Public Sector Pay in Finland

This study analyses the forces determining public and private sector pay in Finland. The data used is a 7 per cent sample taken from the Finnish 2001 census. It contains information on 42 680 male workers, of which 8 759 are employed in public and 33 921 in the private sector. The study documents and describes data by education, occupation and industry. We estimate earnings equations for the whole sample as well as for four industries (construction, real estate, transportation and health) that provide an adequate mix of both public and sector workers. The results suggest that the private-public sector pay gap of about one per cent can be accounted for by differences in observable characteristics between the sectors (3.4 per cent) and lower returns from these characteristics (-2.3 per cent). However, the industry-level analysis indicates that the earnings gaps vary across industries, and are negative in some cases. These inter-industry differences in public-private gaps persist even when the usual controls are introduced. This suggests that public sector wage setters need greater local flexibility, which should result in less uniform wages within the public sector.

Okun’s law – A meta analysis

This paper seeks to identify whether there is a representative empirical Okun’s Law coefficient (OLC) and to measure its size. We carry out a meta regression analysis on a sample of 269 estimates of the OLC to uncover reasons for differences in empirical results and to estimate the ‘true’ OLC. On statistical (and other) grounds, we find it appropriate to investigate two separate subsamples, using respectively (some measure of) unemployment or output as dependent variable. Our results can be summarized as follows. First, there is evidence of type II publication bias in both sub-samples, but a type I bias is present only among the papers using some measure of unemployment as the dependent variable. Second, after correction for publication bias, authentic and statistically significant OLC effects are present in both sub-samples. Third, bias-corrected estimated true OLCs are significantly lower (in absolute value) with models using some measure of unemployment as the dependent variable. Using a bivariate MRA approach, the estimated true effects are -0.25 for the unemployment sub-sample and -0.61 for the output-sub sample; with a multivariate MRA methodology, the estimated true effects are -0.40 and -1.02 for the unemployment and the output-sub samples respectively.

An investigation of the determinants of household demand for bushmeat in the Serengeti using an open-ended choice experiment

Illegal hunting for bushmeat is regarded as an important cause of biodiversity decline in Africa. We use a stated preferences method to obtain information on determinants of demand for bushmeat in villages around the Serengeti National Park, Tanzania. We estimate the effects of changes in the own price of bushmeat and in the prices of two substitute protein sources – fish and chicken. Promoting the availability of protein substitutes at lower prices would be effective at reducing pressures on wildlife. Supply-side measures that raise the price of bushmeat would also be effective.

An Empirical Assessment of Optimal Monetary Policy Delegation in the Euro Area

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy maker preferences and shock volatilities. This reveals that there have been several changes in Euro area policy making, with a strengthening of the anti-inflation stance in the early years of the ERM, which was then lost around the time of German reunification and only recovered following the turnoil in the ERM in 1992. The ECB does not appear to have been as conservative as aggregate Euro-area policy was under Bundesbank leadership, and its response to the financial crisis has been muted. The estimates also suggest that the most appropriate description of policy is that of discretion, with no evidence of commitment in the Euro-area. As a result although both ‘good luck’ and ‘good policy’ played a role in the moderation of inflation and output volatility in the Euro-area, the welfare gains would have been substantially higher had policy makers been able to commit. We consider a range of delegation schemes as devices to improve upon the discretionary outcome, and conclude that price level targeting would have achieved welfare levels close to those attained under commitment, even after accounting for the existence of the Zero Lower Bound on nominal interest rates.

An Empirical Assessment of Optimal Monetary Policy Delegation in the Euro Area

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy maker preferences and shock volatilities. This reveals that there have been several changes in Euro area policy making, with a strengthening of the anti-inflation stance in the early years of the ERM, which was then lost around the time of German reunification and only recovered following the turnoil in the ERM in 1992. The ECB does not appear to have been as conservative as aggregate Euro-area policy was under Bundesbank leadership, and its response to the financial crisis has been muted. The estimates also suggest that the most appropriate description of policy is that of discretion, with no evidence of commitment in the Euro-area. As a result although both ‘good luck’ and ‘good policy’ played a role in the moderation of inflation and output volatility in the Euro-area, the welfare gains would have been substantially higher had policy makers been able to commit. We consider a range of delegation schemes as devices to improve upon the discretionary outcome, and conclude that price level targeting would have achieved welfare levels close to those attained under commitment, even after accounting for the existence of the Zero Lower Bound on nominal interest rates.