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Journal articles on the topic 'Substitution (Economics) Econometric models'

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Author: Grafiati

Published: 10 December 2022

Last updated: 29 January 2023

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1

Banerjee, Swagata “Ban”, Irfan Y. Tareen, Lewell F. Gunter, Jimmy Bramblett, and Michael E. Wetzstein. "Forecasting Irrigation Water Demand: A Case Study on the Flint River Basin in Georgia." Journal of Agricultural and Applied Economics 39, no. 3 (December 2007): 641–55. http://dx.doi.org/10.1017/s1074070800023324.

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Southeast drought conditions have accentuated the demand for irrigation in the face of restricted water supply. For allocating this supply, Georgia held an auction for withdrawing irrigated acreage. This auction withdrew 33,000 acres from irrigation, resulting in a physical estimate of a 399 acre-feet daily increase in water flow. The actual reduction is driven by crop distributional changes on the basis of economic substitution and expansion effects. In contrast to the physical estimates, an econometric model that considers these effects is developed. The differences between the physical and econometric models result in an increase in the estimate of water savings of around 19% to 24%.

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2

Oberfield, Ezra, and Devesh Raval. "Micro Data and Macro Technology." Econometrica 89, no. 2 (2021): 703–32. http://dx.doi.org/10.3982/ecta12807.

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We develop a framework to estimate the aggregate capital‐labor elasticity of substitution by aggregating the actions of individual plants. The aggregate elasticity reflects substitution within plants and reallocation across plants; the extent of heterogeneity in capital intensities determines their relative importance. We use micro data on the cross‐section of plants to build up to the aggregate elasticity at a point in time. Interpreting our econometric estimates through the lens of several different models, we find that the aggregate elasticity for the U.S. manufacturing sector is in the range of 0.5–0.7, and has declined slightly since 1970. We use our estimates to measure the bias of technical change and assess the decline in labor's share of income in the U.S. manufacturing sector. Mechanisms that rely on changes in the relative supply of factors, such as an acceleration of capital accumulation, cannot account for the decline.

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3

Kozinova, A. T. "An econometric analysis of retail turnover in Russia." Economic Analysis: Theory and Practice 19, no. 6 (June 29, 2020): 1133–53. http://dx.doi.org/10.24891/ea.19.6.1133.

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Subject. The article deals with econometric analysis of retail turnover in Russia and its relationship with macroeconomic indicators, like real disposable household income, consumer prices, etc. Objectives. The purpose is to create effective models to analyze the retail turnover in Russia and its relationship with other macroeconomic indicators, taking into account the existence of periods of economic instability. Methods. I apply correlation and regression methods to analyze statistics. To quantify changes in the retail turnover of Russia during the periods of economic instability, I use dummy variables. Results. The Russia’s retail trade turnover index had a reverse and moderate relationship with the consumer price index, direct and strong relationship with the indices of real disposable household income and imports, direct relationship with the manufacturing index. I offer statistically significant regression models of Russia’s retail turnover with the said macroeconomic indicators. Conclusions. The main advantage of models of retail turnover that are built using a large number of observations is a greater number of simultaneously considered factors. The quantitative assessment of retail turnover elasticity by consumer prices confirms the need for inflation targeting by the Central Bank of the Russian Federation. The higher elasticity of retail turnover in manufacturing as compared with the imports denotes the importance of import substitution policy.

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4

Rupert, Peter, Richard Rogerson, and Randall Wright. "Estimating substitution elasticities in household production models." Economic Theory 6, no. 1 (February 1995): 179–93. http://dx.doi.org/10.1007/bf01213946.

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5

Anderson, Richard K., and John R. Moroney. "Substitution and Complementarity in C. E. S. Models." Southern Economic Journal 60, no. 4 (April 1994): 886. http://dx.doi.org/10.2307/1060427.

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6

Banerjee, Swagata “Ban”, and Babatunde A. Obembe. "Econometric Forecasting of Irrigation Water Demand Conserves a Valuable Natural Resource." Journal of Agricultural and Applied Economics 45, no. 3 (August 2013): 557–68. http://dx.doi.org/10.1017/s107407080000506x.

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Natural causes (such as droughts), non-natural causes (such as competing uses), and government policies limit the supply of water for agriculture in general and irrigating crops in particular. Under such reduced water supply scenarios, existing physical models reduce irrigation proportionally among crops in the farmer's portfolio, disregarding temporal changes in economic and/or institutional conditions. Hence, changes in crop mix resulting from expectations about risks and returns are ignored. A method is developed that considers those changes and accounts for economic substitution and expansion effects. Forecasting studies based on this method with surface water in Georgia and Alabama demonstrate the relative strength of econometric modeling vis-à-vis physical methods. Results from a study using this method for ground water in Mississippi verify the robustness of those findings. Results from policy-induced simulation scenarios indicate water savings of 12% to 27% using the innovative method developed. Although better irrigation water demand forecasting in crop production was the key objective of this pilot project, conservation of a valuable natural resource (water) has turned out to be a key consequence.

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7

Castillo-Manzano, José I., Lourdes López-Valpuesta, Fernando Gonzalez-Laxe, and Diego J. Pedregal. "An econometric analysis of the Spanish fresh fish market." ICES Journal of Marine Science 71, no. 3 (November 14, 2013): 628–35. http://dx.doi.org/10.1093/icesjms/fst186.

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Abstract This article seeks to analyse the factors that determine the dynamics of the balance between supply and demand in the Spanish fresh fish market. For this, the time-series of fresh fish landed in the 1973–2009 period is analysed through an estimation of the series of transfer function models. Among other things, the findings in the Spanish case show a complex relationship between the amount of fish landed and price; a clear substitution relationship between fresh fish and aquaculture; a negative impact of labour costs in a manual labour-intensive sector such as fishing, which in developed countries is being affected by an exodus of manpower to other sectors where there is less uncertainty surrounding labour conditions; the impact of Spain being barred from international fishing grounds a result of the delimitation of exclusive economic zones (EEZs); and the dwindling importance of fisheries traffic as a result of the port devolution process begun in Spain in the early 1990s. The non-significance of a priori key factors, such as the price of oil and Spain's entry into the EEC, can be explained by widespread energy subsidies and contradictions in the objectives of the Common Fisheries Policy, respectively.

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8

Karney, Daniel H. "General equilibrium models with Morishima elasticities of substitution in production." Economic Modelling 53 (February 2016): 266–77. http://dx.doi.org/10.1016/j.econmod.2015.12.003.

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9

Castro, Luciano, and Antonio F. Galvao. "Dynamic Quantile Models of Rational Behavior." Econometrica 87, no. 6 (2019): 1893–939. http://dx.doi.org/10.3982/ecta15146.

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This paper develops a dynamic model of rational behavior under uncertainty, in which the agent maximizes the stream of future τ‐quantile utilities, for τ ∈ (0,1). That is, the agent has a quantile utility preference instead of the standard expected utility. Quantile preferences have useful advantages, including the ability to capture heterogeneity and allowing the separation between risk aversion and elasticity of intertemporal substitution. Although quantiles do not share some of the helpful properties of expectations, such as linearity and the law of iterated expectations, we are able to establish all the standard results in dynamic models. Namely, we show that the quantile preferences are dynamically consistent, the corresponding dynamic problem yields a value function, via a fixed point argument, this value function is concave and differentiable, and the principle of optimality holds. Additionally, we derive the corresponding Euler equation, which is well suited for using well‐known quantile regression methods for estimating and testing the economic model. In this way, the parameters of the model can be interpreted as structural objects. Therefore, the proposed methods provide microeconomic foundations for quantile regression methods. To illustrate the developments, we construct an intertemporal consumption model and estimate the discount factor and elasticity of intertemporal substitution parameters across the quantiles. The results provide evidence of heterogeneity in these parameters.

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10

Hoke, Donald. "British and American Horology: Time to Test Factor-Substitution Models." Journal of Economic History 47, no. 2 (June 1987): 321–27. http://dx.doi.org/10.1017/s0022050700048087.

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This article examines the productivity of American watch manufacturing technology between 1850 and 1900 as representative of the industries collectively known as the American System of Manufactures. It then compares and contrasts products and responses to market events in British and American horology in the nineteenth century. Finally it weighs factor-substitution models which purport to explain the sharply different British and American responses to mechanization, specifically why the American System of Manufactures is indeed American.

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11

Altonji, Joseph G., and John C. Ham. "Intertemporal Substitution, Exogeneity, and Surprises: Estimating Life Cycle Models for Canada." Canadian Journal of Economics 23, no. 1 (February 1990): 1. http://dx.doi.org/10.2307/135517.

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12

Palivos, Theodore, and Giannis Karagiannis. "THE ELASTICITY OF SUBSTITUTION AS AN ENGINE OF GROWTH." Macroeconomic Dynamics 14, no. 5 (June 15, 2010): 617–28. http://dx.doi.org/10.1017/s1365100509000479.

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This paper characterizes the elasticity of factor substitution in one-sector convex growth models with a general production function. It shows that an elasticity of substitution that is asymptotically greater than unity is a sufficient (but not a necessary) condition for the existence of a lower bound on the marginal product of capital, which in turn can lead to unbounded endogenous growth. Hence, an elasticity of substitution that eventually becomes greater than unity can counteract the role of diminishing returns to capital. This renders factor substitution a powerful engine of growth.

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13

Ham, John C., and Kevin T. Reilly. "Testing Intertemporal Substitution, Implicit Contracts, and Hours Restriction Models of the Labor Market Using Micro Data." American Economic Review 92, no. 4 (August 1, 2002): 905–27. http://dx.doi.org/10.1257/00028280260344524.

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We present new tests of three theories of the labor market: intertemporal substitution, hours restrictions, and implicit contracts. The intertemporal substitution test we implement is an exclusion test robust to many specification errors and we consistently reject this model. We model hours restrictions as part of an endogenous switching model. We compare the implicit probit equation to an unrestricted probit equation for unemployment and reject the hours restriction model. For the implicit contracts model, we estimate nonseparable within-period labor-supply and consumption equations. We test a cross-equation restriction of the model and cannot reject the implicit contracts model.

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14

Lincényi, Marcel, Ladislav Kabát, and Michal Fabuš. "Sustainability of Print Media in the Slovak Republic with Regard to the Economic and Technological Development." Sustainability 13, no. 22 (November 21, 2021): 12876. http://dx.doi.org/10.3390/su132212876.

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(1) Background: The main purpose of the research study is to identify and quantify significant development trends in the market of selected print media in Slovakia for the period 2010–2020 but especially to analyze their decline trend and estimate their sustainability in the media market after the entry of digital media. (2) Methods: To be able to arrive at qualified answers to the above research questions, we obtained and statistically processed available data on the scope of production and sales of relevant periodicals for the period 2010–2020 in the form of a time series. Subsequently, we chose suitable econometric models (regression analysis, panel data analysis, autoregressive models) as tools for their analysis with the possibility of prognostic applications. (3) Results: Research on selected dailies in the Slovak Republic in the years 2011–2020 revealed findings about the trend and also the nature of its variability, showing approximately the same decreases in the streams of dailies sold. We consider the growing popularity of digital media at the expense of traditional media to be the main reason for the decline in the cost of daily newspapers sold. The analysis and quantification of this substitution relationship will be the subject of our next paper. (4) Conclusions: If the current trend of decreasing daily average sold costs continues in the Slovak Republic, based on derived econometric models, it is possible to qualitatively estimate the minimum acceptable level of daily press sales and, thus, estimate the life of dailies in their classic form. The result will be their new orientation toward the electronic form of media products.

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15

BEVAN, DAVID L., PAUL COLLIER, and JAN W. GUNNING. "INCOME AND SUBSTITUTION EFFECTS IN MODELS OF PEASANT SUPPLY RESPONSE UNDER RATIONING." Oxford Economic Papers 43, no. 2 (April 1991): 340–43. http://dx.doi.org/10.1093/oxfordjournals.oep.a042003.

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16

Wong, Siu-kee. "Factor substitution and factor intensities in models with more factors than goods." International Journal of Economic Theory 1, no. 4 (December 2005): 277–97. http://dx.doi.org/10.1111/j.1742-7363.2005.00017.x.

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17

Lloyd-Smith, Patrick, Joshua K. Abbott, Wiktor Adamowicz, and Daniel Willard. "Intertemporal Substitution in Travel Cost Models with Seasonal Time Constraints." Land Economics 96, no. 3 (June 24, 2020): 399–417. http://dx.doi.org/10.3368/le.96.3.399.

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18

Djordjevic, Marija. "Consumption-based macroeconomic models of asset pricing theory." Ekonomski anali 61, no. 211 (2016): 7–28. http://dx.doi.org/10.2298/eka1611007d.

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The family of consumptionbased asset pricing models yields a stochastic discount factor proportional to the marginal rate of intertemporal substitution of consumption. In examining the empirical performance of this class of models, several puzzles are discovered. In this literature review we present the canonical model, the corresponding empirical tests, and different extensions to this model that propose a resolution of these puzzles.

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19

Ales, Laurence, and Christopher Sleet. "Optimal Taxation of Income‐Generating Choice." Econometrica 90, no. 5 (2022): 2397–436. http://dx.doi.org/10.3982/ecta18542.

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Discrete location, occupation, skill, and hours choices of workers underpin their incomes. This paper analyzes the optimal taxation of discrete income‐generating choice. It derives optimal tax equations and Pareto test inequalities for mixed logit choice environments that can accommodate discrete and unstructured choice sets, rich preference heterogeneity, and complex aggregate cross‐substitution patterns between choices. These equations explicitly connect optimal taxes to societal redistributive goals and private substitution behavior, with the latter encoded as a substitution matrix that describes cross‐sensitivities of choice distributions to tax‐induced utility variation. In repeated mixed logit settings, the substitution matrix is exactly the Markov matrix of shock‐induced agent transitions across choices. We describe implications of this equivalence for evaluation of prevailing tax designs and the structural estimation of optimal policy mixed logit models. We apply our results to two salient examples: spatial taxation and taxation of couples.

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20

PINTUS, PATRICK A. "EXPECTATIONS-DRIVEN FLUCTUATIONS WHEN FACTOR UTILIZATION IS VARIABLE." Macroeconomic Dynamics 8, no. 1 (January 30, 2004): 3–26. http://dx.doi.org/10.1017/s1365100504020255.

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The present paper studies the influence of variable labor utilization on local indeterminacy and expectations-driven fluctuations, in one-sector models with (nearly) constant returns to scale. It is shown that, in comparison to the configuration of constant input utilization, considering variable utilization reduces the actual possibilities of factor substitution and, consequently, the range of input substitution elasticities that are compatible with endogenous fluctuations. In particular, local indeterminacy and expectations-driven fluctuations occur only if utilization rates are sufficiently inelastic, whereas local determinacy prevails when utilization is highly elastic. However, accounting for the fact that variable utilization reduces theeffectiveelasticity of capital/labor substitution leads us to argue that expectations-driven fluctuations are more plausible because they require larger elasticities ofapparentinput substitution. In contrast with the recent literature, the analysis does not rely on significantly increasing returns to scale in production. Accordingly, the results are not at variance with recent empirical studies emphasizing the importance of variable utilization and denying the evidence of large increasing returns.

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21

Kumar, V., and Robert P. Leone. "Measuring the Effect of Retail Store Promotions on Brand and Store Substitution." Journal of Marketing Research 25, no. 2 (May 1988): 178–85. http://dx.doi.org/10.1177/002224378802500206.

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Using store-level scanner data, the authors investigate the effect of retail store price promotion, featuring, and displays on sales of brands of disposable diapers within a city. A hierarchical, cross-sectional, and time-series modeling procedure is used to identify the competitive structure among retail stores within a test market city. Models are developed for pooled store pairs to investigate the effect of promotion on store substitution. The specification of these models is based on findings from within-store brand substitution models. Within a store, price promotion produced the largest amount of brand substitution, followed by featuring and displays. Similarly, these activities produced store substitution in certain instances. However, which specific promotional variables are significant and the magnitude of the effect are a function of the geographic proximity of the stores.

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22

Garnier, Jean-Philippe, Kazuo Nishimura, and Alain Venditti. "Intertemporal substitution in consumption, labor supply elasticity and sunspot fluctuations in continuous-time models." International Journal of Economic Theory 3, no. 4 (December 7, 2007): 235–59. http://dx.doi.org/10.1111/j.1742-7363.2007.00058.x.

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23

Cassou, Steven P., Arantza Gorostiaga, and Iker Uribe-Zubiaga. "Policy effects of the elasticity of substitution across labor types in life cycle models." Economic Modelling 35 (September 2013): 59–70. http://dx.doi.org/10.1016/j.econmod.2013.06.021.

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24

Wong, Tsz-Nga, and Chong K. Yip. "Indeterminacy and the elasticity of substitution in one-sector models." Journal of Economic Dynamics and Control 34, no. 4 (April 2010): 623–35. http://dx.doi.org/10.1016/j.jedc.2009.10.011.

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25

Baranova, Nina, Sergey Larin, and Evgeny Khrustalyov. "Econometric models for estimating current and forecast values of the level of human capital development in the Russian economy." InterCarto. InterGIS 26, no. 1 (2020): 52–67. http://dx.doi.org/10.35595/2414-9179-2020-1-26-52-67.

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Studies of factors of sustainable economic development in modern conditions are highly relevant for Russia due to the constant increase and tightening of sanctions restrictions. They have a negative impact on the introduction of innovative developments and economic growth, and reduce the competitiveness of Russian enterprises and their products on world markets. Human capital can become one of the key factors for countering sanctions restrictions, improving the efficiency of economic development and gaining additional competitive advantages for domestic enterprises and the economy as a whole. Assessing the impact of human capital on the sustainable development of the economy is difficult, since it is one of the specific forms of capital. When making appropriate measurements, economic scientists rely on a number of developed theoretical methods and practical tools that support them, which allow us to obtain fairly accurate values of the human capital development index (HDI) based on statistical data. First of all, this is the current UN methodology for calculating the HDI indicator, as well as modern software systems OriginPro-8.6 and Eviews-10.0, which have sufficiently advanced functionality for performing calculations. Russia today has all the necessary prerequisites and opportunities for progressive social and economic development. However, the formation of econometric models will help to timely determine the current and forecast values of the level of human capital development for individual enterprises, industries, and the country’s economy as a whole. This paper shows the practical application of the econometric tools of all the above approaches to obtain the calculated values of the HDI indicator for different time periods and different scenarios for the development of the Russian economy. The results obtained confirmed the high practical significance of the tools used and the acceptable accuracy of the calculations. However, the current and forecast values of the level of human capital development alone will not be able to ensure the effective development of the Russian economy. On the contrary, the effective use of human capital in the implementation of import substitution strategies and national projects will allow our country to become one of the world’s leading economic development countries.

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26

Akay, Koray. "INDETERMINACY IN CASH-IN-ADVANCE MODELS AND THE ROLE OF FRICTIONS." Macroeconomic Dynamics 14, no. 1 (December 8, 2009): 119–35. http://dx.doi.org/10.1017/s1365100509090026.

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A monetary cash-in-advance model is known to be prone to real indeterminacy if the intertemporal elasticity of substitution in consumption is sufficiently low. Moreover, if the model features habit formation in consumption, the scope of indeterminacy increases substantially. This paper shows that many of the nominal frictions and real rigidities commonly used in the New Keynesian paradigm act to decrease the scope of this indeterminacy. These frictions include stickiness in prices and wages, adjustment costs in investment, and variable capacity utilization. When they are all used together in the model, the problem of indeterminacy nearly vanishes, even when habit formation in consumption is allowed.

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27

Mustafin, Askar Nailevich, Svetlana Nikolaevna Kotenkova, Ivana Kravčáková Vozárová, and Rastislav Kotulič. "Impact of Import Substitution Policy on Economic Growth." Economies 10, no. 12 (December 15, 2022): 324. http://dx.doi.org/10.3390/economies10120324.

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This paper highlights the issues of import substitution in the context of attaining total macro-economic balance, market adaptation, and achieving new levels of regional economic development as a constituent part of the national economy of the Russian Federation. An effective strategy and goal management are the important forward-looking orientation points of the existence and development of the country. In this study, we tested the hypothesis that economic growth in the region can be estimated via the GRP per capita. To define the sectors and regions with a successful implementation of a substitution policy, our own special algorithm for sorting and classifying regions was used. This algorithm made it possible to estimate the effectiveness of the economic policy, if any. To confirm and estimate the hypothesis, tests based on panel data models were carried out. The results revealed that the economic policy of import substitution was 10% more efficient in the regions where it was implemented than those without an implemented policy.

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28

Liu, Pan, and Joachim Thøgersen. "PAY-AS-YOU-GO PENSIONS AND ENDOGENOUS RETIREMENT." Macroeconomic Dynamics 24, no. 7 (January 30, 2019): 1700–1719. http://dx.doi.org/10.1017/s1365100518001013.

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This paper revisits two classic results in standard overlapping generations models with a pay-as-you-go (PAYG) pension system. Firstly, a PAYG system crowds out private savings and reduces the overall capital stock. Secondly, in dynamically efficient economies, a PAYG system will reduce steady-state welfare. These classic results have been derived and exposed in models with no retirement decision. However, by allowing for endogenous retirement, and without taking recourse to any frictions, uncertainty, or myopia, it is shown that a PAYG system may be neutral and may even increase the capital–labor ratio. In particular, it is shown that the effect of the pension contribution rate on capital intensity depends on the elasticity of substitution between consumption and leisure. If the elasticity of substitution is between 0 and 1, an increase in the contribution rate will increase capital intensity. Moreover, it is shown that the result regarding welfare may also be overturned. An increase in the PAYG contribution rate may increase steady-state welfare.

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29

MARRERO, GUSTAVO A. "REVISITING THE OPTIMAL STATIONARY PUBLIC INVESTMENT POLICY IN ENDOGENOUS GROWTH ECONOMIES." Macroeconomic Dynamics 12, no. 2 (April 2008): 172–94. http://dx.doi.org/10.1017/s1365100507060452.

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One part of the literature on endogenous growth concerns models where public infrastructure affects the private production process. An unsolved puzzle in this literature concerns observed public investment-to-output ratios for developed economies, which tend to fall short of theoretical model-based optimal ratios. We reexamine the optimal choice of public investment in a more general framework. This setting allows for long-lasting capital stocks, a lower depreciation rate for public capital than for private capital, an elasticity of intertemporal substitution that differs from unity, and the need to finance a nontrivial share of public services in output. Given other fundamentals in the economy, we show that the optimal public investment-to-output ratio is smaller for low-growth economies, for economies populated by consumers with low preferences for substituting consumption intertemporally, and when public capital is durable. For a calibrated economy, we show that a combination of these factors solves the public investment puzzle.

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30

Carlos Córdoba, Juan, and Marla Ripoll. "The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice." Review of Economic Studies 86, no. 5 (December 21, 2018): 1935–72. http://dx.doi.org/10.1093/restud/rdy071.

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Abstract Dynastic models common in macroeconomics use a single parameter to control the willingness of individuals to substitute consumption both intertemporally, or across periods, and intergenerationally, or across parents and their children. This article defines the concept of elasticity of intergenerational substitution (EGS), and extends a standard dynastic model in order to disentangle the EGS from the EIS, or elasticity of intertemporal substitution. A calibrated version of the model lends strong support to the notion that the EGS is significantly larger than one. In contrast, estimates of the EIS suggests that it is at most one. What disciplines the identification is the need to match empirically plausible fertility rates for the U.S. We illustrate the potential role of the EGS in macroeconomics.

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DUFOURT, FRÉDÉRIC, TERESA LLOYD-BRAGA, and LEONOR MODESTO. "INDETERMINACY, BIFURCATIONS, AND UNEMPLOYMENT FLUCTUATIONS." Macroeconomic Dynamics 12, S1 (April 2008): 75–89. http://dx.doi.org/10.1017/s1365100508070211.

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We incorporate imperfectly insured unemployment in the finance constrained economy proposed by Woodford (1986), by introducing unions and unemployment benefits financed by labor taxation. We show that this simple extension of the Woodford model changes drastically its stability conditions and local dynamics around the steady state. In fact, in contrast to related models in the literature, we find that, under constant returns to scale in production: (i) indeterminacy always prevails in the case of a unitary elasticity of substitution between capital and labor and (ii) flip and Hopf bifurcations occur for empirically credible elasticities of substitution between capital and labor, so that a rich set of dynamics may emerge at “realistic” parameters' values.

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32

Rhee, Wooheon. "CAN RBC MODELS EXPLAIN BUSINESS CYCLES IN KOREA?" Macroeconomic Dynamics 21, no. 3 (April 26, 2016): 599–623. http://dx.doi.org/10.1017/s1365100515000619.

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I examine whether an RBC model can generate a higher volatility of consumption relative to output, a strong negative correlation between output and the trade balance, and a weak countercyclicality of the real interest rate, phenomena that have been observed in the business cycles of emerging economies, including Korea. From an RBC model with recursive utility, I show that it is not the degree of relative risk aversion, but the elasticity of intertemporal substitution (EIS), that governs the movements of the variables of the model in the log linearized environment. The Bayesian estimation results based on Korean data from the period 1987 to 2013 suggest that there are some elements of success in describing the Korean economy based on the simple RBC model both with the EIS larger than one and with an error term for the real interest rate equation. An EIS larger than one improves the performance of the simple RBC model mainly in the direction of raising the volatility of consumption relative to output. Simulation results show that the error term for the real interest rate process mostly reflects the endogenous channel of financial frictions where the domestic real interest rate depends negatively on the expected (transitory) productivity shock.

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Federici, Daniela, and Enrico Saltari. "ELASTICITY OF SUBSTITUTION AND TECHNICAL PROGRESS: IS THERE A MISSPECIFICATION PROBLEM?" Macroeconomic Dynamics 22, no. 1 (August 15, 2016): 101–21. http://dx.doi.org/10.1017/s1365100516000031.

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In previous work, we estimated a dynamic model of the Italian economy, showing that its weakness in the past two decades is mainly due to the slowdown in total factor productivity growth. In those models, two parameters play a key role: technological progress and the elasticity of substitution. Recent estimates of those parameters are affected, in our opinion, by a specification problem: technological parameters are inherently long-run but their estimates are based on short-run data. Looking deeply into the estimation procedure, we show that the misspecification issue present in the estimates gives rise to a spurious regression bias (high R2, low DW), because the standard approach does not incorporate frictions and rigidities. Our modeling strategy takes account of them. Although we cannot in general say that our framework gets rid of the serial correlation problem, the statistics for our model do show that residuals are not serially correlated.

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34

Ohanian, Lee E. "The Economic Crisis from a Neoclassical Perspective." Journal of Economic Perspectives 24, no. 4 (November 1, 2010): 45–66. http://dx.doi.org/10.1257/jep.24.4.45.

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This paper assesses the 2007–2009 recession using neoclassical business cycle theory. I find that the 2007–2009 U.S. recession differs substantially from other postwar U.S. recessions, and also from the 2008 recession in other countries, in that lower labor input accounts for virtually all of the decline in income and output in the United States, while lower productivity accounts for much of other U.S. recessions and the 2007–2009 recession in other countries. I also find that existing classes of models, including financial market imperfections models, do not explain the U.S. recession. This is because the 2007–2009 recession is almost exclusively related to what appear to be labor market distortions that drive a wedge between the marginal product of labor and the marginal rate of substitution between consumption and leisure, a topic about which current classes of financial imperfection models are largely silent. I discuss future avenues for developing this class of models, and I consider alternative hypotheses for the recession, including the view of John Taylor and others that economic policies intended to help manage the crisis, actually deepened the recession by increasing uncertainty and distorting incentives.

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Eichenbaum, Martin, and Lars Peter Hansen. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data." Journal of Business & Economic Statistics 8, no. 1 (January 1990): 53. http://dx.doi.org/10.2307/1391753.

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Kaplan, Greg, Benjamin Moll, and Giovanni L. Violante. "Monetary Policy According to HANK." American Economic Review 108, no. 3 (March 1, 2018): 697–743. http://dx.doi.org/10.1257/aer.20160042.

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We revisit the transmission mechanism from monetary policy to household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of wealth and marginal propensities to consume because of two features: uninsurable income shocks and multiple assets with different degrees of liquidity and different returns. In this environment, the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium increase in labor demand, far outweigh direct effects such as intertemporal substitution. This finding is in stark contrast to small- and medium-scale Representative Agent New Keynesian (RANK) economies, where the substitution channel drives virtually all of the transmission from interest rates to consumption. Failure of Ricardian equivalence implies that, in HANK models, the fiscal reaction to the monetary expansion is a key determinant of the overall size of the macroeconomic response. (JEL D31, E12, E21, E24, E43, E52, E62)

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Rogerson, Richard, and Johanna Wallenius. "Nonconvexities, Retirement, and the Elasticity of Labor Supply." American Economic Review 103, no. 4 (June 1, 2013): 1445–62. http://dx.doi.org/10.1257/aer.103.4.1445.

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We consider two life cycle models of labor supply that use nonconvexities to generate retirement. In each case we derive a link between hours worked prior to retirement, the intertemporal elasticity of substitution for labor (IES), and the size of the nonconvexities. This link is robust to allowing for credit constraints and human capital accumulation by younger workers and suggests values for the IES that are .75 or higher. (JEL D91, J22, J24, J26)

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Yang, Wei, and Basil Sharp. "Spatial analysis of dairy yields response to intensive farming in New Zealand." China Agricultural Economic Review 11, no. 1 (February 4, 2019): 79–99. http://dx.doi.org/10.1108/caer-03-2016-0044.

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Purpose The New Zealand (NZ) dairy industry faces the challenge of increasing productivity and dealing with public concerns over nutrient pollution. The effective policy needs to address regional differences in productivity and fertilizer use. The purpose of this paper is to investigate how spatial effects influence the relationship between dairy yields and intensive farming practices across regions in NZ. Design/methodology/approach This paper employs spatial panel data models to establish whether unobserved spatial effects exist in the relationship between dairy yields and nutrient inputs regionally and nationally using 2002, 2007 and 2012 data from Statistics NZ and DairyNZ. Findings The results show positive spatial spillovers for most intensive inputs. The high level of effluent use and estimated negative yield response to nitrogen suggests that an opportunity exists for greater use of effluent as a substitute for nitrogenous fertilizer. Substitution has the potential to reduce dependence on fertilizer and contribute to a reduction in the nutrient pollution. Originality/value This paper is the first empirical application of spatial econometric methods to examine the spatial relevance of dairy yields and intensive farming in NZ. In particular, the spatial panel data model accounts for cross-sectional dependence and controls for heterogeneity. The results contribute to an understanding of how farmers can improve their management of intensive inputs and contribute to the formation of regional environmental policy that recognizes regional heterogeneity.

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Chen, Chia-Wen, Wei-Min Hu, and Christopher R. Knittel. "Subsidizing Fuel-Efficient Cars: Evidence from China’s Automobile Industry." American Economic Journal: Economic Policy 13, no. 4 (November 1, 2021): 152–84. http://dx.doi.org/10.1257/pol.20170098.

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This paper examines the response of vehicle purchase behavior to China’s largest national subsidy program for fuel-efficient vehicles during 2010 and 2011. Using variation from the program’s eligibility cutoffs and the rollout of the subsidy program, the program is found to boost sales for subsidized vehicle models, but also to create a substitution effect within highly fuel-efficient vehicles. Estimates imply that ignoring the substitution effect would lead one to conclude that the program is welfare enhancing, whereas in fact the marginal cost of the program exceeds the marginal benefit by as much as 300 percent. (JEL D12, H25, L25, L62, O14, P23, P36)

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Ezzat, Riham Ahmed. "Fixed-Mobile Substitution in MENA Countries: The Future of Fixed-Line Markets." Review of Network Economics 16, no. 4 (December 20, 2017): 387–417. http://dx.doi.org/10.1515/rne-2017-0013.

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Abstract The aim of this paper is to study the occurrence of Fixed-Mobile Substitution (FMS) in the Middle East North African (MENA) region. While there have been many studies on developed countries, empirical evidence for developing countries is somehow limited. In the last few years, mobile cellular subscriptions achieved a tremendous growth across the MENA region making it the second fastest growing region in the world in terms of mobile subscriptions in 2012, and the fastest growing region in terms of mobile traffic in 2014. Fixed subscriptions have also grown but at a slower rate than mobile subscriptions. Using unbalanced data on 17 MENA countries over the period 1990–2009, we explore the relationship between fixed and mobile telephone services by using dynamic panel data models. We find empirical evidence for asymmetric one-way substitution between fixed-lines and mobile phones and we estimate own- and cross-price elasticities for fixed and mobile telephone services in MENA region. The results are then used to derive policy implications in terms of market redefinition, taxation policies, extension of universal services and broadband markets.

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Herriges, Joseph A., and Daniel J. Phaneuf. "Inducing Patterns of Correlation and Substitution in Repeated Logit Models of Recreation Demand." American Journal of Agricultural Economics 84, no. 4 (November 2002): 1076–90. http://dx.doi.org/10.1111/1467-8276.00055.

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Dotson, Jeffrey P., John R. Howell, Jeff D. Brazell, Thomas Otter, Peter J. Lenk, Steve MacEachern, and Greg M. Allenby. "A Probit Model with Structured Covariance for Similarity Effects and Source of Volume Calculations." Journal of Marketing Research 55, no. 1 (February 2018): 35–47. http://dx.doi.org/10.1509/jmr.13.0240.

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Distributional assumptions for random utility models play an important role in relating observed product attributes to choice probabilities. Choice probabilities derived with independent errors have the property of independence of irrelevant alternatives, which often does not match observed substitution behavior and leads to inaccurate calculations of source of volume when new entrants are introduced. In this article, the authors parameterize the covariance matrix for a probit model so that similar brands in the preference space have higher correlation than dissimilar brands, resulting in higher rates of substitution. They find across multiple data sets that similarity based on overall utility, not just attributes, defines products as similar with heightened rates of substitution. The proposed model results in better in-sample and predictive fits to the data and more realistic measures of substitution for a new product introduction.

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Andreasen, Martin M., and Pawel Zabczyk. "Efficient bond price approximations in non-linear equilibrium-based term structure models." Studies in Nonlinear Dynamics & Econometrics 19, no. 1 (January 1, 2015): 1–33. http://dx.doi.org/10.1515/snde-2012-0005.

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AbstractThis paper develops an efficient method to compute higher-order perturbation approximations of bond prices. At third order, our approach can significantly shorten the approximation process and its precision exceeds the log-normal method and a procedure using consol bonds. The efficiency gains greatly facilitate any estimation which is illustrated by considering a long-run risk model for the US. Allowing for an unconstrained intertemporal elasticity of substitution enhances the model’s fit, and we see further improvements when incorporating stochastic volatility and external habits.

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Lee, Lung-fei. "The method of elimination and substitution in the GMM estimation of mixed regressive, spatial autoregressive models." Journal of Econometrics 140, no. 1 (September 2007): 155–89. http://dx.doi.org/10.1016/j.jeconom.2006.09.006.

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Feng, Zhen, Sainan Cheng, Guohua Qu, Yunlong Cui, and Jiameng Ye. "Research on Theoretical Mechanism and Promotion Path of Digital Economy Driving China’s Green Development under “Double Carbon” Background." International Journal of Environmental Research and Public Health 20, no. 1 (December 27, 2022): 437. http://dx.doi.org/10.3390/ijerph20010437.

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(1) Background: Under the background of building a new pattern of “double cycle” development, the green meaning of the digital economy is highly valued. The innovative feature of the digital economy is forming a new economic growth pole, and gradually becomes the driving force for China’s economic restructuring and green development; (2) methods: this paper empirically tests whether the digital economy can promote green development by using various econometric models based on panel dataset with 30 provinces from 2011 to 2019 in mainland China and measuring the development level of the digital economy and the greening index; (3) results: it is found that the digital economy can directly boost green development in greening degree of economic growth, resources and environment-carrying potential, and government policy support. The digital economy’s influence on green development has an inverted U-shaped trend; environmental control is an effective regulatory variable with a substitution effect on green development. With an obvious regional heterogeneity, the digital economy promotes green development; the digital economy can greatly affect green growth through technical innovation through mechanism analysis. The robustness test supports the above conclusion; (4) conclusions: the findings provide a foundation for multi-party policymakers to effectively formulate and implement policies for the digital economy that encourage green growth.

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Shimer, Robert. "Convergence in Macroeconomics: The Labor Wedge." American Economic Journal: Macroeconomics 1, no. 1 (January 1, 2009): 280–97. http://dx.doi.org/10.1257/mac.1.1.280.

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I review research on the behavior of the labor wedge, the ratio between the marginal rate of substitution of consumption for leisure and the marginal product of labor. According to competitive, market-clearing macroeconomic models, the ratio is easy to measure and should be equal to the sum of consumption and labor taxes. The observation that the wedge is higher in continental Europe than in the United States has proved useful for understanding the extent to which taxes can explain differences in labor market outcomes. The observation that the ratio rises during recessions suggests some failure of competitive, market-clearing macroeconomic models at business cycle frequencies. The latter observation has guided recent research, including work on sticky wage models and job search models. (JEL E24, E32, J64)

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Nishimura, Kazuo, Carine Nourry, Thomas Seegmuller, and Alain Venditti. "PUBLIC SPENDING AS A SOURCE OF ENDOGENOUS BUSINESS CYCLES IN A RAMSEY MODEL WITH MANY AGENTS." Macroeconomic Dynamics 20, no. 2 (April 23, 2014): 504–24. http://dx.doi.org/10.1017/s1365100514000078.

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We introduce public spending, financed through income taxation, into the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles through Hopf bifurcation and expectation-driven fluctuations appear if the degree of capital–labor substitution is high enough to be compatible with capital income monotonicity. Moreover, unlike frameworks with a representative agent, our results do not require externalities in production and are compatible with a weakly elastic labor supply with respect to wage.

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Miao, Bin, and Songfa Zhong. "Comment on “Risk Preferences Are Not Time Preferences”: Separating Risk and Time Preference." American Economic Review 105, no. 7 (July 1, 2015): 2272–86. http://dx.doi.org/10.1257/aer.20131183.

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Andreoni and Sprenger (2012a,b) observe that utility functions are distinct for risk and time preferences, and show that their findings are consistent with a preference for certainty. We revisit this question in an enriched experimental setting in which subjects make intertemporal decisions under different risk conditions. The observed choice behavior supports a separation between risk attitude and intertemporal substitution rather than a preference for certainty. We further show that several models, including Epstein and Zin (1989); Chew and Epstein (1990); and Halevy (2008) exhibit such a separation and can account for the overall experimental findings. (JEL C91, D81, D91)

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Frings, Hanna. "The Employment Effect of Industry- Specific, Collectively Bargained Minimum Wages." German Economic Review 14, no. 3 (August 1, 2013): 258–81. http://dx.doi.org/10.1111/geer.12009.

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Abstract This study estimates the employment effects of industry-specific, collectively bargained minimum wages in Germany for two occupations associated with the construction sector. I propose a truly exogenous control group in contrast to the control group design used in the literature. Further, a difference-in-differences-in-differences estimator is presented as a robustness test for occupation-specific and/or industry-specific, time-varying, unobserved heterogeneity. I do not find a significantly negative employment effect, even though the minimum wage is binding in (East) Germany. Possible explanations include substitution effects, non-compliance and models of monopsonic competition.

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Chetty, Raj, Adam Guren, Day Manoli, and Andrea Weber. "Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins." American Economic Review 101, no. 3 (May 1, 2011): 471–75. http://dx.doi.org/10.1257/aer.101.3.471.

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We evaluate whether state-of-the-art macro models featuring indivisible labor are consistent with modern quasi-experimental micro evidence by synthesizing evidence on both the intensive and extensive margins. We find that micro estimates are consistent with macro estimates of the steady-state (Hicksian) elasticities relevant for cross-country comparisons on both the extensive and intensive margins. However, micro estimates of intertemporal substitution (Frisch) elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences. The key puzzle to be resolved is why micro and macro estimates of the Frisch extensive margin elasticity are so different.

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