CEMFI

About: CEMFI is a based out in . It is known for research contribution in the topics: Unemployment & Estimator. The organization has 71 authors who have published 499 publications receiving 46553 citations. The organization is also known as: Center for Monetary and Financial Studies.

Income Uncertainty and Precautionary Saving: Evidence from Household Rotating Panel Data

Abstract: The aim of this paper is to analyse precautionary saving associated with income risk over the last two decades in Spain; some empirical evidence seems to point to the extension of temporary job contracts in those years as an important source of uncertainty for Spanish households. I use a rotating panel, the Spanish family expenditure survey, to model income dynamics and consumption growth. Following Banks, Blundell and Brugiavini (1999), I consider three components in the innovation to household income: idiosyncratic, (year-of-birth) cohort-specific and aggregate. I compute the conditional variance of these shocks, so as to include them as income risk terms in a consumption growth equation. I show how the rotating nature of my data (as compared to the repeated cross-sections available to Banks, Blundell and Brugiavini) can be exploited to identify the idiosyncratic component. The results provide evidence on the importance of precautionary motive for saving in response to income risk. Moreover, I find the cohort-specific (rather than aggregate) risk effect to be significant; this fact implies a failure of between-cohort insurance mechanisms.

The theory and estimation of individual and social welfare measures

Abstract: . The most widespread measure of individual welfare is consumer surplus (cs). If consumer surplus is to represent underlying preferences, very restrictive assumptions must be imposed and, worse, the resulting measures completely ignore distributional issues. Applied economists often argue that consumer surplus is a good approximation to the theoretically correct measures and the only feasible choice in practice. This is no longer true; recent advances in estimation techniques have made it possible to determine the approximate values of the correct measures quite satisfactorily. The theory and estimation of social welfare measures automatically involves ethical and distributional judgements. Often, these are difficult to incorporate in intuitive summary indicators that are easy to estimate. A range of money metric measures is presented that provide a more desirable, albeit still problematic alternative. Subject to severe data limitations, the theoretically correct welfare measures can be estimated for a wide range of modelling situations using parametric and nonparametric techniques.

Stranded Costs: An Overview

Abstract: The purpose of this article is to review the major results in the literature regarding stranded costs. Despite the starting differences in the areas of research included in the paper, they have one characteristic in common: all recognize that during the last decades, the treatment of stranded costs has been one of the most critical and controversial regulatory issue facing infrastructure industries, specially electric utilities, and regulatory agencies. To this end I attempt to describe the stranded-cost problem, its magnitude and the main arguments for and against recovery. I also seek to provide guidance about welfare implications and efficient recovery of stranded costs.

The China Syndrome: Local Labor Market Effects of Import Competition in the United States

Abstract: We analyze the effect of rising Chinese import competition between 1990 and 2007 on U.S. local labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization and instrumenting for U.S. imports using changes in Chinese imports by other high-income countries. Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import-competing manufacturing industries. In our main specification, import competition explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.

Optimally Solving Banks' Legacy Problems

Abstract: We characterize policy interventions directed to minimize the cost to the deposit guarantee scheme and the taxpayers of banks with legacy problems. Non-performing loans (NPLs) with low and risky returns create a debt overhang that induces bank owners to forego profitable lending opportunities. NPL disposal requirements can restore the incentives to undertake new lending but, as they force bank owners to absorb losses, can also make them prefer the bank being resolved. For severe legacy problems, combining NPL disposal requirements with positive transfers is optimal and involves no conflict between minimizing the cost to the authority and maximizing overall surplus.