Policy Disciplining Effect of Capital Account Openness in India

In this paper, the policy disciplining effect of capital account openness in India is examined by examining the impact of capital account openness on inflation and fiscal deficit. Multivariate modeling, which includes other relevant variables identified in the literature, is used for the analysis. Our results show capital account openness has a strong disciplining effect on inflation whereas it has no significant effect on fiscal deficit. In the case of fiscal deficit, trade openness and number of government changes only are the significant determinants. The moves of the RBI tend to reaffirm the disciplinary effect of capital account openness. In the meantime, since the mid 1990s, RBI kept a strict vigil over inflation and inflation expectations in the context of a more open capital account. One major reason for the problem concerning inflation expectation by RBI is the threat of capital outflow in the face of loose monetary policy and high inflation.     

THE EFFECT OF NONCONTRIBUTORY PENSIONS ON SAVING IN MEXICO

This paper examines the effects of noncontributory pension programs at the federal and state levels on Mexican households' saving patterns using micro data from the Mexican Income and Expenditure Survey. We find that the federal program curtails saving among households whose oldest member is either 18–54 or 65–69 years old, possibly through anticipation effects, a decrease in the longevity risk faced by households, and a redistribution of income between households of different generations. Specifically, these households appear to be reallocating income away from saving into human capital investments, like education and health. Generally, state programs have neither significant effects on household saving, nor does the combination of federal and state programs. Finally, with a few exceptions, noncontributory pensions have no significant impact on the saving of households with members 70 years of age or older—individuals eligible for those pensions, plausibly because of their dissaving stage in the lifecycle. (JEL D14, J26, O12, H55)     

THE CREDIT‐CHANNEL TRANSMISSION MECHANISM AND THE NONLINEAR GROWTH AND WELFARE EFFECTS OF INFLATION AND TAXES

With the credit‐channel effect driven by the central bank's open market operations, this paper's model easily gives rise to the nonlinear inflation‐growth nexus, which is evidenced by a number of cross‐country empirical studies. The threshold level of the inflation rate is found to be lower when tax rates are higher. The presence of the credit‐channel effect also provides the rationale for setting positive (and smaller than 1) tax rates on consumption, labor income, and capital income. The optimal tax rates rise as the inflation target declines. Under a fiscal policy rule where labor and capital income taxes move proportionally to each other, the optimal capital income tax rate could be higher than the optimal labor income tax rate. Under a sufficiently large central bank balance sheet, the credit‐channel effect will be so weak that inflation and all kinds of taxes are growth and welfare repressing. This provides a rationale for central banks that have implemented quantitative easing policies to shrink their balance sheets. (JEL E58, E62, O42)     

Which pension?: women,risk and pension choice1

This paper investigates women's perceptions of choice and risk in the field of pensions. It extends on a paper published in a recent edition of this Journal in which Alan Aldridge applied Pierre Bourdieu's notions of cultural capital and habitus to the field of personal finance. Since the late 1980s the marketisation of pensions has resulted in an expansion of pension options. According to Anthony Giddens the expansion of choice is one of the positive aspects of living in a ‘risk society’. However, the expansion of pension choice has passed pension risks onto consumers. Using qualitative interviews this paper investigates the perceptions of 45 employed women aged 40–59 of the risks associated with choosing a pension. At the theoretical level the paper seeks to demonstrate the need to qualify notions of reflexive decision‐making put forward by Giddens by emphasising the role of habitual action in decision‐making, as put forward by Bourdieu. The paper shows that material circumstances, cultural capital, extent and quality of pension information and habitus affect perceptions of pension choice and pension risks. The paper concludes that the expansion of pension choice has been, in many ways, negative rather than positive and thus is likely to lead to increasing poverty among many women in later life.     

PENSION SURVIVORS INSURANCE FOR WIDOWS

Men frequently do not provide pension survivors insurance for their wives. To analyze why, a demand-supply model of survivors insurance is presented. Using the Survey of Private Pension Benefit Amounts, Tobit estimates are calculated for a sample of married male pensioners. Social security reduces the survivors insurance provided through private pensions, partially foiling governmental attempts to reduce poverty among widows. The decline in inflation and the Supreme Court's unisex pension decisions have increased the selection of pension survivors insurance so that an increase could not necessarily be attributed to the passage of the Retirement Equity Act.     

A RESPECIFIED TAX-ADJUSTED FISHER RELATION

How much will a 1% increase in expected inflation increase nominal interest rates? Irving Fisher's famous equation implies that nominal interest rates will rise in proportion to an increase in expected inflation. Darby and Feldstein, correcting the Fisher equation for taxation, predict a nominal interest rate increase of [1/(1 - T)]% where T is the marginal tax rate: i.e., if T =3, then a 1 % increase in expected inflation should cause a 1.4 % rise in interest rates. Empirical evidence, however, suggests that the rise in interest rates is much smaller than the Darby/Feldstein prediction. Estimates are around 9, varying mostly between 5 and 1.15, which is much closer to Fisher's original prediction. It is important to know the size of the interest rate response to inflation expectations in a world in which inflation and interest rates are volatile and in which tax laws are designed to influence savings and investment through interest rates. In this paper we attempt to close the gap between theorized and estimated effects of inflation by incorporating into the Fisher equation two important aspects of the U.S. tax code: historic cost depreciation and the lower tax rate on capital gains. Our model shows that the effect of expected inflation on interest rates is dampened by the lower benefits from depreciation deductions arid the capital gains tax. Our corrected Fisher equation predicts a 1.12 % nominal interest rate increase, rather than the 1.4 % increase implied by the Darby/Feldstein model. The, our model closes about 56 % of the gap between theory and empirical evidence. The remainder could be closed by additional refinements in the model or better empirical modeling.     

Individual Pension Plans in Spain: How Expected Change in Future Income and Liquidity Constraints Shape the Behavior of Households

Understanding the motives that underlie Spaniards’ retirement saving decisions is important because many, if not most, future retirees will need to rely on personal savings to maintain a decent standard of living. The governor of the Bank of Spain has stated recently that the current public pension system will not guarantee an adequate pension to the citizens, advising to save now for retirement. In this debate on public pensions, and the complementary role that private pensions might play in Spain, this article has shed light on the decision of Spanish households to engage in individual pension plans and it has identified which factors determine the total amount saved in such retirement plans. Using micro data from the Bank of Spain (Survey of Household Finances 2011), the analysis has revealed that the expectations of lower future income, along with preferences for the financial risk and education, exert an important influence on the likelihood of enrolling in a private pension plan. University education minimizes the myopic behavior of households in the sense of making them more forward-looking and cautious in the face of their future well-being. Additionally using Heckman’s methodology to correct for the problem of selection bias, our results have revealed that liquidity constraints affect negatively the total amount of money saved for retirement.     

The private sector and urban housing production process in Nigeria: A study of small-scale landlords in Abuja

The private production system continues to supply the majority of housing to the population of Third World cities. In Nigeria, statistics show that the bulk of urban housing units is supplied for rent by small-scale private landlords. This paper examines the process of housing production among this category of producers using, as a case study, the peripheral settlements of Abuja, Nigeria's new capital city. A predominance of small-size sole proprietorships is established among the small-scale house building firms, mostly for reasons of maintaining operational flexibility and cost saving. It is also found that the greatest attraction of investing in rental housing by small entrepreneurs is the hedge it provides against inflation and the stability and permanence it introduces into the capital base of economic pursuits. A strong influence of traditional chiefs in land supply is revealed, together with the emergence of a commercialised land market, resulting in speculation and contributing to rising land prices. It is shown that building materials are the most problematic of the key building components to the housing production process. It is argued that small building firms would make more profit if they had access to formal sector working capital and that the practice of using casual workers in project execution has the advantage of enabling firms to survive periods of job drought, but does not encourage growth of the firms, apprenticeship training and skills development in the house construction industry. It is concluded that what is needed to enhance the operation of this category of producers is for government to accept an enabling role that will seek to minimise the financial burden and risks to which they are currently exposed.     

A Model of Migrants' Remittances with Human Capital Investment and Intrafimilial Transfers1

This study analyzes data on migrants' remittances using a two‐period theory of intergenerational transfers based on an informal, intrafamilial loan arrangement using “weak altruism,” a behavior between “strong altruism” and pure self‐interest. The model provides an integrated theory of migrants' remittances, human capital investment decisions, and intrafamilial transfers applicable to low‐income countries with no official pension schemes and imperfect capital markets. Propositions, derived from the theory, are tested, re‐analyzing original survey data on remittances of Pacific island migrants in Sydney. When weak altruism and strong altruism yield opposite predictions, the econometric results tend to confirm the former hypothesis and invalidate the latter.     

Does Self-control Predict Wealth Creation Among Young Baby Boomers?

Why similar people have different patterns of wealth accumulation is puzzling. The behavioral life-cycle hypothesis indicates self-control is an important aspect of household saving behavior. This study investigated if household wealth creation from 1994 to 2008 could be predicted by self-control among a sample of young baby boomers using National Longitudinal Survey of Youth (NLSY79) data. Variables that significantly predicted 2008 net worth included homeownership, 1994 net worth, income, bankruptcy filing, inheritance, education level, race, marital status, children, retirement planning activities, locus of control, and self-mastery. The addition of self-control predictors to a regression model improved the model’s ability to predict net worth by 1.3 % above and beyond the human capital, financial status, and demographic predictor variables. In total, the model explained 60 % of the variance in net worth. Findings indicated that individuals who invested in their human capital, were homeowners, and had higher self-control, accumulated more wealth.     

2014年中国经济展望

从经济增速、通货膨胀、国际收支、就业看,中国经济2013年的形势是平稳的,这有利于经济结构调整、有利于经济增长方式转变。综合考虑我国未来的人口、技术、资本、制度、出口、城市化、工业化等种种因素,我国未来20年潜在的经济增速为6％;前10年为79／6,后10年为5％,较前33年有较大幅度的下降。2014年中国经济增长以稳为主,但增速可能低于2013年,甚至不排除季度增速低于7％,这是结构调整转型升级过程中必须经历的。经济适当减速,有利于化解经济危机,有利于中国经济的中长期发展。     

Discrimination and pension income among aging women.

Using data from the National Longitudinal Survey of Labor Market Experience, Mature Women's Cohort, this study examined the extent to which discrimination influenced pension receipt and levels of pension income among women aged 55-69 in 1992. It found that discrimination affected the level of pension income beyond that of demographic and human capital variables, when controlling for wage-related income, only among moderate-to-affluent near-elderly women. No relation was found between discrimination and receipt of pension income.     

The association between saving disposition and financial distress: A genetically informed approach

Saving disposition, the tendency to save rather than consume, has been found to be associated with economic outcomes. People lacking the disposition to save are more likely to experience financial distress. This association could be driven by other economic factors, behavioral traits, or even genetic effects. Using a sample of 3,920 American twins, we develop scales to measure saving disposition and financial distress. We find genetic influences on both traits, but also a large effect of the rearing family environment on saving disposition. We estimate that 44% of the covariance between the two traits is due to genetic effects. Saving disposition remains strongly associated with lower financial distress, even after controlling for family income, cognitive ability, and personality traits. The association persists within families and monozygotic twin pairs; the twin who saves more tends to be the twin who experiences less financial distress. This result suggest that there is a direct association between saving disposition and financial distress, although the direction of causation remains unclear.     

EXPECTED INFLATION AND INTEREST RATES

While there may have been a Darby-Feldstein effect in the 1960's (interest rates rising by more than expected inflation because of tax considerations), the relationship is so variable that it more likely reflects changing investor confidence in the expected returns to capital assets. In addition, the degree of capacity utilization appears to have a strong influence on short-term interest rates, and there is a statistically significant but quantitatively small liquidity effect from changes in the growth rate of money.     

Gender inequalities in pensions: different components similar levels of dispersion

While the average gender gap in pensions is quite well documented, gender differences in the distribution of pensions have rarely been explored. We show in this paper that pension dispersion is very similar for men and women within the French pension system of a given sector (public or private). Gender differences are less marked among retired civil servants than among former private sector employees. However, the determinants of these inequalities are not the same for men and women. Using a regression-based decomposition of the Gini coefficient, we find that pension dispersion is mostly due to dispersion of the reference wage for all retirees but gender differences exist. For women, in particular, pension dispersion is also due to the dispersion in contribution periods. We also decompose the Gini coefficient by source of pension to measure the impact of institutional rules (minimum pensions, survivor’s pension) on the extent of pension inequality. Unexpectedly, we find that the impact of minimum pensions is limited, although slightly larger for civil servants than for private-sector employees. Survivor’s pension schemes, on the other hand, contribute positively to pension dispersion among retired women.     

Pension prospects of minority ethnic groups: inequalities by gender and ethnicity

Minority ethnic groups have low income in later life from private pensions, partly due to shorter employment records in Britain since migration. Yet disadvantage and discrimination in the labour market, as well as differences in cultural norms concerning women's employment, may lead to persistence of ethnic variation in private pension acquisition. Little is known about the pension arrangements made by men and women in minority ethnic groups during the working life. This paper examines the extent of ethnic disadvantage in private pension scheme arrangements and analyses variation according to gender and specific ethnic group, using three years of the British Family Resources Survey, which provides information on over 97,000 adults aged 20-59, including over 5,700 from ethnic minorities. Both men and women in minority ethnic groups were less likely to have private pension coverage than their white counterparts but the extent of the difference was most marked for Pakistanis and Bangladeshis. Ethnicity interacted with gender, so that Blacks showed the least gender inequality in private pension arrangements, reflecting the relatively similar full-time employment rates of Black men and women. A minority ethnic disadvantage in private pension coverage, for both men and women, remained after taking account of age, marital and parental status, years of education, employment variables, class and income. The research suggests that minority ethnic groups - especially women - will be disproportionately dependent on means-tested benefits in later life, due to the combined effects of low private pension coverage and the policy of shifting pension provision towards the private sector.     

ASSET MANAGEMENT,ALLOCATION OF TIME,AND RETURNS TO SAVING*

The paper entertains the proposition that individuals' time performs a productive role in generating nonwage income through the management of nonhuman capital assets. The asset management hypothesis is used to develop a life cycle model of consumptive and productive decisions. The model allows for variations in gross rates of return both across persons at a point in time and for any one person over his life cycle. The behavioral implications developed show that differences across consumption units in their time allocations and in their borrowing, saving, and asset holding decisions may be the result of differences in opportunities rather than “tastes.”     

STOCHASTIC INFLATION AND THE OPTIMAL POLICY OF PRICE ADJUSTMENT

This paper analyzes the optimal policy of price adjustment for a monopolistic firm in the presence of stochastic inflation. It shows that an increase in the expected rate of inflation or in the cost of price adjustment leads to an increase in the initial real price and a decrease in the terminal real price in each period with a fixed nominal price. It also shows that the effects of increased riskiness of inflation are ambiguous.     

Pension Participation: Do Parents Transmit Time Preference?

A wide range of economic and health behaviors are influenced by individuals’ attitudes toward the future—including investments in human capital, health capital and financial capital. Intergenerational correlations in such behaviors suggest an important role the family may play in transmitting time preferences to children. This article presents a model of parental investment in future-oriented capital, where parents shape their children’s time preference rates. The research identifies a dual role for a parent’s time preference rate in the process of shaping the offspring’s attitude toward the future, and discusses paths through which parents may socialize children to be patient. The model’s implications are studied by investigating the parent–child correlation in pension participation using data from the Panel Study of Income Dynamics     

基本养老保险实现全国统筹的区域障碍及策略研究

目前我国基本养老保险统筹存在层次上的区域障碍,不同地区在经济水平、基本养老保险历史债务和现状等方面的巨大差距严重制约着基本养老保险统筹层次的提高,因此,适当降低地区间收入再分配的幅度,需要对在岗职工平均工资进行较长时期分步调节,以实现较小幅度的收入转移代价,这将有利于减小基本养老保险全国统筹实现的阻力。