			Home About us Contact

Intertemporal Substitution (intertemporal + substitution)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	80%

Selected Abstracts

Intertemporal Substitution of Effort: Some Empirical Evidence

ECONOMICA, Issue 280 2003
John G. Treble
The labour economics literature refers often to effort, but there is little empirical evidence as to how productivity and effort respond to wage rate variations. An unusual natural experiment in which wage rates suffered an exogenous change of two weeks' duration gives some insight into the magnitude of this effect. For a group of workers in Victorian County Durham, the effort response, measured as the impact of a temporary wage rate change on output per shift, dominates the response of attendance. Comparison of the estimates presented here with those in Treble (Journal of Economic History, 61, 414,38, 2001) suggests that the effects are short lived. [source]

A Parsimonious Macroeconomic Model for Asset Pricing

ECONOMETRICA, Issue 6 2009
Fatih Guvenen
I study asset prices in a two-agent macroeconomic model with two key features: limited stock market participation and heterogeneity in the elasticity of intertemporal substitution in consumption (EIS). The model is consistent with some prominent features of asset prices, such as a high equity premium, relatively smooth interest rates, procyclical stock prices, and countercyclical variation in the equity premium, its volatility, and in the Sharpe ratio. In this model, the risk-free asset market plays a central role by allowing non-stockholders (with low EIS) to smooth the fluctuations in their labor income. This process concentrates non-stockholders' labor income risk among a small group of stockholders, who then demand a high premium for bearing the aggregate equity risk. Furthermore, this mechanism is consistent with the very small share of aggregate wealth held by non-stockholders in the U.S. data, which has proved problematic for previous models with limited participation. I show that this large wealth inequality is also important for the model's ability to generate a countercyclical equity premium. When it comes to business cycle performance, the model's progress has been more limited: consumption is still too volatile compared to the data, whereas investment is still too smooth. These are important areas for potential improvement in this framework. [source]

Risk-free bond prices in incomplete markets with recursive multiple-prior utilities

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 2 2006
Chiaki Hara
D52; D91; E21; E44; G12 We consider an exchange economy under uncertainty, in which agents' utility functions may be recursive and the expected utility calculation may be based on multiple priors. The utility functions representing risk attitudes and intertemporal substitution are negative exponential functions. These utility functions and the access to asset markets may arbitrarily differ across agents. We prove that the risk-free bond price goes down (and the interest rate goes up) monotonically as the market incompleteness diminishes. We also find the range of equilibrium bond prices that depends on the primitives of the economy but not on the structures of asset markets. [source]

Multiple equilibria in a cash-in-advance two-sector economy

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 2 2005
Stefano Bosi
C61; E32; E41 We consider a two-sector infinite horizon economy with a fractional cash-in-advance constraint on consumption expenditures. This formulation allows us to consider a steady-state velocity of money that is strictly greater than one and, therefore, provides a more plausible framework than the standard formulation in which all the consumption purchases are paid cash. We prove that the steady state is bound to be indeterminate and multiple equilibria occur when the share of the liquidity constraint is low enough and that a capital-intensive investment good or a strongly capital-intensive consumption good improve considerably the scope for indeterminacy. As a consequence, we show that without any restriction on the elasticity of intertemporal substitution in consumption, multiple equilibria might occur if the velocity of money is greater than a critical bound that is compatible with empirical estimates. [source]

The State-by-State Economic Impacts of the 2002 Shutdown of the Los Angeles,Long Beach Ports

GROWTH AND CHANGE, Issue 4 2008
JIYOUNG PARK
ABSTRACT In previous research, the economic impacts of temporary shutdowns of the Los Angeles,Long Beach harbors were simulated after a hypothetical terrorist attack, applying the National Interstate Economic Model to estimate state-by-state as well as interindustry impacts. However, the unpredictable characteristic of terrorist attacks might not be applicable to the case of a ports shutdown such as the one caused by the lockout of September,October 2002. Market participants can be expected to have contingency plans based on anticipations of a strike or shutdown. Can we identify any of these in terms of the use of alternate ports, in terms of alternate modes or even alternate time periods? The purpose of this study is to examine these questions. The approach is elaborated by testing for the possible effects of trade diversion to other West Coast ports, transportation modes, and intertemporal substitutions. We use data from WISERTrade describing commodity-specific trade for the major West Coast ports before, during, and after the 11-day shutdown of the fall of 2002. Shippers' ability to divert trade is a key ingredient in the economy's ability to withstand attacks and disruptions. The work estimates the impacts on 47 industrial sectors across 50 states (and the District of Columbia). [source]