Modern neoclassical business cycle theories posit that the observed fluctuations in consumption and employment correspond to decisions of an optimizing representative individual. We estimate three first-order conditions that represent three tradeoffs faced by such an optimizing individual. He can trade off present for future consumption, present for future leisure, and present consumption for present leisure. The aggregate U. S. data lend no support to this model. The overidentifying restrictions are rejected, and the estimated utility function is often convex. Even when it is concave, the estimates imply that either consumption or leisure is an inferior good.

This paper examines the relative importance of timing and persistence elements in explaining cyclical fluctuations in labour supply. Data from the natural experiment provided by World War II and cross-sectional data on American local labour markets, as well as aggregate time-series data are used in the empirical work. We find little evidence that timing effects play an important role in labour market dynamics. The evidence suggests that views emphasizing persistence are more accurate, and that previous employment tends to raise the probability of subsequent employment.

Although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation, our understanding of bequest motives remains incomplete. We develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries' actions. The model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers. We present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries.

Conditions of secular stagnation--low interest rates, below target inflation, and sluggish output growth--now characterize much of the global economy. We consider a simple two-country textbook model to examine how capital markets transmit secular stagnation and to study policy externalities across countries. We find capital flows transmit recessions in a world with low interest rates and that policies that attempt to boost national saving are beggar-thy-neighbor. Monetary expansion cannot eliminate a secular stagnation and may have beggar-thy-neighbor effects, while sufficiently large fiscal interventions can eliminate a secular stagnation and carry positive externalities.

The last decade has witnessed dramatic changes in economic policy in the developing world. On every continent, countries have moved to open their economies, free up prices, and reduce the role of the state in managing and regulating economic activity. Developing nations from Mexico to Malaysia have made changes in their economies that dwarf anything achieved by Ronald Reagan. The design of structural adjustment programs directed at the four ... ations-stabilization, liberalization, deregulation, privatization-has become a cottage industry. Efforts at structural adjustment have been assisted and encouraged by the international community, most directly through multilateral financial institutions. The International Monetary Fund has long conditioned its support on policies consistent with macroeconomic stability. The IMF has increasingly taken the position that changes in economic structure are necessary if stabilization is to be attained and maintained. Structural-adjustment lending (lending conditioned on specific economic policy changes) has emerged as a major instrument of World Bank support to developing countries, and World Bank investment lending has increasingly been conditioned on policy reforms. Given the extent of economic change that structural-adjustment programs have wrought, it is hardly surprising they have been controversial. This paper summarizes the results of the latest World Bank Review of Adjustment Lending (World Bank, 1992) and highlights the crucial identification problem involved in assessing structuraladjustment programs. We then try to advance the debate over structural-adjustment lending by distilling the main lines of criticism levied against structural-adjustment programs to four critiques and assessing the validity of each. In conclusion, we point to three newer issues for which we believe further research and analysis are necessary.