Faculty

James Holmes

Professor of Economics
Office: 431 Fronczak Hall
Phone: (716) 645-2121
E-mail: ecoholme@buffalo.edu

Spring 2008: On Research Leave

Office Hours: By Appointment; call 658-2461

Education

  • Ph.D. University of Chicago
  • M.A. University of Chicago
  • B.A. Wabash College

Research Interests

Recent Papers and Downloadable Links:

In the paper, “Can Monetary Shocks Cause Nominal Wage Rigidity and Involuntary Unemployment?”, a general equilibrium type model economy is presented which has only monetary shocks, all spot markets are competitive and clear, agents are heterogeneous in that the welfare of the owners of a firm can be increased at the expense of that of their employees, and conditions are derived for the non-existence of the forward labor market for workers who are laid off or quit. Employees are initially hired at the competitive spot market clearing wage, but future wages may be indexed to output price (or not).  When these conditions hold, fully optimizing agents who hold completely rational expectations, may nevertheless optimally choose either nominal wage rigidity or stickiness  producing a Keynesian-type model with expansionary and contractionary phases and cyclical involuntary unemployment in the latter or full wage indexation resulting in a competitive equilibrium. Optimal wage indexation depends upon whether employees or firms have this power, their behavioral specifications (using general functional forms), and the stochastic monetary policy (for a general class of probability distributions).

 

In the paper, “Spurious Real Wage Cyclicality and Disequilibrium Theory”, the evidence that the real wage/employment relationship is not countercyclical is re-examined and  this conclusion is found to be specious, as it is based on inappropriately restricted parameter estimates. Disequilibrium theories that involve rigid wages and demand disturbances predict that the real wage/employment relationship should be labor demand/ supply constrained in contractions/expansions.  This implies that appropriate tests of the equilibrium versus disequilibrium hypothesis should involve parameter restrictions that test for (1) changing regimes between expansions and contractions, and 2) a negative relationship only in the latter. Recent disequilibrium theories, based upon rigorous micro-foundations, have strong implications for econometric tests including causality, choice of data, variable measurement, and dynamic structure.  Strong statistical support is found for the (new) disequilibrium hypothesis using new data.

 

In the paper, “The Minimum Wage, Teenage Employment and the Business Cycle”, the effect of increases in the federal minimum wage on monthly black and white teenage employment is examined based upon our new disequilibrium theory at the level of the firm that predicts changing regimes between the demand and supply of labor associated with the business cycle phase.  Both simple, exploratory data analysis and more sophisticated econometrics are consistent with past findings when the data is pooled, but finds large, significant, negative employment effects in contractions and positive or zero, insignificant effects in expansions.  These effects apparently offset each other in the pooled data.  This is consistent with a disequilibrium theory and suggests that minimum wage policy should depend upon the phase of the business cycle.

Milton Friedman's Minimum Wage Letter

Selected Publications

  • “A Stochastic Monopsony Theory of the Business Cycle.”, (with P.A. Hutton), Economic Inquiry, (2005). [Reader's Guide to Stochastic Monopsony, Mathcad files A, B, and C.]
  • “Savings Education: Learning the Value of Self-Control”,(with P.A.Hutton), Education Policy Analysis Archives, (2005), lead article.
  • "Keynesian Involuntary Unemployment and Sticky Nominal Wages," (with P.A. Hutton.) The Economic Journal (1996)
  • "A New Test of Money/Income Causality," (with P.A. Hutton) Journal of Money, Credit and Banking (1992)
  • "The Specification of the Transaction Demand for Money and the Tax Multiplier," (with D. J. Smyth) Journal of Political Economy (1972)
  • "A Functional-Form, Distribution-Free Alternative to Parametric Analysis of Granger Causal Models," (with P.A. Hutton) Advances in Econometrics (1988)
  • "Memory and Market Stability: The Case of the Cobweb," (with R. Manning) Economics Letters (1988)

Other Contributions and Distinctions

  • Board of Editors, Journal of Macroeconomics.
  • Recipient of Milton Pleasur Excellence in Teaching Award, 1996, 2003.
  • Who’s Who in America. (61th Edition, 2001, 60th Diamond Edition, 2005, and prior years). (They note that I discovered the “Holmes-Smyth Effect” and a new non-parametric test for causality in a non-experimental science.)
  • Who’s Who in American Education. (7th Edition, 2006,).
  • Who’s Who Among America’s (Best) Teachers (Who's Who Among America 's Teachers. (1998, 2000, 2001, 2003, 8th Edition, 2005, and 9th Edition, 2006).
  • Who’s Who in Social Sciences Higher Education. (2004-6).
  • 2000 Outstanding Intellectuals of the 21st Century – 1st Edition and 2nd Edition.
  • Leading Educators of the World. (2005).