On the welfare costs of business cycles in the 20th century

Lucas (1987) has shown a surprising result in business-cycle research, that the welfare cost of business cycles are relatively small. Using standard assumptions on preferences and a reasonable reduced form for consumption, we computed these welfare costs for the pre- and post-WWII era, using three alternative trend-cycle decomposition methods. The post-WWII period is very era this basic result is dramatically altered. For the Beveridge and Nelson decomposition, and reasonable preference parameter and discount values, we get a compensation of about 5% of consumption, which is by all means a sizable welfare cost (about US$ 1,000.00 a year).

The social context of entrepreneurship in Brazil and Spain in the late twentieth and early twenty-first centuries

Este trabalho teve o principal objetivo de contribuir para o entendimento do contexto social que circunda empreendedores inovadores brasileiros e espanhóis que emergem em seus próprios países de origem, procurando mapear e entender relações sociais relevantes estabelecidas durante o delicado período de emergência de seus empreendimentos no final do século XX e começo do XXI. Autores alinhados com o pensamento da sociologia econômica foram utilizados como referência para a determinação das perguntas de pesquisa, que provocaram a realização de um estudo comparativo entre empreendedores finalistas de um mesmo prêmio atribuído a empreendedores inovadores brasileiros e espanhóis. No total, 19 empreendedores oriundos de setores emparelhados em ambos os países foram entrevistados e documentos sobre eles e seus empreendimentos foram levantados, possibilitando verificar, entre outras coisas, a influência relativamente homogênea do contexto social de ambos os países no período de emergência de empreendimentos fundados por empreendedores advindos de classes sociais mais elevadas destas sociedades, com especial ênfase nas complicadas características do padrão de financiamento dos empreendimentos, no aumento consistente do apoio social e público ao empreendedorismo, no elevado envolvimento emocional que os empreendedores estabelecem com seus empreendimentos e no peculiar papel das relações de confiança construídos entre os empreendedores, seus sócios e funcionários

On the welfare costs of business-cycle fluctuations and economic-growth variation in the 20th century

Lucas (1987) has shown a surprising result in business-cycle research: the welfare cost of business cycles are very small. Our paper has several original contributions. First, in computing welfare costs, we propose a novel setup that separates the effects of uncertainty stemming from business-cycle fluctuations and economic-growth variation. Second, we extend the sample from which to compute the moments of consumption: the whole of the literature chose primarily to work with post-WWII data. For this period, actual consumption is already a result of counter-cyclical policies, and is potentially smoother than what it otherwise have been in their absence. So, we employ also pre-WWII data. Third, we take an econometric approach and compute explicitly the asymptotic standard deviation of welfare costs using the Delta Method. Estimates of welfare costs show major differences for the pre-WWII and the post-WWII era. They can reach up to 15 times for reasonable parameter values -β=0.985, and ∅=5. For example, in the pre-WWII period (1901-1941), welfare cost estimates are 0.31% of consumption if we consider only permanent shocks and 0.61% of consumption if we consider only transitory shocks. In comparison, the post-WWII era is much quieter: welfare costs of economic growth are 0.11% and welfare costs of business cycles are 0.037% - the latter being very close to the estimate in Lucas (0.040%). Estimates of marginal welfare costs are roughly twice the size of the total welfare costs. For the pre-WWII era, marginal welfare costs of economic-growth and business- cycle fluctuations are respectively 0.63% and 1.17% of per-capita consumption. The same figures for the post-WWII era are, respectively, 0.21% and 0.07% of per-capita consumption.

On the welfare costs of business-cycle fluctuations and economic-growth variation in the 20th century

Lucas(1987) has shown a surprising result in business-cycle research: the welfare cost of business cycles are very small. Our paper has several original contributions. First, in computing welfare costs, we propose a novel setup that separates the effects of uncertainty stemming from business-cycle uctuations and economic-growth variation. Second, we extend the sample from which to compute the moments of consumption: the whole of the literature chose primarily to work with post-WWII data. For this period, actual consumption is already a result of counter-cyclical policies, and is potentially smoother than what it otherwise have been in their absence. So, we employ also pre-WWII data. Third, we take an econometric approach and compute explicitly the asymptotic standard deviation of welfare costs using the Delta Method. Estimates of welfare costs show major diferences for the pre-WWII and the post-WWII era. They can reach up to 15 times for reasonable parameter values = 0:985, and = 5. For example, in the pre-WWII period (1901-1941), welfare cost estimates are 0.31% of consumption if we consider only permanent shocks and 0.61% of consumption if we consider only transitory shocks. In comparison, the post-WWII era is much quieter: welfare costs of economic growth are 0.11% and welfare costs of business cycles are 0.037% the latter being very close to the estimate in Lucas (0.040%). Estimates of marginal welfare costs are roughly twice the size of the total welfare costs. For the pre-WWII era, marginal welfare costs of economic-growth and business-cycle uctuations are respectively 0.63% and 1.17% of per-capita consumption. The same gures for the post-WWII era are, respectively, 0.21% and 0.07% of per-capita consumption.

On the welfare costs of business-cycle fluctuations and economic-growth variation in the 20th century and beyond

The main objective of this paper is to propose a novel setup that allows estimating separately the welfare costs of the uncertainty stemming from business-cycle uctuations and from economic-growth variation, when the two types of shocks associated with them (respectively,transitory and permanent shocks) hit consumption simultaneously. Separating these welfare costs requires dealing with degenerate bivariate distributions. Levis Continuity Theorem and the Disintegration Theorem allow us to adequately de ne the one-dimensional limiting marginal distributions. Under Normality, we show that the parameters of the original marginal distributions are not afected, providing the means for calculating separately the welfare costs of business-cycle uctuations and of economic-growth variation. Our empirical results show that, if we consider only transitory shocks, the welfare cost of business cycles is much smaller than previously thought. Indeed, we found it to be negative - -0:03% of per-capita consumption! On the other hand, we found that the welfare cost of economic-growth variation is relatively large. Our estimate for reasonable preference-parameter values shows that it is 0:71% of consumption US$ 208:98 per person, per year.