High Discounts and High Unemployment

2017 ◽  
Vol 107 (2) ◽  
pp. 305-330 ◽  
Author(s):  
Robert E. Hall
Keyword(s):  
Labor Market ◽  
Stock Market ◽  
Discount Rate ◽  
Job Creation ◽  
Discount Rates ◽  
Present Value ◽  
High Unemployment ◽  
Business Income ◽  
New Hire

Unemployment is high when financial discounts are high. In recessions, the stock market falls and all types of investment fall, including employers' investment in job creation. The discount rate implicit in the stock market rises, and discounts for other claims on business income also rise. A higher discount implies a lower present value of the benefit of a new hire to an employer. According to the leading view of unemployment—the Diamond-Mortensen-Pissarides model—when the incentive for job creation falls, the labor market slackens and unemployment rises. Thus high discount rates imply high unemployment. (JEL E24, E32, E44, J23, J31, J63)

A note on the effect of the discount rate and length of the accounting period on the economic value of genetic improvement in cattle populations

1975 ◽  
Vol 21 (1) ◽  
pp. 77-80 ◽  
Author(s):  
E. P. Cunningham ◽  
Joan Ryan
Keyword(s):  
Gene Flow ◽  
Discount Rate ◽  
Economic Benefit ◽  
Genetic Improvement ◽  
Economic Value ◽  
Discount Rates ◽  
Present Value ◽  
Genetic Merit ◽  
Flow Method ◽  
Accounting Period

SUMMARYThe discounted gene flow method was used to study the effect of varying financial discount rates and accounting period on the present value of the genetic merit conferred by each insemination.Over the range from 8% to 16%, each 1% increase in the discount rate reduces the value of the dairy and beef consequences of an insemination by about 5% and 4% respectively, Virtually all of the economic benefit arising from an insemination is complete within 20 years, with about 90% of it being realized in the first 10 years and 98% in the first 15 years.

Unification of Discount Rates Used in External Debt Analysis for Low-Income Countries

Policy Papers ◽  
2013 ◽  
Vol 2013 (26) ◽  
Author(s):  
Keyword(s):  
Discount Rate ◽  
Low Income ◽  
External Debt ◽  
Low Income Countries ◽  
Discount Rates ◽  
Present Value ◽  
Debt Sustainability ◽  
Joint Product

This paper proposes reforms to the discount rates used by the Bank and the Fund to (a) calculate the present value (PV) of the external debt of low-income countries (LICs) in debt sustainability analyses (DSAs) and (b) to calculate the grant element of individual loans. Consistent with the conclusions of the March 2013 review of the Fund’s debt limits policy, the paper proposes a single uniform discount rate to be used for these related operational purposes. It has been prepared as a joint product of Bank and Fund staff, with the exception of the decision, which is Fund-specific.

Global Conclusion

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Decision Rule ◽  
Term Structure ◽  
Discount Rate ◽  
Net Present Value ◽  
Cash Flows ◽  
Future Generations ◽  
Discount Rates ◽  
Present Value ◽  
Basic Principles ◽  
Key Parameter

This concluding chapter summarizes the principles set forth in this volume. It argues that the discount rate is a key parameter in economics because it determines how our societies value their future. The chapter aims to use the discount rate in the net present value (NPV) decision rule: to find the discount rate which gives a positive NPV only for those projects that raise the sum of present and future generations’ felicity. In that light, this chapter briefly touches upon the basic principles of discounting, the discounting of safe real cash flows, the term structure of real discount rates, the evaluation of uncertain projects, and the adaptability of projects.

The Valuation Relevance of Reversing Deferred Tax Liabilities

2004 ◽  
Vol 79 (2) ◽  
pp. 437-451 ◽  
Author(s):  
David A. Guenther ◽  
Richard C. Sansing
Keyword(s):  
Discount Rate ◽  
Firm Value ◽  
Market Value ◽  
Present Value ◽  
Depreciation Rate ◽  
The Future ◽  
Deferred Tax Liabilities ◽  
Deferred Tax ◽  
Tax Depreciation ◽  
Depreciation Methods

This paper compares two attributes of a deferred tax liability (DTL) that arise from differences in book and tax depreciation methods. The first attribute is the effect of the DTL on the market value of the firm. The second is the length of time between when the asset is placed into service and when the DTL associated with that asset begins to reverse. The paper shows that a decrease in the time it takes for the DTL to begin to reverse is neither necessary nor sufficient for the value of the DTL to increase. It also shows that the value of the DTL is not equal to the present value of the future deferred tax expense. The effect of one dollar of DTL on firm value depends only on the tax depreciation rate and the discount rate.

scholarly journals Can Insider Power Affect Employment?

2003 ◽  
Vol 4 (2) ◽  
pp. 139-150 ◽  
Author(s):  
Pilar Díaz-Vázquez ◽  
Dennis J. Snower
Keyword(s):  
Labor Market ◽  
Stochastic Model ◽  
Present Value ◽  
Reservation Wages ◽  
Theoretical Literature ◽  
Newly Hired

Abstract Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional answer in the theoretical literature is that insider power has no influence on employment, provided that the newly hired employees (entrants) receive their reservation wages. The reason given is that an increase in insider wages gives rise to a countervailing fall in reservation wages, leaving the present value of wage costs unchanged. Our analysis contradicts this conventional answer. We show that, in the context of a stochastic model of the labor market, an increase in insider wages promotes firing in recessions, while leaving hiring in booms unchanged. Thereby insider power reduces average employment.

scholarly journals Another Look at the Macroeconomic Information Content of Aggregate Earnings: Evidence from the Labor Market

2020 ◽  
Author(s):  
Rebecca N. Hann ◽  
Congcong Li ◽  
Maria Ogneva
Keyword(s):  
Labor Market ◽  
Information Content ◽  
Job Creation ◽  
Job Destruction ◽  
Special Items ◽  
Macroeconomic Information ◽  
Earnings Components ◽  
Aggregate Earnings ◽  
Core Earnings ◽  
Near Term

We examine the macroeconomic information content of aggregate earnings from the labor market's perspective. We use insights from the labor economics literature to characterize the information contained in aggregate GAAP earnings and its components that is relevant for predicting aggregate job creation and destruction. Our results suggest that not only does aggregate earnings news convey information about future labor market aggregates, but its information content is incremental to other macroeconomic variables at near-term horizons. Further, the source of this information stems primarily from two earnings components: aggregate core earnings and special items. Shocks to core earnings signal persistent changes in economy-wide profitability that predict aggregate job creation up to four quarters ahead, while shocks to special items predict job destruction up to one quarter. Taken together, our results suggest that aggregate earnings contain useful information about future labor market conditions, with the nature of such information varying across earnings components.

UNEMPLOYMENT AS A SIGN OF INSTABILITY IN SOCIETY

2021 ◽  
pp. 5-10
Author(s):  
Р. Х. Азиева ◽  
Х. Э. Таймасханов
Keyword(s):  
Developing Countries ◽  
Labor Market ◽  
Political Stability ◽  
Developed Countries ◽  
Living Standards ◽  
Modern World ◽  
High Unemployment ◽  
Global Problem ◽  
The Past ◽  
The Impact

В современном мировом пространстве политика государств сопряжена с решением такой глобальной проблемы, как безработица. За последние три десятилетия безработица стала одной из наиболее значимых проблем не только в развивающихся, но и в развитых странах, так как безработица приводит к массовой нищете и угрожает социальной и политической стабильности. В статье представлены масштабы изменений в сфере занятости в условиях неопределенности и дана оценка влияния происходящих процессов на изменения структуры занятости. А также авторами представлены рекомендации по стабилизации рынка труда для недопущения высокого уровня безработицы и падения уровня жизни населения. In the modern world space, the policy of states is associated with the solution of such a global problem as unemployment. Over the past three decades, unemployment has become one of the most significant problems, not only in developing countries, but also in developed countries, as unemployment leads to mass poverty and threatens social and political stability. The article presents the scale of changes in the field of employment in conditions of uncertainty and assesses the impact of the processes on changes in the structure of employment. The authors also present recommendations for stabilizing the labor market to prevent high unemployment and falling living standards of the population.

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