l i (! ; !; t)d!
X(!; t) R 0 1 j(! ) d! : (2) The parameter a F > 0 is exogenous. The variable X(!; t) changes with time and has a
speci…c value for every product !. If it increases, R&D becomes more costly, which means that more resources have to be invested in order to keep the arrival rate of new qualities constant. Details on the exact nature of X(!; t) will be provided below. It su¢ ces to say for now that it is key in removing the growth scale e¤ect present in Aghion and Howitt (1994) and Mortensen (2005). The expression R 0 1 j(! ) denotes that as the average quality of products in the economy grows, R&D becomes more di¢ cult. Due to the unit-elastic nature of the R&D technology through which individual products enter, innovating …rms spend an equal amount of resources on every good at a given period t. An alternative and equivalent in its implications approach would be to introduce a …nal good as in Mortensen (2005), which would be produced by intermediate inputs. Those intermediate goods would be the set of all product varieties available and individual product qualities would matter for the productivity of the …nal good technology.
When a central bank embarks on an expansionary monetary policy, it does so to stimulate the domestic economyand reduce unemployment: A reduced real rate of interest results in an increase in output and employment while un- employment falls. The main motivation for such a policy stance is a societal preference for low levels of unemployment which entails both considerable psychological and …scal costs. The psychological costs are borne mainly by the unemployed but also by those who still have a job as was shown with Ger- man, European and US data by Lüchinger, Meier and Stutzer (2010; LMS henceforth). In this paper I will shed light on two implications of this psycho- logical e¤ect of unemployment when introduced into an otherwise standard New-Keynesian openeconomy business cycle model. The …rst implication is the reaction of the labor force to expansionary monetary policy shocks. Stan- dard New Keynesian models fail to replicate the stylized fact of an increase in labor market participation in response to monetary or other demand shocks while the modi…ed model presented here can explain it. The second impli- cation is the welfare e¤ect of monetary policy shocks in the tradition of the Obstfeld and Rogo¤ (1995) openeconomy redux model. The modi…ed model allows for considerable welfare improvements relative to those in standard models.
In this paper we have analyzed the impacts of TFP and risk premium shocks on the economic performance of a highly indebted openeconomy. The analysis is based on the well-known semi-small openeconomymodel of the Turnovsky (2000, ch. 11) type, where an upward sloping supply curve of debt is added. The key feature of the economy is that the labor market is non-Walrasian and suﬀers from frictions. Unemployment emerges as matching of job vacancies with searching agents is time- consuming and costly. Because of the model’s complex dynamic structure, we resorted to numerical simulations, enabling us to analyze the short-run dynamics and the steady-state adjustments. We also have introduced sticky wages ` a la Blanchard and Gal´ı (2010). We calibrated the model to replicate some structural key characteristics of highly indebted advanced economies like Greece, Ireland, or Portugal, which in the aftermath of the global ﬁnancial crisis run into severe troubles both in terms of economic performance and in terms of their ability to borrow on the international ﬁnancial market.
We show that in developing countries this channel may be reversed in an open when compared to a closed economy
Increasing the income of the rich is beneficial for growth in a closed economy because it increases their willingness-to-pay for innovated high-quality goods
MEDSEA includes a number of nominal and real frictions such as sticky wages and prices, habit formation and capital adjustment costs, that have been shown to help produce more realistic short-term adjustments to shocks. Moreover, the model includes a number of shocks, such as wage and goods mark-up shocks that are very relevant from a policy analysis view-point, thereby allowing a theoretically coherent quantitative analysis of policy reforms. While being already useful for policy analysis purposes, the model presented in this paper should be interpreted as a first step towards a set of more detailed DSGE models that are better suited to explain the transmission mechanisms of certain shocks. Indeed, the model’s compact and relatively simplistic nature allows it to be extended in a number of dimensions depending on the changing needs of the policy maker. For example the model completely abstracts from search and matching frictions and is thus unable to explain the existence of involuntary unemployment. Moreover, the treatment of fiscal policy in this model is very stylised. A further step would be the estimation of the model which would enable a historical decomposition of the shocks that drive the Maltese business cycle.
In this paper we have analyzed the impacts of TFP and risk premium shocks on the economic performance of a highly indebted openeconomy. The analysis is based on the well-known semi-small openeconomymodel of the Turnovsky (2000, ch. 11) type, where an upward sloping supply curve of debt is added. The key feature of the economy is that the labor market is non-Walrasian and suffers from frictions. Unemployment emerges as matching of job vacancies with searching agents is time- consuming and costly. Because of the model’s complex dynamic structure, we resorted to numerical simulations, enabling us to analyze the short-run dynamics and the steady-state adjustments. We also have introduced sticky wages ` a la Blanchard and Gal´ı (2010). We calibrated the model to replicate some structural key characteristics of highly indebted advanced economies like Greece, Ireland, or Portugal, which in the aftermath of the global financial crisis run into severe troubles both in terms of economic performance and in terms of their ability to borrow on the international financial market.
27 It is significant that Larry Summers has come out in support of the “secular stagnation”
thesis, because in earlier pronouncements, especially while he was in the administration, he projected much more optimism about the shape of things to come. He now argues
convincingly that “something is a little bit odd” about the performance of the US economy in the 21 st century. He noticed that in spite of the easy-money policy of the Federal Reserve, the explosion of debt as people withdrew their savings from their house equity, the “vast amount of imprudent lending”, and consumers giddy from a false impression that they were wealthy “in excess of its reality”, the economy was by no means growing as one would expect in a boom. Summers concludes that in spite of all these factors that should have fueled aggregate demand, “Capacity utilization wasn’t under any great pressure. Unemployment wasn’t under any remarkably low level. Inflation was entirely quiescent. So somehow, even a great bubble wasn’t enough to produce any excess in aggregate demand” (Summers 2013). According to Krugman this was a “very radical manifesto,” as Summers is really saying that “we may be an economy that needs bubbles just to achieve something near full employment—that in the absence of bubbles the economy…” will continue to falter (Krugman 2013). In short,
2.1.2. Ad hoc rational expectations or Keynesian models not based on optimal savings Regardless of their school of thought and the varieties of their ideas, a large market share of macroeconomic models in the 80s were static or dynamic models not based on optimal savings derived from intertemporal microfoundations (for example, Dornbusch’s (1976) rational expectations model of the overshooting of exchange rate). It has been somehow forgotten that, not only Keynesian models, including large scale forecasting models in central banks and treasuries, but also many small scale rational expectations models were not based on intertemporal optimal savings at the time. In the 1990s, optimal savings based on the intertemporal substitution effect of the interest rate on consumption, with infinite (Ramsey) or finite horizon in overlapping generation models, turned out to be of compulsory use in mainstream macroeconomics. This was fostered by theories of endogenous growth, of the openeconomy, and of real business cycles. The obituary notice says: Either they were static
Full list of author information is available at the end of the article
As the creativeeconomy has developed, the university has been given an important role of nurturing creative talents that companies desire to have. The most important objective in creative education is to provide a support system and a good environment for fostering creativity. This will help students in obtaining results and profits through experimenting as well as gaining experience in each step of the process in performing innovation by developing their ideas through utilizing self-directed information and knowledge. There are various creativeeconomy-related businesses being conducted in Korea, which have been supported by the government since 2008, the supporting environment has been constructed to utilize the internal and external systems of universities. However, there are a number of cases where supporting projects that are possible to utilize are overlapping each other or support for projects is not available, as these sorts of supporting systems are designed according to the purpose and drawing performances for each business. For this, creating a “student customized innovation model ” has been attempted by linking internal and external support for universities with a process of steps from design thinking to commercialization. The education model in universities should be established by balancing the roles and needs of enterprises, universities, and governments. An open innovation based system should be built for students who are being nurtured the university. The research method for this is as follows: First, the research aim was determined by considering the relationship between creativeeconomyand the concept of open innovation. Second, a new model was developed by analyzing and doing case investigation of university convergence education programs that nurtured creativity. Third, this proposed model (CHEESE program (CHEESE Program stands for Creativity Human Emotional
focus on workers in distressed firms and estimate the same RD regression on the simulated data as we do in the reduced form (RD) analysis. Second, to map the job mobility patterns estimated in the reduced-form (RD) analysis into our structural model we must account for the transition from an old to a new system. Indeed, our RD design which identifies the effects of the reform is populated by pre- and post-reform workers, the former anticipating that any future employment relationship will be subject to the post-reform rules. This constraint is explicitly taken into account in our model-simulation procedure. To further discipline the model, we also match macro moments such as the unemployment rate, the aggregate job finding rate, and the job destruction rate with data generated by our model. The model captures mobility responses to the reform as well as aggregate moments that are in line with those estimated in the reduced-form analysis. Moreover, the model allows us to shed light on changes in job creation (anddestruction) and the labor market equilibrium as structural responses to the reform. Comparing steady states, we find that the 2003 Austrian reform led to a moderate decrease in the equilibrium unemployment rate of 0.6 percentage points, mainly driven by higher job creation. The associated mild productivity increase (output per worker increases of 0.33 percent) is driven by workers moving to more productive jobs, shifting the stationary productivity distribution to the right.
y=1, when unemployment period is longer than one year, y=0 otherwise.
A list of potentially useful independent variables was developed consisting of 15 categories for the GS and 14 for the CS. All of these qualitative variables have been recoded into dummies. Thirteen of these categories appeared in both samples, including: socio-demographic characteristics of the unemployed (sex, age and marital status); family situation (dependent child); and quality of human capital (education, knowledge of foreign languages, work experience, numbers of professions and practised occupations, health). Information on an individual’s willingness to take any job, i.e. not necessarily in accordance with one’s formal profession, was also included in the model. Based on the unemployed worker’s history, a variable showing the moment of the first registration in PES has been constructed. Finally, two variables in both models explain type of living place of the unemployed.
creativedestruction, measures should be taken to smooth the effects of recessions.
Another stream of literature stands against the theory that recessions help reorganise the economyand states that economic downturns might even have an adverse effect on the allocation of labour and capital. For instance, much in the line of the labour productivity issue mentioned above, Barlevy (2002) points out that two effects might be happening at the same time. During a recession less efficient jobs are destroyed, but it might be the case that it complicates the creation of more efficient ones via a “sullying effect”. Companies post fewer vacancies and agents are afraid of being unemployed for a long time, so they stick to their low-productive job as much as they can. A matching model calibrated with data from the United States (US) indicates that the sullying effect has a larger magnitude than the cleansing effect, which would imply that the frictions created by recessions outweigh (in terms of productivity improvement) the benefits of destroying less productive matches, units or activities.
balance-sheet positions. Labour market frictions are modelled using the Mortensen-Pissarides- Diamond framework – which assumes that there are search frictions in the labour market and that unemployment is an equilibrium outcome. The new feature is the segmented labour market struc- ture. There are two separate labour markets in the model: one for the tradable sector, and one for the non-tradable sector. The labour market parameters are sector-specific. As a result, in one sector, the labour market may be tighter than in the other, and the wage contract may be less sticky than in the other. These features, from the unemployed workers’ perspective, make the labour market in that sector less frictional, because it is easier for them to find jobs. In addition, the frictions related to labour mobility are modelled in the following way: for workers willing to move across sectors, they first must be separated from jobs in one sector and become unemployed. The separation rate is exogenously given. Once unemployed, they have a chance to search for jobs in the other sector and the probability of finding a job depends on the labour market tightness in that sector.
3.2 Foreign Aid, Fiscal Transfers, and Municipal Spending
How can the positive effect of disasters on economic mobility be explained? Researchers often attribute the effect to the government’s proactive growth-stimulating post-disaster recovery and reconstruction programs. On the other hand, given the large scale of the resources channeled to affected regions from both domestic and external sources in the aftermath of major disasters, the most important question facing a country is where the aid money is going. Global experience (Keefer 2009) shows that at the time of major disasters, countries with weak institutions often see large relief funding mismanaged or captured by local elites, with the poor and the most vulnerable population left to fend for themselves, pushing many households into deeper poverty. In the case of the Philippines, to mitigate the continuing hazards caused by 1991’s Mt Pinatubo eruption, in 2012 the Japan Bank of international Cooperation provided a concessionary loan of Php 1.32 billion to the province of Pampanga, which is about 1% of the province’s GDP when combined with the government’s matching fund of Php 289 million (Jose 2012). Similarly, the government prioritized public spending on disaster risk reduction investment by integrating natural disaster risk into its overall development plan, strengthening risk management institutions, and investing in early warning systems, weather forecasting, and effective disaster response systems (World Bank 2014).
Holzer (1991) proposes an alternative measure of sectoral shifts, namely the sales growth rates, used to disentangle shifts between and within local markets. The econo- metric analysis shows that the former have a much greater impact than the latter.
A new wave of studies on the impact of structural change on regional unemployment is related to the transition from plan to market. Newell and Pastore (2006) provide similar evidence of the impact of the Lilien for voivodship unemployment in Poland. Krajnyàk and Sommer (2004) find similar evidence for the Czech Republic over the years 1998 –1999, when restructuring actually started. Based on Berg (1994), Barbone, Marchetti and Paternostro (1999) decompose the labour productivity growth of various two-digit sectors of industry, finding that structural determinants of the recovery out- weighed cyclical ones during Polish transition. Lehmann and Walsh (1999) suggest a possible explanation of why sectoral shifts are associated with higher unemployment, arguing that labour turnover is linked to the level of human capital: where human cap- ital is interchangeable, workers do not oppose restructuring, which takes place generat- ing unemployment, but also fast output recovery.
Flankiert werden diese Entwicklungen von Diskursen um die neue Bedeutung von Makern, Bastlern, Hackern und Do-It-Yourself Praktiken (Anderson, 2013; Hatch, 2013), Internet of Things (Kellmereit und Obodovski, 2013; Sprenger und Engelmann, 2015) und Industrie 4.0 sowie neues Unternehmertum und Startup-Kulturen (Florida und Mellander, 2014; Sternberg und Krauss, 2014). Dabei fällt auf, dass verstärkt Orte (Maker Spaces, Hacker Spaces, offene Werkstätten, Coworking Spaces etc.) und Individuen (Bastler, Tüftler, Unternehmer, Gründer, Kre- ative) hervorgehoben werden, die sich dieser Orte für ihre kreativen Praktiken bedienen. Organisierte Formen von kollektivem Handeln, wie beispielsweise in Unternehmen oder auch Vereine, scheinen dabei in den Hintergrund zu treten. Vor diesem Hintergrund verwenden wir den Begriff „OpenCreative Labs“ als Sammelbegriff für Organisa- tionen, die Arbeitsräume und technische Infrastrukturen temporär an Nutzer vergeben. Die Entstehung von OpenCreative Labs ist nur vor dem Hintergrund grundlegender sozio-ökonomischer Wandlungsprozesse zu verstehen:
demographics of creative occupations, specifically with regard to gender, class, and ethnicity (Conor et al 2015, Saha 2018)
These debates dovetail with a broader academic trend emphasizing the clarity to be gained by examining the economy generally, and often specifically the creativeeconomy, through an occupational and task-oriented lens (Feser, 2003; Markusen et al, 2007; Currid and Stolarick, 2010, Kemeny and Rigby, 2012). The resulting policy response sought to shift the definition towards the practices and activities within occupations, with specific occupations having high levels of activities and practices defined as ‘creative’ (Bakhshi et al (2012), DCMS 2018). This approach sees creative practice as 'a role within the creative process that brings cognitive skills to bear to bring about differentiation to yield either novel, or significantly enhanced products whose final form is not fully specified in advance' . This
job creation (Hypothesis H 2 ). Nonetheless, their studies were based on the early
administrative data available after the transition from plan to market. There are few other recent examples of a null or negative correlation.
Interestingly, Naticchioni, Rustichelli and Scialà (2006) expect that H 3 be verified in the Italian case: in fact, they assume that rigid labour markets may be behind the bad performance of Southern regions. However, using the ISFOL panel based on ISTAT Labour Force Survey data they find a positive correlation. The evidence they provide lines towards providing support for H 2 not only in terms of the unconditional gap, but also after controlling for compositional differences of the samples of low and high unemployment regions that might line towards expecting a higher degree of worker reallocation in high unemployment regions because of, say, the higher share of young workers employed in small-sized firms.
CESifo Working Paper No. 5974
Unemployment in a Just Economy
This paper is based on the ideas of political philosopher John Rawls who suggested that a just society is one which would be created behind a “veil of ignorance”, that is to say, without knowing where one would end up in the society’s distribution of talent and other attributes valued in the labor market. Today’s labor market does not meet this criterion inasmuch as risk averse people would not be willing to enter it at random, being too concerned about ending up among the excluded, i.e., those without full time jobs which today in the U.S. is still 10% of the labor force or some 15 million people (Bureau of Labor Statistics, 2014). This is substantial but it does not even include about 5 million additional people who have dropped out of the labor force altogether or the 2.3 million convicts in jail.
The Programme also contains a chapter on creative businesses growth and access to finance, where three key areas are seen by the government (the government also asks enterprises themselves to identify more if appropriate):
The national development agency for the arts is responsible for delivering objectives of the creativeeconomy programme. The support is targeted at projects combining artistic excellence with commercial potential. This should be done both via financial programmes providing venture capital to small creative enterprises mainly via public funding e.g. the Advantage Creative Fund 8 , venture capital schemes 9 ; and via education and training schemes to help small businesses develop business plans, trainings in marketing, financial planning and budgeting. The other way of education is to train future managers to help them maximising their financial return on commercial activities in order to have further revenues for their creative work.