Inflation and income inequality: a shopping-time aproach: (Forthcoming, Journal of Development Economics)

Our work is based on a simpliÖed heterogenous-agent shoppingtime economy in which economic agents present distinct productivities in the production of the consumption good, and di§erentiated access to transacting assets. The purpose of the model is to investigate whether, by focusing the analysis solely on endogenously determined shopping times, one can generate a positive correlation between ináation and income inequality. Our main result is to show that, provided the productivity of the interest-bearing asset in the transacting technology is high enough, it is true true that a positive link between ináation and income inequality is generated. Our next step is to show, through analysis of the steady-state equations, that our approach can be interpreted as a mirror image of the usual ináation-tax argument for income concentration. An example is o§ered to illustrate the mechanism.

Income inequality in a job-search model with heterogeneous time preferences

This paper explores the use of an intertemporal job-search model in the investigation of within-cohort and between-cohort income inequality, the latter being generated by the heterogeneity of time preferences among cohorts of homogenous workers and the former by the cross-sectional turnover in the job market. It also offers an alternative explanation for the empirically-documented negative correlation between time preference and labor income. Under some speciÖc distributions regarding wage offers and time preferences, we show how the within-cohort and between-cohort Gini coe¢ cients of income distribution can be calculated, and how they vary as a function of the parameters of the model.

Towards a measure of income inequality freed from the volatility caused by variations in the rate of unemployment

By mixing together inequalities based on cyclical variables, such as unemployment, and on structural variables, such as education, usual measurements of income inequality add objects of a di§erent economic nature. Since jobs are not acquired or lost as fast as education or skills, this aggreagation leads to a loss of relavant economic information. Here I propose a di§erent procedure for the calculation of inequality. The procedure uses economic theory to construct an inequality measure of a long-run character, the calculation of which can be performed, though, with just one set of cross-sectional observations. Technically, the procedure is based on the uniqueness of the invariant distribution of wage o§ers in a job-search model. Workers should be pre-grouped by the distribution of wage o§ers they see, and only between-group inequalities should be considered. This construction incorporates the fact that the average wages of all workers in the same group tend to be equalized by the continuous turnover in the job market.

A search-theoretic explanation for the negative correlation between labor income and impatience

Lawrance (1991) has shown, through the estimation of consumption Euler equations, that subjective rates of impatience (time preference) in the U.S. are three to Öve percentage points higher for households with lower average labor incomes than for those with higher labor income. From a theoretical perspective, the sign of this correlation in a job-search model seems at Örst to be undetermined, since more impatient workers tend to accept wage o§ers that less impatient workers would not, thereby remaining less time unemployed. The main result of this paper is showing that, regardless of the existence of e§ects of opposite sign, and independently of the particular speciÖcations of the givens of the model, less impatient workers always end up, in the long run, with a higher average income. The result is based on the (unique) invariant Markov distribution of wages associated with the dynamic optimization problem solved by the consumers. An example is provided to illustrate the method.

Inflation and income inequality: A link through the job-search process

In this paper I devise a new channel by means of which the (empirically documented) positive correlation between ináation and income inequality can be understood. Available empirical evidence reveals that ináation increases wage dispersion. For this reason, the higher the ináation rate, the higher turns out to be the beneÖt, for a worker, of making additional draws from the distribution of wages, before deciding whether to accept or reject a job o§er. Assuming that some workers have less access to information (wage o§ers) than others, I show that the Gini coe¢ cient of income distribution turns out to be an increasing function of the wage dispersion and, consequently, of the rate of ináation. Two examples are provided to illustrate the mechanism.

Estimating the term structure of volatility and fixed income derivative pricing

Estimating the parameters of the instantaneous spot interest rate process is of crucial importance for pricing fixed income derivative securities. This paper presents an estimation for the parameters of the Gaussian interest rate model for pricing fixed income derivatives based on the term structure of volatility. We estimate the term structure of volatility for US treasury rates for the period 1983 - 1995, based on a history of yield curves. We estimate both conditional and first differences term structures of volatility and subsequently estimate the implied parameters of the Gaussian model with non-linear least squares estimation. Results for bond options illustrate the effects of differing parameters in pricing.

Income inequality: the role of impatience in a job-search process

This paper investigates the income inequality generated by a jobsearch process when di§erent cohorts of homogeneous workers are allowed to have di§erent degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the time preference (Cysne (2004)), I show that the Lorenz curve and the between-cohort Gini coe¢ cient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage o§ers and the distribution of time preferences among cohorts provides some quantitative insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not Önd a job o§er each period.

Productive restructuring: effects on Brazilian regional development distribution

This paper aims to evaluate the dynamics of Brazilian regional development during the 1985-95 period. First, regional inequalities indexes were calculated for the whole country’s economy based on the per capita regional income (Williamson Inequality Index), in order to test the convergence or divergence. After this, the analysis aimed to verify the sector and regional dynamics in a more detailed exam, and for this purpose Dispersion Quotients and Dispersion Intensity Coefficients were calculated based on two variables, the Regional Gross Domestic Product and the Working Population. The results of the analysis confirm the existence of considerable regional disparities and it was verified that the sector and regional redistribution of the GDP indicate that, in a general way, no remarkable changes occurred in the regional productive structures in the period. It is also inferred that the economic policy at that period, in spite of resulting in a global regional convergence process of the per capita product, did not avoid the continuation of the concentration of greater economic dynamism in the most advanced regions, nor did it diminish in any considerable way the difference in the degree of development of the Northeast region.

Productivity of nations: a stochastic frontier approach to TFP decomposition

This Paper Tackles the Problem of Aggregate Tfp Measurement Using Stochastic Frontier Analysis (Sfa). Data From Penn World Table 6.1 are Used to Estimate a World Production Frontier For a Sample of 75 Countries Over a Long Period (1950-2000) Taking Advantage of the Model Offered By Battese and Coelli (1992). We Also Apply the Decomposition of Tfp Suggested By Bauer (1990) and Kumbhakar (2000) to a Smaller Sample of 36 Countries Over the Period 1970-2000 in Order to Evaluate the Effects of Changes in Efficiency (Technical and Allocative), Scale Effects and Technical Change. This Allows Us to Analyze the Role of Productivity and Its Components in Economic Growth of Developed and Developing Nations in Addition to the Importance of Factor Accumulation. Although not Much Explored in the Study of Economic Growth, Frontier Techniques Seem to Be of Particular Interest For That Purpose Since the Separation of Efficiency Effects and Technical Change Has a Direct Interpretation in Terms of the Catch-Up Debate. The Estimated Technical Efficiency Scores Reveal the Efficiency of Nations in the Production of Non Tradable Goods Since the Gdp Series Used is Ppp-Adjusted. We Also Provide a Second Set of Efficiency Scores Corrected in Order to Reveal Efficiency in the Production of Tradable Goods and Rank Them. When Compared to the Rankings of Productivity Indexes Offered By Non-Frontier Studies of Hall and Jones (1996) and Islam (1995) Our Ranking Shows a Somewhat More Intuitive Order of Countries. Rankings of the Technical Change and Scale Effects Components of Tfp Change are Also Very Intuitive. We Also Show That Productivity is Responsible For Virtually All the Differences of Performance Between Developed and Developing Countries in Terms of Rates of Growth of Income Per Worker. More Important, We Find That Changes in Allocative Efficiency Play a Crucial Role in Explaining Differences in the Productivity of Developed and Developing Nations, Even Larger Than the One Played By the Technology Gap

How does corruption hurt growth? Evidences about the effects of corruption on factors productivity and per capita income

Corruption is a phenomenon that plagues many countries and, mostly, walks hand in hand with inefficient institutional structures, which reduce the effectiveness of public and private investment. In countries with widespread corruption, for each monetary unit invested, a sizable share is wasted, implying less investment. Corruption can also be a burden on a nation’s wealth and economic growth, by driving away new investment and creating uncertainties regarding private and social rights. Thus, corruption can affect not only factors productivity, but also their accumulation, with detrimental consequences on a society’s social development. This article aims to analyze and measure the influence of corruption on a country’s wealth. It is implicitly admitted that the degree of institutional development has an adverse effect on the productivity of production factors, which implies in reduced per capita income. It is assumed that the level of wealth and economic growth depends on domestic savings, foster technological progress and a proper educational system. Corruption, within this framework, is not unlike an additional cost, which stifles the “effectiveness” of the investment. This article first discusses the key theories evaluating corruption’s economic consequences. Later, it analyzes the relation between institutional development, factor productivity and per capita income, based on the neoclassical approach to economic growth. Finally, it brings some empirical evidence regarding the effects of corruption on factor productivity, in a sample of 81 countries studied in 1998. The chief conclusion is that corruption negatively affects the wealth of a nation by reducing capital productivity, or its effectiveness.