwise determinate and stable economy indeterminate and unstable.Petroleum industry and trade ; Economic stabilization

Predicting the performance of a first year graduate student

In this paper, i analyse, statistically, if GRE scores are a good predictor of the performance of a first year Economics graduate student. I also test if the scholastic year of an Economics PhD program contributes to the harmonization of the skills of students with different backgrounds. To both questions the answer is positive. GRE scores are relevant and the first scholastic year is effective in bringing together students with different entering skills

The adequacy of the traditional econometric approach to nonlinear cycles

To show that the traditional econometric approach is not able to deal with deterministic chaos, we use an extension of Goodwin.s growth cycle model to generate arti.cial data for output. An EGARCH model is estimated to describe the data generation process. Although using some traditional econometric tests no evidence of misspeci.- cation is found the estimated process is qualitatively wrong: it is dynamically stable when the true process is unstable. We present a speci.c econometric procedure de- veloped to deal with deterministic chaos: the BDS statistics. Also an explanation for the little evidence of deterministic chaos in aggregated macroeconomic time series is suggested.Economic Policies Research Unit - (NIPE

Referendum Design, Quorum Rules and Turnout

In this article, we focus on the consequences of quorum requirements for turnout in referendums. We use a rational choice, decision theoretic voting model to demonstrate that participation quorums change the incentives some electors face, inducing those who oppose changes in the status quo and expect to be in the minority to abstain. As a result, paradoxically, participation quorums decrease electoral participation. We test our model’s predictions using data for all referendums held in current European Union countries from 1970 until 2007, and show that the existence of a participation quorums increases abstention by more than ten percentage points.Referendum Design; Voter turnout

Understanding the Impact of Oil Shocks

This paper provides new empirical evidence on and theoretical support for the close link between oil prices and aggregate macroeconomic performence in the 1970s. Although this link has been well documented in the empirical literature and is further confirmed in this paper, standard economic models are not able to replicate this link when actual oil prices are used to stimulate the models. In particular, standard models cannot explain the depht of the recession in 1974-75 and the strong revival in 1976-78 based on the oil price movements in that period. This paper argues that a missing multiplier-accelerator mechanism from standard models may hold the key. This multipliplier-accelerator mechanism not only exacerbated the impact of the oil schocks in 1973-74 but also helped create the temporary recovery in 1976-1978. This paper derives the missing multiplier-accelarator mechanism from externalities in general equilibrium. Our calibrated model can explain both the recession in 1974-75 and revival in 1976-78.Oil price shocks, Real business cycle, indeterminacy, capacity utilization, externalities, monopolistic competition.

Foreign Trade and Equilibrium Indeterminacy

We show that dependence of production on foreign inputs (or non-producible natural resources) can significantly increase the likelihood of indeterminacy. Payment of imported foreign factors of production may act as a semi-fixed cost, amplifying production externalities and returns to scale, making selffulfilling expectations driven busyness cycles easier to arise. This is demonstrated using a standard neoclassical growth model. Calibration exercise shows that the required increasing returns to scale can be reduced by as much as 64% based on estimated share of foreign inputs in production for OECD countries.Indeterminacy, Factor Imports, Natural Resources, Capacity Utilization, Externality, Returns to Scale, Open Economy, Sunspots, Self- Fulfilling Expectations.