---------------------------------------------------------------------------- NEP: New Economics Papers All new papers ---------------------------------------------------------------------------- Edited by: Marco Novarese http://ideas.repec.org/e/pno2.html Universita del Piemonte Orientale Date: 2005-04-09 Papers: 104 This document is in the public domain, feel free to circulate it. ++++++++++++++++++++++++++++++++++++++++++++++++++ + Note: Access to full contents may be restricted+ ++++++++++++++++++++++++++++++++++++++++++++++++++ 1. Recent Developments in Self-Employment in Canada Nadja Kamhi Danny Leung The authors document the recent evolution of the self-employment rate in Canada. Between 1987 and 1998, the self-employment rate rose 3.5 percentage points from 13.8 per cent to 17.3 per cent. In contrast, over the 1999 to 2002 period, the self-employment rate fell by 1.9 percentage points, returning the self-employment rate in 2002 to a level only 0.2 percentage points higher than in 1992. The authors explore the possible explanations for this reversal. They describe trends in self-employment by age, gender, and types of self-employment, and then decompose the changes in the self-employment rate into the fraction due to shifts in the industrial structure and the proportion due to changes within each industry. The authors also examine the role of the business cycle and other macroeconomic factors, such as tax rates. Keywords: Labour markets JEL: J23 J24 Date: 2005 URL: http://d.repec.org/n?u=RePEc:bca:bocawp:05-8&r=all 2. State Dependence in Fundamentals and Preferences Explains Risk-Aversion Puzzle Fousseni Chabi-Yo Rene Garcia Eric Renaul The authors examine the ability of economic models with regime shifts to rationalize and explain the risk-aversion and pricing- kernel puzzles put forward in Jackwerth (2000). They build an economy where investors' preferences or economic fundamentals are state-dependent, and simulate prices for a market index and European options on that index. Based on the original nonparametric methodology, the risk-aversion and pricing-kernel functions obtained across wealth states with these artificial data exhibit the same puzzles found with the actual data, but within each regime the puzzles disappear. This suggests that state dependence potentially explains the puzzles. Keywords: Financial markets; Market structure and pricing JEL: G12 G13 Date: 2005 URL: http://d.repec.org/n?u=RePEc:bca:bocawp:05-9&r=all 3. NOUVEAUX INSTRUMENTS DE PAIEMENT: UNE ANALYSE DU POINT DE VUE DE LA BANQUE CENTRALE Li-Chun Yuan Les evolutions technologiques apportent des solutions de paiement de detail innovantes (paiements par telephone mobile par exemple). Ce cahier d'etudes aborde le sujet de la qualification des nouveaux instruments de paiement. Il contient une analyse basee sur la definition des differentes formes de monnaie (dont la monnaie electronique) et des instruments de paiement, dans le cadre general des paiements et des systemes de paiement, ainsi que dans leur contexte reglementaire national et europeen. Parmi les nouvelles possibilites technologiques, les systemes de telephonie mobile offrent des atouts techniques et commerciaux pour le developpement de solutions de paiements mobiles d'ambition ubiquitaire. Comme pour certaines solutions electroniques de paiement de detail, les paiements mobiles sont l'occasion pour des entrepreneurs non lies au secteur bancaire de devenir des prestataires de paiement de masse. L'observation des caracteristiques et des modeles de solutions de paiement electroniques et mobiles permet d'identifier si cette participation tend a etre cooperative ou concurrentielle avec les banques. S'agissant des paiements, la garantie de securite est primordiale. L'utilisation de reseaux de telecommunication ouverts (la telephonie mobile, Internet, etc.) genere des craintes supplementaires liees a la fraude et a la securite. Une partie est consacree aux risques associes aux paiements electroniques et a leurs composantes de securite. Finalement sont abordees les differentes initiatives publiques et privees qui ont pour but de promouvoir la securite et l'efficience des paiements electroniques. Le Systeme europeen de banques centrales est assez entreprenant en la matiere. Date: 2003-11 URL: http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etude_10&r=all 4. THE NEW KEYNESIAN PHILLIPS CURVE: EMPIRICAL RESULTS FOR LUXEMBOURG Ieva Rubene Paolo Guarda The New Keynesian Phillips curve (NPC) differs from the conventional expectations-augmented Phillips curve in that it is forward-looking and links inflation to a measure of marginal cost instead of unemployment or the output gap. More fundamentally, the NPC is derived from New Keynesian models that combine nominal rigidities with individual optimising behaviour and model- consistent (rational) expectations. Because the NPC is grounded in micro-theory (unlike the conventional expectations-augmented Phillips curve), it is robust to some forms of the Lucas critique and may serve to analyse the impact structural changes such as increased price flexibility may have on inflation. New Keynesian Phillips curve estimates for Luxembourg using the Gali and Gertler (1999) hybrid form suggest that firms change prices often but tend to use backward-looking rules-of-thumb instead of resetting prices optimally using forward-looking expectations. In terms of policy implications, although the results suggest prices in Luxembourg are relatively flexible, the prevalence of backward- looking price setting implies greater inflation persistence and a higher sacrifice ratio attached to disinflationary monetary policy. From the perspective of individual firms, backward- looking price setting may be a rational response in a very small open economy because of its vulnerability to external shocks. Small size and openness plausibly imply higher costs of collecting information and lower benefits from optimal price setting. Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etude_11&r=all 5. INFLATION PERSISTENCE IN LUXEMBOURG A COMPARISON WITH EU15 COUNTRIES AT THE DISAGGREGATE LEVEL Patrick Lunnemann Thomas Y. Matha The aim of this paper is to analyse the degree of inflation persistence in Luxembourg using disaggregate price index data from the Harmonised Index of Consumer Prices. The degree of inflation persistence is then compared to estimates for the EU15 and for the euro area as well as for the individual member countries according to a unified approach. In order to assess the robustness of our estimates both a parametric and a non- parametric measure of inflation persistence is used. Overall, our results suggest a relatively low degree of inflation persistence in Luxembourg. For a large number of sub-indices we are not only able to reject the unit root hypothesis, but also we find a low degree of inflation persistence relative to other EU15 countries and relative to the EU15 and euro area aggregates. For Luxembourg as well as the other EU15 countries, our results suggest substantial heterogeneity in the degree of inflation persistence across sub-indices. We find some support for the presence of aggregation effects, both across indices and countries. Structural break tests for all EU15 countries suggest the presence of structural changes in the inflation process owing to the inception of the single monetary policy and/or to the modified treatment of sales. Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etude_12&r=all 6. LES DETERMINANTS DU SOLDE DE LA BALANCE DES TRANSACTIONS COURANTES AU LUXEMBOURG Abdelaziz Rouabah La balance des transactions courantes de la balance des paiements luxembourgeoise est confrontee a une forte modification de ses composantes: deficit persistant de la balance des biens, degradation du solde des revenus d’investissement, evolution inquietante des transferts courants,… Mais quelles en sont les causes? Sont-elles d’origine structurelle ou sont-elles d’une nature passagere? Sont-elles liees a une perte de competitivite ou sont-elles la consequence d’une croissance economique atone favorisant ainsi le desequilibre de la balance des operations courantes? C’est a cet ensemble de questions que nous allons essayer de repondre en adoptant deux types d’approches. La premiere consiste a utiliser des modeles de la balance commerciale ( biens et services) de type «Mundell-Fleming» afin d’estimer des elasticites critiques (condition de Marshall Lerner) ou de determiner l’existence d’une courbe en J. La seconde approche consiste a utiliser les modeles intertemporels de la balance courante dans lesquels les economies echangent un meme bien (ou deux biens echangeables: importation et exportation) afin de tester les comportements de lissage intertemporel de la consommation, de l’epargne et de l’investissement des agents. Length: 40 pages Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etude_13&r=all 7. REGLE DE TAYLOR: ESTIMATION ET INTERPRETATION POUR LA ZONE EURO ET POUR LE LUXEMBOURG Patrick Lunnemann Abdelaziz Rouabah Dans cette contribution, nous tentons de mener une analyse sur la compatibilite du comportement de l'Eurosysteme en matiere de conduite de la politique monetaire avec la regle dite de Taylor. Cette derniere a pour ambition d'etablir une ligne de conduite qui s'impose aux autorites monetaires afin qu'elles puissent assurer une stabilite des agregats macroeconomiques. Ainsi, la finalite de cette regle est la determination d'un taux d'interet a court terme, suppose compatible avec les objectifs de la stabilite des prix et du maintien de l'output a son niveau potentiel. L'ecart entre les taux calcules et les taux observes represente un indicateur de l'adequation de la politique monetaire aux donnees economiques fondamentales. Au premier niveau, une attention particuliere est accordee a la critique de la regle initiale de Taylor. Son application retrospective sur des donnees relatives a l'Eurosysteme se revele peu concluante. Des ajustements des ponderations et/ou l'introduction de nouvelles variables sont necessaires pour calquer sa trajectoire sur celle des taux observes. Au second niveau, l'usage de la regle de Taylor est etendue a l'evaluation des effets differencies de la politique monetaire. Le calibrage de la regle selon les parametres estimes pour la zone euro, sur de donnees observees au Luxembourg tend a confirmer cette hypothese. Date: 2003-10 URL: http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etude_9&r=all 8. Teacher Shocks and Student Learning: Evidence from Zambia Jishnu Das Stefan Dercon James Habyarimana Pramila Krishnan Following a tradition that relates household-level shocks to educational attainment, we examine the impact of teacher-level shocks on student learning. As a plausible measure for these shocks, we use teacher absenteeism during a 30-day recall period. A 5-percent increase in teacher absence rate reduced learning by 4 to 8 percent of average gains over the year, for both Mathematics and English. The estimated impacts are substantial and, in addition to the losses due to time away from class, likely reflect lower teaching quality when in class and less lesson-preparation when at home. Health problems-primarily their own illness and the illnesses of family members-account for more than 60 percent of teacher absenteeism. This suggests both that households are unable to substitute adequately for school-level teaching inputs and that, to support human capital formation, insurance at the school-level may be a policy priority that is worth exploring further. Date: 2004-07 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0514&r=all 9. A economia popular solidaria em Belo Horizonte: um estudo exploratorio Candido Guerra Ferreira (Cedeplar-UFMG) Jonas de Oliveira Bertucci (Cedeplar-UFMG) The aim of the present article is to initiate an explanatory study on the alternative experiences that are developed in Belo Horizonte within the Solidarity Economics context. First, the current crisis of capitalism and the recent changes on the structure of work are discussed, revealing how these conditions stimulate the sprouting of alternative experiences and elucidate the necessity of a new model of development and social inclusion. After that, support programs to this kind of enterprise ( developed by the agencies of the Municipal City hall of Belo Horizonte and local organizations) are presented. In the conclusion, proposals and suggestions of politics for empowering the solidarity economics are presented. Keywords: capitalism; solidarity economics; popular economics; Belo Horizonte JEL: O21 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:cdp:texdis:td255&r=all 10. Linking public investment to private investment. Diego Martinez Lopez (Centro de Estudios Andaluces y Universidad Pablo de Olavide) Literature describes a positive effect of public investment on private capital accumulation. This paper seeks to provide new empirical evidence on this latter relationship for the case of Spanish regions over period 1965-1997. We use a crowding-out theoretical framework and panel data methodology. The results show a positive effect of productive and social public investment especially in education) on private investment. The spillover effects generated by productive infrastructures located in other regions do not seem to encourage private investment in neighbouring regions. Public consumption and interest rate exert a negative influence on private capital accumulation. These results are robust to changes in the econometric specification. Keywords: Crowding-out, regional economics, investment, panel data. JEL: R53 H54 E62 C33 Date: 2005 URL: http://d.repec.org/n?u=RePEc:cea:doctra:e2001_04revision&r=all 11. Structural Breaks in Volatility: Evidence for the OECD Real Exchange Rates Amalia Morales Zumaquero (Universidad de Malaga) Simon Sosvilla Rivero (FEDEA y Universidad Complutense de Madrid) This paper analyses whether volatility changes in the bilateral and effective real exchange rates of the OECD industrial countries are associated with a specific nominal exchange rate regime. To that end, we examine the real exchange rate behaviour during the 1960-2003 period, therefore covering both the Bretton Woods system of fixed exchange rates and adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on the Hansen (1997)'s approximation to the p- values of the supreme, exponential and average statistics developed by Andrews (1993) and Andrews and Ploberger (1994). This methodology allows us to obtain a profile of p-values and to delimit periods of stability and instability in the variance of real exchange rates. Results suggest that there is evidence in favour of the non-neutrality of nominal exchange rate regime regarding real exchange rate volatility. Keywords: Exchange rate regimes, real exchange rate, volatility JEL: F31 F33 F41 Date: 2005 URL: http://d.repec.org/n?u=RePEc:cea:doctra:e2005_01&r=all 12. El Diferencial de Desempleo Andaluz: Analisis SVAR de la Curva de Beveridge Pablo Alvarez de Toledo Saavedra (Universidad de Sevilla) Fernando Nunez Hernandez (Universidad de Sevilla) Carlos Usabiaga Ibanez (Universidad Pablo de Olavide) En este trabajo aportamos una nueva evidencia sobre el problema del diferencial de desempleo andaluz. Para ello, planteamos un modelo SVAR con las variables desempleo, vacantes y poblacion activa, considerando tres tipos de perturbaciones: reasignacion, actividad agregada y poblacion activa. Dada la estructura teorica considerada, enfatizamos el estudio de los efectos dinamicos de las perturbaciones de reasignacion y de actividad agregada sobre el desempleo y las vacantes. El analisis se plantea para Andalucia y el resto de Espana (1978-2003). La principal conclusion es que el desempleo andaluz presenta un caracter estructural mas acentuado que el del resto de Espana, por lo que las politicas de demanda agregada podrian ser menos efectivas en el caso andaluz. Keywords: Diferencial de desempleo andaluz, curva de Beveridge, analisis SVAR, perturbaciones de reasignacion, perturbaciones de actividad agregada. JEL: J63 J64 Date: 2005 URL: http://d.repec.org/n?u=RePEc:cea:doctra:e2005_02&r=all 13. On the states' behavior with equalization grants Diego Martinez-Lopez (Centro de Estudios Andaluces y Univesidad Pablo de Olavide) This paper discusses how the state government's behavior is affected when the so-called Representative Tax System (RTS) equalization scheme is implemented. In particular, we study the changes in the marginal cost of the public funds (MCPF), and in the first order conditions for the optimal provision of a public input. A reduction in the MCPF is to be expected when lump-sum grants are replaced by RTS equalization transfers. However, this result has to be qualified under certain assumptions. Also we find that there does not exist an unambiguous relationship between the degree of fiscal equalization and the marginal cost of providing the public input and the tax setting. Production efficiency condition in the provision of public inputs holds with both types of vertical transfers. Keywords: Fiscal federalism, MCPF, vertical transfers. JEL: H71 H72 Date: 2005 URL: http://d.repec.org/n?u=RePEc:cea:doctra:e2005_03&r=all 14. Multicriteria Policy Making. Defining Efficient Policies in a General Equilibrium Model Francisco J. Andre (Univesidad Pablo de Olavide) Manuel Alejandro Cardenete (Univesidad Pablo de Olavide) We propose to model policy making as a multicriteria problem and solve it using suitable multicriteria techniques in connection with some structural economic model to represent optimal policy making and to get useful policy recommendations. By using a multiobjective approach combined with a Computable General Equilibrium model, we propose the concept of efficient policy and calculate the set of efficient policies for the Spanish economy in an empirical exercise. This approach allows us to quantify the trade-off between growth and inflation, to measure the efficiency of the actually applied fiscal policy and to get some plausible modifications that could foster policy efficiency in practice. Keywords: Public Policy, Multicriteria Decision Making, Efficient Frontier, Computable General Equilibrium Model. JEL: C61 C68 D78 Date: 2005 URL: http://d.repec.org/n?u=RePEc:cea:doctra:e2005_04&r=all 15. Analyse de la perception des Quebecois a l’egard de l’impot :
une relation paradoxale Matthieu Arseneau Luc Godbout Jean-Herman Guay This paper analyses a survey undertaken by the polling firm CROP between the 20th and the 31st of January 2005. The 21 questions presented in this study concern the Quebec population's perception of fiscal issues. Several issues are examined such as budgetary choices and fiscal administration as well as the size of the tax burden and it's distribution among the various tax brackets. As well as analysing the survey results, the authors contribute to the debate by presenting additional relevant information on these issues. Primarily, the results show a general consensus within the Quebec population on major issues. In fact, there is no major ideological division. Moreover, the authors detect a degree of ambiguity in that those polled want a reduction of the Quebec tax burden and, at the same time, wish to see eventual surpluses serve to increase spending on social services. The results show that, the Quebec population is most favourably inclined towards taxes when the allocation of resources thus raised is clearly defined. In this regard, the Quebec population would even favour, in certain cases, an increase in the consumption tax (TVA) if the proceeds were to finance policies they prioritize. Finally, even though an important proportion of the population pay little or no income tax, those polled believe that, on the whole, low and middle incomes individuals are taxed too heavily and that high income individuals are not sufficiently taxed.

Cette etude presente l’analyse des resultats d’un sondage realise par la firme CROP du 20 au 31 janvier 2005. Les 21 questions presentees dans ce document portent sur la perception des Quebecois a l’egard de l’imposition. Principalement, ce sondage aborde les themes tels que les choix budgetaires, la facon d’administrer les impots et la question du fardeau fiscal et de sa repartition. Outre l’analyse des resultats du sondage proprement dite, les auteurs enrichissent le debat par la presentation d’informations reliees aux differents themes abordes. A la lumiere des resultats du sondage, les auteurs observent dans un premier temps que les Quebecois s’entendent generalement sur les grands enjeux. En effet, rares sont les questions sur lesquelles la population est clairement divisee. De plus, les auteurs ont decele une equivoque chez les repondants puisque ces derniers veulent a la fois voir le fardeau fiscal au Quebec etre reduit tout en orientant les eventuels surplus vers une augmentation des programmes sociaux. En effet, ils constatent que les impots sont beaucoup mieux percus quand le but est clairement specifie. A cet egard, les Quebecois seraient meme, dans certains cas, favorables a l’augmentation de la TVQ si les recettes generees par cette hausse etaient allouees a leur priorite. Finalement, meme si un grand nombre de contribuables ne paient pas ou tres peu d’impot sur le revenu, les repondants considerent dans l’ensemble que les individus a faibles et moyens revenus en paient trop alors que les individus ayant de hauts revenus n’en paient pas assez. Keywords: survey, Quebec, tax policy, tax burden, sondage, Quebec, politique fiscale, fardeau fiscal JEL: H2 H5 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-16&r=all 16. La progressivite de l’imposition du revenu : une comparaison Quebec-Ontario Luc Godbout Suzie St-Cerny This study compares the progressivity of the income tax of Quebec and Ontario. After observing the predominance of income taxation in Quebec and Ontario, by way of international and interprovincial comparisons and illustrating the presence of progressivity in both provinces, progressivity indicators are described. Using these indicators, we measured the progressivity of the Quebec and Ontario tax systems for four different family situations and six levels of income. The results show that in certain situations, Quebec’s tax system is more progressive while in others, the reverse is true. More specifically, Quebec’s tax system is more progressive for changes in income at the lower end of the income scale while in general Ontario’s system is more progressive for higher incomes. These results confirm the greater concentration of Ontario’s income tax on high-income taxpayers that we have previously illustrated in the study.

L’etude compare la progressivite des impots sur le revenu du Quebec et de l’Ontario. Apres avoir constate l’importance de l’imposition du revenu au Quebec et en Ontario, par des comparaisons internationales et interprovinciales, et avoir illustre la presence de progressivite dans les deux cas, nous presentons des indicateurs de progressivite. A l’aide de ces indicateurs, nous avons mesure la progressivite des regimes d’imposition quebecois et ontarien pour quatre situations familiales differentes et pour six niveaux de revenus. Les resultats montrent que, dans certaines situations, la progressivite est plus grande au Quebec alors que, dans d’autres cas, la progressivite est superieure en Ontario. Plus precisement, la progressivite est plus grande au Quebec pour les variations de revenus au bas de l’echelle des revenus tandis qu’elle est en general plus elevee en Ontario pour les revenus superieurs. Ces resultats confirment la plus grande concentration de l’impot ontarien sur le revenu aupres des contribuables a revenu eleve que nous avions precedemment illustree dans l’etude. Keywords: Quebec, Ontario, progressivity, income tax, tax policy, indicator, Quebec, Ontario, progressivite, impot sur le revenu, politique fiscale, indicateur Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-17&r=all 17. The Progressivity of Income Taxation:
A Comparison between Quebec and Ontario / La progressivite de l’imposition du revenu :
une comparaison Quebec-Ontario Luc Godbout Suzie St-Cerny This study compares the progressivity of the income tax of Quebec and Ontario. After observing the predominance of income taxation in Quebec and Ontario, by way of international and interprovincial comparisons and illustrating the presence of progressivity in both provinces, progressivity indicators are described. Using these indicators, we measured the progressivity of the Quebec and Ontario tax systems for four different family situations and six levels of income. The results show that in certain situations, Quebec’s tax system is more progressive while in others, the reverse is true. More specifically, Quebec’s tax system is more progressive for changes in income at the lower end of the income scale while in general Ontario’s system is more progressive for higher incomes. These results confirm the greater concentration of Ontario’s income tax on high-income taxpayers that we have previously illustrated in the study.

L’etude compare la progressivite des impots sur le revenu du Quebec et de l’Ontario. Apres avoir constate l’importance de l’imposition du revenu au Quebec et en Ontario, par des comparaisons internationales et interprovinciales, et avoir illustre la presence de progressivite dans les deux cas, nous presentons des indicateurs de progressivite. A l’aide de ces indicateurs, nous avons mesure la progressivite des regimes d’imposition quebecois et ontarien pour quatre situations familiales differentes et pour six niveaux de revenus. Les resultats montrent que, dans certaines situations, la progressivite est plus grande au Quebec alors que, dans d’autres cas, la progressivite est superieure en Ontario. Plus precisement, la progressivite est plus grande au Quebec pour les variations de revenus au bas de l’echelle des revenus tandis qu’elle est en general plus elevee en Ontario pour les revenus superieurs. Ces resultats confirment la plus grande concentration de l’impot ontarien sur le revenu aupres des contribuables a revenu eleve que nous avions precedemment illustree dans l’etude Keywords: Quebec, Ontario, progressivity, income tax, tax policy, indicator, Quebec, Ontario, progressivite, impot sur le revenu, politique fiscale, indicateur JEL: H24 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-18&r=all 18. Le programme SBIC : analyse et enseignements Cecile Carpentier Jean-Marc Suret We analyse the American Small Business Investment Companies ( SBIC) program designed to help small and medium sized businesses find venture capital. SBICs are private entities that may be financed by the Small Business Administration under favourable conditions. The success of this program should inspire public policy makers in other countries. Indeed, SBICs have financed numerous traditional and high tech SMEs at a low or zero cost for the government. The rules of government intervention are very similar to those of private financing. The program rests on strong governance, clear rules and stakeholder accountability. The SBA is powerful and the SBICs are stringently governed. The private status of SBICs, their sizeable initial funding, the third party certifying the quality of the project and officers with proven management capacity may explain the success of the program.

Nous analysons le programme americain des Small Business Investment Companies (SBIC), destine a aider les PME a trouver du capital de risque. Les SBICs sont des entites entierement privees ayant la possibilite de se refinancer dans des conditions favorables aupres de la Small Business Administration (SBA). Ce programme peut etre considere comme un succes et devrait inspirer les decideurs d’autres pays. Les SBICs ont en effet permis des financements nombreux de petites et moyennes entreprises traditionnelles et de haute technologie, a un cout faible ou nul pour le Gouvernement. L’intervention se fait suivant des regles qui sont proches de celles qui prevalent sur le marche prive. Le programme repose sur un systeme de gouvernance solide, des regles claires et la responsabilisation des acteurs. Le pouvoir de la SBA est important, et la regie interne des SBICs est forte. Le caractere largement prive des SBICs associe a une capitalisation initiale relativement importante, a la presence d’une tierce partie certifiant la qualite du projet, et a la qualite de gestion des dirigeants contribuent egalement au succes de ce programme. Keywords: public policy, small business, financing, SBIC, governance, : politique publique, petites entreprises, financement, SBIC, gouvernance Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-15&r=all 19. Que reste-t-il du rapport de la Commission sur le desequilibre fiscal? Matthieu Arseneau Luc Godbout Jean-Herman Guay This paper analyses two questions of a survey undertaken by the polling firm CROP between the 20th and 31st of January 2005. The questions presented in this paper on polling concern Quebec’s perception of fiscal imbalance. “Fiscal imbalance” is the idea that the federal government disposes of too much revenues considering it responsibilities while the situation is the opposite with regard to provincial governments. The first question seeks to determine the adhesion of Quebec’s population to this idea and the second is about the idea of transferring fiscal spaces to the provincial governments. The authors also present the answers to these questions by linguistic affiliation and political allegiance of those polled. Among others things, the authors observe that in spite of billions of dollars having been transferred to provincial governments through the 2004 health agreement, the idea of fiscal imbalance has gained ground among Quebec’s population since the period of the Fiscal Imbalance Commission activities (2002). Moreover, a high proportion of the population subscribes to the principal recommendation of the Commission which was the transfer of fiscal “spaces” to the provincial governments.

Cette etude presente l’analyse des resultats de deux questions d’un sondage portant sur les finances publiques realise par la firme CROP du 20 au 31 janvier 2005. Celles-ci portent sur le desequilibre fiscal, c’est-a-dire l’idee que le gouvernement federal au Canada percoit trop de revenus par rapport a ses responsabilites alors que ce serait l’inverse pour les gouvernements provinciaux. La premiere question vise a determiner dans quelle proportion les repondants adherent a cette idee. La seconde entend determiner dans quelle mesure les repondants sont enclins a un transfert de points d’impot en vue de remedier a ce probleme. En plus d’analyser les resultats globaux des reponses a ces questions, les auteurs accordent aussi une attention aux resultats en fonction de la langue et l’allegeance politique des repondants. Entre autres, les auteurs affirment que malgre les milliards provenant de la recente entente sur la sante, l’appui a l’idee d’un desequilibre fiscal est desormais plus fort qu’il l’etait au moment ou la Commission sur le desequilibre fiscal siegeait. De plus, ils constatent qu’une forte proportion des repondants soutient la principale recommandation de son rapport qui consiste au transfert de points d’impot. Keywords: fiscal federalism, fiscal imbalance, survey, Quebec, federalisme fiscal, desequilibre fiscal, sondage, Quebec JEL: H77 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-19&r=all 20. Le regime enregistre d’epargne-actions :
la fin du moratoire Luc Godbout Robert Laplante Marc-Andre Lapointe Suzie St-Cerny As part of the 2003-2004 budget, the finance minister announced the imposition of a moratorium on certain fiscal policies related to the REA. In the advent of the termination of the moratorium in the next budget (2005-2006), the goal of this study is to find certain alternatives which could be applied to the REA. The first part will briefly expose all the phases that the REA went trough since its inception, as well as its utilization rate. In the second part, some propositions are explored on possible modifications of its application in relation to the financial support of small businesses that go public and the implication to the tax payers who acquire their shares. Those modifications aim at increasing the attractiveness of the program while maintaining a neutral cost for the government.

Dans son budget 2003-2004, le ministre des Finances du Quebec a annonce sa decision d’appliquer un moratoire a certaines mesures fiscales pour en revoir la pertinence. Ce moratoire touche notamment les nouvelles emissions effectuees dans le cadre du regime d’epargne- actions. Dans l’eventualite ou le ministre annoncerait la fin du moratoire lors de la presentation du budget 2005-2006, cette etude a pour but d’enoncer quelques pistes a explorer quant a des modifications possibles du REA. La premiere partie presente succinctement les diverses phases que ce regime a traversees depuis sa creation ainsi que son taux d’utilisation. Dans la seconde partie, des propositions de modification a son fonctionnement actuel sont proposees sous l’angle de l’aide accordee aux PME procedant a une emission publique d’actions et aux contribuables-investisseurs les achetant. Ces modifications visent a accroitre l’attraction du REA tout en etant relativement neutres en terme de cout pour le gouvernement. Keywords: Stock Saving Plan (SSP), tax incentive, Quebec, capitalization, Regime d’epargne-actions (REA), mesure fiscale, Quebec, capitalisation Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-20&r=all 21. Anti-Limit Pricing Byoung Heon Jun In-Uck Park Date: 2005-03-28 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000041&r=all 22. Overcoming the Coordination Problem: Dynamic Formation of Networks Jack Ochs In-Uck Park Date: 2005-03-28 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000046&r=all 23. Culture in Organizations: Inertia and Uniformity Juan D. Carrillo Denis Gromb Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000053&r=all 24. Promises, Promises, ... Juan D. Carrillo Mathias Dewatripont Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000058&r=all 25. Biases in Perceptions, Beliefs and Behavior Isabelle Brocas Juan D. Carrillo Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000063&r=all 26. A Theory of Influence: The Strategic Value of Public Ignorance Isabelle Brocas Juan D. Carrillo Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000068&r=all 27. The Brain as a Hierarchical Organization Isabelle Brocas Juan D. Carrillo Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000073&r=all 28. Rational Trader Frenzies Helios Herrera Lones Smith Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000078&r=all 29. Sorting in Risk-Aversion and Asset Price Volatility Helios Herrera Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000083&r=all 30. Public Education and Capital Accumulation Michele Boldrin Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000090&r=all 31. A,B,C's (and D's)'s for Understanding VARS Jesus Fernandez-Villaverde Juan F. Rubio-Ramirez Thomas J. Sargent Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:cla:levrem:172782000000000096&r=all 32. Contracts, Liability Restrictions and Costly Verification Francesco Squintani Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:cla:najeco:172782000000000102&r=all 33. Regular Quantal Response Equilibrium Goeree, Jacob Holt, Charles Palfrey, Thomas The structural Quantal Response Equilibrium (QRE) generalizes the Nash equilibrium by augmenting payoffs with random elements that are not removed in some limit. This approach has been widely used both as a theoretical framework to study comparative statics of games and as an econometric framework to analyze experimental and field data. The framework of structural QRE is flexible: it can be applied to arbitrary finite games and incorporate very general error structures. Restrictions on the error structure are needed, however, to place testable restrictions on the data ( Haile et al., 2004). This paper proposes a reduced-form approach, based on quantal response functions that replace the best- response functions underlying the Nash equilibrium. We define a {\em regular} QRE as a fixed point of quantal response functions that satisfies four axioms: continuity, interiority, responsiveness, and monotonicity. We show that these conditions are not vacuous and demonstrate with an example that they imply economically sensible restrictions on data consistent with laboratory observations. The reduced-form approach allows for a richer set of regular quantal response functions, which has proven useful for estimation purposes. Keywords: Quantal response equilibrium, discrete choice models, reduced-form approach Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:clt:sswopa:1219&r=all 34. INFLATION, PRICES, AND INFORMATION IN COMPETITIVE SEARCH Miquel Faig Belen Jerez Inflation, as a tax on money, induces buyers to reduce their money balances. Sellers are aware of this, so to attract costumers, they post price offers that reduce the need for buyers to carry precautionary money balances. We study this effect of inflation in a competitive search environment where buyers experience preference shocks after they are matched with a seller. With full information, equilibrium price offers consist of a flat fee which is independent of the quantities purchased. With private information of buyers' preferences, equilibrium price offers are restricted by incentive compatibility constraints. As a result, the price schedule that maps quantities purchased onto payments must be increasing. As inflation rises, these price schedules become relatively flat, so the marginal cost of purchasing goods is low. Consequently, buyers that are not liquidity constrained (with a low desire to consume) purchase inefficiently large quantities. Meanwhile, buyers with a high desire to consume typically purchase inefficiently low quantities because, as their money balances fall, they become liquidity constrained. This is in contrast with the full information benchmark where inflation reduces the quantities purchased by all buyers. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we051708&r=all 35. Robust estimation of dimension reduction space Cizek,Pavel Haerdle,Wolfgang (Tilburg University, Center for Economic Research) Most dimension reduction methods based on nonparametric smoothing are highly sensitive to outliers and to data coming from heavy-tailed distributions. We show that the recently proposed methods by Xia et al. (2002) can be made robust in such a way that preserves all advantages of the original approach. Their extension based on the local one-step M-estimators is sufficiently robust to outliers and data from heavy tailed distributions, it is relatively easy to implement, and surprisingly, it performs as well as the original methods when applied to normally distributed data. JEL: C14 C20 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200531&r=all 36. Uniqueness conditions for the infinite-planning horizon open- loop linear quadratic differential game Engwerda,Jacob (Tilburg University, Center for Economic Research) In this note we consider the open-loop Nash linear quadratic differential game with an infinite planning horizon. The performance function is assumed to be indefinite and the underlying system affine. We derive both necessary and sufficient conditions under which this game has a unique Nash equilibrium. JEL: C61 C72 C73 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200532&r=all 37. A numerical algorithm to find soft-constrained Nash equilibria in scalar LQ-games Engwerda,Jacob (Tilburg University, Center for Economic Research) In this paper we provide a numerical algorithm to calculate all soft-constrained Nash equilibria in a regular scalar indefinite linear-quadratic game. The algorithm is based on the calculation of the eigenstructure of a certain matrix. The analysis follows the lines of the approach taken by Engwerda in [7] to calculate the solutions of a set of scalar coupled feedback Nash algebraic Riccati equations. JEL: C63 C72 C73 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200533&r=all 38. The open-loop linear quadratic differential game revisited Engwerda,Jacob (Tilburg University, Center for Economic Research) In this note we reconsider the indefinite open-loop Nash linear quadratic differential game with an infinite planning horizon. In particular we derive both necessary and sufficient conditions under which the game will have a unique equilibrium. JEL: C61 C72 C73 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200534&r=all 39. On the sensitivity matrix of the Nash bargaining solution Engwerda,Jacob Douven,Rudy C. (Tilburg University, Center for Economic Research) In this note we derive the sensitivity matrix of the Nash bargaining solution w.r.t. the disagreement point d. This first order derivative is completely specified in terms of the Pareto frontier function. We show that whenever one player increases his threatpoint always at least one player will loose utility: i.e. the dual result of Pareto optimality. Furthermore,the dmonotonicity property is easily re-established from this matrix. This matrix also enables us to consider the concept of local strong d-monotonicity. That is,under which conditions on the Pareto frontier function . an infinitesimal increase of di,while for each j = i, dj remains constant,it happens that agent i is the only one who s payoff increases. We show that for the Nash bargaining solution this question is closely related to non- negativity of the Hamiltonian matrix of . at the solution. JEL: C61 C72 C73 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200535&r=all 40. Uncertainty in a fisherey management game Engwerda,Jacob (Tilburg University, Center for Economic Research) In this paper we analyze the consequences of taking noise into account in a simple twoperson fishery management game. Both a stochastic and deterministic formulation are considered. Compared to the noise-free model it is shown that the used stochastic frameworkhas no implications for the equilibrium actions, whereas in the deterministic formulation as well the number of as the equilibrium actions themselves depend on the model parameters. The various equilibrium actions predicted using the deterministic frameworkseem to be quite plausible. JEL: C61 C72 C73 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200536&r=all 41. Matrices and graphs Haemers,Willem H. (Tilburg University, Center for Economic Research) The present article is designed to be a contribution to the chapter `Combinatorial Matrix Theory and Graphs' of the Handbook of Linear Algebra, to be published by CRC Press. The format of the handbook is to give just de?nitions, theorems, and examples; no proofs. In the five sections given below, we present the most important notions and facts about matrices related to (undirected) graphs. 1. Graphs. 2. The adjacency matrix and its eigenvalues. 3. Other matrix representations. 4. Graph parameters. 5. Association schemes. JEL: C0 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200537&r=all 42. Learning and governance in inter-firm relations Nooteboom,Bart (Tilburg University, Center for Economic Research) This article connects theory of learning with theory of governance, in the context of inter-firm relations. It recognizes fundamental criticism of transaction cost economics (TCE), but preserves elements from that theory. Two kinds of relational risk are identified: hold-up and spillover risk. For the governance of relations, i.e. the control of relational risk, the article presents a set of instruments that includes trust, next to instruments adopted and adapted from TCE. It also includes roles for gobetweens. Some references to empirical evidence are included. JEL: D23 D83 L14 L24 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200538&r=all 43. Adaptive build-up and breakdown of trust : an agent based computational approach Gorobets,Alexander Nooteboom,Bart (Tilburg University, Center for Economic Research) This article employs Agent-Based Computational Economics (ACE) to investigate whether, and under what conditions, trust is viable in markets. The emergence and breakdown of trust is modeled in a context of multiple buyers and suppliers. Agents develop trust in a partner as a function of observed loyalty. They select partners on the basis of their trust in the partner and potential profit. On the basis of realized profits, they adapt the weight they attach to trust relative to profitability, and their own trustworthiness, modeled as a threshold of defection. Trust turns out to be viable under fairly general conditions. JEL: C63 D23 L14 L22 L24 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200539&r=all 44. Density and strength of ties in innovation networks : a competence and governance view Nooteboom,Bart Gilsing,Victor A. (Tilburg University, Center for Economic Research) Taking into account both competence and governance issues, and six dimensions of tie strength, this article argues that in networks for exploration there are good reasons, counter to the thesis of the 'strength of weak ties', for a dense structure of ties that are strong in most dimensions. By contrast, in exploitation networks there are good reasons for structures that are non-dense, with ties that are strong in other dimensions than in networks for exploration. JEL: L14 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200540&r=all 45. Density and strength of ties in innovation networks : an analysis of multi-media and biotechnology Gilsing,Victor A. Nooteboom,Bart (Tilburg University, Center for Economic Research) In this article we provide an empirical illustration of hypotheses, developed in the literature, on the role of density and strength of ties in innovation networks. We study both exploration and exploitation networks in the Dutch multimedia and pharmaceutical biotechnology industry. We find support for most of our hypotheses but not all. These findings, in line with the mixed results in the literature, seem to indicate that the distinction between exploration versus exploitation, albeit useful, is still too general. There may be a stronger sectoral effect in how exploration and exploitation settle in network structural properties than anticipated thus far. JEL: D23 D83 L14 L63 L65 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200541&r=all 46. Entrepreneurial roles along a cycle of discovery Nooteboom,Bart (Tilburg University, Center for Economic Research) The literature on entrepreneurship recognizes a variety of entrepreneurial roles, and the question arises what roles are played when and by whom. In this article, roles are attributed to different stages of innovation and organizational development. A central theme is the relation between discontinuity, in radical innovation (exploration), and continuity, in application, diffusion and adaptation (exploitation). Use is made of a concept of a 'cycle of discovery', which seeks to explain how exploration leads on to exploitation, and how exploitation may yield exploration, in a step-by-step development towards radical innovation. Parallel to this there are processes of organisational development. JEL: D83 M13 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200543&r=all 47. Innovation, learning and cluster dynamics Nooteboom,Bart (Tilburg University, Center for Economic Research) This chapter offers a theory and an analytical framework for the analysis of cluster dynamics, i.e. the innovative performance and evolution of clusters. It develops three types of embedding: institutional embedding, structural embedding (network structure), and relational embedding (type and strength of ties). The analysis is conducted from a perspective of both competence ( learning) arising from relations and governance of relational risk, which includes risk of lock-in and risk of spillover. A basic proposition is that innovative clusters face the challenge of combining exploration and exploitation. Hypotheses are specified concerning differences between networks for exploration and exploitation, and concerning combinations and transitions between them. Arguments are presented that in some important respects go against the thesis of the strength of weak ties . Some empirical evidence is presented from recent studies. JEL: L14 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200544&r=all 48. Empirical tests of optimal cognitive distance Wuyts,Stefan Colombo,Massimo G. Dutta,Shantanu Nooteboom,Bart (Tilburg University, Center for Economic Research) This article provides empirical tests of the hypothesis of optimal cognitive distance , proposed by Nooteboom (1999, 2000), in two distinct empirical settings. Variety of cognition, needed for learning, has two dimensions: the number of agents with different cognition, and differences in cognition between them ( cognitive distance). The hypothesis is that in interfirm relationships optimal learning entails a trade-off between the advantage of increased cognitive distance for a higher novelty value of a partner s knowledge, and the disadvantage of less mutual understanding. If the value of learning is the mathematical product of novelty value and understandability, it has an inverse-U shaped relation with cognitive distance, with an optimum level that yields maximal value of learning. With auxiliary hypotheses, the hypothesis is tested on interfirm agreements between pharmaceutical companies and biotech companies, as well as on interfirm agreements in ICT industries. JEL: D83 L24 L63 L65 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200545&r=all 49. Elements of a cognitive theory of the firm Nooteboom,Bart (Tilburg University, Center for Economic Research) This paper presents elements of a cognitive theory of the firm, from the perspective of embodied cognition. It entails the notion of 'cognitive distance' between people that have developed their cognition in different environments. This yields the notion of the firm as a 'focusing device', to reduce cognitive distance for the sake of efficient collaboration and for the resolution of conflict. This focus yields organisational myopia, which needs to be compensated by outside relations, between firms, at some cognitive distance. Next, on the basis of principles derived from cognitive science, this paper tries to resolve the problem of combining structural stability and change, which in economics is known as the problem of combining exploitation and exploration. This provides the basis for a theory of learning and innovation in organisations and economies. The theory is elaborated on the basis of the notion of 'scripts', also derived from cognitive science. JEL: D21 D83 M13 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200546&r=all 50. Learning to trust Nooteboom,Bart (Tilburg University, Center for Economic Research) Trust is full of puzzle and paradox. Trust is both rational and emotional. Trust can go beyond calculative self-interest, but has its limits. People may want to trust, while they may also feel threatened by it. If trust is not in place prior to a relationship, on the basis of institutions, prior experience, or reputation, it has to be built up, in specific relations. For that one needs to learn, in the sense of building empathy, and perhaps a certain degree of identification. In an attempt at a better understanding of the puzzles and processes of trust, this chapter applies the perspective of 'embodied cognition', and insights from mental 'framing' and decision heuristics from social psychology. JEL: B52 D23 D83 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200547&r=all 51. The social and industrial dynamics of retailing an evolutionary reconstruction Nooteboom,Bart (Tilburg University, Center for Economic Research) This paper reconstructs the long-term development of retailing, including industrial, economic and social antecedents and consequences. Among other things, it includes innovation in the form of the emergence and diffusion of successive novel types of shop (including self-service), relations between large and small firms in innovation and diffusion, change of demand conditions, institutional change concerning the opening time of shops, increase of scale and concentration, and social effects. For the analysis of the process and costs of retailing, use is made of queuing theory rather than customary production functions. The reconstruction is conducted in evolutionary terms of selection, variety generation and transmission. Scripts with nodes for component activities are used in analogy to chromosomes composed of genes. The paper concludes with a discussion of the usefulness of evolutionary economics, and offers suggestions for its development. JEL: B52 L22 L81 M13 O31 O33 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200548&r=all 52. Anonymous voting and minimal manipulability Maus,Stefan Peters,Hans Storcken,Ton (METEOR) We compare the manipulability of different choice rules by considering the number of manipulable profiles. We establish the minimal number of such profiles for tops-only, anonymous, and surjective choice rules, and show that this number is attained by unanimity rules with status quo. Keywords: public economics ; Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:umamet:2005009&r=all 53. The feasibility of a fixed exchange rate regime for new EU- members: evidence from real exchange rates Candelon,Bertrand Kool,Clemens Raabe,Katharina Veen,Tom,van (METEOR) In this paper, we estimate fundamental bilateral real exchange rates for a group of eight accession countries using a panel- cointegration approach for the period 1993-2003. We document a significant positive link between productivity levels and the corresponding real exchange rate levels. Future rises in productivity cannot be excluded on the basis of either our own analysis or the literature as a whole. Consequently, inflation pressure and real exchange rate appreciation in the accession countries probably remain a fact of life in the near future. The extent to which this is a problem for a fixed nominal exchange rate regime is hard to determine. Price dynamics in the accession countries are still quite flexible to accommodate substantial real exchange rate movements even when the nominal exchange rate is rather fixed; moreover, that price adjustment is mostly an internal process for the accession countries. Overall we conclude that a fixed exchange rate regime for each of the accession countries would be feasible in itself, despite possible future real exchange rate appreciations due to either the Balassa- Samuelson effect or demand shifts. We find current misalignments to be small, robust and generally in line with the literature. This implies current exchange rate levels provide a reasonable indication of the level at which a parity exchange rate could be set. Keywords: international economics and trade ; Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:umamet:2005010&r=all 54. A Fixed Point Theorem for Discontinuous Functions Herings,Jean-Jacques Laan,Gerard,van der Talman,Dolf Yang,Zaifu (METEOR) In this paper we prove the following fixed point theorem. Consider a non-empty bounded polyhedron P and a function ? : P > P such that for every x º P for which ? (x) ? x there exists ? > 0 such that for all y, z º B (x, ?) ? P it holds that (?(y)-y)2 (?(z)-z) ? 0, where B (x, ?) is the ball in R? centered at x with radius ? . Then ? has a fixed point, i. e., there exists a point x* º P satisfying ? (x*) = x* . The condition allows for various discontinuities and irregularities of the function. In case f is a continuous function, the condition is automatically satisfied and thus the Brouwer fixed point theorem is implied by the result. We illustrate that a function that satisfies the condition is not necessarily upper or lower semi-continuous. A game-theoretic application is also discussed. Keywords: mathematical economics and econometrics ; Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:umamet:2005011&r=all 55. Measuring Financial Stability: Applying the MfRisk Model to the Netherlands Jan Willem van den End Mostafa Tabbae Models which integrate various financial stability risks are still in an early stage of development. Inthis paper we use the Macrofinancial Risk model (MfRisk) to construct a measure for financial stability. MfRisk applies the Merton option model in a multi-sector framework. We argue that this method satisfies the macro-prudential approach. On the basis of the MfRisk model we construct a system-wide financial stability measure for the Netherlands, which builds on the put options of the banking, insurance and pension sectors. This measure approximates the probability and the potential loss of stress in the financia l system. The measure is tested against various indicators of default risk, from which we conclude that it is a reliable proxy. Finally, it is shown how the measure can be used for stress testing. JEL: G12 G13 G28 G32 G33 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:dnb:dnbwpp:030&r=all 56. The Impact of Central Bank Transparency on Inflation Expectations Carin van der Cruijsen Maria Demertzis In contrast to previous empirical attempts to examine the effect ofincreasing central bank transparency on macroeconomic magnitudes, we investigate how the link between inflation and inflation expectations alters with increasing transparency. Our motivation stems from the belief that changes in the institutional features or operations of the Central Bank affect, first and foremost, the way that private agents form their expectations about the future behaviour of the Central Bank, and only through them, inflation. We apply the framework used by Levin et al (2004) who differentiate between inflation targeters and countries that do not have explicit quantitative objectives. They discover that inflation targeters benefit from a weaker link between inflation and expectations, and the more so for longer horizons. We, in turn, examine whether this observation still holds as central banks become more transparent. Our attempt is facilitated by the recent development of quantitative measures for transparency, used in the main text. We find that our results provide some evidence to substantiate the beneficial impact of transparency, on helping fix private sector expectations. Keywords: Central Bank Transparency; Infl;ation Expectations; Monetary Policy JEL: E31 E52 E58 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:dnb:dnbwpp:031&r=all 57. Supermarkets as a Natural Oligopoly Ellickson, Paul This paper uses a model of endogenous sunk cost (ESC) competition to explain the industrial structure of the supermarket industry, where a few powerful chains provide high quality products at low prices. The predictions of this model accord well with the features of the supermarket industry documented here. Using a novel dataset of store level observations, I demonstrate that 1) the same number of high quality firms enter markets of varying sizes and compete side by side for the same consumers and 2) quality increases with the size of the market. In addition to documenting a local structure of competition consistent with the ESC framework, I demonstrate that the choice of quality by rival firms behaves as a strategic complement. This key finding, which is consistent with an ESC model of quality enhancing sunk outlays, eliminates several alternative explanations of concentration in the supermarket industry, including most standard models of cost-reducing investment and product proliferation. These results suggest that the competitive mechanisms sustaining high levels of concentration in the supermarket industry are inherently rivalrous and unlikely to lead to the emergence of a single dominant firm. Keywords: endogenous sunk costs, vertical product differentiation, oligopoly, retail, supermarkets, market concentration, dartboard, complementarity JEL: L13 L22 L81 Date: 2005 URL: http://d.repec.org/n?u=RePEc:duk:dukeec:05-04&r=all 58. Does Sutton Apply to Supermarkets? Ellickson, Paul This paper presents empirical evidence that endogenous sunk costs play a central role in determining the equilibrium structure of the supermarket industry. Using the endogenous sunk cost (ESC) framework developed in Sutton (1991), I construct a model of supermarket competition where escalating investment in firm level distribution systems is driven by the incentive to produce a greater variety of products in every store. Using the observed networks of store and warehouse locations, I identify 51 distinct geographic markets covering nearly the entire United States and empirically verify their relative independence. Employing a dataset consisting of every supermarket operating in these markets, I establish the existence of a lower bound to concentration that remains strictly positive as market size expands. Furthermore, I am able to verify that this non- fragmentation result applies only to firms that have built their own distribution networks, as the model predicts. Keywords: endogenous sunk costs, vertical product differentiation, oligopoly, retail, supermarkets, market concentration JEL: L13 L22 L81 Date: 2005 URL: http://d.repec.org/n?u=RePEc:duk:dukeec:05-05&r=all 59. Improved Approximation of the General Soft-Capacitated Facility Location Problem Alfandari, Laurent (ESSEC Business School) An NP-hard variant of the single-source Capacitated Facility Location Problem is studied, where each facility is composed of a variable number of fixed-capacity production units. This problem, especially the metric case, has been recently studied in several papers. In this paper, we only consider the general problem where connection costs do not systematically satisfy the triangle inequality property. We show that an adaptation of the set covering greedy heuristic, where the sub-problem is approximately solved by a Fully Polynomial-Time Approximation Scheme based on cost scaling and dynamic programming, achieves a logarithmic approximation ratio of (1+?O)H(n) for the problem, where n is the number of clients to be served, and H is the harmonic series. This improves the previous bound of 2H(n) for this problem. Keywords: Facility Location; Combinatorial optimization; Set Covering; Dynamic Programming; Approximation JEL: C44 C61 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ebg:essewp:dr-05003&r=all 60. Performance Appraisal Research: A Critical Review of Work on “The Social Context and Politics of Appraisal” Jenkins , Alan (ESSEC Business School) This paper reviews existing literatures on the analysis of performance appraisal (PA) paying special attention to those which try to take into account the “social context” of appraisal systems and processes. The special place of political action within these processes is underlined and the different levels at which politics need to be considered in research are outlined. Research on politics is considered and shown to lack an adequate consideration of the social relations involved in the reciprocal interactions between PA tools and processes and users interpretation and manipulation of them. Keywords: Performance appraisal; Social context; Politics JEL: M12 M54 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ebg:essewp:dr-05004&r=all 61. Shareholder value creators in the S&P 500: Year 2004 Fernandez, Pablo (IESE Business School) Villanueva, Alvaro (IESE Business School) During 2004, 64% of the companies in the S&P 500 created value, while in 2003 the figure was 87%. The market value of the 500 companies was $11.2 trillion in 2004, compared to $10.1 trillion in 2003. The top shareholder value creators in 2004 were Exxon, General Electric, Ebay, Johnson & Johnson and Qualcomm. We define created shareholder value and provide the ranking of created shareholder value for the 500 companies. We also calculate the created shareholder value of the 500 companies during the twelve- year period 1993-2004. General Electric was the top shareholder value creator and AT&T was the top shareholder value destroyer during the twelve-year period. On average, the small market capitalization companies of the S&P were more profitable. Between 1998 and 2004, the volatility of the S&P as a whole fell, but the volatility of its components increased on the average. Keywords: shareholder value creation; created shareholder value; equity market value; shareholder value added; shareholder return; required return to equity; JEL: G12 G31 M21 Date: 2005-02-14 URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0580&r=all 62. An institutional sociology perspective of the implementation of activity based costing by Spanish health care institutions Eriksen, Scott D. (Instituto de Empresa) Urrutia, Ignacio (IESE Business School) According to institutional sociology, hospitals will respond to external environmental pressures and adopt Activity-Based-Costing ABC). This theory overemphasizes conformity and fails to consider the advantages of organizational non-conformance. A conflict of interests between physicians and management leads to physician resistance to accepting ABC. This paper investigates the Spanish government's response to this resistance by creating new public foundation hospitals, and involves a case study of the Alcorcon foundation hospital. Population ecology is offered as an explanation for the emergence of new entities as a result of inert existing entities' resistance to reform. Keywords: Activity based costing; ABC implementation; Health care; Institutional sociology; Spanish health care sector; Date: 2005-02-21 URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0582&r=all 63. EuroStoxx 50: 1997-2004. Shareholder value creation in Europe Fernandez, Pablo (IESE Business School) Villanueva, Alvaro (IESE Business School) 2004 was a good year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value creation of these 50 companies was ˆ42,880 million. It was not as good as 2003, however, when their value creation reached slightly over ˆ160, 000 million. The companies that created most value for their shareholders were Enel (ˆ13,364 million), ENI (11,855) and TIM ( 9,891). The companies that destroyed most value were Nokia (- ˆ15,239 million), L'Oreal (-9,095) and Philips (-7,823). In 2004, the Euro Stoxx 50 was much more volatile than either the S&P 500 or the Dow Jones. Shareholder value destruction in the three-year period 2002-2004 was ˆ-0.9 trillion. The market value of the companies included in the Euro Stoxx 50 was ˆ1.5 trillion in 2004 and ˆ1.4 trillion in 2003. We also calculate the created shareholder value of the 50 companies during the seven-year period 1997-2004. ENI was the top shareholder value creator and Vivendi, the top shareholder value destroyer during that period. A portfolio long in the companies that entered the index and short in the companies that abandoned the index had on average a 7.2% return in the 20 days prior to the index recomposition and a 2.3% return in the 20 days after the index recomposition. Keywords: shareholder value creation; created shareholder value; shareholder value added; shareholder return; required return to equity; JEL: G12 G31 M21 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0583&r=all 64. Energy Consumption and GDP in Market and Transitional Economies Ageeva Svetlana Suslov Nikita A cross-country analysis of factors affecting the levels of the energy intensity of production in the countries with both the market and the transitional economies is provided. Climatic conditions, variables of institutional environment, production structure variations and evaluations of unofficial economy shares are involved into consideration. These variables turned out to be significant when explaining the differences of energy intensity. We construct regressions for both the values of absolute levels and their time change indices involving 1993, 1995, 1996 and 2000 statistics. We show that the quality of institutional environment directly affects the process of energy consumers' adjustment to energy price changes: the higher is the institutions' quality the more effective are the measures aimed at the energy conservation. The samples used include up to 117 economies. Keywords: Russia, energy intensity, institutions, prices, unofficial economy JEL: C21 O13 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-05e&r=all 65. Reconsidering the Backward Vertical Linkage of Foreign Affiliates: Evidence from Japanese Multinationals Kozo Kiyota Toshiyuki Matsuura Shujiro Urata Yuhong Wei This paper examined the determinants of the backward vertical linkages of Japanese foreign affiliates in manufacturing for the period 1994-2000, focusing on the local backward linkages, or local procurements. We found that the experience of the affiliate, which is measured by the length of operation, has positive impacts on local procurements in the affiliates in East and Southeast Asian countries but not so for the affiliates in developed countries. This result is robust even after we control for various factors, including government regulation on the local procurements, agglomeration effects, and unobservable firm heterogeneity. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05019&r=all 66. Los mecanismos de cohesion territorial en Espana: un analisis y algunas propuestas Angel de la Fuente URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:200&r=all 67. The limits on the Design of Long-Term Care Insurance Schemes in Spain stas Joan Costa-Fonta Montserrat Font-Vilalta URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:201&r=all 68. Time use, computable general equilibrium and tax policy analysis Javier Ferri Maria Luisa Molto Ezequiel Uriel URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:202&r=all 69. An essay on the regimes of cities combinations and the dynamics of the worlds (In French) Jean-Louis PERNIN The aim of this article lies in the categorization of modes of regulation, of coordinated actions. We mobilize a constructivist and complex epistemo-methodology and place our approach within the economy of conventions. A regulation is perceived as a combination of cities which organizes a world, an action situation structured by relations of power. The two keys used to categorize the modes of regulation are the finalized space times of the action (the universes) and the intensity of the power which is exerted there. We reinterpret the concept of city within the framework of an action theory using power theories. They are examined and, as a result, the concept of utility is perceived within a complex, built and located framework. The model suggested authorizes an infinite number of possible regulations and finds the need for a multi-disciplinary approach when one’s study a world. It also recognizes the plurality of action logics and their degree of generality. Finally, we show that this model coincides with the identity model forged in Sciences of Management. Keywords: action, individual, power, universe, regulation, world, city, convention, identity, dynamics JEL: A12 A13 A14 B52 L51 Q13 Date: 2005 URL: http://d.repec.org/n?u=RePEc:grs:wpegrs:2005-04&r=all 70. Co-operation among firms and communities : a new standardization process for the software industry (In French) Marie CORIS (E3i, IFReDE-GRES) >From a voluntary production, free software fulfil to be broadly diffused on the market side. The commercial success of these software is attented by an active participation in their development from a large number of firms. We explain this participation by the opportunities of free software development and intellectual property models for standardization process within the software industry. We analyze these opportunities by considering the cases of open consortiums where firms and communities cooperate for the creation of open software standards. Keywords: Software industry, Intellectual property, Standardization, Free Software, Consortiums JEL: L15 D23 O34 Date: 2005 URL: http://d.repec.org/n?u=RePEc:grs:wpegrs:2005-05&r=all 71. Overlapping fiscal domains and effectiveness of environmental policy in India Subrata Mandal (National Institute of Public Finance and Policy) M. Govinda Rao (National Institute of Public Finance and Policy) The paper analyses the assignment systems and implementation aspects of environmental regulation in regard to water, air, and forests. The assignment of environmental functions and its overlapping is analysed in terms of not only the different levels of government, but also between the executive and judiciary. Specifically, the paper examines judicial intervention in environmental protection in India and argues that judicial activism although can be construed as a part of "checks and balances" in a federal system, it cannot be a substitute to the failure of executive in undertaking the task of environmental protection. The paper also analyses the implementation aspects of environmental policy, particularly the effectiveness of policies and institutions relating to environmental governance. Despite a reasonably clear assignment system, the implementation of environmental functions has not been satisfactory. In most cases, an important factor impeding effective implementation is seen in the structure of incentives to bureaucracy and policy makers and influence of polluters on them. Besides, the environmental regulators do not have access to modern technology and inadequate resources to measure and regulate pollution levels. The paper highlights overlapping roles of executive and judiciary in implementing environmental regulation. In other words, failure of the executive to regulate and monitor pollution levels as well as forest cover has led to the Supreme Court intervention. Interpreting that access to clean water and air as a fundamental right, the courts have pronounced several judgements on the implementation of environmental regulation virtually taking over the role of executive. This has helped to resolve the issues in the short term and in some cases has led to the improvement in environmental quality. However, the solution is ad hoc as the courts cannot undertake the task of implementation nor do they have the technical knowledge to deal with complex problems of environmental regulation. Besides, technology is not static and mandating a technical solution through a judgement such as the use of a particular technology or particular fuel for running of commercial vehicles can create serious problems in the long term. The solution lies in reforming the incentive structure and institutions of governance to make the executive much more sensitive and accountable to environmental issues. Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:ind:nipfwp:25&r=all 72. Estimation of marginal abatement costs for undesirable outputs in India's power generation sector: An output distance function approach Manish Gupta (National Institute of Public Finance and Policy) (National Institute of Public Finance and Policy) Many production activities generate undesirable byproducts in conjunction with the desirable outputs they produce. The present study uses an output distance function approach and its duality with the revenue function to estimate the marginal abatement cost of CO2 emissions from a sample of thermal plants in India. Two sets of exercises have been undertaken. The marginal abatement cost is first estimated without considering the distinction between the clean and the dirty plants (model-1) and then by differentiating between the two (model-2). The shadow prices of CO2 for the coal fired thermal plants in India for the period 1991-92 to 1999-2000 was found to be Rs. 3,380.59 per ton of CO2 as per model-1 and Rs. 2401.99 per ton of CO2 as per model-2. The wide variation noticed in the marginal abatement costs across plants is explained by the ratio of CO2 emissions to electricity generation, the different vintages of capital used by different plants in the generation of electricity and provisions for abatement of pollution. The relationship between firm specific shadow prices of CO2 and the index of efficiency (ratio of CO2 emission and electricity generation) points to the fact that the marginal cost of abating CO2 emissions increases with the efficiency of the thermal plant. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ind:nipfwp:27&r=all 73. Peer effects in Austrian schools Nicole Schneeweis (Department of Economics, Johannes Kepler University Linz, Austria) Rudolf Winter-Ebmer (Department of Economics, Johannes Kepler University Linz, Austria) Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:jku:econwp:2005_02&r=all 74. Choosing Electoral Rules: Theory and Evidence from US Cities Philippe Aghion Alberto Alesina Francesco Trebbi This paper studies the choice of electoral rules, in particular, the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by US cities (particularly in the South), we show why majorities tend to adopt "winner-take-all" city-wide rules ( at-large elections) in response to an increase in the size of the minority when the minority they are facing is relatively small. In this case, for the majority it is more effective to leverage on its sheer size instead of risking to concede representation to voters from minority-elected districts. However, as the minority becomes larger (closer to a fifty-fifty split), the possibility of losing the whole city induces the majority to prefer minority votes to be confined in minority-packed districts. Single-member district rules serve this purpose. We show empirical results consistent with these implications of the model. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11236&r=all 75. Deflation and the International Great Depression: A Productivity Puzzle Harold L. Cole Lee E. Ohanian Ron Leung This paper presents a dynamic, stochastic general equilibrium study of the causes of the international Great Depression. We use a fully articulated model to assess the relative contributions of deflation/monetary shocks, which are the most commonly cited shocks for the Depression, and productivity shocks. We find that productivity is the dominant shock, accounting for about 2/3 of the Depression, with the monetary shock accounting for about 1/3. The main reason deflation doesn't account for more of the Depression is because there is no systematic relationship between deflation and output during this period. Our finding that a persistent productivity shock is the key factor stands in contrast to the conventional view that a continuing sequence of unexpected deflation shocks was the major cause of the Depression. We also explore what factors might be causing the productivity shocks. We find some evidence that they are largely related to industrial activity, rather than agricultural activity, and that they are correlated with real exchange rates and non-deflationary shocks to the financial sector. JEL: E0 N1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11237&r=all 76. Suicidal Behavior and the Labor Market Productivity of Young Adults Erdal Tekin Sara Markowitz This paper provides a comprehensive analysis of the link between suicidal behaviors and labor market productivity of young adults in the United States. Using data from the National Survey of Adolescent Health (Add Health), we estimate the effects of suicide thoughts and suicide attempts on the work and schooling activities of young adults as well as on their hourly wage rates. The richness of the data set allows us to implement several strategies to control for unobserved heterogeneity and the potential reverse causality. These include using a large set of control variables that are likely to be correlated with both the suicidal behavior and the outcome measures, an instrumental variables method, and a twin fixed effects analysis from the subsample of twin pairs contained in the data. The longitudinal nature of the data set also allows us to control for past suicide thoughts and attempts of the individuals from their high school years as well as the suicide behaviors of the members of their family. Results from the different identification strategies consistently indicate that both suicide thoughts and suicide attempts decrease the hourly wage rate and the probability that a young adult individual works and/or attends school. The results are found to be robust to various specification tests. JEL: I1 J24 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11238&r=all 77. Bargaining Power in Marriage: Earnings, Wage Rates and Household Production Robert A. Pollak What determines bargaining power in marriage? This paper argues that wage rates, not earnings, determine well-being at the threat point and, hence, determine bargaining power. Observed earnings at the bargaining equilibrium may differ from earnings at the threat point because hours allocated to market work at the bargaining solution may differ from hours allocated to market work at the threat point. In the divorce threat model, for example, a wife who does not work for pay while married might do so following a divorce; hence, her bargaining power would be related to her wage rate, not to her earnings while married. More generally, a spouse whose earnings are high because he or she chooses to allocate more hours to market work, and correspondingly less to household production and leisure, does not have more bargaining power. But a spouse whose earnings are high because of a high wage rate does have more bargaining power. Household production has received little attention in the family bargaining literature. The output of household production is analogous to earnings, and a spouse's productivity in household production is analogous to his or her wage rate. Thus, in a bargaining model with household production, a spouse's productivity in home production is a source of bargaining power. JEL: D1 J1 J2 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11239&r=all 78. What Do Wage Differentials Tell Us about Labor Market Discrimination? June E. O'Neill Dave M. O'Neill We examine the extent to which non-discriminatory factors can explain observed wage gaps between racial and ethnic minorities and whites, and between women and men. In general we find that differences in productivity-related factors account for most of the between group wage differences in the year 2000. Determinants of wage gaps differ by group. Differences in schooling and in skills developed in the home and in school, as measured by test scores, are of central importance in explaining black/white and Hispanic/white wage gaps among both women and men. Immigrant assimilation is an additional factor for Asians and workers from Central and South America. The sources of the gender gap are quite different, however. Gender differences in schooling and cognitive skills as measured by the AFQT are quite small and explain little of the pay gap. Instead the gender gap largely stems from choices made by women and men concerning the amount of time and energy devoted to a career, as reflected in years of work experience, utilization of part-time work, and other workplace and job characteristics. JEL: J0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11240&r=all 79. Corporate Tax Avoidance and Firm Values Mihir A. Desai Dhammika Dharmapala How do investors value managerial actions designed solely to minimize corporate tax obligations? Using a framework in which managers' tax sheltering decisions are related to their ability to divert value, this paper predicts that the effect of tax avoidance on firm value should vary systematically with the strength of firm governance institutions. The empirical results indicate that the average effect of tax avoidance on firm value is not significantly different from zero; however, the effect is positive for well-governed firms as predicted. Coefficient estimates are consistent with an expected life of five years for the devices that generate these tax savings for well-governed firms. Alternative explanations for the dependence of the valuation of the tax avoidance measure on firm governance do not appear to be consistent with the empirical results. The findings indicate that the simple view of corporate tax avoidance as a transfer of resources from the state to shareholders is incomplete, given the agency problems characterizing shareholder- manager relations. JEL: G32 H25 H26 K34 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11241&r=all 80. Ex Ante Carrots instead of Ex Post Sticks: Two Examples Joshua Aizenman This paper argues that the limited ability to help developing countries in a crisis should shift the focus to policies helping in reducing the ex ante probability of crises. Indirectly, such policies would also alleviate the depths of realized crises. Two specific ideas are explored: I. International reserves escrow accounts: Managing international reserves provides an effective mechanism for self insurance. The hazard of this mechanism is that international reserves are easy prey for opportunistic policy makers in polarized countries characterized by political instability. This hazard may be alleviated by escrow accounts run by the International Financial Institutions (IFIs), where part of the international reserves of a country are saved and would be used if pre-set conditions, like large TOT deteriorations, are met. The IFIs may offer a subsidized return on these escrow accounts in order to encourage countries to reduce external borrowing and to increase fiscal savings. Such subsidies may be welfare improving due to the over borrowing bias induced by sovereign risk. II. IFIs as lenders of last resort to finance fiscal reforms: I illustrate this possibility in a modified version of Cukierman, Edwards and Tabellinis (AER 1992) model. I identify conditions where IFIs function as the lenders of last resort, financing fiscal reforms. IFIs financing may shift the equilibrium from an inefficient outcome with a low tax base and high inflation to a superior outcome, associated with a more sound tax system. JEL: F15 F21 F34 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11242&r=all 81. Fear and Greed in Financial Markets: A Clinical Study of Day- Traders Andrew W. Lo Dmitry V. Repin Brett N. Steenbarger We investigate several possible links between psychological factors and trading performance in a sample of 80 anonymous day- traders. Using daily emotional-state surveys over a five-week period as well as personality inventory surveys, we construct measures of personality traits and emotional states for each subject and correlate these measures with daily normalized profits-and-losses records. We find that subjects whose emotional reaction to monetary gains and losses was more intense on both the positive and negative side exhibited significantly worse trading performance. Psychological traits derived from a standardized personality inventory survey do not reveal any specific %u201Ctrader personality profile%u201D, raising the possibility that trading skills may not necessarily be innate, and that different personality types may be able to perform trading functions equally well after proper instruction and practice. JEL: G12 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11243&r=all 82. Deflation and Monetary Policy in Taiwan Ya-Hwei Yang Jia-Dong Shea >From 1999 to 2003, Taiwan faced a deflationary situation. The reasons for this deflation can be attributed to both domestic and global factors. Domestic changes including local political unrest, tensions with China, outbound investment to China, a weakened financial system, and a deteriorating government financial situation, provided the backdrop for the economic slowdown and corresponding deflation. A number of global factors, especially the bursting of the Internet and IT bubbles in late 2000 and the rise of China%u2019s economy, also heavily influenced both global and Taiwanese prices. This paper adopts a simplified aggregate demand and aggregate supply model to derive a deterministic equation of the GDP deflator (PGDP), and then applies quarterly data covering the period from 1982 to 2003 to estimate the PGDP equation using 2SLS. The empirical results are used to identify the sources of PGDP deflation in Taiwan. In addition, the phenomenon of price divergence appears since 2002 where the WPI increased and the CPI decreased. The causes of the WPI-CPI divergence are also investigated in this paper. JEL: E0 E3 E5 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11244&r=all 83. The Limited Influence of Unemployment on the Wage Bargain Robert E. Hall Paul R. Milgrom When a job-seeker and an employer meet, find a prospective surplus, and bargain over the wage, conditions in the outside labor market, including especially unemployment, may be irrelevant. The job-seeker's threat point in the bargain is to delay bargaining, not to terminate bargaining and resume search at other employers. Similarly, the employer's threat point is to delay bargaining, not to terminate it. Consequently, the outcome of the bargain depends on the relative costs of delay to the parties, not on the results of irrational threats to disclaim any bargain. In a model of the labor market that otherwise adopts all of the features of the standard Mortensen-Pissarides model, unemployment is much more sensitive to changes in productivity than in the standard model, because feedback through the wage is absent. We also present models where the wage bargain is in partial contact with conditions in the labor market. JEL: E24 E32 J64 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11245&r=all 84. Births, Deaths, and New Deal Relief during the Great Depression Price V. Fishback Michael R. Haines Shawn Kantor This paper examines the impact of New Deal relief programs on infant mortality, noninfant mortality and general fertility rates in major U.S. cities between 1929 and 1940. We estimate the effects using a variety of specifications and techniques for a panel of 114 cities for which data on relief spending during the 1930s were available. The significant rise in relief spending during the New Deal contributed to reductions in infant mortality, suicide rates, and some other causes of death, while contributing to increases in the general fertility rate. Estimates of the relationship between economic activity and death rates suggest that many types of death rates were pro-cyclical, similar to Ruhm%u2019s (2000) findings for the modern U.S.. Estimates of the relief costs associated with saving a life ( adjusted for inflation) are similar to estimates found in studies of modern social insurance programs. JEL: I38 J11 N32 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11246&r=all 85. Portfolio Choice over the Life-Cycle in the Presence of 'Trickle Down' Labor Income Luca Benzoni Pierre Collin-Dufresne Robert S. Goldstein Empirical evidence shows that changes in aggregate labor income and stock market returns exhibit only weak correlation at short horizons. As we document below, however, this correlation increases substantially at longer horizons, which provides at least suggestive evidence that stock returns and labor income are cointegrated. In this paper, we investigate the implications of such a cointegrated relation for life-cycle optimal portfolio and consumption decisions of an agent whose non-tradable labor income faces permanent and temporary idiosyncratic shocks. We find that, under economically plausible calibrations, the optimal portfolio choice for the young investor is to take a substantial {\em short} position in the risky portfolio, in spite of the large risk premium associated with it. Intuitively, this occurs because the cointegration effect makes the present value of future labor income flows `stock-like' for the young agent. However, for older agents who have shorter times-to-retirement, the cointegration effect does not have sufficient time to act, and the remaining human capital becomes more `bond-like.' Together, these effects create a hump-shaped optimal portfolio decision for the agent over the life cycle, consistent with empirical observation. JEL: G1 E2 E3 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11247&r=all 86. The Thick Market Effect on Local Unemployment Rate Fluctuations Li Gan Qinghua Zhang This paper studies how the thick market effect influences local unemployment rate fluctuations. The paper presents a model to demonstrate that the average matching quality improves as the number of workers and firms increases. Unemployed workers accumulate in a city until the local labor market reaches a critical minimum size, which leads to cyclical fluctuations in the local unemployment rates. Since larger cities attain the critical market size more frequently, they have shorter unemployment cycles, lower peak unemployment rates, and lower mean unemployment rates. Our empirical tests are consisten with the predictions of the model. In particular, we find that an increase of two standard deviations in city size shortens the unemployment cycles by about 0.72 months, lowers the peak unemployment rates by 0.33 percentage points, and lowers the mean unemployment rates by 0.16 percentage points. JEL: J64 R23 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11248&r=all 87. The Euro and the Stability Pact Martin Feldstein This paper begins by discussing the inherent conflict between the simultaneous existence of a single currency for the countries of the European Economic and Monetary Union (EMU) and the independent fiscal policies of those countries. The Stability and Growth Pact was an attempt to reconcile that conflict. I describe how EMU governments have chosen to ignore the Stability Pact's constraint on budget deficits and how they sought to undermine it by changing the rules themselves. The final part of the paper describes the actual resolution of the issue by the agreement reached at the end of March 2005 by the European Council. The new policy effectively abandons the Stability Pact and leaves the way open to much larger sustained deficits. JEL: F4 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11249&r=all 88. Rethinking Social Insurance Martin Feldstein This paper begins by discussing the nature of and rationale for social insurance programs. I then consider three political principles and four economic principles that could guide the design and reform of social insurance programs. These ideas are then applied to unemployment insurance, Social Security pensions, health insurance and Medicare. A common theme is the advantage of incorporating investment based personal accounts in each of these programs. JEL: H5 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11250&r=all 89. Technology Adoption From Hybrid Corn to Beta Blockers Jonathan Skinner Douglas Staiger In his classic 1957 study of hybrid corn, Griliches emphasized the importance of economic incentives and profitability in the adoption of new technology, and this focus has been continued in the economics literature. But there is a distinct literature with roots in sociology emphasizing the structure of organizations, informal networks, and "change agents." We return to a forty-year- old debate between Griliches and the sociologists by considering state-level factors associated with the adoption of a variety of technological innovations: hybrid corn and tractors in the first half of the 20th century, computers in the 1990s, and the treatment of heart attacks during the last decade. First, we find that some states consistently adopted new effective technology, whether hybrid corn, tractors, or effective treatments for heart attacks such as Beta Blockers. Second, the adoption of these new highly effective technologies was closely associated with social capital and state-level 1928 high school graduation rates, but not per capita income, density, or (in the case of Beta Blockers) expenditures on heart attack patients. Economic models are useful in identifying why some regions are more likely to adopt early, but sociological barriers -- perhaps related to a lack of social capital or informational networks -- can potentially explain why other regions lag far behind. JEL: O3 I1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11251&r=all 90. Charter School Quality and Parental Decision Making With School Choice Eric A. Hanushek John F. Kain Steven G. Rivkin Gregory F. Branch Charter schools have become a very popular instrument for reforming public schools, because they expand choices, facilitate local innovation, and provide incentives for the regular public schools while remaining under public control. Despite their conceptual appeal, evaluating their performance has been hindered by the selective nature of their student populations. This paper investigates the quality of charter schools in Texas in terms of mathematics and reading achievement and finds that, after an initial start-up period, average school quality in the charter sector is not significantly different from that in regular public schools. Perhaps most important, the parental decision to exit a charter school is much more sensitive to education quality than the decision to exit a regular public school, consistent with the notion that the introduction of charter schools substantially reduces the transactions costs of switching schools. Low income charter school families are, however, less sensitive to school quality than higher income families. JEL: I2 H4 D1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11252&r=all 91. A Tale of Two Labor Markets: Intergenerational Occupational Mobility in Britain and the U.S. Since 1850 Jason Long Joseph Ferrie The U.S. both tolerates more inequality than Europe and believes its economic mobility is greater than Europe's. These attitudes and beliefs help account for differences in the magnitude of redistribution through taxation and social welfare spending. In fact, the U.S. and Europe had roughly equal rates of inter- generational occupational mobility in the late twentieth century. We extend this comparison into the late nineteenth century using longitudinal data on 23,000 nationally-representative British and U.S. fathers and sons. The U.S. was substantially more mobile then Britain through 1900, so in the experience of those who created the U.S. welfare state in the 1930s, the U.S. had indeed been "exceptional." The margin by which U.S. mobility exceeded British mobility was erased by the 1950s, as U.S. mobility fell compared to its nineteenth century levels. JEL: J6 N3 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11253&r=all 92. When Labor Has a Voice in Corporate Governance Olubunmi Faleye Vikas Mehrotra Randall Morck Equity ownership gives labor both a fractional stake in the firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly-traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. We therefore propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than towards, shareholder value maximization. JEL: G3 J0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11254&r=all 93. Trade Policy, Income Risk, and Welfare Tom Krebs Pravin Krishna William Maloney This paper studies empirically the relationship between trade policy and individual income risk faced by workers, and uses the estimates of this empirical analysis to evaluate the welfare effect of trade reform. The analysis proceeds in three steps. First, longitudinal data on workers are used to estimate time- varying individual income risk parameters in various manufacturing sectors. Second, the estimated income risk parameters and data on trade barriers are used to analyze the relationship between trade policy and income risk. Finally, a simple dynamic incomplete-market model is used to assess the corresponding welfare costs. In the implementation of this methodology using Mexican data, we find that trade policy changes have a significant short run effect on income risk. Further, while the tariff level has an insignificant mean effect, it nevertheless changes the degree to which macroeconomic shocks affect income risk. JEL: F13 F16 D52 E21 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11255&r=all 94. Price-Channel Effects of North-South Trade on the Direction of Technological Knowledge and Wage Inequality Oscar Afonso (CEMPRE, Faculdade de Economia do Porto) Alvaro Aguiar (CEMPRE, Faculdade de Economia do Porto) This paper develops a general equilibrium endogenous growth model that emphasizes the mechanisms, other than market size, through which trade-induced North-South technological knowledge diffusion influences the direction of technological progress and, thus, the path of intra and inter-country wage inequality. In contrast with the market-size effect, more common in previous literature on skill-biased technological change, the operation of the price channel, central to this paper, predicts an increasing high-skilled technological bias following openness, which is more in line with the recent trends observed in developed and developing countries. Keywords: North-South trade; Technological knowledge diffusion; Direction of technological progress; Wage inequality. JEL: F16 F43 O31 O33 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:por:fepwps:170&r=all 95. Competitiveness and Public-Private Partnerships: Towards a More Decentralised Policy Mario Rui Silva (CEDRES, Faculdade de Economia do Porto) Hermano Rodrigues (Faculdade de Economia do Porto) Public-private partnerships are a recent instrument for social and economic development policies. A more decentralised policy is supposed to increase focus and effectiveness and to involve agencies that are closer to firms and that have a more narrow range of objectives. In this contribution, we analyse the pattern of the so-called PIP (Partnerships and Public Initiatives) projects, approved between 2000 and the 30th June of 2003 in the framework of the Portuguese Operational Program for the Economy. By using HOMALS and K-means cluster analysis, we were able to characterise the decentralisation pattern and to identify typical clusters for the PIP projects. The results show clearly that a greater decentralisation is linked to partnerships while public initiatives are closer to the conventional pattern of public intervention. The results also show that partnerships are mainly focused in specific sectors and / or in specific regions, being conducted by private agencies that have chiefly a sectoral or regional nature. However, we have observed a trade-off between policy decentralization and structural change goals because decentralization has originated a bias towards the present more representative sectors. Also, decentralization has generated an extremely unequal access of local economies to the PIP instrument, favoring the more developed areas of the country. Keywords: Public-private partnerships; Competitiveness policy; Decentralization JEL: H50 O20 C14 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:por:fepwps:171&r=all 96. Public-Private Partnerships and the Promotion of Collective Entrepreneurship Mario Rui Silva (CEDRES, Faculdade de Economia do Porto) Hermano Rodrigues (Faculdade de Economia do Porto) Public-private partnerships (PPP) are a recent instrument for social and economic development policies. Within the framework of competitiveness policy, PPP are an adequate instrument to promote collective entrepreneurship. Through this instrument, some market failures can be overcome and a better provision of strategic services can be afforded to firms. Also, PPP can be able to promote co-ordination between public and private partners and lead to specific innovative networks. PPP correspond to a more decentralised policy and they are supposed to increase focus and effectiveness and to involve agencies that are closer to firms and that have a more narrow range of objectives. In this contribution, we analyse the pattern of the so-called partnerships projects, approved between 2000 and the 30th june of 2003 in the framework of the Portuguese Operational Program for the Economy. By using HOMALS and K-means cluster analysis, we were able to characterise PPP and to identify typical clusters for the PPP projects. On one hand, the results show that policy decentralization brought by partnerships has promoted or reinforced a more specialized institutional framework (mainly national, sectoral or regional entrepreneurial associations). But, on the other hand, PPP had a small impact in the promotion of specific networks and/or in innovation. Collective entrepreneurship induced by PPP instrument has presented a clear bias toward the provision of services that have a public or semi- public nature, by the fact that firms that can use these services are in a large number (all the firms of a sub sector or even larger universes). But technological projects and/or projects addressed to specific networks of firms were very few. In particular, the impact of PPP on structural change seems to have been short. Keywords: Public-private partnerships; Competitiveness policy; Entrepreneurship; Collective entrepreneurship JEL: M13 H50 O20 C14 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:por:fepwps:172&r=all 97. Market equilibrium with search and computational costs Pedro Cosme Costa Vieira (Faculdade de Economia do Porto) Although it is an empirical regularity that in the trade of homogeneous goods there is persistent price dispersion and buyers search for low-priced items, theoretically we find that in market equilibrium, when buyers are optimisers (the neo-classical framework), these regularities do not occur. Summing this undesirable theoretical result to the fact that the computation of optimal strategies is demanding, the relevance of using optimisation models in rationalising human behaviour is put in question. Even so, Lucas (1981) claims that optimisation models should not be abandoned because only these are “able to isolate those aspects of behaviour that remain invariant to policy shifts from those that do not”. In this work, following Lucas’ claim, we introduce economic agents as having computational limitations in the neo-classical optimisation model, which is new in the literature. As a result of this alteration to the model, in market equilibrium, we observe both price dispersion and search when buyers have information and computational limitations. Keywords: Computational limitations, Optimisation, Search, Market equilibrium JEL: D43 D83 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:por:fepwps:173&r=all 98. Role and Effects of Credit Information Sharing Tullio Jappelli (University of Salerno, CSEF and CEPR) Marco Pagano (Universita di Napoli "Federico II", CSEF and CEPR) Information sharing about borrowers’ characteristics and their indebtedness can have important effects on credit markets activity. First, it improves the banks’ knowledge of applicants’ characteristics and permits a more accurate prediction of their repayment probabilities. Second, it reduces the informational rents that banks could otherwise extract from their customers. Third, it can operate as a borrower discipline device. Finally, it eliminates borrowers’ incentive to become over-indebted by drawing credit simultaneously from many banks without any of them realizing. This chapter provides a brief account of models that capture these four effects of information sharing on credit market performance, as well as of the growing body of empirical studies that have attempted to investigate the various dimensions and effects of credit reporting activity. Understanding the effects of information sharing also helps to shed light on some key issues in the design of a credit information system, such as the relationship between public and private mechanisms, the dosage between black and white information sharing, and the “memory” of the system. Merging the insights from theoretical models with the lessons of experience, one can avoid serious pitfalls in the design of credit information systems. Keywords: information sharing, credit markets JEL: D82 G21 G28 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:sef:csefwp:136&r=all 99. Quantum Games and Programmable Quantum Systems Katarzyna Miakisz Edward W. Piotrowski Jan Sladkowski Attention to the very physical aspects of information characterizes the current research in quantum computation, quantum cryptography and quantum communication. In most of the cases quantum description of the system provides advantages over the classical approach. Game theory, the study of decision making in conflict situation has already been extended to the quantum domain. We would like to review the latest development in quantum game theory that is relevant to information processing. We will begin by illustrating the general idea of a quantum game and methods of gaining an advantage over "classical opponent". Then we review the most important game theoretical aspects of quantum information processing. On grounds of the discussed material, we reason about possible future development of quantum game theory and its impact on information processing and the emerging information society. The idea of quantum artificial intelligence is explained. URL: http://d.repec.org/n?u=RePEc:sla:eakjkl:22&r=all 100. Party formation in single-issue politics Martin J. Osborne Rabee Tourky We study party formation in a general model of collective decision-making, modelling parties as agglomerations of policy positions championed by decision-makers. We show that in the presence of economies of party size and a one-dimensional policy space, players agglomerate into exactly two parties. This result does not depend on the magnitude of the economies of party size or sensitively on the nature of the individuals\' preferences. Our analysis encompasses several models, including decision- making in committees with costly participation and representative democracy in which the legislature is elected by citizens, for a wide range of electoral systems including plurality voting and proportional representation. The result implies that a multiplicity of parties hinges on the presence of more than one significant political issue or of diseconomies of party size. JEL: D70 D72 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-174&r=all 101. Estimation of Panel Data Models with Binary Indicators when Treatment Effects are not Constant over Time Audrey Laporte Frank Windmeijer We show that two commonly employed estimation procedures to deal with correlated unobserved heterogeneity in panel data models, within-groups and first-differenced OLS, can lead to very different estimates of treatment effects when these are not constant over time and treatment is a state that only changes occasionally. It is therefore important to allow for flexible time varying treatment effects when estimating panel data models with binary indicator variables as is illustrated by an example of the effects of marital status on mental wellbeing. Keywords: panel data, treatment effects. JEL: C23 C51 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:tor:tecipa:laporte-04-01&r=all 102. Extinction by Miscalculation: Mart R Gross Pablo Montagnes Mike Parkes Paul Riis Barbara Roberts Matthew A Turner JEL: Q22 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-175&r=all 103. MODELLI DI SVILUPPO LOCALE. I DISTRETTI INDUSTRIALI E LA PICCOLA E MEDIA IMPRESA: L’ESPERIENZA SPAGNOLA Nicola Boccella Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ufg:qdsems:08-2005&r=all 104. A Note on Instability and Indeterminacy in Search and Matching Models Thomas Lubik Michael Krause We demonstrate the possibility of indeterminacy and non- existence of equilibrium dynamics in a standard business cycle model with search and matching frictions in the labor market. Our results arise for empirically plausible parametrizations and do not rely upon a mechanism such as increasing returns. Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:jhu:papers:518&r=all