---------------------------------------------------------------------------- NEP: New Economics Papers All new papers ---------------------------------------------------------------------------- Edited by: Marco Novarese http://ideas.repec.org/e/pno2.html Universita del Piemonte Orientale Date: 2005-06-27 Papers: 199 This document is in the public domain, feel free to circulate it. ++++++++++++++++++++++++++++++++++++++++++++++++++ + Note: Access to full contents may be restricted+ ++++++++++++++++++++++++++++++++++++++++++++++++++ 1. A Note on Parallelizing the Parameterized Expectations Algorithm Michael Creel The parameterized expectations algorithm (PEA) involves a long simulation and a nonlinear least squares (NLS) fit, both embedded in a loop. Both steps are natural candidates for parallelization. This note shows that parallelization can lead to important speedups for the PEA. I provide example code for a simple model that can serve as a template for parallelization of more interesting models, as well as a download link for an image of a bootable CD that allows creation of a cluster and execution of the example code in minutes, with no need to install any software. Keywords: parameterized expectations, parallel computing JEL: E27 C63 C88 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:aub:autbar:651.05&r=all 2. India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 1 Roy Bahl (Andrew Young School of Policy Studies) Eunice Heredia-Ortiz (Andrew Young School of Policy Studies) Jorge Martinez-Vazquez (Andrew Young School of Policy Studies) Mark Rider (Andrew Young School of Policy Studies) India is a Union of 28 States, two Union Territories with legislatures, and five Union Territories without legislatures. The 7th Schedule of India’s Constitution provides for a separate State List, which enumerates exclusive legislative and executive authority that lies with state governments. The State List entrusts major responsibilities in the areas of human and physical development to the states. These responsibilities require major expenditures by the states, but the tax revenue sources assigned to the states, although they have not been fully used, are not sufficient to meet these expenditure responsibilities. The resulting fiscal imbalances of the states is addressed through a complex system of intergovernmental transfers in various forms and through several other channels, including borrowings. Over the years, in practice, the States of India have sought to finance their increasing needs for expenditures through different forms of transfers from the Union Government and loans, rather than by raising additional tax revenues and/or charging for services delivered. This has resulted in the states running large revenue and fiscal deficits and accumulating potentially unsustainable debt burdens. In this process, most states have compromised budgetary discipline, resorted to off-budget forms of borrowings, and accumulated large contingent liabilities, with the attendant risks of default. The lack of fiscal discipline among the states is symptomatic of a flawed intergovernmental fiscal system. In addition to the lack of aggregate fiscal discipline, the level and quality of services delivered by the states are well below where they ought to be with the money actually spent. There is much evidence of inefficient service delivery. For example, many states have high rates of illiteracy, particularly among women, and high infant and maternal mortality rates. In addition, the quality of economic services provided by the states, particularly electricity and transportation, is poor. Keywords: india,intergovernmetnal, fiscal transfers, government expenditures Date: 2005-06-01 URL: http://d.repec.org/n?u=RePEc:ays:ispwps:paper05141&r=all 3. The Management of Digital Rights in Pay TV Campbell Cowie Sandeep Kapur (School of Economics, Mathematics & Statistics, Birkbeck College) Successful roll-out of Digital Rights Management (DRM) solutions has the potential to transform the economics of pay television. This paper explains how a technology that is being developed as a potential solution to the challenge posed by the widespread theft of intellectual property (piracy) may ultimately support the development of new business models. These new business models could trigger a radical change in the sources of market power in the supply chain, increasing the bargaining power of content companies relative to vertically integrated platform operators. The paper examines some of the regulatory challenges that the new business models and the new technology raise Keywords: Digital rights management, pay television, competition JEL: L1 L5 L82 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:bbk:bbkefp:0510&r=all 4. Buyback of Colombian Sovereign Debt Peter Rowland At a request from the Ministry of Finance, Banco de la Republica last year carried out an investigation into the feasibility to use parts of the foreign reserves to buy back some of Colombia’s outstanding sovereign U.S.-dollar debt. This project resulted in two thorough technical reports. This paper aims to complement these reports by a general discussion on the subject. Even if many economists will find the discussion and the empirical results interesting, the main target group of the paper is professionals and policy makers without a background in Economics or Finance. The paper discusses emerging market debt in general, the Colombian debt in particular, and the current level of the Colombian foreign reserves. It, thereafter, continues by discussing buyback of sovereign debt, and what a country could gain or lose from such a buyback and why. The paper also includes a cross-country empirical analysis of the relationship between the sovereign spread of the outstanding debt of a country and its foreign reserve levels. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:331&r=all 5. Sobre los Efectos Macroeconomicos de la Composicion de la Deuda Publica en Colombia Franz Hamann Julian Perez Paulina Restrepo Este articulo presenta un analisis cuantitativo del impacto macroeconomico de la forma como se financia el deficit fiscal en una economia pequena y abierta. En particular, nos enfocamos en evaluar el impacto macroeconomico de una situacion en la que, dado un nivel de deficit fiscal, el gobierno decide entre financiarlo con deuda domestica o externa. Para este proposito empleamos un modelo de equilibrio general dinamico y estocastico para una economia pequena y abierta. Al calibrar el modelo a la economia colombiana, encontramos que los efectos de una sustitucion de deuda publica externa por interna dependen de que tan permanente sea dicha sustitucion. Una sustitucion transitoria tiene efectos macroeconomicos despreciables, con excepcion de su impacto sobre los flujos de capital privados ("efecto portafolio"). Es decir, un aumento de la deuda publica domestica vis a vis una reduccion en la externa, es balanceado por una reduccion de los activos externos netos privados. Por el contrario, una sustitucion permanente de un 10% de deuda externa por domestica tiene efectos macroeconomicos transitorios pero considerables sobre la actividad real y los flujos de capital. Dicha recomposicion genera un aumento en los activos externos netos de un 5% acompanada de una depreciacion nominal cercana al 1 %. Aunque nuestros resultados son generales en ambientes con flexibilidad de precios, especulamos que pueden variar en presencia de incertidumbre acerca de la sostenibilidad de las finanzas publicas y/o rigideces nominales y reales. Keywords: Politica Fiscal; Composicion de deuda Publica; Flujos de Capital; Colombia JEL: F41 H60 URL: http://d.repec.org/n?u=RePEc:bdr:borrec:332&r=all 6. Demanda de Exportaciones no Tradicionales en Colombia Juan Nicolas Hernandez El proposito de este trabajo es estudiar y ponderar las posibles relaciones existentes entre el nivel de las exportaciones no tradicionales colombianas totales y segun socio comercial, con el PIB del pais que demanda dichas exportaciones y el indice de tasa de cambio real bilateral o total segun corresponda. La deduccion de esta funcion de demanda de exportaciones no tradicionales en Colombia se lleva a cabo a traves de un analisis de cointegracion multivariado, el cual examina la existencia de una relacion de largo plazo entre las exportaciones menores, la demanda externa y los precios relativos. La interpretacion de las respectivas elasticidades comprende varios enfoques que van desde la obtencion de las mismas a partir del vector de cointegracion hasta el analisis de la funcion de impulso respuesta. La conveniencia de uno u otro enfoque se analiza mas adelante. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:333&r=all 7. Derivative Markets' Impact on Colombian Monetary Policy Esteban Gomez Diego Vasquez Camilo Zea Derivatives are contingent claims that complete financial markets. Their use allow agents and firms to ameliorate the impact over con- sumption, production and investment given a change in relative prices induced by an active monetary policy. In this sense, derivatives gene- rate in some cases a loss in the effectiveness of the traditional monetary transmission channels in the short run, and in others, they promote an increase in the speed of transmission itself. Using an investment model, the impact of the use of interest rate and exchange rate derivatives in the dilution of colombian monetary channels is verified. Empirical exercises suggest that monetary policy has lost effectiveness in the short run.In spite of the surprise this result may offer given the relative im- matureness of domestic derivative markets, the marginal effect of these instruments appears to be significant, in the face of local financial mar- kets' imperfections. In addition, not only the hedge directly taken by firms with access to this instruments matter; there could be hedging spill-overs whenever commercial banks use derivatives, which allow for a more stable and cheap credit supply for firms with no access to those markets. The natural recommendation deriving from this conclusion suggests an urgent analysis of the derivatives impact over the speed of monetary transmission in Colombia. Keywords: Derivatives; Monetary Policy Transmission Channels; Investment JEL: E22 E52 G11 URL: http://d.repec.org/n?u=RePEc:bdr:borrec:334&r=all 8. Economia Subterranea en Colombia 1976-2003: Una medicion a partir de la Demanda de Efectivo Carlos Arango A. Martha Misas Enrique Lopez La economia subterranea (ES), definida ampliamente como aquella asociada con actividades al margen del codigo legal de un pais, es de particular relevancia en Colombia debido al alcance que tiene la economia del narcotrafico y la economia informal evasora de la legislacion fiscal y laboral. Esto es particularmente relevante no solo para el Banco Central, pues la ES tiene una ingerencia directa en la demanda de efectivo, sino tambien por sus implicaciones fiscales e institucionales. En este trabajo se hace una revision critica del estado del arte en la estimacion de la ES representado en los modelos estructurales: "multiple indicators multiple causes" (MIMIC) y "dynamic multiple indicators multiple causes" (DYMIMIC). En particular, se documenta el posible sesgo de variable omitida que estos pueden presentar en su estimacion y las ventajas que pueden tener representaciones mas generales del tipo estado- espacio estimadas mediante filtro de Kalman. Este ultimo enfoque es aplicado al caso colombiano donde se parte de una funcion de demanda de efectivo y se estima la dinamica y tamano de la ES en el periodo 1976-2003. Debido a los limitados grados de libertad, se calcularon intervalos de confianza implementando "bootstrapping" para establecer la significancia de las distintas "causas" de la ES. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:335&r=all 9. Efectividad de la Intervencion Discrecional del Banco de la Republica en el Mercado Cambiario Jorge Toro Juan Manuel Julio En este trabajo se hace una evaluacion de la efectividad de la intervencion discrecional utilizando una base de datos unica que contiene informacion de alta frecuencia sobre el comportamiento intradia de la tasa de cambio, y de la intervencion del Banco de la Republica. Se estima un modelo ARCH para los retornos (variaciones) de la tasa de cambio en intervalos de diez minutos. Se encuentra que la intervencion obtiene el efecto deseado (un incremento permanente en la tasa de devaluacion) solo si se emite una senal creible y no ambigua, acompanada de montos de intervencion significativos. Adicionalmente, se obtiene que el diferencial entre la tasa de interes interna y externa es un determinante fundamental del retorno promedio. El conflicto entre el esquema de inflacion objetivo y la intervencion cambiaria ha debilitado la credibilidad de los agentes sobre la efectividad de la intervencion, lo que se ha reflejado en un incremento de la volatilidad de los retornos. Los resultados econometricos son consistentes con la transmision de los efectos a traves del canal de Microestructura, y de la debilidad del canal de senales. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:336&r=all 10. La tasa de cambio Real en Colombia. ?Muy Lejos del Equilibrio? Juan Jose Echavarria Diego Vasquez Mauricio Villamizar La discusion sobre el comportamiento y los determinantes de la tasa de cambio ha resurgido en Colombia a raiz de la revaluacion que tuvo lugar en 2004 (cercana a 12%, la mayor en la region) y la que ha tenido lugar en 2005. El sector privado en su conjunto ha manifestado honda preocupacion ante lo sucedido, incluso con el apoyo de algunos grupos que podrian beneficiarse transitoriamente con la revaluacion. En este trabajo se presenta la evolucion de diferentes tasas de cambio, se consideran sus determinantes, con base en los cuales se explica la revaluacion de 1991-97 y la posterior devaluacion de 1997- 03. Luego de comparar nuestros resultados con los de otros trabajos sobre Colombia, la Seccion final discute cuan lejos del equilibrio se encuentra la tasa de cambio actual. Se define la tasa de cambio de equilibrio o de largo plazo como aquella que resulta al remover los elementos especulativos (reflejo de disturbios en los mercados de activos) y ciclicos (dadas las rigideces en precios y salarios). Dicha tasa es compatible con una balanza de pagos sostenible en el largo plazo para un nivel dado de los fundamentos. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:337&r=all 11. Tasa de cambio y Crecimiento Economico en Colombia Durante la Ultima Decada Juan Jose Echavarria Maria Angelica Arbelaez Este documento utiliza el modelo sugerido por Bleakley & Cowan ( 2002) para analizar el impacto de la tasa de cambio real sobre la inversion, las ventas y las utilidades de las empresas colombianas en el periodo 1994- 2002. Se encuentra un impacto claramente positivo. Tres factores explican la respuesta favorable a la tasa de cambio: la respuesta de los exportadores e importadores es alta y rapida en Colombia (fuertes efectos competitividad); el nivel de deuda externa es mucho menor que en otros paises de la region y ha descendido en los ultimos anos; , y existe un calce entre actividad y deuda (se endeudan mas las firmas exportadoras y las multinacionales). El stock de capital inicial se corrige con base en la metodologia sugerida por Harberger (1969), y la informacion sobre deuda externa se mejora sensiblemente al utilizar los informacion interna del Banco de la Republica. Se utiliza la tecnica econometrica sugerida por Arellano & Bover (1995), apropiada cuando el numero de anos es corto y la persistencia de la variable dependiente es alta, pero tambien se reportan los resultados con la metodologia sugerida por Arellano & Bond (1991). Los resultados de ambas metodologias resultan consistentes, en parte por que el nivel de persistencia observado para la variable dependiente resulta relativamente baja. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:338&r=all 12. The Stature of the Colombian Elite Before the Onset of Industrialization, 1870-1919 Adolfo Meisel Margarita Vega The average height of Colombian women increased 8.95 cm between 1905 and 1985 and of men 8.96 cm in the same time period. Thus the country was a success story according to international standards in this respect. The information for the adult height of Colombians born between 1905 and 1985 was obtained from a database with more than 9 million observations constructed with the national ID cards. This implies that the results are indicative of what happened to the overall population. For the pre-industrial era in Colombia, which is before the 20th century, information on height is only available from 1870. The source in this case is the records of the passports issued to Colombian citizens, for which we have obtained about 17.000 observations. The analysis of those records for the period 1870-1919 reveals some striking results. In the first place, the long run behavior of height was stable, unlike what is observed with the national ID card records, beginning in 1905, in which case heights were increasing. The group included in the passport records is much taller than those from the ID card. For the period 1905-1909 the average passport height for men was 168.7 cm compared with 162 cm for national ID cards. In the case of women the former had an average height of 158 cm and the later 150 cm. Another characteristic found in the passport sample is that there were almost no regional differences, unlike what is observed in the case of the national ID cards. The reason why the behavior of the height of Colombians obtained in the passports differs from the one recorded in the national ID cards is that in the 19th century and early 20th century Colombians who traveled abroad, mainly to Europe and the US, belonged to the elite. Thus, they seemed to have good levels of nutrition and living conditions which made them relatively tall even by the standards of European countries at that time. However, although tall by the standards of the 19th century these Colombians had an average height which was below Colombians born in 1985. While the average height for men in this group in 1900 was 168.2 cms, Colombians born in 1985 grew to an average height of 170.6 cm. Thus, the health conditions under which the elite found itself was holding their height down. Only until the late 1920’s, when the earliest the international advances in modern medical technology would have been felt, could many of the health impediments for advances in height would have begun to be eliminated. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:339&r=all 13. Depressions in the Colombian Economic Growth Durng the XX Century: A Markov Switching Regime Model Martha Misas Maria Teresa Ramirez In this paper, we modeled the Colombian long run economic growth 1925-2003) using a tworegime first order Markov switching model. We found evidence of non-linearity in the annual rate of economic growth. The results show that changes between regimes are sudden and sporadic. The Colombian economy remains in the sustainable growth regime most of the time. The turning points from the Markov switching model capture very well the behavior of real output through time. In fact, they identify the four main depressions of the century. Keywords: Markov switching regime model, economic growth, fluctuations, Colombia JEL: O40 C22 E32 N16 URL: http://d.repec.org/n?u=RePEc:bdr:borrec:340&r=all 14. Regional Structural Changes in Colombia: An Input-Output Approach Jaime Bonet No previous work has focused on the analysis of the regional and interregional structure and structural changes in Colombia. An initial exploration using a parsimonious approach to the measurement of interregional interaction suggested a country with limited spatial interdependency. These findings were evaluated by taking advantage of a newly constructed interregional input- output model to measure the interactions within and between the Colombian regions. The direct and indirect production linkages effects are captured through the evaluation of the Leontief inverse matrices. The results suggest that key sectors have moved from primary and secondary sectors to tertiary sectors, which is a movement observed in the economic development process. However, it can be argued that the regional economies do not have exactly the same linkage structures. These differences are the result of discrepancies in the dominant sectors in each economy. The interregional linkages reveal a country with self-sufficient sectors in most of the regions, which supports the idea of a country with relatively poor interregional dependences, results that were also found in previous studies. The fact that the powerful backward and forward linkages are identified in the most prosperous regions instead of the lagged ones implies that the regional inequalities are likely to be sustained. URL: http://d.repec.org/n?u=RePEc:bdr:borrec:341&r=all 15. Speculation in Standard Auctions with Resale Rod Garrat Thomas Troger In standard auctions with symmetric, independent private value bidders resale creates a role for a speculator - a bidder who is commonly known to have no use value for the good on sale. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions. Keywords: standard auctions, speculation, resale, efficiency JEL: D44 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:bon:bonedp:bgse10_2005&r=all 16. A Note on Negative Electoral Advertising Subhadip Chakrabarti In their seminal paper, Harrington and Hess (1996) discuss a model where candidates differ along two dimensions - ideology which is modeled by the standard Hotelling-Downs formulation and valence factors which encompass traits which all voters agree as desirable. While valence factor is given, the voter perception of a candidate’s ideology can be influenced via advertising. In this expository note, we extend the model model to take account of valence as well as ideological advertising but we restrict our attention only to negative advertising. We find that when the available resources are sufficiently small and certain technical conditions are fulfilled, the expected result holds, namely, the candidate with the higher initial valence index will run a relatively personal campaign while the candidate with the lower initial valence index will run an ideological campaign. Keywords: Negative Advertising, Electoral Contests JEL: C72 D72 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:bon:bonedp:bgse7_2005&r=all 17. Produktdesign und Semi-Statische Absicherung von Turbo- Zertifikaten Antje Mahayni Michael Suchanecki Turbo-Certificates are one of the most popular structured equity products for private investors in Germany. They can be regarded as special forms of barrier options. The relation between the barrier level and the strike price is especially important for the design of these products. By using a certain choice of these parameters, the issuer is able to obtain an almost static (super-) hedge in standard option contracts. If the barrier level is equal to the strike, the upper price bound of a Turbo-Long- Certificate coincides with the value of a forward contract. Therefore, in the case of a Turbo-Short-Certificate, the forward implies only a lower price bound. It is shown that in general, the issuer can neither hedge a single certificate nor a portfolio of certificates without using standard options. Keywords: Turbo-Zertifikate, Put-Call-Symmetrie, Static Hedging, Barrier-Optionen, Produktdesign JEL: G10 G13 G21 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:bon:bonedp:bgse8_2005&r=all 18. A Characterization of the Distributions That Imply Existence of Linear Equilbria in the Kyle-Model Georg Noldeke Thomas Troger The existence of a linear equilibrium in Kyle's model of market making with multiple, symmetrically informed strategic traders is implied for any number of strategic traders if the joint distribution of the underlying exogenous random variables is elliptical. The reverse implication has been shown for the case in which the random variables are independent and have finite second moments. Here we extend this result to the case in which the underlying random variables are not necessarily independent and their joint distribution is determined by its moments. Keywords: Market Microstructure, Kyle Model, Linear Equilibria, Elliptical Distributions JEL: G14 D82 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:bon:bonedp:bgse9_2005&r=all 19. Acquisition and disclosure of genetic information under alternative policy regimes Deborah Wilson A current policy issue is whether, and if so under what circumstances, insurance companies should be given access to genetic test results. The insurance industry argues for mandatory disclosure in order to avoid problems of adverse selection; genetic interest groups argue for a moratorium or legislation preventing such disclosure; a third option would be a voluntary consent law. The purpose of this paper is to investigate the impact of alternative policies on individuals’ incentives to both acquire genetic information and to disclose it to insurers. The theoretical framework used to inform this analysis is provided by the ‘games of persuasion’ literature, in which one agent tries to influence another agent’s decision by selectively withholding her private information regarding quality. The application of the theoretical framework to this policy context yields surprising results. Individuals have the incentive to acquire genetic information and to disclose the test results if disclosure is voluntary. If, however, they are obliged to disclose the results of any genetic tests they have taken, their incentive may be not to acquire such information. I discuss the policy implications of these findings both from the point of view of the insurance industry and from a public health perspective. Keywords: Genetic Information, Disclosure, Insurance JEL: D8 I1 Date: 2005 URL: http://d.repec.org/n?u=RePEc:bri:cmpowp:05/118&r=all 20. Worker Flows, Job Flows and Unemployment in a Matching Model Simon Burgess Helene Turon Standard matching models of unemployment assume that workers and job flows are identical. This is in stark contrast to empirical evidence that job flows in fact only account for a fraction of worker ?ows, that unemployment exits only account for a fraction of hires and that these fractions vary over the cycle. In this paper, we develop and calibrate a model based on the Mortensen and Pissarides approach but that emphasises this issue. We show that this matters - that it has very different implications for our view of unemployment dynamics. The key features of our model relate to the search options of the worker, and the job creation decision by firms. We allow workers to search whilst employed, and firms to re-advertise jobs that have been quit from. This leads us to use a different job creation process, whereby potential vacancies, or job 'ideas', arise at a finite rate per period over a range of idiosyncratic productivities. In the standard setting, there is an unlimited supply of potential vacancies at the top idiosyncratic productivity. The main results are as follows. First, the presence of on-the-job search has a substantial impact on labour market equilibrium, whereby equilibrium unemployment is lower and exhibits a higher turnover rate. On-the-job search renders the unemployment inflow rate more sensitive to the cycle: in all cases, the inflow rate is found to be more cyclically sensitive than the outflow rate, suggesting that most unemployment dynamics occur through this channel. This confrms empirical results for Great Britain (Burgess and Turon ( 2005)). Second, our model offers some insight into a (two-way) relationship between job-to-job flows, which drives the difference between worker and job flows, and the extent of wage dispersion. More wage dispersion increases the incentive to search on-the-job and more on-the-job search widens the range of viable productivities and leads to lower wages at the bottom of the wage distribution, thereby increasing wage dispersion. Third, changes in the model's exogenous parameters impact unemployment to a considerable degree by changing the level of employed job search. Keywords: Unemployment, on-the-job search, worker flows, job flows, matching. JEL: J64 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:bri:uobdis:05/572&r=all 21. The Cyclical Behavior of Equilibrium Unemployment and Vacancies – A Comment Simon Burgess Helene Turon The Mortensen-Pissarides model is an attractive model because it is tractable, delivers some intuitive comparative statics and permits policy analysis. However, Shimer (2005) shows that the model generates far too little volatility in its key variables - unemployment and vacancies - relative to the variation in the shock variables. Shimer identifes the flexibility of wages as the key issue. In this Comment, we show that it is possible to generate suffcient volatility in unemployment and vacancies whilst retaining the standard wage determination process. We set out a model with two important changes from the Mortensen- Pissarides approach: job search by the employed is allowed, and the vacancy creation condition is changed to allow churning of workers. Calibrating the model to UK data, we show that our model can produce volatility in the unemployment and vacancy series to match the data; we confirm for the UK that the Mortensen- Pissarides model cannot, as shown by Shimer for the US. Keywords: Unemployment, on-the-job search, worker flows, job flows, matching. JEL: J64 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:bri:uobdis:05/573&r=all 22. Diferenciacao intersetorial na interacao entre empresas e universidades no Brasil: notas introdutorias sobre as especificidades da interacao entre ciencia e tecnologia em sistemas de inovacao imaturos Eduardo da Motta e Albuquerque (Cedeplar-UFMG) Leandro Alves Silva (Cedeplar-UFMG) Luciano Povoa (Cedeplar-UFMG) This article presents results based on special tabulations prepared by IBGE, using data from PINTEC in order to focus on the interaction between firms and universities in the Brazilian industry. The basic hypothesis states that the relevance of universities as a source of information to the firms’ innovation activities is greater when firms are engaged in R&D activities (both internal and external). The hypothesis is not rejected neither for the general industry nor for inter-sectorial analysis. Keywords: systems, industrial R&D, universities JEL: O30 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cdp:texdis:td264&r=all 23. Economic growth, convergence and quality of human capital formation system Luciano Nakabashi (Cedeplar-UFMG) Lizia de Figueiredo (Cedeplar-UFMG) This paper’s goal is to make use of a human capital proxy that takes into account quantitative and qualitative aspects of this factor to measure with a higher level of accuracy the impact of human capital on countries’ income level and rate of growth. The empirical study will take place by means of a comparative analysis of Mankiw, Romer and Weil’s 1992 paper. Keywords: human capital proxy, qualitative aspects of human capital JEL: C21 E13 I20 O11 O41 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cdp:texdis:td265&r=all 24. Relacion entre volatilidad de tasas de crecimiento del producto y volatilidad en el precio del stock de capital y su impacto en el nivel de inversion agregada de la economia Jose Pablo Dapena La tradicional regla marshalliana de inversion (o abandono) cuando el valor del activo subyacente es mayor (o menor) al costo de la inversion se ve modificada cuando existen situaciones de incertidumbre e irreversibilidad, generando un componente de opcion en dichas decisiones. Este componente se ve afectado por la volatilidad del activo subyacente, que a su vez puede encontrar en el agregado su origen en la volatilidad de la tasa de crecimiento de la economia. La evidencia de volatilidad afecta las decisiones de inversion en el agregado, y repercute en el proceso de formacion de capital y por ende en las posibilidades de crecimiento a largo plazo. Se explora de manera cuantitativa la relacion entre tasas de crecimiento del producto y volatilidad del precio del stock de capital. Keywords: volatilidad, opciones reales, inversion, mercado de capitales. JEL: G00 G31 O16 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cem:doctra:294&r=all 25. Dictators and Their Viziers: Agency Problems in Dictatorships George Egorov (Centre for Economic and Financial Research) ( New Economic School) Constantin Sonin (Centre for Economic and Financial Research) The possibility of treason by a close associate has been a nightmare of most dictators throughout history. Better informed viziers are also better able to discriminate among potential plotters, and this makes them more risky subordinates for the dictator. To avoid this, dictators, especially which are weak and vulnerable, sacrifice the competence of their agents, hiring mediocre but loyal subordinates. One reason why democracies generally witness more talented people in the government, is the dictator’s inability to commit to the optimal (less than the capital) punishment for those who unsuccessfully plotted to remove him from power. We model a principal-agent game between a dictator and his (probably, few) viziers both in static and dynamic perspectives. The dynamic model allows us to focus on the succession problem the insecure dictators face. Keywords: Russia; Transition; Date: 2005 URL: http://d.repec.org/n?u=RePEc:cfr:cefirw:w0043&r=all 26. Efficacite et navigabilite d'un site web :
rien ne sert de courir, il faut aller dans la bonne direction Jacques Nantel Abdelouahab Mekki-Berrada

Contrairement a l’idee generalement vehiculee, ni le temps mis par un consommateur pour accomplir une tache sur un site Web, ni le nombre de clics necessaires pour y parvenir, n’affectent l’efficacite percue ou reelle de ce site. Par contre, le nombre de culs-de-sac que rencontre ce meme consommateur aura un effet determinant sur sa perception d’un site. La presente recherche a ete effectuee en collaboration avec plusieurs entreprises canadiennes. Les comportements de navigation de plus de sept cents consommateurs ont ete analyses selon une methodologie basee sur la triangulation de trois methodes de recherche. Etablis a partir d’une serie d’echelles de mesures, d’analyses de protocoles ainsi que de l’analyse des parcours de navigation (clickstream analysis), les resultats obtenus demontrent de maniere probante que les consommateurs ne privilegient pas necessairement les sites concis et parcimonieux, mais souhaitent plutot qu’un site reflete leurs propres inferences de recherche, comportant ainsi moins de risques de s’y perdre. Ces resultats suggerent une facon differente de developper des sites Web destines aux consommateurs, une facon qui tienne davantage compte de l’avis des usagers que de celui des developpeurs. Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:cir:cirbur:2005rb-02&r=all 27. Partner Selection in R&D Cooperation Gamal Atallah In this paper we extend the R&D cooperation model to asymmetric firms, focusing on the incentives for cooperating with firms characterized by different levels of efficiency. Three firms differentiated by their cost levels invest in cost-reducing R&D before competing in output. Firms may cooperate in R&D, which implies both R&D coordination and perfect information sharing. It is found that firms’ preferences over whom to cooperate with depend on spillovers and on cost differences between firms. With low (high) spillovers, a firm prefers to cooperate with the most ( least) efficient among the remaining firms. As the cost differential between firms increases, efficient (inefficient) firms prefer to cooperate with the most (least) efficient firm more often. For very high spillovers, a firm prefers to be excluded from R&D cooperation. The equilibrium configuration is that the most efficient firms cooperate for low spillovers, while all firms cooperate for intermediate spillovers. For high spillovers, the equilibrium is for all firms to cooperate when the cost differential is sufficiently low, but depends on the bargaining mechanism when the cost differential is high. The model constitutes a generalization of the standard R&D model with symmetric firms.

Ce papier analyse les incitations a la cooperation technologique entre des firmes differenciees par leur niveau d’efficacite. Trois firmes dotees de couts de production differents investissent dans la R&D visant a reduire leurs couts de production, avant de se concurrencer en quantites. Les firmes peuvent cooperer en R&D, ce qui implique la coordination des investissements en R&D et le partage d’information. Il est demontre que les preferences quant au choix du partenaire dependent des externalites de recherche et du differentiel de couts. Lorsque les externalites de recherche sont faibles (elevees), une firme prefere cooperer avec le partenaire le plus (moins) efficace qui est disponible. A mesure que le differentiel de couts augmente, les firmes efficaces (inefficaces) preferent cooperer avec les partenaires les plus (moins) efficaces plus souvent. Pour des niveaux d’externalites tres eleves, une firme prefere etre exclue de la cooperation en R&D. La configuration d’equilibre est que les firmes les plus efficaces cooperent lorsque les externalites sont faibles, alors que toutes les firmes cooperent pour des niveaux intermediaires des externalites. Lorsque les externalites sont elevees, l’equilibre est que toutes les firmes cooperent lorsque le differentiel de couts est suffisamment faible, mais depend de la structure de negociation lorsque ce differentiel est eleve. Le modele constitue une generalisation du modele de concurrence en R&D avec des firmes symetriques. Keywords: asymmetric firms, R&D cooperation, R&D spillovers, research joint ventures, cooperation en R&D, consortiums de recherche, firmes asymetriques, externalites de recherche JEL: L13 O33 Date: 2005-06-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-24&r=all 28. Robust Implementation: The Role of Large Type Spaces Dirk Bergemann Stephen Morris Date: 2005-06-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000116&r=all 29. A Simple Theory of Temptation and Self-Control Faruk Gul Wolfgang Pesendorfer Date: 2005-06-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000121&r=all 30. Efficient Kidney Exchange: Coincidence of Wants in a Structured Market Alvin E Roth Tayfun Sonmez M. Utku Unver Date: 2005-06-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000126&r=all 31. An Ascending Vickrey Auction for Selling Bases of a Matroid Sushil Bikhchandani Sven de Vries James Schummer Rakesh V. Vohra Date: 2005-06-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000133&r=all 32. Note: Using the Emergent Seed to Completely Characterize 'Evolution and Information in a Gift Giving Game.' Kevin Hasker Date: 2005-06-24 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000142&r=all 33. A Note on Budget Balance under Interim Participation Constraints: The Case of Independent Types Tilman Borgers Peter Norman Date: 2005-06-24 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000147&r=all 34. US, Europe and the developing world: transatlantic challenges for world integration. Fabrizio Onida (CESPRI, Universita Bocconi, Milano) For more than a decade Europe has been lagging behind the US in growth of aggregate GDP, per capita GDP, productivity, employment, as well as in demographic selection of new firms and in the design of market-friendly regulations. While an increasing trade agglomeration around large "regional" areas (NAFTA, Asia-Pacific, Europe) has taken place in the last decades, the US has become the primary external market outlet for many partners, including Western Europe. Moreover, trends in stocks and flows of foreign direct investment, while reflecting the increasing share of developing Asia and (to a lesser extent) of Central-Eastern Europe as countries of destination, do reveal a persistent solid Transatlantic interdependence through multinational production. An accelerating world integration of low-wages/highly productive emerging economies raises in US and Europe mounting fears of "excessive competition", massive net job destruction, downward spiral in domestic wages. While most empirical evidence points to positive "trade multiplier effects" from integration of newly industrializing economies in world economic development, national governments and international institutions are under pressure to provide effective "trade adjustment" policy measures, mainly aimed at restructuring declining activities, re-training manpower, improving infrastructures for labour mobility, favouring more technology generation and diffusion. Europe is seriously lagging under this respect. After the failure of Cancun, both US and Europe share a big responsibility in providing new impetus to the ailing Doha Development Round. Under the pressure of the newly formed G-20, but also of the mounting tensions on the world political scenario (Islamic terrorism, Palestine, Middle East), both sides of the Atlantic seem aware of the great stakes and in search of new negotiating moves. Keywords: Europe; Transatlantic; Integration JEL: F14 F15 F23 Date: 2005-05 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cri:cespri:wp164&r=all 35. Estimation and inference in dynamic unbalanced panel data models with a small number of individuals Giovanni S.F. Bruno (IEP, Universita Bocconi, Milano) This study describes a new Stata routine that computes bias- corrected LSDV estimators and thier bootstrap variance-covariance matrix for dynamic (possibly) unbalanced panel data models. A Monte Carlo analysis is carried out to evaluate the finite-sample performance of the bias corrected LSDV estimators in comparison to the original LSDV estimators and three popular N-consistent estimators: Arellano-Bond, Anderson-Hsiao and Blundell-Bond. Results strongly support the bias-corrected LSDV estimators according to bias and root mean squared error criteria when the number of individuals is small. Keywords: Bias approximation; Unbalanced panels; Dynamic Panel data; LSDV estimator; Monte Carlo experiment; Bootstrap variance-covariance JEL: C23 C15 Date: 2005-05 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cri:cespri:wp165&r=all 36. Switching Costs, Consumers' Heterogeneity and Price Discrimination in the Mobile Communications Industry Nicoletta Corrocher (CESPRI, Universita Bocconi, Milano) Lorenzo Zirulia (CESPRI, Universita Bocconi, Milano) In this paper we develop a formal model that captures some basic features of competition in the mobile communications service industry. In a model of oligopolistic competition with price discrimination and switching costs, we study the role of firms’ installed base of consumers in providing the incentives to offer contracts for a new class of consumers with a lower willingness to pay. The model predicts that there exists an inverse relationship between the share of the leader in the market of consumers with high willingness to pay and its share in the market of consumers with low willingness to pay. This implies that market shares converge. If firms collude in the introduction of new contracts, convergence is milder. This result is consistent with the empirical evidence related to the mobile communications industry in different European countries, where we observe a convergence in market shares driven by the superior ability of followers to acquire new customers, who typically have lower willingness to pay as compared with early adopters. Keywords: Switching costs; Price discrimination; Mobile communications JEL: L13 L96 Date: 2005-05 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cri:cespri:wp166&r=all 37. R&D Networks with Heterogenous Firms Lorenzo Zirulia (CESPRI, Universita Bocconi, Milano) This paper models the formation of R&D networks in an industry where firms are technologically heterogenous, extending previous work by Goyal and Moraga (2001). While remaining competitors in the market side, firms share their R&D efforts on a pairwise base, to an extent that depends on their technological capabilities. First, we consider a four firms’ industry. In the class of symmetric networks, the complete network is the only pairwise stable network, although not necessarily profit or social welfare maximizing. Then, we extend the analysis to asymmetric structures in a three firms’ industry. Only the complete and the partially connected networks are possibly stable, but which network is stable depends on the level of heterogeneity and technological opportunities. The complete and partially connected networks are also the possible welfare and aggregate profit maximizing networks, but social and private incentives do not generally coincide. Finally, we consider the notion of strongly stable networks, where all the possible deviations by coalitions of agents are allowed. It turns out that in the four firms’ case, the complete network is very rarely strongly stable, while in the three firms’ case the partially connected network where two firms in different technological group are linked is, for a large subset of the parameter space, the only strongly stable network. Keywords: Strategic alliances; Networks; Research and development; Technological complementarities JEL: D21 D43 Date: 2005-05 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cri:cespri:wp167&r=all 38. The Scientific Productivity of Academic Inventors: New Evidence From Italian Data Stefano Breschi (CESPRI, Universita Bocconi, Milano) Francesco Lissoni (CESPRI, Universita Bocconi, Milano and University of Brescia, Italy) Fabio Montobbio (CESPRI, Universita Bocconi, Milano and Universita of Insubria, Varese, Italy) We investigate the scientific productivity of Italian academic inventors, namely academic researchers designated as inventors on patent applications to the European Patent Office, 1978-1999. We use a new longitudinal data set comprising 299 academic inventors, and as many matching controls (non-patenting researchers). We enquire whether a trade-off between publishing and patenting, or a trade-off between basic and applied research exists, on the basis of the number and quality of publications. We find no trace of such a trade- off, and find instead a strong and positive relationship between patenting and publishing, even in basic science. Our results suggest however that it is not patenting per se that boosts scientific productivity, but the advantage derived from solid links with industry, as the strongest correlation between publishing and patenting activity is found when patents are owned by business partners, rather than individual scientists or their universities. Keywords: Scientific productivity; Academic inventors; University patenting JEL: O34 O31 Date: 2005-05 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cri:cespri:wp168&r=all 39. If Star Scientists do not Patent: an Event History Analysis of Scientific Eminence and the Decision to Patent in the Academic World Mario Calderini (DSPEA, Polytechnic of Turin, Italy) Chiara Franzoni (University of Bergamo and CERIS (CNR), Italy) Andrea Vezzulli (Department of Economics, University of Milan, Italy) This paper contributes to the debate upon the trade-off between science and technology by looking at how the scientific performances of a researcher relate ex-ante to his/her attitude to patent, during his/her academic career. We run an event history analysis explaining the hazard for a scientist to become the inventor of a private-company -assigned patent as depending on publications and on personal, institutional and environmental characteristics. A striking result is that, although either productivity or quality, independently taken, are likely to increase the hazard to patent, top performers scientists, i.e. those scientists that publish a lot on highly-rated journals, are at very low risk. Keywords: Academic patenting; Research funding; Technology transfer JEL: O31 O34 O38 Date: 2005-06 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cri:cespri:wp169&r=all 40. Economics: the next physical science? J. Doyne Farmer Martin Shubik (Cowles Foundation, Yale University) Eric Smith We review an emerging body of work by physicists addressing questions of economic organization and function. We suggest that, beyond simply employing models familiar from physics to economic observables, remarkable regularities in economic data may suggest parts of social order that can usefully be incorporated into, and in turn can broaden, the conceptual structure of physics. Keywords: Economic theory, Physics, Econo-physics JEL: B49 C00 G00 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1520&r=all 41. A Note on a "Square-Root Rule" for Reinsurance Michael R. Powers (Temple University) Martin Shubik (Cowles Foundation, Yale University) In previous work, the current authors derived a mathematical expression for the optimal (or "saturation") number of reinsurers for a given number of primary insurers (see Powers and Shubik, 2001). In the current paper, we show analytically that, for large numbers of primary insurers, this mathematical expression provides a "square-root rule"; i.e., the optimal number of reinsurers in a market is given asymptotically by the square root of the total number of primary insurers. We note further that an analogous “fourth-root rule” applies to markets for retrocession (the reinsurance of reinsurance). Keywords: Primary insurance, Reinsurance, Market size, Square- root rule JEL: C72 G22 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1521&r=all 42. A Simple Approach to the Parametric Estimation of Potentially Nonstationary Diffusions Federico M. Bandi Peter C.B. Phillips (Cowles Foundation, Yale University) A simple and robust approach is proposed for the parametric estimation of scalar homogeneous stochastic differential equations. We specify a parametric class of diffusions and estimate the parameters of interest by minimizing criteria based on the integrated squared difference between kernel estimates of the drift and diffusion functions and their parametric counterparts. The procedure does not require simulations or approximations to the true transition density and has the simplicity of standard nonlinear least-squares methods in discrete-time. A complete asymptotic theory for the parametric estimates is developed. The limit theory relies on infill and long span asymptotics and is robust to deviations from stationarity, requiring only recurrence. Keywords: Diffusion, Drift, Local time, Parametric estimation, Semimartingale, Stochastic differential equation JEL: C14 C22 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1522&r=all 43. A Two-Stage Realized Volatility Approach to the Estimation for Diffusion Processes from Discrete Observations Peter C.B. Phillips (Cowles Foundation, Yale University) Jun Yu This paper motivates and introduces a two-stage method for estimating diffusion processes based on discretely sampled observations. In the first stage we make use of the feasible central limit theory for realized volatility, as recently developed in Barndorff-Nielsen and Shephard (2002), to provide a regression model for estimating the parameters in the diffusion function. In the second stage the in-fill likelihood function is derived by means of the Girsanov theorem and then used to estimate the parameters in the drift function. Consistency and asymptotic distribution theory for these estimates are established in various contexts. The finite sample performance of the proposed method is compared with that of the approximate maximum likelihood method of Ait-Sahalia (2002). Keywords: Maximum likelihood, Girsnov theorem, Discrete sampling, Continuous record, Realized volatility JEL: C13 C22 E43 G13 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1523&r=all 44. The Evolution of Our Preferences: Evidence from Capuchin- Monkey Trading Behavior M. Keith Chen (School of Management, Yale University) Venkat Lakshminarayanan Laurie Santos Behavioral economics has demonstrated systematic decision-making biases in both lab and field data. But are these biases learned or innate? We investigate this question using experiments on a novel set of subjects — capuchin monkeys. By introducing a fiat currency and trade to a capuchin colony, we are able to recover their preferences over a wide range of goods and risky choices. We show that standard price theory does a remarkably good job of describing capuchin purchasing behavior; capuchin monkeys react rationally to both price and wealth shocks. However, when capuchins are faced with more complex choices including risky gambles, they display many of the hallmark biases of human behavior, including reference-dependent choices and loss-aversion. Given that capuchins demonstrate little to no social learning and lack experience with abstract gambles, these results suggest that certain biases such as loss-aversion are an innate function of how our brains code experiences, rather than learned behavior or the result of misapplied heuristics. Keywords: Prospect theory, Loss aversion, Reference dependence, Evolution, Neuroeconomics, Capuchin monkeys, Monkey business JEL: C91 C99 D12 D46 D80 D81 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1524&r=all 45. Natural Concepts in Macroeconomics Ray C. Fair (Cowles Foundation, Yale University) Ragnar Frisch proposed in 1936 a procedure for estimating natural variable values by modifying what are now called structural macroeconometric models. This paper shows that Frisch’s procedure can be used to illuminate natural concepts using today’s models. The procedure also forces one to be precise regarding the assumptions used in moving from a short-run model to a medium-run or long-run model. Keywords: Natural concepts, Equilibrium JEL: E00 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1525&r=all 46. 05-05 "Teaching Ecological and Feminist Economics in the Principles Course" Neva Goodwin and Julie A. Nelson It can be difficult to incorporate ecological and feminist concerns into introductory courses based on neoclassical analysis. We have faced these issues head-on as we have worked on writing introductory economics textbooks, Microeconomics in Context ( Goodwin, Nelson, Ackerman and Weisskopf, 2005) and Macroeconomics in Context (in progress). In this essay, we will describe how we have modified the introductory curriculum to encompass these perspectives. URL: http://d.repec.org/n?u=RePEc:dae:daepap:05-05&r=all 47. Externalities of social capital : the role of values, norms and networks Butter, Frank A.G. den (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie ( Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics) Mosch, Robert H.J. The economic perspective on values and norms shows that they may bring about externalities for the society as a whole. This possibility of market failure provides a good reason for the government to follow closely the developments in values and norms, and the resulting behaviour in communities and networks. It justifies the initiative of Prime Minister Balkenende to organise the debate on these matters in the Netherlands (and, under the Dutch EU-presidency, in Europe). Networks can be associated both with positive (Putnam type) and with negative (Olson type) externalities. This paper discusses the various influences of values, norms and networks on socio-economic welfare and provides empirical evidence on these relationships. The focus of our own empirical analysis is on the Netherlands. Trust as part of social capital, and the role that values, norms and networks play as co- ordination mechanism, form important aspects both in the theoretical and in the empirical analysis. It appears that there has been no obvious decrease in these aspects of social capital in the Netherlands. It contrasts the findings of Putnam for the US. Keywords: social capital; values and norms; trust; networks; market failure JEL: D62 D70 H19 Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:vuarem:2004-10&r=all 48. Employing Travel Costs to Compare the Use Value of Competing Cultural Organizations Boter, Jaap (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics) Rouwendal, Jan Wedel, Michel Since recently, a number of studies have applied non-market valuation techniques to measure the value of cultural goods. All studies are single case applications and rely mostly on stated preferences, such as contingent valuation techniques. We compare the relative value of multiple, competing goods and show how revealed preferences, in particular travel costs, may be used for this. In addition, we account for heterogeneity. Using a unique transaction database with the visiting behavior of 80,821 Museum Cardholders to 108 Dutch museums, we propose a latent class application of a logit model to account for the different distances of museums to the population and for differences in willingness-to-travel. Keywords: museums; non-market valuation; revealed preferences; travel cost method Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:vuarem:2004-11&r=all 49. Culture's Influence on innovation adoption : A global study of manager's adoption intention of telecom innovations Frambach, Ruud T. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics) Herk, Hester van Agarwal, Manoj K. Diffusion patterns of products are known to differ significantly between countrie. Studies that mainly focused on consumer contexts in European countries show that culture has a significant effect on innovation diffusion and consumer innovativeness. In the present research we focus on adoption intentions of individual managers operating in a business-to- business context, for two telecommunication innovations. We expect rational motives to drive the adoption process more than national-cultural values. The study contains data from more than 3,200 respondents in 22 countries worldwide, including less developed countries. Results reveal that individual-level variables and economic characteristics of a country drive adoption more than national culture. Moreover, this effect seems stronger for the relatively newer and more expensive innovation. Keywords: international adoption; innovation; national culture; managers; worldwide survey Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:vuarem:2004-14&r=all 50. An empirical model of collective household labour supply with nonparticipation Bloemen, Hans G. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics) We present a structural empirical model of collective household labour supply. Following recent developments in the literature on collective household labour supply our model allows for the nonparticipation decision, along with the choice of working hours. We use the theoretical framework for the specification of a simultaneous model for hours, participation and wages of husband and wife. We discuss the problems of identification and statistical coherency that arise in the application of the collective household labour supply model. The model is estimated using a paneldata set of Dutch couples. The paneldata allow for the inclusion of random effects. The estimates allow us to check the underlying regularity conditions on individual preferences, and to obtain estimates of the sharing rule that governs the division of household income between husband and wife. Keywords: labour supply; household behaviour; collective model JEL: J22 Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:vuarem:2004-2&r=all 51. Kosten/Baten analyse als bestuurlijk baken in het milieubeleid Butter, Frank A.G. den (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie ( Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics) Een maatschappelijke kosten/baten analyse (KBA) kan ook bij complexe, wereldwijde "wicked" milieuproblemen met grote kennisleemten en onzekerheden van nut zijn. Wel verliest de KBA dan iets van de gebruikelijke functie als rekenmethode. Naarmate de problematiek complexer is en de onzekerheden groter zijn, is het nut van de maatschappelijke KBA vooral gelegen in het feit dat deze een bestuurlijk kader biedt om kennis over de aard van de milieuproblemen en de daarbij geldende belangen te verkrijgen. Deze kennis betreft niet alleen technisch-wetenschappelijke kennis over de processen en systemen die ten grondslag liggen aan de milieuproblematiek, maar ook de kennis over voorkeuren van de verschillende belanghebbenden en over eventuele belangentegenstellingen. Bij extreme onzekerheden en risicomijding kan het voorzorgbeginsel als rationele strategie bij de afweging van kosten en baten gelden. Keywords: kosten-baten analyse; milieubeleid; milieu Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:vuarem:2004-5&r=all 52. A spatial economic perspective on language acquisition : segregation, networking and assimilation of immigrants Florax, Raymond J.G.M. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie ( Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics) Graaff, Thomas de Waldorf, Brigitte S. Immigration and multiculturalism are at the heart of modern western societies. The issue of language acquisition of immigrants is intrinsically linked to immigration. We formally link language acquisition of immigrants to the relative size of the immigrant stock, employing a microeconomic trading framework. Our model allows for spatial interaction going beyond the immigrant's area of residence, and explicitly incorporates spatial segregation. In addition, behavioral differences of immigrants with respect to their level of assimilation into the host country as well as differences in networking within their own ethnic community are accounted for. We test our model for four non-western immigrant groups in the Netherlands using two different spatial scale levels. The empirical results reveal that there is only ambiguous support for the inverse relationship between size of the immigrant community and language acquisition or language proficiency in The Netherlands. We find instead, that there is strong support for language acquisition and understanding being positively influenced by assimilation to the host country's culture. Keywords: Immigration; segregation; networks; assimilation, language JEL: J15 J61 R12 R23 Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:vuarem:2004-6&r=all 53. Credit Booms in Emerging Market Economies: A Recipe for Banking Crises? Daniel Ottens Edwin Lambregts This paper investigates whether credit booms are an important warning signal for banking crises in Asian and Latin American emerging market economies. Based on a signalling leading indicator model, the results suggest that credit booms are indeed a prelude for banking crises, especially in Latin America. To minimise a policymaker's loss- function, it is optimal to take precautionary actions in the event credit growth rises substantially above its trend. Keywords: emerging markets; credit booms and banking crises JEL: E44 G10 G21 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:dnb:dnbwpp:046&r=all 54. Repeat exposure effects of internet advertising LEE, Janghyuk BRILEY, Donnel A. (Hong Kong University of Science and Technology) In this paper, we explain the repeat exposure effect of Internet advertising. By using a field data set of 34 advertising campaigns, we analyze functional forms of the repeat exposure effect of Internet advertising. Among four ad effectiveness measures including aided brand awareness, message recall, brand opinion (favorability), and purchase intent, only message recall shows substantial differences between control and exposures groups. Two patterns of repeating exposure effect on message recall are found: the one in monotonically increasing with a decreasing rate and the other in a quadratic form of inverted 'U'- shape with 'wearout' effect. Keywords: Internet; Advertising; Repeat exposure; Message recall JEL: M37 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:ebg:heccah:0809&r=all 55. La rentabilite des services dans les entreprises industrielles: "enquete sur un postulat" MALLERET, Veronique The working paper discusses the profitability of service offers in industrial firms. It first lists the main arguments supporting the theoretical debate, and then describes the results of a field study implemented in six industrial SME’s, which highlights the heterogeneity of their practices regarding the pricing and costing of service offers. The paper concludes by presenting the main conditions required to ensure the profitability of services in industrial firms. Keywords: profitability; services; pricing JEL: L00 L80 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:ebg:heccah:0811&r=all 56. Fertility determinants in modern Russia Boykov Andrey Roshchina Yana Economic models of fertile behavior are the theoretical background of this research. For empirical models estimates we use RLMS data (Russian Longitudinal Monitoring Survey) for 1994–2001. These models are estimated for following dependent variables: probability of childbearing, probability of pregnancy break (within the next year after polling), the desire to have a child in future. Many economic variables influence family decision-making on a childbearing, however nevertheless major factors which determine reproductive behavior, remain demographic age and quantity of children ever born) and cultural. Values and cultural factors remain more influencing propensity to parenthood, than economic. The importance of nationality, religiousness, satisfaction by financial position, and also frequencies of alcohol consuming is high. Distinctions between regions are essential, between cities and countryside too. Birth rate is higher in poorer regions, with lower level of female unemployment. Many economic factors which theoretically should influence decision-making on a birth of a child(employment, profession, education, incomes of women and their spouses, conditions of life) appeared insignificant or significant only in models for some samples of women. Keywords: Russia, fertile behavior, fertility, propensity to parenthood JEL: J13 Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-04e&r=all 57. Estimation of environmental efficiencies of economies and shadow prices of pollutants in countries in transition Salnykov Mykhaylo Zelenyuk Valentin Various measures of technical efficiency, such as output distance function, input distance function and directional distance function can be used as sustainability indicators in the case when some outputs produced are undesirable, such as pollution. Shadow prices of environmental pollution asses short run perspectives of increase in pollution when desirable output is increased and may serve as a reference value for environmental taxes and prices for international emission trade. We make an attempt to estimate environmental efficiencies of countries ( based on the output distance function with general directional vector) as well as shadow prices for selected pollutants (CO2, SO2 and NOx). Two alternative estimation approaches are employed: parametric (Translog specification) and nonparametric (DEA). Statistical characteristics of the obtained parametric estimates are assessed using the smooth homogeneous bootstrap technique. Our results indicate that, on average, countries value pollutants proportionally to their direct impact on human health (i.e. the most hazardous pollutants have the highest shadow prices). We find that in general both rich and poor countries can be fully environmentally efficient, while most of the countries in transition (CITs) turned out to be inefficient. Our findings imply that under emission permit trade agreements CITs will generally be permit sellers. By selling permits they will hamper their future ability of economic growth, thus some restrictions ( which we propose) must be made in such agreements to limit their unsustainability for CITs. Our estimates show that currently global wealth and pollution are allocated inefficiently. We determine that different estimation techniques provide with statistically different estimates. The work provides with illustrative examples of using the estimates to draw forecasts on environmental effect of economic growth; to determine price range on international pollution permit markets and to estimate economically justified rates of environmental taxation. Finally, we provide policy implications and outline potential directions for the future studies in the field. Keywords: Russia, pollution, environmental efficiency, shadow prices, bootstrap, countries in transition, parametric and nonparametric techniques, bootstrap JEL: Q56 H23 C67 D24 C15 Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-06e&r=all 58. Testing the Forecasting Performance of Ibex 35 Option- implied Risk-neutral Densities. Francisco Alonso (Bank of Spain) Roberto Blanco (Bank of Spain) Gonzalo Rubio (Universidad del Pais Vasco) Keywords: risk-neutral densities, forecasting performance JEL: G10 G12 Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:ehu:dfaeii:200509&r=all 59. Option-Implied Preferences Adjustments and Risk-Neutral Density Forecasts. Francisco Alonso (Bank of Spain) Roberto Blanco (Bank of Spain) Gonzalo Rubio (Universidad del Pais Vasco) Keywords: risk-adjustment, option-implied densities, forecasting performance JEL: G10 G12 Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:ehu:dfaeii:200510&r=all 60. Consumer Confidence and Yield Spreads in Europe. Eva Ferreira (Universidad del Pais Vasco) Maria Isabel Martinez (Universidad de Murcia) Eliseo Navarro (Universidad de Castilla La Mancha) Keywords: Economic Sentiment Indicator, yield spreads, consumer confidence expected real activi JEL: G12 E43 Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:ehu:dfaeii:200511&r=all 61. How does the New Keynesian Monetary Model fit in the ES and the Eurozone?. Ramon Maria-Dolores (Universidad de Murcia) Jesus Vazquez (Universidad del Pais Vasco) Keywords: Indirect inference, NKM model, Taylor rule, optimal policy JEL: C32 E30 E52 Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:ehu:dfaeii:200513&r=all 62. Nominal versus Real Convergence with Respect to EMU Accession.How to Cope with the Balassa-Samuelson Dilemma Paul de Grauwe Gunther Schnabl Keywords: Euro; EMU; EU-East-Central Europe; enlargement Date: 2004-10-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0137&r=all 63. A Bridge Too Far: The United Kingdom and the Transatlantic Relationship William Wallace Tim Oliver Keywords: international relations Date: 2004-10-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0138&r=all 64. Sharing the Transatlantic Burden: The End of an Era? Hubert Zimmermann Keywords: Germany; NATO; international relations Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0139&r=all 65. Three Rifts, Two Reconciliations: Franco-American Relations During the Fifth Republic Georges-Henri Soutou Keywords: France; NATO; international relations Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0140&r=all 66. Anti-Europeanism and Euroscepticism in the United States Patrick Chamorel Keywords: international relations Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0141&r=all 67. The Dynamics of Alliance Diplomacy Over Iraq Elizabeth Pond Keywords: NATO; international relations Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0142&r=all 68. The Iraq Crisis and the Future of the Western Alliance: An American view Marc Trachtenberg Keywords: NATO; international relations Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0143&r=all 69. International Fragmentation of Production and Euro-Med Integration Paolo Guerrieri Filippo Vergara Caffarelli Keywords: East-Central Europe; international trade; Mediterranean Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0144&r=all 70. Conflict Resolution in the European Neighbourhood: The Role of the EU as a Framework and as an Actor Nathalie Tocci Keywords: Europeanization Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0145&r=all 71. The Eastward Enlargement of the European Monetary Union Michele Ca' Zorzi Roberto A. De Santis Keywords: EMU; enlargement; East-Central Europe Date: 2004-11-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0146&r=all 72. The EU's Schizophrenic Constitutional Debate: Vertical and Horizontal Decentralism in European Governance Stijn Smismans Keywords: governance; constitution building; decentralisation Date: 2004-12-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0147&r=all 73. State Weakness in Eastern Europe: concept and causes Verena Fritz Keywords: governance; transition processes; post-Communism Date: 2004-12-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0148&r=all 74. Torn between Reform and Stagnation: An Institutionalist Analysis of the MEDA Programme Stephan Stetter Keywords: Mediterranean; implementation; institutionalism; political science Date: 2004-12-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0149&r=all 75. Institution-Driven Competition: The Regulation of Cross- Border Broadcasting in the EU Alison Harcourt Keywords: regulatory competition; media Date: 2004-12-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0150&r=all 76. Integration in Tension in Immigration Law: Mirror and Catalyst of the Inherent Paradox of the Nation-States Helene Oger Keywords: immigration policy; law Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0151&r=all 77. The Strengthening of the Commission Competences by the Constitutional Treaty and the Principle of Balance of Power Eva Nieto Garrido Keywords: European Commission; Constitution for Europe; institutions Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0152&r=all 78. Difference as a Potential for European Constitution-Making Christine Landfried Keywords: European Convention; Constitution for Europe; governance; integration theory Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0153&r=all 79. EU Conditionality and Minority Rights: Translating the Copenhagen Criterion into Policy Gwendolyn Sasse Keywords: Hungary; Slovakia; Romania; Copenhagen criteria; minorities Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0154&r=all 80. Media Pluralism: European Regulatory Policies and the Case of Central Europe Beata Klimkiewicz Keywords: media; Poland; Czech Republic; Slovakia; regulatory politics Date: 2005-05-15 URL: http://d.repec.org/n?u=RePEc:erp:euirsc:p0156&r=all 81. Is more information always better? Experimental financial markets with asymmetric information Jurgen Huber Matthias Sutter Michael Kirchler We study the value of information in financial markets by asking whether having more information always leads to higher returns. We address this question in an experiment where single traders have different information levels about an asset's intrinsic value. In our treatments we vary the nature of the information and the trading mechanism. We find that only the very best informed traders (i.e. insiders) significantly outperform less informed traders. However, there is a wide range of information levels (from zero information to an average information level) where additional information does not yield higher returns. The latter result implies that the value of information is not strictly monotonic. Keywords: Asymmetric information, Experimental economics, Value of information JEL: C91 D82 D83 G1 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:esi:discus:2005-13&r=all 82. Asymmetric Error Correction Models for the Oil-Gasoline Price Relationship Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei) Margherita Grasso (University College London) The existing literature on price asymmetries does not systematically investigate the sensitivity of the empirical results to the choice of a particular econometric specification. This paper fills this gap by providing a detailed comparison of the three most popular models designed to describe asymmetric price behaviour, namely asymmetric ECM, autoregressive threshold ECM and ECM with threshold cointegration. Each model is estimated on a common monthly dataset for the gasoline markets of France, Germany, Italy, Spain and UK over the period 1985-2003. All models are able to capture the temporal delay in the reaction of retail prices to changes in spot gasoline and crude oil prices, as well as some evidence of asymmetric behaviour. However, the type of market and the number of countries which are characterized by asymmetric oil-gasoline price relations vary across models. The asymmetric ECM yields some evidence of asymmetry for all countries, mainly at the distribution stage. The threshold ECM strongly rejects the null hypothesis of symmetric price behaviour, particularly in the case of France and Germany. Finally, the ECM with threshold cointegration finds long- run asymmetry for each country in the reaction of retail prices to oil price changes. Keywords: Oil prices, Gasoline prices, Asymmetries, Error correction models JEL: C22 D40 Q40 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.75&r=all 83. Hunting the Living Dead A “Peso Problem” in Corporate Liabilities Data Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei) Umberto Cherubini (University of Bologna) Recent literature has pointed out that information asymmetries may be the reason for the poor performance of structural credit risk models to fit corporate bond data. It is well known in fact that these models lead to a strong understatement of the credit spread terms structure, particularly on the short maturity end. Possible explanations stem from strategic debt service behavior and, as discovered more recently, the problem of accounting transparency. This raises the possibility that some of these flaws could be reconducted to a sort of “peso problem”, i.e. that the market may ask for a premium in order to allow for a small probability that accounting data may actually be biased ( Baglioni and Cherubini, 2005). In this paper we propose a modified version of the Duan (1994,2000) MLE approach to structural models estimation in order to allow for this “peso problem” effect. The model is estimated for the Parmalat case, one of the most famous cases of accounting opacity, using both equity and CDS data. Keywords: Credit risk, Corporate debt, Peso problem, Maximum likelihood, Transformed data JEL: C22 G33 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.76&r=all 84. Cartel Stability under an Optimal Sharing Rule Hans-Peter Weikard (Wageningen University) Previous work on the formation and stability of cartels has focused on the case of identical players. This assumption is very restrictive in many economic environments. This paper analyses stability of cartels in games with heterogeneous players and spillovers to non-members. I introduce a sharing rule for coalition payoffs, called "optimal sharing" which stabilises all cartels that are possibly stable under any rule. Under optimal sharing the grand coalition is the unique stable cartel if spillovers are negative. I introduce a new property, called "non- essentiality" and determine the set of stable cartels under optimal sharing if spillovers are positive and if the non- essentiality property applies. Finally I analyse cartel stability under optimal sharing in simple public goods game with heterogeneous players. My results show – in contrast to earlier findings for identical players – that large coalitions may well be stable. Keywords: Cartel stability, Coalition formation games with spillovers, Partition function approach, Optimal sharing rule JEL: C72 D72 H41 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.77&r=all 85. Local and Global Interactions in an Evolutionary Resource Game Joelle Noailly (CPB Netherlands Bureau for Economic Policy Analysis) Jeroen C.J.M. van den Bergh (Free University) Cees A. Withagen (Free University and Tilburg University) Conditions for the emergence of cooperation in a spatial common- pool resource game are studied. This combines in a unique way local and global interactions. A fixed number of harvesters are located on a spatial grid. Harvesters choose among three strategies: defection, cooperation, and enforcement. Individual payoffs are affected by both global factors, namely, aggregate harvest and resource stock level, and local factors, such as the imposition of sanctions on neighbors by enforcers. The evolution of strategies in the population is driven by social learning through imitation. Numerous types of equilibria exist in these settings. An important new finding is that clusters of cooperators and enforcers can survive among large groups of defectors. We discuss how the results contrast with the non- spatial, but otherwise similar, game of Sethi and Somanathan ( 1996). Keywords: Common property, Cooperation, Evolutionary game theory, Global interactions, Local interactions, Social norms JEL: C72 Q2 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.78&r=all 86. Spatial Evolution of Social Norms in a Common-Pool Resource Game Joelle Noailly (CPB Netherlands Bureau for Economic Policy Analysis) Cees A. Withagen (Free University and Tilburg University) Jeroen C.J.M. van den Bergh (Free University) We study the conditions for the emergence of cooperation in a spatial common-pool resource game. We consider three types of agents: cooperators, defectors and enforcers. The role of enforcers is to punish defectors for overharvesting the resource. Agents are located around a circle and they only observe the actions of their two nearest neighbors. Their payoffs are determined by both local and global interactions and they modify their actions by imitating the strategy in their neighborhood with the highest payoffs on average. Using theoretical and numerical analysis, we find that a large diversity of equilibria exists in this game. In particular, we derive conditions for the occurrence of equilibria in which the three strategies coexist. We also discuss the stability of these equilibria. Finally, we show that introducing resource dynamics favors the occurrence of cooperative equilibria. Keywords: Common property, Evolutionary game theory, Local interactions game, Self-organization, Cooperation JEL: C72 Q2 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.79&r=all 87. Economic Instruments and Induced Innovation: The Case of End- of-Life Vehicles European Policies Massimiliano Mazzanti (University of Ferrara) Roberto Zoboli (CERIS-DSE, National Research Council of Italy) The paper addresses the dynamic-incentive effect of environmental policy instruments when innovation is uncertain and occurs in very complex industrial subsystems. The case of end-of- life vehicles (ELVs) is considered focusing predominantly on the effects of the European Directive adopted in 2000 which stipulated economic instruments as free take-back, and on the voluntary agreements in place in many EU countries. The ELV case study is an example of a framework where policy-making faces an intrinsic dynamic and systemic environment. Coherent sequences of single innovations taking place in both upstream (car making) and downstream (car recycling/recovery) of the ELV system can give rise to different “innovation paths”, in accordance with cost- benefit considerations, technological options and capabilities associated to the different industrial actors involved. The impact of economic instruments on innovation paths, in particular free take-back, is considered. Deficiencies or difficulties concerning the transmission of incentives between different industries can prevent the creation of new recycling/recovery/reuse markets, giving rise to other less preferable and unexpected outcomes. The implication for policy is a need for an integrated policy approach, as enforceable VAs, in order to create a shared interindustry interest for innovation and to reduce the possible adverse effects which economic instruments exert on innovation through cost benefit impacts on key industrial and waste-related agents involved in the ELV management system. These advantages should be taken into account vis a vis the emergence of Integrated Product Policy (IPP) as a leading concept of EU environmental policy and the associated shift from "extended producer responsibility" to "extended product responsibility". Keywords: ELV, Induced innovation, Dynamic efficiency, Economic instruments, Recycling JEL: L62 O13 O31 O38 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.80&r=all 88. Creative Thinking and Modelling for the Decision Support in Water Management Anna Lasut (University of Science and Technology) This paper reviews the state of art in knowledge and preferences elicitation techniques. The purpose of the study was to evaluate various cognitive mapping techniques in order to conclude with the identification of the optimal technique for the NetSyMod methodology. Network Analysis – Creative System Modelling ( NetSyMod) methodology has been designed for the improvement of decision support systems (DSS) with respect to the environmental problems. In the paper the difference is made between experts and stakeholders knowledge and preference elicitation methods. The suggested technique is very similar to the Nominal Group Techniques (NGT) with the external representation of the analysed problem by means of the Hodgson Hexagons. The evolving methodology is undergoing tests within several EU-funded projects such as: ITAES, IISIM, NostrumDSS. Keywords: Creative modelling, Cognitive mapping, Preference elicitation techniques, Decision support JEL: D70 D78 O21 Q0 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.81&r=all 89. Using Data Envelopment Analysis to Assess the Relative Efficiency of Different Climate Policy Portfolios Valentina Bosetti (Fondazione Eni Enrico Mattei) Barbara Buchner (Fondazione Eni Enrico Mattei) Within the political, scientific and economic debate on climate change, the process of evaluating climate policies ex-ante, during and/or ex-post their lifetime, is receiving increasing attention from international institutions and organisations. The task becomes particularly challenging when the aim is to evaluate strategies or policies from a sustainability perspective. The three pillars of sustainability should then be jointly considered in the evaluation process, thus enabling a comparison of the social, the environmental and the economic dimensions of the policy’s impact. This is commonly done in a qualitative manner and is often based on subjective procedures. The present paper discusses a data-based, quantitative methodology to assess the relative performances of different climate policies, when long term economic, social and environmental impacts of the policy are considered. The methodology computes competitive advantages as well as relative efficiencies of climate policies and is here presented through an application to a sample of eleven global climate policies, considered as plausible for the near future. The proposed procedure is based on Data Envelopment Analysis (DEA) a technique commonly employed in evaluating the relative efficiency of a set of decision making units. We consider here two possible applications of DEA. In the first, DEA is applied coupled with Cost-Benefit Analysis (CBA) in order to evaluate the comparative advantages of policies when accounting for social and environmental impacts, as well as net economic benefits. In the second, DEA is applied to compute a relative efficiency score, which accounts for environmental and social benefits and costs interpreted as outputs and inputs. Although the choice of the model used to simulate future economic and environmental implications of each policy (in the present paper we use the FEEM RICE model), as well as the choice of indicators for costs and benefits, represent both arbitrary decisions, the methodology presented is shown to represent a practical tool to be flexibly adopted by decision makers in the phase of policy design. Keywords: Climate, Policy, Valuation, Data envelopment analysis, Sustainability JEL: H41 Q51 Q54 C61 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.82&r=all 90. Intellectual Property Rights and Biotechnology: How to Improve the Present Patent System Ignazio Musu (Ca’ Foscari University of Venice) This paper discusses the problems related to assigning or denying intellectual property rights to biotechnological innovation, with particular reference to agro-biotechnologies and the relations between developed and developing countries. There are two types of problems to consider. First, the aim of protecting property rights on innovations is to create incentives towards research and innovation in general, which in some cases may be beneficial to society, in others not so. If the assignment of an intellectual property right does not guarantee the potential beneficial use of new knowledge, not assigning rights would not prevent its potentially dangerous utilization. Secondly, the holder of an intellectual property right has a power of exclusion which limits access by others to the newly produced knowledge. However, the production of new knowledge is very often a process which starts from a base of existing knowledge. Hence, discouraging access to existing knowledge also means discouraging the process of producing new knowledge. Paradoxically then, in protecting intellectual property we obtain the opposite result to the one expected and desired. Moreover, the holder of an intellectual property right may end up with excessive market power when commercializing the innovation. This paper will try to show that these problems cannot be solved, as sometimes is suggested, by denying protection of property rights on innovations, but by improving the procedures for awarding these rights and accompanying them with other measures such as liability rules governing potential damage and also antitrust measures. Keywords: Intellectual property rights, Biotechnology, Patent system JEL: O30 O33 O34 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.83&r=all 91. Social Capital, R&D and Industrial Districts Massimiliano Mazzanti (University of Ferrara) Giulio Cainelli (University of Bari and CERIS-CNR) Susanna Mancinelli (University of Ferrara) The main idea behind this paper is that social capital is not, as generally suggested by the socio-economic literature, an individual attitude towards something which does not imply privately appropriable economic benefits. Actually, SC might and should be interpreted as a public component of an investment which implies private and public benefits entangled with each other. In order to put forward this idea, a dynamic theoretical model that assumes social capital as the public component of the impure public good R&D is developed. It shows that the ‘civic culture’ of the district area in which the firm works is not sufficient as an incentive to increase its investment in social capital, because this investment strictly depends on the economic convenience of investing in the impure public good. Social capital /networking dynamics might positively and complementarily evolve only if the opportunity cost of investing in innovation is sufficiently low. We consequently focus our attention on a specialized industrial district located in the Emilia Romagna region – the biomedical district of Mirandola (Modena) – characterised by a strong pattern of innovative activity. Using a proxy for innovative activity as dependant variable, we observe that R&D and networking/social capital arise as complementary driving forces for innovation outputs. When empirical evidence confirms that this complementarity plays a key role, and consequently strong links exist between market and non-market dynamics relating to firms, the role for policy actions targeted to social capital is larger. The policy effort should be targeted toward both market and non-market characteristics taken together, rather than solely to the production of (local) public goods ( social capital) or innovation inputs as independent elements of firm processes. The input of SC alone is not sufficient to ensure innovation and growth: economic incentives matter. On the other hand, whenever SC dynamics are crucial for R&D private investments, the effect of economic incentives depends on the presence and degree of their complementarity. Keywords: Social capital, R&D, Technological innovation, Industrial districts JEL: O32 D92 H49 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.84&r=all 92. Quality and Investment Decisions in Hospital Care when Physicians are Devoted Workers Michele Moretto (University of Brescia) Rosella Levaggi (University of Brescia) Vincenzo Rebba (Universita di Padova) This paper analyses the decision to invest in quality by a hospital in an environment where doctors are devoted workers, i.e. they care for specific aspects of the output they produce. We assume that quality is the result of both an investment in new technology and the effort of the medical staff. Hospital services are paid on the basis of their marginal cost of production while the number of patients treated depends on a purchasing rule which discriminates for the level and timing of the investment. We show that the presence of devoted doctors affects the trade-off between investment and the purchasing rule so that for the hospital it is not always optimal to anticipate the investment decision. Keywords: Hospital technology, Devoted worker, Quality, Irreversible investment, Real options JEL: I11 D81 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2005.85&r=all 93. FISCAL CONSOLIDATION AND DECENTRALISATION: A TALE OF TWO TIERS Julia Darby V. Anton Muscatelli Graeme Roy This paper contributes to the established literature on fiscal consolidations (e.g. Alesina and Perotti, 1995, 1997, Alesina et al, 1998) by investigating the distinct behaviour of central and sub-central tiers of government during general government consolidation attempts. In the light of different degrees of decentralisation across OECD countries, and the different responsibilities devolved to sub-central tiers, we believe that this approach offers an illuminating insight into the analysis of fiscal consolidations and their success. We show that the involvement of the sub-central tiers of government is crucial to achieving cuts in expenditure, particularly in relation to the overall size of the government wage bill. In addition, central governments appear to exert a strong influence on the expenditure of subcentral tiers through their grant allocations, and control of these allocations appears to have a considerable impact upon the overall success of consolidation attempts. Finally we demonstrate that there is a skewness in cuts towards sub-central capital expenditure both when central governments cut grant allocations and when sub-central governments engage in lone consolidation attempts. URL: http://d.repec.org/n?u=RePEc:gla:glaewp:2004_2&r=all 94. Sticky Prices, Limited Participation or Both? Niki Papadopoulou This paper investigates the micro mechanisms by which monetary policy affects and is transmitted through the U.S economy, by developing a unified, dynamic, stochastic, general equilibrium model that nests two classes of models. The first sticky prices and the second limited participation. Limited participation is incorporated by assuming that households’ are faced with quadratic portfolio adjustment costs. Monetary policy is characterized by a generalized Taylor rule with interest rate smoothing. The model is calibrated and investigates whether the unified model performs better in replicating empirical stylized facts, than the models that have only sticky price or limited participation. The unified model replicates the second moments of the data better than the other two types of models. It also improves on the ability of the sticky price model to deliver the hump-shaped response of output and inflation. Moreover, it also delivers on the ability of the limited participation model to replicate the fall in profits and wages, after a contractionary monetary policy. JEL: E31 E32 E44 E52 URL: http://d.repec.org/n?u=RePEc:gla:glaewp:2004_3&r=all 95. The New Growth Theoris and their Empirics Rosa Capolupo The aim of this paper is to update the reviews on endogenous growth theories in order to explore whether recent empirical studies are more supportive of their main predictions. Among the core topics studied in the growth econometric framework, namely, convergence, identifications of growth determinants and factors responsible of growth differences in the data, the primary focus of this paper is on the last two. Since the use of econometrics was originally motivated by convergence issues, in this work we will review econometric studies that test primarily the relevance of endogenous models in terms of significance and robustness of growth’s determinant coefficients. We argue that: (i) causal inference drawn from the empirical growth literature remains highly questionable, ii) there are estimates for a wide range of potential factors but their magnitude and robustness are still under debate. Overall, however, if properly interpreted, endogenous growth models' predictions are increasingly gaining empirical support. JEL: O47 O41 C31 URL: http://d.repec.org/n?u=RePEc:gla:glaewp:2005_4&r=all 96. Strategic Effects and Incentives in Multi-issue Bargaining Games Francesca Flamini The focus of the paper is on issue-by-issue bargaining procedures in which parties are allowed to differ not only in their valuations of the issues but also in their rates of time- preference. We show that the interplay of the forces in the bargaining game is complex and standard assumptions in the literature, such as a common discount factor, can be strong. We investigate the SPE of the game when the order of the issues can be changed and show that parties can have the same preferences over agendas when they both agree over the importance of an issue or when they disagree (if corner solutions are allowed and/or there is a difficult/urgent issue). JEL: C72 C73 C78 URL: http://d.repec.org/n?u=RePEc:gla:glaewp:2005_5&r=all 97. Bargining and Investment Francesca Flamini The focus of this paper is on repeated bargaining games in which two parties can decide how much to invest and how to share the remaining surplus for their own consumption. The game is dynamic since the current level of investment affects future surpluses. We characterise an MPE without delays in general terms and show the parametrical effects for the specific case in which parties share the surplus equally. We show that the relatively more patient player invests more than his opponent, for a given capital stock. Moreover, if the probability of becoming a proposer decreases for the more patient player, then such a player reduces his investment, while the relatively impatient player increases his investment. JEL: C61 C72 C73 C78 URL: http://d.repec.org/n?u=RePEc:gla:glaewp:2005_6&r=all 98. Cognitive maps in spatial economics: A multidisciplinary approach Nathalie GAUSSIER (IERSO, IFReDE-GRES) Philippe LAROQUE ETIS neurocybernetics team (UMR CNRS 8051) Nicolas CUPERLIER ETIS neurocybernetics team (UMR CNRS 8051) Mathias QUOY ETIS neurocybernetics team (UMR CNRS 8051) Sorin MOGA ENST Brest Philippe GAUSSIER ETIS neurocybernetics team (UMR CNRS 8051) If mental maps are a well-known subject in spatial analysis, they suffer from the difficulties to make them an operational concept. Nowadays, the development of cognitive science opens up new perspectives. Thanks to an association of spatial economists, roboticists and computer scientists in the context of a CNRS project “Geomatics, Space, Territories and Mobilities”, we show that it is possible to simulate cognitive maps that fit both with non-metric and situated properties. The paper works on a common assumption that space is central to understand individual strategies. It puts forward the idea that spatial visual information is central to spatial situated action. As a consequence, cognitive maps are built with endogenous preferences and exhibit interesting characteristics to better comprehend situated rationality. As an example, we show that a cognitive agent that means agent with a cognitive map, is able to solve spatial compromise without optimising any a priori known resources on a geographic map. Keywords: Cognitive maps; neural networks; learning; economics issues; multidisciplinary system JEL: D00 R10 Date: 2005 URL: http://d.repec.org/n?u=RePEc:grs:wpegrs:na2005-14&r=all 99. The Spatial Dimension of Segregation: A Case Study in Four French Urban Areas, 1990-1999 Frederic GASCHET (IERSO, IFReDE-GRES) Julie LE GALLO (IERSO, IFReDE-GRES) The aim of this paper is to analyze the intra-urban spatial segregation in terms of socio-professional categories in four French urban areas: Paris, Lyon, Bordeaux and Dijon. Two questions are investigated. First, how does spatial segregation vary across the four urban poles? Second, what are the spatial patterns of segregation within each urban pole? In order to answer these questions, we compute spatial global segregation indices for socio-professional categories in each urban area, together with entropy indices, which are local segregation indices that reflect the diversity within each unit and that can be mapped to show the spatial variations of segregation among the units of the four urban poles. The results highlight the self- segregation of the managers, the specific features of Paris and the complex spatial distribution of segregation. Keywords: segregation, French urban areas, entropy index JEL: J15 J41 R14 Date: 2005 URL: http://d.repec.org/n?u=RePEc:grs:wpegrs:2005-12&r=all 100. Political economy and pensions in ageing societies – a note on how an ”impossible” reform was implemented in Sweden. Kruse, Agneta (Department of Economics, Lund University) Ageing puts a strain on most countries’ pension systems; forecasts show them to be more or less unsustainable. Evidence from social choice research, theoretical as well as empirical, does not seem to offer a way out of the dilemma, as the median voter will resist a reform. Despite this, Sweden has implemented a major reform, supposedly making the system sustainable. The question in this paper is thus: how was it possible to launch such a reform in Sweden? The analysis is based on majority voting models. Important explanatory factors are age structure as well as the age of the median voter; both of these go against the probability of a reform. A focus on age structure in combination with transitional rules and specific features of the reform may provide an explanation. Keywords: political economy; pension reform; median voter; age structure JEL: D72 H55 J26 Date: 2005-06-07 URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_035&r=all 101. Inequality in the Access to Secondary Education and Rural Poverty in Bangladesh: An Analysis of Household and School Level Data Ahmad, Alia (Department of Economics, Lund University) Hossain, Mahabub (Social Sciences Division, International Rice Research Institute (IRRI)) Bose , Manik Lal (Social Sciences Division, International Rice Research Institute (IRRI)) This paper explores the relationship between different levels of education and poverty through an analysis of household-level data from 60 villages in Bangladesh. First of all, it depicts the overall trend in school enrollment at primary and secondary level between 1988-2000, and confirms the inequality that exists in the access to education at post-primary level. This is followed by a presentation of income and occupation data that show a strong positive correlation with the level of education. In the second part, an income function analysis has been done to assess the impact of education along with other determinants. Marginal returns to upper secondary and primary level of education have been found to be higher than lower secondary education. The third part analyzes the effects of education on child/woman ratio, and on the secondary school participation rate of male and female children. Both poverty and low education have positive but weak effect on child/woman ratio. On the other hand, school participation rates are strongly affected by the income status of the household and education of father and mother. Mother?s education has stronger effect on girls? enrollment in seconadry schools. Lastly, the analysis of school-level data confirms the findings from household survey such as the absence of gender gap at primary level and higher proportion of girls in some secondary schools. The unexpectedly high promotion rates in secondary schools suggest that the schools are more concerned about government financial support than the quality of education. High degree of private tuition among secondary school teachers also points toward inequality in the access to quality education that impairs the ability of the poor to complete the secondary level. Keywords: poverty; returns to secondary education; inequality JEL: I20 I21 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_036&r=all 102. The Q theory and the Swedish housing market –an empirical test Berg, Lennart (Department of Economics) Berger, Tommy (Institute for Housing and Urban Research) We argue that major changes in economic policy have resulted in a more market driven demand for housing investment in Sweden as a result of changes in policy during the end of the 1980s and beginning of the 1990s. The used investment theory is Tobin’s transparent Q theory. Our results indicate, for the last period of the sample (1993-2003 quarterly data) that a high degree of correlation between the Q ratio and the (logarithm of) two different variables for housing investment exist. An error correction regression model, controlling for structural breaks, indicates also a stable long run relationship could be detected for the logarithm of building starts and the Q ratio between 1993- 2003 but not between 1981-1992. Keywords: Tobin's Q; housing investment; error correction model; structural break JEL: E22 R21 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_019&r=all 103. A Comparative Statics Analysis of Punishment in Public-Good Experiments Nikos Nikiforakis (Department of Economics, Royal Holloway, University of London) Hans-Theo Normann (Department of Economics, Royal Holloway, University of London) This paper provides a comparative statics analysis of punishment in public-good experiments. We vary systematically the effectiveness of punishment, that is, the factor by which punishment reduces the punished player’s income, and we find that contributions to the public good increase monotonically in effectiveness. High effectiveness leads to near complete contribution rates and welfare improvements. Below a certain threshold, however, punishment cannot prevent the decay of cooperation found in the public-good game without punishment. In these cases, the possibility to punish may even worsen welfare. Finally, we show that punishment is a normal and inferior good. Date: 2005-06 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hol:holodi:0507&r=all 104. Identity and Self-Other Differentiation in Work and Giving Behaviors: Experimental Evidence Avner Ben-Ner Brian McCall Massoud Stephane Hua Wang The asumption that behavior is independent of the identity of those who participate in an economic interaction is fundamental to economists’ understanding of how markets operate, how firms work internally, how nations trade with each other, and much else. In this paper, we show that the distinction between Self and Other, ‘us’ and ‘them,’ or in-group and out-group, affects significantly economic and social behavior. In a series of experiments with approximately 200 Midwestern students as our subjects, we found that they favor those who are similar to them on any of a wide range of categories of identity over those who are not like them. Whereas family and kinship are the most powerful source of identity in our sample, all 13 potential sources of identity in our experiments affect behavior. We explored individuals’ willingness to give money to imaginary people, using a dictator game setup with hypothetical money. Our experiments with hypothetical money generate essentially identical data to our experiments with actual money. We also investigated individuals’ willingness to share an office with, commute with, and work on a critical project critical to their advancement with individuals who are similar to themselves (Self) along a particular identity dimension than with individuals who are dissimilar (Other). In addition to family, our data point to other important sources of identity such as political views, religion, sports-team loyalty, and music preferences, followed by television-viewing habits, dress type preferences, birth order, body type, socio-economic status and gender, albeit statistically significant, sources of differentiation between Self and Other. The importance of the source of identity varies with the type of behavior under consideration. URL: http://d.repec.org/n?u=RePEc:hrr:papers:0805&r=all 105. Product Market Competition and Human Resource Practices: An Analysis of the Retail Food Sector Elizabeth Davis Matthew Freedman Julia Lane Brian McCall Nicole Nestoriak Timothy Park The rise of super-centers and the entry of Wal-Mart into food retailing have dramatically altered the competitive environment in the industry. This paper explores the impact of such changes on the labor market practices of traditional food retailers. We use longitudinal data on workers and firms to construct new measures of compensation and employment, and examine how these measures evolve within and across firms in response to changes in product market structure. An additional feature of the analysis is to combine rich case study knowledge about the retail food industry with the new matched employer-employee data from the Census Bureau. URL: http://d.repec.org/n?u=RePEc:hrr:papers:0905&r=all 106. Interventions and Japanese Economic Recovery Takatoshi Ito This paper attempts to explain possible reasons and objectives behind the 35 trillion yen (7% of GDP) interventions conducted by the Japanese monetary authorities from January 2003 to March 2004, and to discuss whether the interventions achieved the presumed objectives: making the movement of the yen flexible but orderly, and helping economic recovery. The motivation of starting intervention in January 2003 was to keep the yen from appreciating in the midst of financial and macroeconomic weakness. The economy started to show some strength in the second half of 2003, but interventions continued, with a brief pause in September. Reasons for interventions after September are two-fold. First, the interventions provided opportunities for unsterilized interventions. Second, the monetary authorities were extremely sensitive to speculative activities in the market. Keywords: Intervention of foreign exchange market, the yen, monetary policy, Japanese economy JEL: E44 E58 F31 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-100&r=all 107. Policy Coordination in East Asia and across the Pacific Koichiro Kamada Izumi Takagawa In this paper, we construct a macro-econometric model that describes the economic activity in the Asia-Pacific area and provide quantitative insights into the recent policy debates on monetary and currency coordination among the East Asian economies. The model includes a wide variety of monetary and currency policy rules that the East Asian economies adopt and allows for one country's policymaking to have substantial effects on foreign countries. We apply the model to three current policy issues: (1) the desirability of currency basket pegs in East Asia, (2) the anticipated effects of China's currency policy reform, and (3) the non-negativity constraint on Japanese nominal interest rates. The simulation analyses show the external economy effects of policy rules quantitatively and suggest the difficulty of monetary and currency policy coordination among the East Asian economies. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-101&r=all 108. Reform of the Japanese Banking System Masahiro Kawai Japan has experienced a decade-long economic stagnation with a distressed banking sector in the 1990s. The absence of a credit culture to rigorously assess and price credit risks of borrowers, aggravated by weak prudential and supervisory frameworks, in the 1980s, the collapse of the asset price bubble in the early 1990s, and the lack of decisive, comprehensive strategy to address the banking sector problem at an early stage were largely responsible for the emergence of banking sector problems. All of these allowed a systemic banking crisis to emerge in 1997-98 and a large output loss during 1998-2002. The crisis ultimately prompted the government to take a more aggressive policy to tackle the problem. Sufficient progress has been made since then on banking sector stabilization, restructuring, and consolidation. The regulatory and supervisory framework has been strengthened in a way consistent with an increasingly market-oriented, globalized environment. As a result, the worst is over in the Japanese banking system, setting the stage for sustained economic recovery. Though bank capital may still be inadequate, safety nets are in place, the credit allocation has been made more rational. Remaining risks are limited to regional and smaller institutions that are vulnerable to weak, local economic conditions and hikes of the long-term interest rate. Keywords: Asset price bubble, Japan's "lost decade", systemic banking sector crisis, bank restructuring and consolidation, market-based regulatory and supervisory framework JEL: E44 E51 G21 G28 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-102&r=all 109. Exchange Rate or Wage Changes in International Adjustment? Japan and China versus the United States Ronald McKinnon Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-103&r=all 110. Good Deflation/Bad Deflation and Japanese Economic Recovery Gary Saxonhouse Many economists dismiss the role of positive supply shocks as a cause of Japan's deflation. Indeed, they attribute the long delay in Japan's recovery to the mistaken view that Japan's deflation reflects an acceleration of technological progress. Whatever the current situation in Japan, however, economic history certainly suggests that technological progress can go hand in hand with general deflation. Conducting a VAR analysis using very detailed information about the components of Japan's consumer price index, this paper finds that short-run shocks to Japan's relative price structure persist in the long run. Given this finding, it is possible to conclude that such shocks are real in origin and reflect technological change. As no effort has yet been completed to show the full extent to which technological change is driving short-run relative price change in Japan compared with other factors, and the full extent to which relative price changes are driving aggregate price change compared with other factors, the policy implications of these findings are unclear. What is clear is that it is a mistake to dismiss out of hand the possibility that technological shocks are playing an important role among other forces in Japan's current deflation. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-104&r=all 111. Overseas R&D Activities by Multinational Enterprises: Evidence from Japanese Firm-Level Data Yasuyuki Todo Satoshi Shimizutani This paper investigates both the determinants and the impact of overseas subsidiaries' R&D activities, using firm-level panel data for Japanese multinational enterprises. We distinguish between overseas innovative and adaptive R&D and find substantial differences between the two types of R&D. The evidence suggests that overseas innovative R&D aims at the exploitation of foreign advanced knowledge, and by doing so, it helps to raise the productivity of the parent firm. In contrast, the primary role of overseas adaptive R&D is to enhance the productivity of overseas subsidiaries through the use of parent firms' knowledge. In addition, we find no complementarity between home and overseas innovative R&D, i.e., no evidence that overseas innovative R&D raises the marginal effect of home R&D on home productivity. Keywords: overseas R&D activities, multinational enterprises, total factor productivity JEL: F23 O30 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-91&r=all 112. Employment Policy and Corporate Governance: An Empirical Comparison of the Stakeholder versus the Profit-Maximization model Naohito Abe Satoshi Shimizutani Japan's economic problems over the past decade and a half have triggered far reaching changes in the country's corporate governance system and there have been significant changes in both companiesf ownership structures and composition of board members. This paper examines how board and ownership structures affect firms' decision as to how to reduce labor costs when firms face excess employment. Our findings confirm that outside directors are more inclined to implement layoffs and voluntary or early retirement, while insiders are more likely to decrease new hiring and protect incumbent employees. These findings are consistent with the stakeholder view of the firm rather than the neoclassical view of firms as profit-maximizers. Keywords: corporate governance, employment downsizing, multivariate probit model JEL: G30 J23 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-92&r=all 113. Foreign Exchange Intervention and Monetary Policy in Japan, 2003-2004 Rasmus Fatum Michael M. Hutchison Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-93&r=all 114. The Effects of 'Gesell' (Currency) Taxes in Promoting Japan's Economic Recovery Mitsuhiro Fukao The traditional interest rate policy has lost its potency due to the zero-lower bound of nominal interest rates and the gradual accelerating deflation in Japan. Without stopping deflation, the Japanese government may face a rapid erosion of credit worthiness due to an uncontrolled budget deficit. In order to cope with this unusual situation, a non-traditional monetary policy measure is proposed. A negative nominal interest rate is needed to clear Japanese markets and can be achieved by levying a tax on all the government-guaranteed yen financial assets. This is a modified version of Gesell's stamp duty on currency for actual implementation in the contemporary context. The benefits and side effects of this tax for Japan are analyzed here. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-94&r=all 115. Zombie Firms and Economic Stagnation in Japan Alan G. Ahearne Naoki Shinada It is often claimed that one contributing factor to Japan's weak economic performance over the past decade is that Japanese banks have continued to provide financial support for highly inefficient, debt-ridden companies, commonly referred to as "zombie" firms. Such poor banking practices in turn prevent more productive companies from gaining market share, strangling a potentially important source of productivity gains for the overall economy. To explore further the zombie-firm hypothesis, we use industry- and firm-level Japanese data and find evidence that productivity growth is low in industries reputed to have heavy concentrations of zombie firms. We also find that the reallocation of market share is going in the wrong direction in these industries, adding to already weak productivity performance. In addition, we find evidence that financial support from Japanese banks may have played a role in sustaining this perverse reallocation of market share. Keywords: Productivity, banking system, creative destruction Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-95&r=all 116. Overcoming the Zero Bound on Nominal Interest Rates: Gesell's Currency Carry Tax vs. Eisler's arallel Virtual Currency Wilem H. Buiter Despite the zero lower bound on the short nominal interest rate in Japan having become a binding constraint, conventional monetary policy in Japan, in the form of generalised open market purchases of government securities of all maturities, has never been pushed to the limit where all outstanding government debt and all current and anticipated future government deficits are ( or are confidently expected to be) monetised. Open market purchases of private securities can create serious governance problems. Two ways of overcoming the zero lower bound constraint have been proposed. The first is Gesell's carry tax on currency. The second is Eisler's proposal for the unbundling of the medium of exchange/means of payment function and the numeraire function of money through the creation of a parallel virtual currency. This raises the fundamental issue of who chooses or what determines the numeraire used in private wage and price contracts an issue that is either not addressed in the literature or addressed incorrectly. On balance, Gesell's proposal appears to be the more robust of the two. Keywords: zero bound, deflation, carry tax on currency, parallel virtual currency JEL: E31 E42 E52 E58 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-96&r=all 117. The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in Two Deflationary Periods Koichi Hamada Asahi Noguchi This paper examines the role of misleading economic ideas that most likely promoted the economic disasters of the two deflationary periods in Japanese economic history. Misleading ideas deepened the depression during the interwar years, and erroneous thinking has prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interest of political agents as well as of voters, we highlight the role of ideas in policy making, in particular, in the field of macro-economy where the incidence of a particular policy is not clear to the public. Using two significant examples, this paper illustrates the role of preconceived ideas, in contrast to economic interests, as dominant forces influencing economic policy making. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-97&r=all 118. Price Expectations and Consumption under Deflation: Evidence from Japanese Household Survey Data Masahiro Hori Satoshi Shimizutani The Japanese economy has experienced price deflation since the mid-1990s. Despite the importance of overcoming deflation, there has been little recent research on price expectations in Japan. This paper takes advantage of an original and rich quarterly household-level data set from the gKokumin Seikatsu Monitorsh to estimate average price expectations, examine the factors that affect price expectations, and examine how changes in price expectations have affected household consumption. Our estimates indicate that average price expectations ranged from minus 0.2 to zero percent in 2001 and 2002. However, there was an increase to 1 percent in the first quarter of 2003, followed by a decline to 02 percent in the second quarter, and a steady increase toward 0. 8 percent by the first quarter of 2004. Price expectations depend on current price movements and lagged expectations. A series of quantitative easing monetary policies were not very effective in changing the price expectations, since the policy announcements caused revision of price expectations only for a small portion, i. e., 5-10% of people surveyed. The jump observed in the first quarter of 2003 was a reaction to the outbreak of the Iraq war. Our study also confirms that deflationary expectations discourage household consumption, mainly durable consumption, by delaying the timing of purchases, suggesting that the deflationary expectations should be upwardly revised to restore a vital Japanese economy. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-98&r=all 119. Japan's Fiscal Policy and Fiscal Reconstruction Toshihiro Ihori Atsushi Nakamoto This paper investigates the macroeconomic effects of fiscal policy and the fiscal reconstruction movement in Japan. We first summarize Japan's fiscal policy in recent years and discuss advantages and disadvantages of government deficits. Next, we investigate the macroeconomic effects of Japanese fiscal policy and evaluate the plausibility of non-Keynesian effects. We also analyze the possibility of the crowding-in effect of fiscal policy and investigate the spillover effects of deregulation. Finally, we discuss political constraints in the fiscal reconstruction attempts and propose some measures for successful fiscal reforms in the near future. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-99&r=all 120. Do Parents Favor their Biological Offspring over Adopted Orphans? Theory and Evidence from Tanzania Papa Seck (Hunter College, Department of Economics) This paper looks at the consequences children face when they lose a parent(s). After modeling the representative household’s bargaining process between their biological and orphaned children, the empirical section of this paper looks at the types of activities that children engage in, and the differences in educational outlays of host households between those children who have lost their parents and those who have not. The results indicate that orphanhood is of critical importance to human capital formation as the probability of engaging in child labor and being idle increases relative to school attendance, following the loss of both parents. This has the same distortionary effect as a tax on children as a result of orphanhood. Even though these children do not have markedly lower abilities to read, write or perform written calculation before the death of their parents, they are outperformed in all three categories once they join the new household following the loss of both parents. It concludes that for policymakers, in-kind subsidies provided at the school level will have a bigger impact than those provided at the household level. JEL: C23 C25 D13 D19 I20 I30 J12 O15 Date: 2005 URL: http://d.repec.org/n?u=RePEc:htr:hcecon:409&r=all 121. Experimental and Quasi-Experimental Methods of Microeconomic Program and Policy Evaluation Jeff Borland (Department of Economics, The University of Melbourne) Yi-Ping Tseng (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) In this paper we review new empirical methods for evaluating microeconomic policies. Experimental and quasi-experimental evaluation measure the causal impact of a policy by comparing outcomes in the presence of the policy 'treatment' with outcomes in the absence of this treatment. For example, evaluation of a government program involves comparing outcomes associated with participation and non-participation in the program. We describe the motivation for the use of experimental and quasi-experimental methods, the types of policy effects that they can identify, and how they are implemented. Application of experimental and quasi- experimental methods is illustrated through a brief review of a variety of recent Australian studies that have evaluated microeconomic policies such as labour market programs, welfare payments policies, education policies, health policies and minimum wage laws. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:iae:iaewps:wp2005n08&r=all 122. Using Qualitative and Quantitative Methods to Investigate Patterns in Marketing Channels and International Marketing Strategies Oburai Prathap Kok Wai Chew Changed agenda and paradigms require marketing’s research methods and tools of enquiry to reflect fully the need to intensify theory-building programmes. We examine the evolution of the case research strategy in the context of business markets and inter-organisational relations, and submit that there is marked convergence of its underlying methodological and philosophical perspectives. Given that marrying qualitative and quantitative is a strategy endorsed by several eminent researchers, we apply mixed method approach to studying two significant phenomena viz. marketing channels and international marketing strategies. We adopt a mix of case research, grounded theoretic research methodologies and multivariate multidimensional mapping techniques for exploring both the subject areas. The first study offers a classification scheme for grouping marketing channels observed across thirteen industries into five homogenous clusters. The second study investigates the international marketing strategies adopted in twelve different business sectors in India. This study identifies several elements of international marketing strategies that may have the potential to affect business outcomes across sectors. In this paper, a case is made to promote the use of innovative and novel combinations of research methodologies to derive new insights of business phenomena. Keywords: India International Marketing Strategy Marketing Channels Research Methodology Date: 2005-06-21 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-06-02&r=all 123. El Mercado de Transporte Aereo: Lecciones para Chile de una Revision de la Literatura Claudio Agostini (ILADES-Georgetown University, Universidad Alberto Hurtado) En la industria de transporte aereo en Chile, existe hoy libre ingreso a los mercados, libertad de precios y una minima intervencion del estado. Sin embargo, la evolucion de la industria ha generado discusion y preocupacion publica en los ultimos anos respecto a que tan competitivo es el mercado de transporte domestico de pasajeros. Preocupaciones y discusiones de politica publica similares a las que existen hoy en Chile, han sido el foco de la literatura economica en el tema desde la regulacion de los mercados aereos a afines de los 70. El gran avance que ha habido, tanto teorico como empirico, en entender las caracteristicas especificas de la industria de transporte aereo y los determinantes del grado de competencia en los mercados en que opera, permiten sacar conclusiones que son relevantes para Chile y que pueden ayudar a orientar la discusion. El objetivo de este estudio entonces, es hacer una revision de la literatura economica que de luces respecto a los elementos criticos que uno deberia considerar en el caso de Chile para evaluar el grado de competencia de la industria. Dichos elementos permitiran orientar la investigacion respecto a si la politica aerocomercial chilena garantiza la existencia mercado competitivo o hay espacio para implementar algun tipo de politica publica que permita hacer mas competitivo el mercado. Keywords: mercado transporte aereo, aerolineas, transporte aereo pasajeros JEL: L10 L93 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:ila:ilades:inv163&r=all 124. How should we measure the return on public investment in a VAR Alvaro Manuel Pina Miguel St. Aubyn Keywords: Public investment;rate of return;VAR. JEL: C32 H43 H57 O47 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp42005&r=all 125. Cross-country Efficiency of Secondary Education Provision: a Semi-parametric Analysis with Nondiscretionary Inputs Antonio Afonso Miguel St. Aubyn We address the efficiency of expenditure in education provision by comparing the output (PISA results) from the educational system of 25, mostly OECD, countries with resources employed ( teachers per student, time spent at school). We estimate a semi- parametric model of the education production process using a two- stage procedure. By regressing data envelopment analysis output scores on nondiscretionary variables, both using Tobit and a single and double bootstrap procedure, we show that inefficiency is strongly related to GDP per head and adult educational attainment. Keywords: education; technical efficiency; DEA; bootstrap; semi- parametric JEL: C14 C61 H52 I21 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp52005&r=all 126. Determinant Factors of FDI Spillovers – What Do We Really Know? Nuno Crespo Maria Paula Fontoura Empirical evidence about FDI spillovers to domestic firms has provided mixed results. This global evaluation has recently been complemented with the analysis of the factors that determine the existence, dimension and sign of FDI spillovers. We survey the arguments that support these factors and analyze the empirical evidence already produced. FDI spillovers depend on many factors, frequently with an indeterminate effect. Absorptive capacity of domestic firms and regions are a precondition for incorporating the benefits of FDI spillovers. Concerning the remaining factors, the results suggest opposite effects or, in some cases, are still insufficient to legitimate decisive conclusions. Keywords: productivity; spillovers; FDI; determinant factors. JEL: O12 F23 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp62005&r=all 127. Feeding and the Equilibrium Feeder Animal Price-Weight Schedule Hennessy, David A. The feeder animal price is a derivative in the sense that its value depends upon the price of animals for the consumption market. It also depends upon the biological growth technology and feed costs. Daily maintenance costs are of particular interest to the husbander because they can be avoided through accelerated feeding. In this paper, the optimal feeding path under equilibrium feeder animal prices is established. This analysis is used to gain a better understanding of feeding decisions, regulation in feedstuff markets, and the consequences of genetic innovations. It is shown that days on feed can increase or decrease with a genetic innovation or other improvement in feed conversion efficiency. The structure of comparative prices for feeder animals at different weights, the early slaughter decision, and equilibrium in feeder animal markets are also developed. Feeder animal prices can increase over a weight interval if biological feed efficiency parameters are low over the interval. Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:isu:genres:12365&r=all 128. Calibration and Validation of SWAT for the Upper Maquoketa River Watershed Reungsang, Pipat Kanwar, Ramesh S. Jha, Manoj Gassman, Philip W. Ahmad, Khalil Saleh, Ali A validation study has been performed using the Soil and Water Assessment Tool (SWAT) model with data collected for the Upper Maquoketa River Watershed (UMRW), which drains over 16,000 ha in northeast Iowa. This validation assessment builds on a previous study with nested modeling for the UMRW that required both the Agricultural Policy EXtender (APEX) model and SWAT. In the nested modeling approach, edge-of-field flows and pollutant load estimates were generated for manure application fields with APEX and were then subsequently routed to the watershed outlet in SWAT, along with flows and pollutant loadings estimated for the rest of the watershed routed to the watershed outlet. In the current study, the entire UMRW cropland area was simulated in SWAT, which required translating the APEX subareas into SWAT hydrologic response units (HRUs). Calibration and validation of the SWAT output was performed by comparing predicted flow and NO3-N loadings with corresponding in-stream measurements at the watershed outlet from 1999 to 2001. Annual stream flows measured at the watershed outlet were greatly under-predicted when precipitation data collected within the watershed during the 1999- 2001 period were used to drive SWAT. Selection of alternative climate data resulted in greatly improved average annual stream predictions, and also relatively strong r2 values of 0.73 and 0. 72 for the predicted average monthly flows and NO3-N loads, respectively. The impact of alternative precipitation data shows that as average annual precipitation increases 19%, the relative change in average annual streamflow is about 55%. In summary, the results of this study show that SWAT can replicate measured trends for this watershed and that climate inputs are very important for validating SWAT and other water quality models. Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:isu:genres:12375&r=all 129. Historical Development and Applications of the EPIC and APEX Models Gassman, Philip W. Williams, Jimmy R. Benson, Verel W. Izaurralde, R. Cesar Hauck, Larry M. Jones, C. Allan Atwood, Jay D. Kiniry, James R. Flowers, Joan D. The development of the field-scale Erosion Productivity Impact Calculator (EPIC) model was initiated in 1981 to support assessments of soil erosion impacts on soil productivity for soil, climate, and cropping conditions representative of a broad spectrum of U.S. agricultural production regions. The first major application of EPIC was a national analysis performed in support of the 1985 Resources Conservation Act (RCA) assessment. The model has continuously evolved since that time and has been applied for a wide range of field, regional, and national studies both in the U.S. and in other countries. The range of EPIC applications has also expanded greatly over that time, including studies of (1) surface runoff and leaching estimates of nitrogen and phosphorus losses from fertilizer and manure applications, (2) leaching and runoff from simulated pesticide applications, (3) soil erosion losses from wind erosion, (4) climate change impacts on crop yield and erosion, and (5) soil carbon sequestration assessments. The EPIC acronym now stands for Erosion Policy Impact Climate, to reflect the greater diversity of problems to which the model is currently applied. The Agricultural Policy EXtender (APEX) model is essentially a multi-field version of EPIC that was developed in the late 1990s to address environmental problems associated with livestock and other agricultural production systems on a whole-farm or small watershed basis. The APEX model also continues to evolve and to be utilized for a wide variety of environmental assessments. The historical development for both models will be presented, as well as example applications on several different scales. Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:isu:genres:12376&r=all 130. Informed Control Over Inputs and Extent of Industrial Processing Hennessy, David A. Stylized facts regarding the industrial process include emphases on obtaining information about and control over the quality of raw materials. We provide a model that establishes conditions under which informed control involves ensuring uniformity in inputs and increased uniformity encourages more extensive processing. We show when the Boltzmann-Shannon entropy statistic is an appropriate measure of uniformity. Date: 2005-06-22 URL: http://d.repec.org/n?u=RePEc:isu:genres:12377&r=all 131. The Influence of Information Externalities on the Value of Reputation Building - An Experiment Gary E. Bolton Axel Ockenfels We observe that information externalities arise in sequential equilibrium of the chain store game such that the amount of reputation building among partners differs from that among strangers. No matching effects are predicted for the trust game. Our experiment confirms the qualitative chain store prediction, but information externalities also show up in the trust game. Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:kls:series:0017&r=all 132. Le management des activites culturelles et de loisirs: questions strategiques et etat des recherches academiques. FILSER, Marc (LEG-CERMAB - CNRS - IAE - Universite de Bourgogne) La recherche academique en management des activites culturelles et de loisirs est un courant recent, apparu au debut des annees 90, mais dont la production est importante et eclectique. Trois axes peuvent etre identifies pour structurer ces recherches:l'analyse du comportement du public, la strategie des institutions et la gestion de leurs decisions operationnelles dans les domaines de la tarification, de la communication et de la distribution. Cet article analyse la convergence de ces recherches vers les interrogations operationnelles des institutions du secteur./ Management of culture and leisure is a relatively new field for the academic research. It began to structure in the early 90's, and leads to a dynamic and eclectic flow of contributions. Three major areas are investigated : the behaviour of public, strategic decision making by institutions, and operational implementation of this strategy, most notably in the areas of pricing, communication and distribution. This paper investigates the convergence of academic research with strategic expectations of the institutions in the sector of culture and leisure activities. Keywords: management des activites culturelles et de loisirs ; management of culture and leisure Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:lat:gstion:2005-01&r=all 133. Pour favoriser la memorisation d'une marque, un annonceur a-t-il interet a utiliser des couleurs etonnantes? / In order to favor the memorization of an ad, is it recommanded to use surprising colors ? LICHTLE, Marie-Christine (LEG-CERMAB - CNRS - IAE - Universite de Bourgogne) Le choix des couleurs utilisees dans une publicite est tres important mais souvent effectue de maniere intuitive. Lorsqu'un annonceur souhaite favoriser la memorisation d'une marque, on peut s'interroger sur le choix de la couleur : faut-il plutot selectionner des couleurs pertinentes? Auxquelles les individus s'attendent? Qu'ils apprecient? Ou a-t-on au contraire interet a opter pour des couleurs considerees comme etonnantes? Les resultats d'une etude exploratoire montrent que la memorisation est meilleure lorsque l'annonceur choisit des couleurs pertinentes et appreciees des individus. Il faut donc chercher quelles sont les couleurs presentant ces caracteristiques pour les adapter a la cible, d'autant plus que les couleurs preferees et considerees comme pertinentes peuvent etre differentes pour les hommes et les femmes./ The choice of the color used in an ad is a very important one, but it is often made in an intuitive way. When an advertiser wants to favor memorization, we can wonder which color he must choose : is it recommanded to select pertinent colors ? which individuals expect ? that they like ? or must he on the contrary choose surprising colors ? The results of an exploratory study show that the more the advertiser selects pertinent and liked colors, the better the memorization. As a consequence, the advertiser has to determine which colors have these characteristics in order to adapt them to the target ; furthermore, preferred colors and colors considered as pertinent may be different for men and women. Keywords: communication ; comportement du consommateur ; distribution Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:lat:gstion:2005-02&r=all 134. The Optimal Amount of Falsified Testimony Winand Emons Claude Fluet An arbiter can decide a case on the basis of his priors or he can ask for further evidence from the two parties to the conflict. The parties may misrepresent evidence in their favor at a cost. The arbiter is concerned about accuracy and low procedural costs. When both parties testify, each of them distorts the evidence less than when they testify alone. When the fixed cost of testifying is low, the arbiter hears both, for intermediate values one, and for high values no party at all. The ability to commit to an adjudication scheme makes it more likely that the arbiter requires evidence. Keywords: Evidence production, procedure, costly state falsification, adversarial, inquisitorial JEL: D82 K41 K42 Date: 2005 URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:0520&r=all 135. New Evidence on the Determinants of Absenteeism Using Linked Employer-Employee Data Georges Dionne Benoit Dostie In this paper, we provide new evidence on the determinants of absenteeism using the Workplace Employee Survey (WES) 1999-2002 from Statistics Canada. Our paper extends the typical labour- leisure model used to analyze the decision to skip work to include firm-level policy variables relevant to the absenteeism decision and uncerainty about the cost of absenteeism. It also provides a non-linear econometric model that explicitly takes into account the count nature of absenteeism data and unobserved heterogeneity at both the individual and firm level. Controlling for very detailed demographic, job and firm characteristics ( including workplace practices), we find that dissatisfaction with contracted hours is a significant determinant of absence. Keywords: Absenteeism, Linked Employer-Employee Data, Unobserved Heterogeneity, Count Data Models JEL: J22 J29 C23 Date: 2005 URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:0521&r=all 136. Gestire il cliente con il CRM e la Business Intelligence: tra st oria e dati Cinzia COLAPINTO MANAGING CUSTOMER BEHAVIOUR BY CRM AND BUSINESS INTELLIGENCE: BET WEEN HISTORY AND DATA. In this paper we introduce some definition s concerning Customer Relationship Management and Business Intell igence and we emphasize how they can improve business strategies and performances. We show how Data Mining techniques can be used for CRM analysis, understanding customer behaviour in order to fo recast future actions, improving decisions and results. We analyz e the evolution of marketing, CRM and BI during the last two deca des in Italy, focusing on the different characteristics of the tw o “waves” of CRM projects. Keywords: Business Intelligence, Customer Relationship Management, Data Mining URL: http://d.repec.org/n?u=RePEc:mil:wpdepa:2005-13&r=all 137. Von Neumann-Morgenstern Stable Sets in Matching Problems EHLERS, Lars The following properties of the core of a one well-known: (i) the core is non-empty; (ii) the core is a lattice; and (iii) the set of unmatched agents is identical for any two matchings belonging to the core. The literature on two-sided matching focuses almost exclusively on the core and studies extensively its properties. Our main result is the following characterization of (von Neumann-Morgenstern) stable sets in one-to-one matching problem only if it is a maximal set satisfying the following properties : (a) the core is a subset of the set; (b) the set is a lattice; (c) the set of unmatched agents is identical for any two matchings belonging to the set. Furthermore, a set is a stable set if it is the unique maximal set satisfying properties ( a), (b) and (c). We also show that our main result does not extend from one-to-one matching problems to many-to-one matching problems. Keywords: Matching Problem, Von Neumann-Morgenstern Stable Sets JEL: C78 J41 J44 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-11&r=all 138. Finite-Sample Simulation-Based Inference in VAR Models with Applications to Order Selection and Causality Testing DUFOUR, Jean-Marie JOUINI, Tarek Statistical tests in vector autoregressive (VAR) models are typically based on large-sample approximations, involving the use of asymptotic distributions or bootstrap techniques. After documenting that such methods can be very misleading even with fairly large samples, especially when the number of lags or the number of equations is not small, we propose a general simulation- based technique that allows one to control completely the level of tests in parametric VAR models. In particular, we show that maximized Monte Carlo tests [Dufour (2002)] can provide provably exact tests for such models, whether they are stationary or integrated. Applications to order selection and causality testing are considered as special cases. The technique developed is applied to quarterly and monthly VAR models of the U.S. economy, comprising income, money, interest rates and prices, over the period 1965-1996. Keywords: Vector autoregression ; VAR ; exact test ; Monte Carlo test ; maximized Monte Carlo test ; bootstra; Granger causality ; order selection ; nonstationary model ; macroeconomics ; money and income ; interest rate ; inflation JEL: C32 C12 C15 E4 E5 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-12&r=all 139. Rational Choice on Arbitrary Domains: A Comprehensive Treatment BOSSERT, Walter SUZUMURA, Kotaro The rationalizability of a choice function on arbitrary domains by means of a transitive relation has been analyzed thoroughly in the literature. Moreover, characterizations of various versions of consistent rationalizability have appeared in recent contributions. However, not much seems to be known when the coherence property of quasi-transitivity or that of P-acyclicity is imposed on a rationalization. The purpose of this paper is to fill this significant gap. We provide characterizations of all forms of rationalizability involving quasi-transitive or P- acyclical rationalizations on arbitrary domains. Keywords: Rational Choice, Quasi-Transitivity, P-Acyclicity JEL: D11 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-13&r=all 140. Choosing Wisely: The Natural Multi-Bidding Mechanism EHLERS, Lars Perez-Castrillo and Wettstein (2002) propose a multi-bidding mechanism to determine a winner from a set of possible projects. The winning project is implemented and its surplus is shared among the agents. In the multi-bidding mechanism each agent announces a vector of bids, one for each possible project, that are constrained to sum up to zero. In addition, each agent chooses a favorite a object which is used as a tie-breaker if several projects receive the same highest aggregate bid. Since more desirable projects receive larger bids, it is natural to consider the multi-bidding mechanism without the announcement of favorite projects. We show that the merits of the multi-bidding mechanism appear not to be robust to this natural simplification. Specifically, a Nash equilibrium exists if and only if there are at least two individually optimal projects and all individually optimal projects are efficient. Keywords: (natural) multi-bidding mechanism, existence, efficiency JEL: D62 D78 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-14&r=all 141. A Portmanteau Test for Serially Correlated Errors in Fixed Effects Models Atsushi Inoue Gary Solon We propose a portmanteau test for serial correlation of the error term in a fixed effects model. The test is derived as a conditional Lagrange multiplier test, but it also has a straightforward Wald test interpretation. In Monte Carlo experiments, the test displays good size and power properties. JEL: C23 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberte:0310&r=all 142. Two-Sample Instrumental Variables Estimators Atsushi Inoue Gary Solon Following an influential article by Angrist and Krueger (1992) on two-sample instrumental variables (TSIV) estimation, numerous empirical researchers have applied a computationally convenient two-sample two-stage least squares (TS2SLS) variant of Angrist and Krueger's estimator. In the two-sample context, unlike the single-sample situation, the IV and 2SLS estimators are numerically distinct. Our comparison of the properties of the two estimators demonstrates that the commonly used TS2SLS estimator is more asymptotically efficient than the TSIV estimator and also is more robust to a practically relevant type of sample stratification. JEL: C3 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberte:0311&r=all 143. Liquidity and Expected Returns: Lessons From Emerging Markets Geert Bekaert Campbell R. Harvey Christian Lundblad Given the cross-sectional and temporal variation in their liquidity, emerging equity markets provide an ideal setting to examine the impact of liquidity on expected returns. Our main liquidity measure is a transformation of the proportion of zero daily firm returns, averaged over the month. We find that our liquidity measures significantly predict future returns, whereas alternative measures such as turnover do not. Consistent with liquidity being a priced factor, unexpected liquidity shocks are positively correlated with contemporaneous return shocks and negatively correlated with shocks to the dividend yield. We consider a simple asset pricing model with liquidity and the market portfolio as risk factors and transaction costs that are proportional to liquidity. The model differentiates between integrated and segmented countries and periods. Our results suggest that local market liquidity is an important driver of expected returns in emerging markets, and that the liberalization process has not eliminated its impact. JEL: G12 G14 G15 F30 F36 F02 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11413&r=all 144. Zero Returns to Compulsory Schooling In Germany: Evidence and Interpretation Jorn-Steffen Pischke Till von Wachter We estimate the impact of compulsory schooling on earnings using the changes in compulsory schooling laws for secondary schools in West German states during the period from 1948 to 1970. While our research design is very similar to studies for various other countries, we find very different estimates of the returns. Most estimates in the literature indicate returns in the range of 10 to 15 percent. We find no return to compulsory schooling in Germany in terms of higher wages. We investigate whether this is due to labor market institutions or the existence of the apprenticeship training system in Germany, but find no evidence for these explanations. We conjecture that the result might be due to the fact that the basic skills most relevant for the labor market are learned earlier in Germany than in other countries. JEL: I21 J24 J31 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11414&r=all 145. They Don't Invent Them Like They Used To: An Examination of Energy Patent Citations Over Time David Popp This paper uses patent citation data to study flows of knowledge across time and across institutions in the field of energy research. Popp (2002) finds the level of energy-saving R&D depends not only on energy prices, but also on the quality of the accumulated knowledge available to inventors. Patent citations are used to represent this quality. This paper explores the pattern of citations in these fields more carefully. I find evidence for diminishing returns to research inputs, both across time and within a given year. To check whether government R&D can help alleviate potential diminishing returns, I pay special attention to citations to government patents. Government patents filed in or after 1981 are more likely to be cited. More importantly, descendants of these government patents are 30 percent more likely to be cited by subsequent patents. Earlier government research was more applied in nature and is not cited more frequently. JEL: O33 O38 Q40 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11415&r=all 146. Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model: Expanded Version Stephanie Schmitt-Grohe Martin Uribe In this paper, we study Ramsey-optimal fiscal and monetary policy in a medium-scale model of the U.S.\ business cycle. The model features a rich array of real and nominal rigidities that have been identified in the recent empirical literature as salient in explaining observed aggregate fluctuations. The main result of the paper is that price stability appears to be a central goal of optimal monetary policy. The optimal rate of inflation under an income tax regime is half a percent per year with a volatility of 1.1 percent. This result is surprising given that the model features a number of frictions that in isolation would call for a volatile rate of inflation---particularly nonstate-contingent nominal public debt, no lump-sum taxes, and sticky wages. Under an income-tax regime, the optimal income tax rate is quite stable, with a mean of 30 percent and a standard deviation of 1.1 percent. Simple monetary and fiscal rules are shown to implement a competitive equilibrium that mimics well the one induced by the Ramsey policy. When the fiscal authority is allowed to tax capital and labor income at different rates, optimal fiscal policy is characterized by a large and volatile subsidy on capital. JEL: E52 E61 E63 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11417&r=all 147. International Outsourcing and Incomplete Contracts Barbara J. Spencer International outsourcing to lower cost countries such as China and India can best be understood through the enrichment of trade models to include concepts from industrial organization and contract theory that explain the vertical organization of production. The combination of trade with the choice of organizational form represents an important new area for both theoretical and empirical research. This survey paper provides a perspective on this new literature so as to gain insights into the forces driving international outsourcing. The paper focuses on relationship-specific investment, incomplete contracts, and also search and matching, as fundamental concepts that explain outsourcing decisions. JEL: F1 L14 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11418&r=all 148. Can Ranking Hospitals on the Basis of Patients' Travel Distances Improve Quality of Care? Daniel P. Kessler Conventional outcomes report cards­ public disclosure of information about the patient-background-adjusted health outcomes of individual hospitals and physicians -- may help improve quality, but they may also encourage providers to %u201Cgame%u201D the system by avoiding sick and/or seeking healthy patients. In this paper, I propose an alternative approach: ranking hospitals on the basis of the travel distances of their Medicare patients. At least in theory, a distance report card could dominate conventional outcomes report cards: a distance report card might measure quality of care at least as well but suffer less from selection problems. I use data on elderly Medicare beneficiaries with heart attack and stroke from 1994 and 1999 to show that a distance report card would be both valid ­ that is, correlated with true quality ­ and able to distinguish confidently among hospitals ­ that is, able to reject at conventional significance levels the hypothesis that the true quality of a low-ranked hospital was the same as the quality of the average hospital. The hypothetical distance report card I propose compares favorably to (although does not necessarily dominate) the California AMI outcomes report card. JEL: I1 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11419&r=all 149. Do Report Cards Tell Consumers Anything They Don't Already Know? The Case of Medicare HMOs Leemore Dafny David Dranove The use of government-mandated report cards to diminish uncertainty about the quality of various products and services is widespread. However, report cards will have little effect if they simply confirm consumers' prior beliefs. Moreover, documented "responses" to report cards may reflect learning about quality that would have occurred in their absence. Using panel data on Medicare HMO market shares between 1994 and 2002, we examine the relationship between enrollment and quality both before and after report cards were mailed to 40 million Medicare beneficiaries in 1999 and 2000. We find evidence for both market-based and report- card-induced learning. We estimate the report-card effect on enrollment in the 2 years following their release to be approximately equal to that of cumulative market learning between 1994 and 2002. The report-card effect is entirely due to beneficiaries' responses to consumer satisfaction scores; other reported quality measures such as the mammography rate did not affect enrollment. JEL: D8 H4 I1 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11420&r=all 150. Are Durable Goods Consumers Forward Looking? Evidence from College Textbooks Judith Chevalier Austan Goolsbee Popular wisdom holds that publishers revise college textbooks mainly to kill off the secondary market for used books. While this behavior might be profitable if consumers are myopic, uninformed or have high short-run discount rates (that exceed the publishers'), neoclassical authors have noted that it will typically not be profitable if publishers can precommit not to cut prices and if consumers are forward-looking and have similar discount rates as the publishers; the consumer's willingness to pay for new books falls if they know that they cannot resell their used books. Using a large new dataset on all textbooks sold in psychology, biology and economics in the 10 semesters from 1997 to 2001, we estimate a demand system for books to test whether textbook consumers are forward-looking. The data strongly support the view that students are forward-looking with low short- run discount rates and that they have rational expectations of publishers' revision behavior. When the students buy their textbooks, they correctly take into account the probability that they will not be able to resell their books at the end of the semester due to a new edition release. Conditional on faculty assignment behavior, simulation results suggest that students are sufficiently forward-looking that publishers could not raise revenues by accelerating current revision cycles. JEL: L2 L6 D9 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11421&r=all 151. Dating Business Cycle Turning Points Marcelle Chauvet James D. Hamilton This paper discusses formal quantitative algorithms that can be used to identify business cycle turning points. An intuitive, graphical derivation of these algorithms is presented along with a description of how they can be implemented making very minimal distributional assumptions. We also provide the intuition and detailed description of these algorithms for both simple parametric univariate inference as well as latent-variable multiple-indicator inference using a state-space Markov-switching approach. We illustrate the promise of this approach by reconstructing the inferences that would have been generated if parameters had to be estimated and inferences drawn based on data as they were originally released at each historical date. Waiting until one extra quarter of GDP growth is reported or one extra month of the monthly indicators released before making a call of a business cycle turning point helps reduce the risk of misclassification. We introduce two new measures for dating business cycle turning points, which we call the %u201Cquarterly real-time GDP-based recession probability index%u201D and the %u201Cmonthly real-time multiple-indicator recession probability index%u201D that incorporate these principles. Both indexes perform quite well in simulation with real-time data bases. We also discuss some of the potential complicating factors one might want to consider for such an analysis, such as the reduced volatility of output growth rates since 1984 and the changing cyclical behavior of employment. Although such refinements can improve the inference, we nevertheless find that the simpler specifications perform very well historically and may be more robust for recognizing future business cycle turning points of unknown character. JEL: E32 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11422&r=all 152. Ethnic Identification, Intermarriage, and Unmeasured Progress by Mexican Americans Brian Duncan Stephen J. Trejo Using Census and CPS data, we show that U.S.-born Mexican Americans who marry non-Mexicans are substantially more educated and English proficient, on average, than are Mexican Americans who marry co-ethnics (whether they be Mexican Americans or Mexican immigrants). In addition, the non-Mexican spouses of intermarried Mexican Americans possess relatively high levels of schooling and English proficiency, compared to the spouses of endogamously married Mexican Americans. The human capital selectivity of Mexican intermarriage generates corresponding differences in the employment and earnings of Mexican Americans and their spouses. Moreover, the children of intermarried Mexican Americans are much less likely to be identified as Mexican than are the children of endogamous Mexican marriages. These forces combine to produce strong negative correlations between the education, English proficiency, employment, and earnings of Mexican-American parents and the chances that their children retain a Mexican ethnicity. Such findings raise the possibility that selective ethnic %u201Cattrition%u201D might bias observed measures of intergenerational progress for Mexican Americans. JEL: J12 J15 J62 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11423&r=all 153. Determinants of Vertical Integration: Finance, Contracts, and Regulation Daron Acemoglu Simon Johnson Todd Mitton We study the determinants of vertical integration in a new dataset of over 750,000 firms from 93 countries. Existing evidence suggests the presence of large cross-country differences in the organization of firms, which may be related to differences in financial development, contracting costs or regulation. We find cross-country correlations between vertical integration on the one hand and financial development, contracting costs, and entry barriers on the other that are consistent with these "priors". Nevertheless, we also show that these correlations are almost entirely driven by industrial composition; countries with more limited financial development, higher contracting costs or greater entry barriers are concentrated in industries with a high propensity for vertical integration. Once we control for differences in industrial composition, none of these factors are correlated with average vertical integration. However, we also find a relatively robust differential effect of financial development across industries; countries with less-developed financial markets are significantly more integrated in industries that are more human capital or technology intensive. JEL: G30 G34 L22 L23 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11424&r=all 154. Opportunities for Improving the Drug Development Process: Results from a Survey of Industry and the FDA Ernst R. Berndt Adrian H. B. Gottschalk Matthew W. Strobeck In the United States, the Food and Drug Administration (FDA) agency is responsible for regulating the safety and efficacy of biopharmaceutical drug products. Furthermore, the FDA is tasked with speeding new medical innovations to market. These two missions create an inherent tension within the agency and between the agency and key stakeholders. Oftentimes, communications and interactions between regulated companies and the FDA suffer. The focus of this research is on the interactions between the FDA and the biopharmaceutical companies that perform drug R&D. To assess the current issues and state of communication and interaction between the FDA and industry, we carried out a survey of industry leadership in R&D and regulatory positions as well as senior leadership at the FDA who have responsibility for drug evaluation and oversight. Based on forty-nine industry and eight FDA interviews we conducted, we found that industry seeks additional structured and informal interactions with the FDA, especially during Phase II of development. Overall, industry placed greater value on additional communication than did the FDA. Furthermore, industry interviewees indicated that they were willing to pay PDUFA-like fees during clinical development to ensure that the FDA could hire additional, well-qualified staff to assist with protocol reviews and decision-making. Based on our survey and discussions, we uncovered several thematic opportunities to improve interactions between the FDA and industry and to reduce clinical development times: 1) develop metrics and goals at the FDA for clinical development times in exchange for PDUFA like fees; 2) establish an oversight board consisting of industry, agency officials, and premier external scientists (possibly at NIH or CDC) to evaluate and audit retrospectively completed and terminated drug projects; and 3) construct a knowledge database that can simultaneously protect proprietary data while allowing sponsor companies to understand safety issues and problems of previously developed/failed drug programs. While profound scientific and medical challenges face the FDA and industry, the first step to reducing development times and associated costs and facilitating innovation is to provide an efficient regulatory process that reduces unnecessary uncertainty and delays due to lack of communication and interaction. JEL: I1 H11 K23 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11425&r=all 155. Investor Competence, Trading Frequency, and Home Bias John R. Graham Campbell R. Harvey Hai Huang People are more willing to bet on their own judgments when they feel skillful or knowledgeable (Heath and Tversky (1991)). We investigate whether this "competence effect" influences trading frequency and home bias. We find that investors who feel competent trade more often and have a more internationally diversified portfolio. We also find that male investors, and investors with higher income or more education, are more likely to perceive themselves as competent investors than are female investors, and investors with lower income or less education. Our results are unlikely to be explained by other hypotheses, such as overconfidence or information advantage. Finally, we separately establish a link between optimism towards the home market and international portfolio diversification. JEL: G11 G15 F30 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11426&r=all 156. Death and the City: Chicago's Mortality Transition, 1850- 1925 Joseph P. Ferrie Werner Troesken Between 1850 and 1925, the crude death rate in Chicago fell by 60 percent, driven by reductions in infectious disease rates and infant and child mortality. What lessons might be drawn from the mortality transition in Chicago, and American cities more generally? What were the policies that had the greatest effect on infectious diseases and childhood mortality? Were there local policies that slowed the mortality transition? If the transition to low mortality in American cities was driven by forces largely outside the control of local governments (higher per capita incomes or increases in the amount and quality of calories available to urban dwellers from rising agricultural productivity) then expensive public health projects, such as the construction of public water and sewer systems, probably should have taken a back seat to broader national policies to promote overall economic growth. The introduction of pure water explains between 30 and 50 percent of Chicago%u2019s mortality decline, and that other interventions, such as the introduction of the diphtheria antitoxin and milk inspection had much smaller effects. These findings have important implications for current policy debates and economic development strategies. JEL: N0 N9 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11427&r=all 157. The benefits of liberalising product markets and reducing barriers to international trade and investment: the case of the United States and the European Union OECD Economics Department This paper provides an assessment of the impact of a package of structural reforms in the European Union and the United States on long-run trade and output gains accruing to OECD countries. The package includes reforms that reduce competition-restraining regulations, cut tariff barriers and ease restrictions on foreign direct investment to "best practice" levels in the OECD area. The analysis, which is based on earlier OECD studies, indicates that such reforms could lead to gains in GDP per capita in both transatlantic areas of up to 3 to 3 ? per cent. Moreover, due to trade linkages, the benefits of reforms in the United States and the European Union would spread to other OECD countries, with an estimated increase in GDP per capita of up to 1? per cent. As the analysis is confined to a relatively narrow set of policies and abstracts from potential dynamic effects from reform-induced increase in innovation, the overall gains from broad reforms could be significantly higher than reported in the paper.

Les benefices de la liberalisation des marches de produits et de la reduction des barrieres aux echanges et aux investissements internationaux: le cas des Etats-Unis et de l'Union europeenne

Ce document offre une evaluation des reformes globales structurelles en Europe et aux Etats-Unis sur les echanges et la croissance de long terme dans les pays de l'OCDE. Ces reformes incluent l'ensemble des mesures politiques visant la reduction de la reglementation anti-competitive, la baisse des barrieres tarifaires et des restrictions sur les investissements directs etrangers vers les "meilleures pratiques" observees au sein des pays de l'OCDE. L'analyse, qui s'appuie sur de precedents travaux de l'OCDE, montre que de telles reformes peuvent conduire a une augmentation du PIB par habitant entre 3 et 3? pour cent. De plus, en raison d'effets de transmission via les echanges, le benefice des reformes en Europe et aux Etats-Unis devrait se repandre a l'ensemble des autres pays de l'OCDE conduisant a une augmentation du PIB moyen par habitant de plus de 1? pour cent. Etant donne que l'analyse ne couvre qu'un nombre de mesures specifiques et exclut les effets dynamiques potentiels de l'innovation, les benefices tires d'un ensemble de reformes beaucoup plus large pourraient bien etre plus eleves que ceux reportes dans ce document. Keywords: international trade; foreign direct investment; regulation; growth and productivity;United States; European Union JEL: F13 F21 K2 O4 Date: 2005-06-07 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:432&r=all 158. Shifting Trade Patterns as a Means to Reduce Global CO2 Emissions: Implications for the Aluminium Industry Anders Hammer Stromman (Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program H?yskoleringen 5, 7491 Trondheim, Norway) Edgar G. Hertwich (Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program Hoyskoleringen 5, 7491 Trondheim, Norway) Faye Duchin (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA) This paper investigates how changes in the international division of labor can contribute to reducing CO2 emissions. The mitigation potential and costs implied by this mechanism are analyzed. Implications for the aluminium sector are assessed, including changes in the price of aluminium when global carbon emissions are constrained and the constraints are progressively tightened. The analysis makes use of the World Trade Model with Bilateral Trade (WTMBT), a linear program based on comparative advantage with any number of goods, factors, and regional trade partners. Minimizing factor use, WTMBT determines regional production, bilateral trade patterns, and region-specific prices. The model is extended for this study through the application of multi-objective optimization techniques and is used to explore efficient trade-offs between reducing CO2 emissions and increasing global factor costs. This application demonstrates how the WTMBT, with its global scope and regional and sectoral production detail, can be used to build bridges between global objectives and concerns about a specific industry in specific regions. This capability can extend the reach of more traditional studies in industrial ecology. JEL: F18 C61 C67 Q56 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0508&r=all 159. "Monetary Policy during Japan's Lost Decade" R. Anton Braun (Faculty of Economics, University of Tokyo) Yuichiro Waki (Graduate School of Economics, University of Tokyo) We develop a quantitative costly price adjustment model with capital formation for the Japanese Economy. The model respects the zero interest rate bound and is calibrated to reproduce the nominal and real facts from the 1990s. We use the model to investigate the properties of alternative monetary policies during this period. The setting of the long-run nominal interest rate in a Taylor rule is much more important for avoiding the zero bound than the setting of the reaction coefficients. A long- run interest rate target of 2.3 percent during the 1990s avoids the zero bound and enhances welfare. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:tky:fseres:2005cf343&r=all 160. "Bankruptcy Law, Corporate Finance, and Corporate Revival Process in Japan"(in Japanese) Noriyuki Yanagawa (Faculty of Economics, University of Tokyo) Sumio Hirose (Faculty of Economics, Sinshu University) Fumio Akiyoshi (Graduate School of Economics, University of Tokyo) This paper examines corporate revival processes in Japan. In recent years, corporate revival processes are drastically changing in Japan. For example, important bankruptcy laws have been revised and Industrial Revitalization Corporation was established. Moreover, many corporate revival funds are actively investing. This paper explains those new movements and examines how those new activities will change the Japanese economy. Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:tky:fseres:2005cj132&r=all 161. The Optimal Amount of Falsfied Testimony Winand Emons Claude Fluet An arbiter can decide a case on the basis of his priors or he can ask for further evidence from the two parties to the conflict. The parties may misrepresent evidence in their favor at a cost. The arbiter is concerned about accuracy and low procedural costs. When both parties testify, each of them distorts the evidence less than when they testify alone. When the fixed cost of testifying is low, the arbiter hears both, for intermediate values one, and for high values no party at all. The ability to commit to an adjudication scheme makes it more likely that the arbiter requires evidence Keywords: evidence production; procedure; costly state falsification; adversarial; inquisitorial JEL: D82 K41 K42 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:ube:dpvwib:dp0506&r=all 162. Criminal Solicitation, Entrapment, and the Enforcement of Law Thomas J. Miceli (University of Connecticut) This paper examines the optimal use of criminal solicitation as a law enforcement strategy. The benefits are greater deterrence of crime (due to the greater likelihood of apprehension), and the savings in social harm and apprehension costs as some offenders are diverted away from committing actual crimes through solicitation. The costs are the expense of hiring undercover cops and the greater likelihood of punishment. The optimal use of solicitation balances these factors. The paper also examines the justification for, and impact of, the entrapment defense, which exonerates those caught in a solicitation but otherwise not predisposed to commit a crime. Keywords: Entrapment, criminal solicitation, law enforcement JEL: K14 K42 Date: 2005-06 URL: http://d.repec.org/n?u=RePEc:uct:uconnp:2005-17&r=all 163. European Employment Strategy and Spanish Labour Market Policies Ballester, Ramon The paper aim is to analyse the influence of the European Employment Strategy (EES) in the implementation of the Spanish labour market policies. The first part of the paper describes the evolution and content of the EES. In the second one, the definition of activation is also explained. In addition to that, the ways how the EES develops and promotes active labour market policies are examined. The evolution of labour market policies in Spain and the current configuration of both active and passive policies are studied in the next three chapters. In these parts, the paper investigates to which extent the provisions of the EES have been implemented in Spain. The paper shows that: i) activation has been rising in the European countries since the implementation of the EES; ii) this fact has also happened in relative terms (comparing the evolution of active to passive policies); iii) Spain has been one of the countries which has led these processes; iv) the EES seems to have been influencing the configuration of some parts of the Spanish labour market policies. Keywords: activation; employment policies JEL: F15 J23 J24 J26 URL: http://d.repec.org/n?u=RePEc:udg:wpeudg:014&r=all 164. Pricing and matching under duopoly with imperfect buyer mobility Massimo A. De Francesco Recent contributions have explored how lack of buyer mobility affects pricing. For example, Burdett, Shi, and Wright (2001) envisage a two-stage game where, once prices are set by the firms, the buyers play a static game by choosing independently which firm to visit. We incorporate imperfect mobility in a duopolistic pricing game where the buyers are involved into a multi-stage game. The firms are shown to have an incentive to give service priority to loyal customers. Under this rationing rule, equilibrium prices converge to their value under perfect buyer mobility as the number of stages of the buyer game increases Keywords: Bertrand competition, matching, imperfect mobility, sequential equilibrium, buyerloyalty JEL: D43 L13 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:usi:wpaper:439&r=all 165. Survival of the Hippest: Life at the Top of the Hot 100 David E. Giles (Department of Economics, University of Victoria) We analyze the survival characteristics of recordings that reached the number one spot on the U.S. popular music charts over the period 1955 to 2003. Our results show that there has been a statistically significant change in the time spent at number one since “album cuts” were included in the compilation of Billboard’s Hot 100. Survival time is significantly improved if the recording is by a female solo artist, or if it is an instrumental tune. We also find a significant “Elvis effect”. Keywords: Popular music, hit tunes, survival function, hazard function, duration model JEL: C16 C49 Z11 Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:vic:vicewp:0507&r=all 166. Portfolio Selection with Two-Stage Preferences Marco Taboga (Banca d'Italia Bank of Italy) We propose a model of portfolio selection under ambiguity, based on a two-stage valuation procedure which disentangles ambiguity and ambiguity aversion. The model does not imply 'extreme pessimism' from the part of the investor, as multiple priors models do. Furthermore, its analytical tractability allows to study complex problems thus far not analyzed, such as joint uncertainty about means and variances of returns. Keywords: ambiguity, portfolio selection, parameter uncertainty. JEL: G Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0506009&r=all 167. Measuring the True Cost of Active Management by Mutual Funds Ross Miller (SUNY at Albany) Recent years have seen a dramatic shift from mutual funds into hedge funds even though hedge funds charge management fees that have been decried as outrageous. While expectations of superior returns may be responsible for this shift, this article shows that mutual funds are far more expensive than commonly believed. Mutual funds appear to provide investment services for relatively low fees because they bundle passive and active funds management together in a way that understates the true cost of active management. In particular, funds that engage in “closet” or “shadow” indexing charge their investors for active management while providing them with little more than an indexed investment. Even the average mutual fund, which ostensibly provides active management, will have over 90% of the variance in its returns explained by its benchmark index. This article derives a method for allocating fund expenses between active and passive management and constructs a simple formula for finding the cost of active management. Computing this “active expense ratio” requires only a fund’s published expense ratio, its R- squared relative to a benchmark index, and the expense ratio for a competitive fund that tracks that index. At the end of 2004, the mean active expense ratio for the large-cap equity mutual funds tracked by Morningstar was 7%, over six times their published expense ratio of 1.15%. More broadly, funds in the Morningstar universe had a mean active expense ratio of 5.2%, while the largest funds averaged a percent or two less. Viewed in this context, the fees of hedge funds that focus on active management do not appear so outrageous. Keywords: mutual fund expenses, cost allocation, active expense ratio, active alpha, portable alpha JEL: G Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0506010&r=all 168. Work incentives and household love: Sequential contracting with altruistic individuals and moral hazard Cecile Aubert (Universite Paris Dauphine, Eurisco) When agents caring for -- and thus insuring -- each other, contract with different principals, a common agency-type situation arises even with independent tasks. With public outcomes and sequential contracting, the first principal may be unable to induce effort in equilibrium. Keywords: Moral Hazard, Common Agency, Altruism JEL: D10 D64 D82 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0506001&r=all 169. Political renegotiation of regulatory contracts Cecile Aubert (Universite Paris Dauphine, Eurisco) Jean- Jacques Laffont (IDEI, Toulouse) Governmental contracts may be renegotiated after political changes. Current governments can anticipate this and strategically distort contracts to influence renegotiation outcomes. In this sequential common agency game, the initial contract impacts elements of the renegotiation process: outside options (a `leverage' effect), and the beliefs of the new government through partial information revelation (a `strategic' effect). We characterize the optimal initial contract, as a function of political stability, time preference, and profits appropriation by the initial government. It always entails either full separation or strategic, partial, information revelation. Last, institutional rules imposing immediate payments to the firm help limit output distortions. Keywords: Renegotiation, Political uncertainty, Regulation. JEL: D82 L51 D73 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0506002&r=all 170. Capital account Liberalization and exchange rate regime choice, What Scope for flexibility in Tunisia ? Ben Ali Mohamed Sami (CADRE, Universite de Lille, France) Capital account liberalization and exchange rate regime choice, what scope for flexibility in Tunisia? The adoption by Tunisia of structural reforms of its economy in a context of gradual opening since 1986, had allowed the instauration in January 1993 of the convertibility of its current account. The total convertibility of the Tunisian Dinar remains a top priority in the immediate future like finality of a more close integration of the Tunisian economy to the world economy. The capital account liberalization in Tunisia poses the problematic of the prospective choice of its appropriate exchange rate regime. This study evaluates within a game-theoretic framework the exchange rate regime from a welfare perspective. In a tradable-nontradable goods model framework, Tunisia’s exchange rate regime choice is cast in terms of strategic interactions between the monetary authority and domestic enterprises. The monetary authority is assumed to choose an optimal exchange rate regime according to a welfare-related criterion by minimising a loss function defined in terms of external competitiveness and domestic inflation. Simulations outcomes reveal that capital account liberalization in the Tunisian economic context is compatible with a flexible exchange rate regime. JEL: C7 D8 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0506003&r=all 171. Alcohol mortality, drinking behaviour, and business cycles: are slumps really dry seasons? Petri Bockerman (Labour Institute for Economic Research) Edvard Johansson (The Research Institute of the Finnish Economy) Ritva Prattala (National Public Health Institute) Antti Uutela (National Public Health Institute) This paper explores the connection between alcohol mortality, drinking behaviour and macroeconomic fluctuations in Finland by using both aggregate and micro-level data during the past few decades. The results from the aggregate data reveal that an improvement in regional economic conditions measured by the employment-to-population rate produces a decrease in alcohol mortality. However, the great slump of the early 1990s is an exception to this pattern. During that particular episode, alcohol mortality did indeed decline, as there was an unprecedented collapse in economic activity. The results from the micro-data show that an increase in the employment-to-population rate and expansion in regional GDP produces an increase in alcohol consumption while having no effect on the probability of being a drinker. All in all, the Finnish evidence presented does not overwhelmingly support the conclusions reported for the USA, according to which temporary economic slowdowns are good for health. In contrast, at least alcohol mortality seems to increase in those bad times that are not exceptional economic crises like the one experienced in the early 1990s. However, there is evidence that alcohol consumption is strongly procyclical by its nature. This suggests that alcohol consumption and mortality may be delinked in the short-run business cycle context. Keywords: alcohol mortality, drinking, business cycles JEL: E32 I12 R11 Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwphe:0506002&r=all 172. Should Research Universities be Led by Top Researchers? Part 1: Are they? Amanda H Goodall (Warwick University Business School) If the best universities in the world – who have the widest choice of candidates – systematically appoint top researchers as their vice chancellors and presidents, is this one form of evidence that, on average, better researchers make better leaders? This paper addresses the first part of the question: are they currently appointing distinguished researchers? The study documents a positive correlation between the lifetime citations of a university’s president and the position of that university in a world ranking. The lifetime citations are counted by hand of the leaders of the top 100 universities identified by the Institute of Higher Education at Shanghai Jiao Tong University in their ‘Academic Ranking of World Universities’ (2004). These numbers are then normalised by adjusting for the different citation conventions across academic disciplines. The results are not driven by outliers. This paper posits the theory that there are two central components involved in leading research universities: managerial expertise and inherent knowledge. It is suggested here that active and successful researchers may have greater inherent knowledge about the academy that in turn informs their role as leader. Keywords: leadership, research university presidents, citations, world university rankings. JEL: I Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwphe:0506003&r=all 173. Purchasing Power Parity: Granger Causality Tests for the Yen- Dollar Exchange Rate Gunther Schnabl (Tuebingen University) Dirk Baur (Tuebingen University) The paper analyses the causality between the Japanese-US relative export prices and the yen-dollar exchange rate. It explains why the Japanese yen proved strong even during the economic slump of the 1990s. The paper suggests that the appreciation of the Japanese yen forced the Japanese enterprises into price reductions and productivity increases, which put a floor under the high level of the yen and thus initiated rounds of appreciation. This corresponds to the conjecture of a vicious ( virtuous) circle of appreciation and price adaptation. Keywords: yen, yen-dollar exchange rate, purchasing power parity, Granger causality test JEL: F31 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0506006&r=all 174. Sustaining Imperfectly Credible Trade Liberalization: Do the Rate of Tariff Reduction and the Degree of Labor Mobility Matter? Robert C. Tatum (University of North Carolina - Asheville) Imperfectly credible trade liberalization can lead to balance of payment deterioration and a subsequent reversal of the reform. Therefore, this paper examines whether the likelihood of policy reversal depends on the rate of tariff reduction or the degree of labor mobility. The analysis shows that transitory unemployment increases the likelihood of policy reversal. Furthermore, a gradual reduction in the tariff rate is found to extend the life of the liberalization episode, but does not necessarily increase the likelihood of sustained liberalization. Keywords: Trade Liberalization; Credibility; Gradual reform; Transitory Unemployment; Balance of Payments JEL: F4 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0506007&r=all 175. CORPORATE ENTREPRENEURSHIP: A STRATEGIC AND STRUCTURAL PERSPECTIVE Joao Ferreira (Universidade da Beira Interior) Recently there has been a growing interest in the use of corporate entrepreneurship as a means for corporations to enhance the innovative abilities of their employees and, at the same time, increase corporate success through the creation of new corporate ventures. However, the creation of corporate activity is difficult since it involves radically changing internal organisational behaviour patterns. Researchers have attempted to understand the factors that stimulate or impede corporate entrepreneurship. They examined the effect of a firm’s strategy, organisation and external environment. It appears that the environment plays a profound role is influencing corporate entrepreneurship whereas there is consensus that the external environment is an important antecedent of corporate entrepreneurship. Focus on the environment, the literature highlights two research questions that deserve examination. First, how do firms that compete in different environments vary in the corporate entrepreneurship activities? Second, which corporate entrepreneurship activities are conductive to superior performance in different environments? This paper develops the theoretical foundation of theses questions and focuses on the relationship between corporate entrepreneurship and strategic management in a integrating model of corporate entrepreneurship, giving special attention to the strategic behaviour, corporate context and organisational types. Keywords: Corporate Entrepreneurship, Strategy JEL: M0 M1 M13 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0506008&r=all 176. Minimum Quality Standards and Equilibrium Selection with Asymmetric Firms Olivier Bonroy (CREA, Laval University) Christos Constantatos (University of Macedonia) In a vertically differentiated market with cost asymmetries, the risk dominance criterion selects the equilibrium where the high quality is produced by the efficient firm. We show that a sufficiently high Minimum Quality Standard reverses equilibrium selection. Hence, MQS may be used in order to increase a domestic firm's profit at the expense of a more efficient foreign rival. This produces higher domestic and lower world welfare. Since the protectionist impact of MQS comes through equilibrium targeting rather than directly affecting equilibrium outcomes, it cannot be easily detected. Keywords: Vertical product differentiation, Minimum quality standards, Equilibrium selection, Protectionism JEL: F13 Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0506009&r=all 177. Macroeconomics of Speculation Korkut Erturk (University of Utah) Despite his emphasis on the speculative character of investment decisions, Minsky paid little attention to asset price speculation per se, ignoring asset price bubbles and their macroeconomic effects. That is perhaps because his views were formed during the era of financial regulation, when speculation “could do no harm as bubbles on a steady stream of enterprise. ” Clearly, times have since changed. Keynes’s old warning that the situation “… is serious when enterprise becomes the bubble on a whirlpool of speculation” has begun to ring true again. To deepen our understanding of financial fragility under present-day conditions, the paper builds on Keynes’s insights in his General Theory on the stock exchange by going back to his Treatise, where asset price expectations and speculation play an integral part in his analysis of the business cycle. More specifically, it develops the macroeconomic implications of some of his arguments that have mainly been eclipsed by his GT. These can be summarized in three related propositions: (1) asset price expectations systematically exhibit self-sustained biases in one direction or another over the business cycle; (2) once an asset price bubble emerges no automatic mechanism exists to check the deviation of prices from their true values; and, (3) mean reversion in asset prices over time plays itself out through a rise in inactive money balances in the banking system, which Keynes called the bear position, as more and more people begin to think that asset prices have reached levels that are unreasonable. This early picture of how financial variables interact with output determination over the business cycle is contrasted with Keynes’s better known analysis in the GT, which, it is argued, does not lend itself as readily to analyzing asset price misalignments. Keywords: asset prices, speculation, business cycle, keynesian theory JEL: E Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0506010&r=all 178. PLANNING FOR NATIONAL DEVELOPMENT: AN AGENDA GUIDED BY THE SOCIOECONOMIC SYSTEM'S SOCIAL PHILOSOPHY stanley c. w. salvary Co-operation among members of the world community is highly desirable, since it would be a step in the right direction to alleviate some of the world's problems. However, the current discussions on the harmonization of socio-economic systems and the globalization of trade goes beyond mere suggestions to the position that such a development is imminent and highly beneficial to the world community. For many countries being able to trade voluntarily with any country is highly desirable, but having to transform one's way of life to one single mode of operation poses far greater problems than those that currently are being experienced. This paper maintains that institutionalized macroeconomic planning, which can produce positive benefits to any and all societies, is the path that should be followed. Keywords: globalization of trade, confron tational competition, managed trade, institutionalized macroeconomic planning, national economic policy de cisions. JEL: E Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0506011&r=all 179. Retraining the Unemployed in a Matching Model with Turbulence Felix Reichling (Stanford University) I investigate to what degree differences in retraining opportunities are responsible for the divergence of unemployment rates between the U.S. and Europe since the early 1980s. I provide some evidence for higher retraining rates in the U.S. as compared to Europe and further show that there is tremendous heterogeneity across OECD countries with respect to retraining. In my model, unemployed workers not only search for jobs but also for suitable retraining programs. I find that when it becomes more difficult to find suitable retraining programs, enrollment rates, productivity and the unemployment rate decline. Furthermore, this paper is the first attempt to investigate the role of retraining in economies that are subject to economic turbulences as described by Ljungqvist and Sargent (1998, 2004). Using a similar parametrization as Ljungqvist and Sargent (2004), I find that the generosity of unemployment benefits, the main driving force in their model, is not an important determinant of unemployment, even during tumultuous economic times, if sufficiently good retraining institutions are available. Economies with more flexible retraining institutions adjust better to economic turbulence, and as a result, feature lower unemployment rates and higher productivity and output. My results suggest that differences in retraining opportunities play an important role in explaining cross-country differences in unemployment rates. Keywords: Retraining the Unemployed, European Unemployment, Economic Turbulence JEL: E24 J64 Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0506012&r=all 180. History of consumer demand theory 1871-1971: A Neo-Kantian rational reconstruction Ivan Moscati (Bocconi University - IEP) This paper examines the history of the neoclassical theory of consumer demand from 1871 to 1971 by bringing into play the knowledge theory of the Marburg School, a Neo-Kantian philosophical movement. The work aims to show the usefulness of a Marburg-inspired epistemology in rationalizing the development of consumer analysis and, more generally, to understand the principles that regulate the process of knowing in neoclassical economics. Keywords: Consumer Theory, Demand Theory, Utility Theory, Neo- Kantianism, Marburg School JEL: B13 B21 B40 D11 Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0506002&r=all 181. Early Experiments in Consumer Demand Theory: 1930-1970 Ivan Moscati (Bocconi University - IEP) This paper reconstructs the history of experimental research on consumer demand behavior between 1930 and 1970. The backgrounds of the experiments and their impact on the development of consumption theory are also investigated. Among other things, the paper shows that in fact many prominent economists of the period were involved in this stream of research. JEL: B21 B31 C91 D12 Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0506003&r=all 182. W.E. Johnson’s 1913 Paper and the Question of His Knowledge of Pareto Ivan Moscati (Bocconi University - IEP) In 1913, the Cambridge logician W.E. Johnson published a famous article on demand theory in the Economic Journal. Although Johnson’s treatment of the subject strongly resembles the analysis set forth by Pareto in the Manual of Political Economy, Johnson does not cite the Italian economist. This has aroused a long-standing debate about Johnson’s actual acquaintance with Pareto’s works, but the debated point has never been thoroughly investigated. The present paper addresses the question of Johnson’s knowledgeof Pareto both from an analytical and historical viewpoint, by examining Johnson’s life in the Cambridge environment and his available unpublished papers. Even though the new evidence gathered gives some weight to the thesis that Johnson could not have been unaware of Pareto’s Manual, it cannot exclude the possibility that the logician wrote his paper autonomously. Keywords: Johnson, Pareto, Cambridge School, Consumer Theory, Complementarity JEL: B31 B13 B21 Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0506004&r=all 183. The pricing of gasoline grades and the third law of demand R. Morris Coats (Nicholls State University) Gary M. Pecquet (Shenandoah University) Leon Taylor (Tulane University) Alchian and Allen’s “third law of demand” states that as a fixed cost increases by the same amount for low- and high-quality goods, the ratio of the prices of high- to low-quality goods will fall and the quantity demanded of high quality goods relative to low quality goods will increase. We examine the more general hypothesis by estimating the ratio of the quantities of sales of premium to regular grade gasoline using the ratio of premium to regular prices, controlling for supply and demand factors. We find moderate evidence for the more general hypothesis. Keywords: Third Law of Demand, Price Ratios, Gasoline Grades JEL: D1 D2 D3 D4 Date: 2005-06-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmi:0506006&r=all 184. THE AUTOMATED PAYMENT TRANSACTION (APT) TAX: A proposal to the President's Advisory Panel on Federal Tax Reform Edgar L. Feige (University of Wisconsin-Madison) I propose the replacement of our current system of individual and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive “revenue neutral” Automated Payment Transaction (APT) tax. The APT tax consists of a flat rate tax levied on all voluntary transactions. The total volume of transactions represents the broadest conceivable tax base and therefore requires the lowest conceivable marginal tax rate. Since the efficiency ( misallocation) costs of a tax system tend to rise geometrically with the marginal tax rate, a massive reduction in tax rates can save an estimated $300 billion of misallocation costs associated with the current tax system. The APT tax is automatically assessed and collected when transactions are routinely settled through the electronic technology of the bank/payments clearing system with no deductions, exemptions, or exclusions. The APT tax also imposes an automatically collected tax on cash as it enters and leaves the banking system. All income and information tax returns are eliminated as taxes are digitally assessed and collected by the financial equivalent of the E-Z pass that is now used to speed traffic through a toll booth system on highways. The annual savings in compliance and administrative costs are estimated to be $200 billion per year. Unlike the “Fair Tax” or “National Sales Tax” proposals which are highly regressive, the flat rate APT tax introduces progressivity through the tax base since the total volume of transactions includes all asset transactions involving exchanges of titles to property. The wealthy carry out a disproportionate share of these asset exchanges and therefore bear a disproportionate burden of the tax despite its flat rate structure. The perceived fairness, even handedness and simplicity of the APT tax will greatly reduce tax evasion, which the IRS estimates to total $325 billion per year. Like all taxes, the APT tax creates new distortions which must be weighed against the benefits obtained by scrapping the current tax system. Scrapping the present tax system tax promises potential benefits estimated at $825 billion annually. The proposed APT tax is simple, comprehensible, fair and efficient, with minimal administrative and compliance costs. The burden of proof therefore rests with APT tax opponents who must demonstrate that its costs exceed the $825 billion of potential annual benefits. Keywords: Tax reform; administration and compliance costs;equity; efficiency; flat tax; JEL: H20 H21 H23 H24 H25 H26 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0506011&r=all 185. On the equivalence of the Arrow impossibility theorem and the Brouwer fixed point theorem (forthcoming in ``Applied Mathematics and Computation''(Elsevier)) Yasuhito Tanaka (Doshisha University) We will show that in the case where there are two individuals and three alternatives (or under the assumption of free-triple property) the Arrow impossibility theorem for social welfare functions that there exists no social welfare function which satisfies transitivity, Pareto principle, independence of irrelevant alternatives, and has no dictator is equivalent to the Brouwer fixed point theorem on a 2-dimensional ball (circle). JEL: D6 D7 H Date: 2005-06-16 Date: 2005-06-16 Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0506012&r=all 186. A topological approach to the Arrow impossibility theorem when individual preferences are weak orders (forcoming in ``Applied Mathematics and Compuation''(Elsevier)) Yasuhito Tanaka (Doshisha University) We will present a topological approach to the Arrow impossibility theorem of social choice theory that there exists no binary social choice rule (which we will call a social welfare function) which satisfies the conditions of transitivity, independence of irrelevant alternatives (IIA), Pareto principle and non-existence of dictator. JEL: D6 D7 H Date: 2005-06-16 Date: 2005-06-16 Date: 2005-06-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0506013&r=all 187. Efectos de la Politica de Estado Hondurena sobre la Seguridad Alimentaria Paul Lewin Baptiste Gerbier Keywords: Honduras, Seguridad Aliemntaria, Politica Publica, Agricultura JEL: D6 D7 H Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0506014&r=all 188. The Economic Impact of a Possible Irrigation-Water Shortage in Odessa Sub-Basin: Potato Production & Processing Sanjoy Bhattacharjee (Washington State University) David Holland (Washington State University) The Columbia Basin Project (CBP) was one of the single largest projects undertaken by the Bureau of Reclamation. The venture, which started in the 1930s in Central Washington, did not entirely turn out as expected. In fact, almost half of the proposed irrigable area, located mainly in the northeastern portion of the original plan, doesn’t have any water supply from the project for irrigation purposes. The Odessa Sub-area is one of those areas. The land in this area is fertile and produces very high quality potatoes. Over the last couple of decades, potato production in this Odessa sub-region has been possible primarily because of irrigation based on deep wells. However, the underground water is drawing down and potato production may shut down as a result. Therefore, an economic threat on the economy of the Columbia Basin is in the offing, unless alternative water sources are negotiated. In this paper, we will mainly explore the regional economic impacts of the possible losses of potato production and its associated processing in the Odessa Sub-area. In section A, we briefly discuss the current status of the Columbia Basin Project. In section B, we discuss ground water level decline issues. In section C, we enumerate the economic impacts of the possible losses in potato production in the Odessa Sub-area and associated loss of potato processing. Summary and conclusions are in the final section. Keywords: potato production, potato processing, regional economic impact, input-output models JEL: R1 Date: 2005-06-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpur:0506011&r=all 189. Ranking Sealed High-Bid and Open Asymmetric Auctions Harrison Cheng For an important family of asymmetric auctions, we show that the seller’s expected revenue is higher in the sealed high-bid auction than in the open auction. This is true for any arbitrary numbers of weak and strong buyers. The family has linear equilibrium bidding strategies, and provides a fertile ground for research in asymmetric auctions. We establish many interesting properties of the linear asymmetric auction model. Revenue comparisons for the two auction formats are performed using data observed in U.S. forest timber auctions. By taking realistic parameters fitting the data, and compare the theoretical predictions of the revenues from the two auction formats, we show that the revenue difference is minimal with a fixed number of participants. When the difference in participation is taken into account, the revenue difference predicted by the linear model is quite similar to the empirical results of Athey, Levin and Seira ( 2004). Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:scp:wpaper:05-26&r=all 190. Evaluation socio-economique des programmes d'infrastructure : ordre optimal de realisation sous contrainte financiere William Roy (LET - Laboratoire d'economie des transports - http://www.ish-lyon.cnrs.fr/let - CNRS : UMR5593;ENTP - Universite Lumiere - Lyon II) L'Etat n'est pas en mesure de financer sans delais l'ensemble des projets d'infrastructure de transport socio-economiquement rentables. La selection operee par les analyses couts- avantages n'est pas suffisante, un arbitrage supplementaire est necessaire pour definir les projets qui seront prioritairement realises. C'est ce choix, structurant les programmes d'infrastructure, auquel nous souhaitons associer des recommandations normatives. Nous proposons un modele analytique permettant de demontrer que le critere pertinent pour hierarchiser les projets est le ratio entre utilite collective et montant de subvention. La modelisation conduit a penser qu'il est plus pertinent de privilegier les projets creant le plus de valeur sociale par euro public investi. En outre, ce critere est tout a fait coherent avec l'evolution partenariale des financements de projets d'infrastructure. Keywords: Infrastructure, contrainte financiere, calcul economique, evaluation Date: 2005-06-14 URL: http://d.repec.org/n?u=RePEc:hal:papers:halshs-00003971_v1&r=all 191. Asymptotic Results with Generalized Estimating Equations for Longitudinal data II R. M. Balan (Department of Mathematics, University of Ottawa, LRSP) Ioana Schiopu-Kratina (Statistics Canada) We consider the marginal models of Liang and Zeger (1986) for the analysis of longitudinal data and we develop a theory of statistical inference for such models. We prove the existence, weak consistency and asymptotic normality of a sequence of estimators defined as roots of pseudo-likelihood equations. Keywords: Generalized estimating equations, Generalized linear model, Consistency, Asymptotic normality JEL: C10 C40 Date: 2004-03-09 URL: http://d.repec.org/n?u=RePEc:pqs:wpaper:0222005&r=all 192. Some Long-Range Dependence Processes Arising from Fluctuations of Particle Systems Luis G. Gorostiza (Departamento de Mathematicas, Centro de Investigacion y de Estudios Avanzados, LRSP) Reyla A. Navarro (Departamento de Fisica y Mathematicas, Universidad de Las Americas) Eliane R. Rodrigues (Instituto de Mathematicas, UNAM) Several long-range dependence, self-similar Gaussian processes arise from asymptotics of some classes of spatially distributed particle systems and superprocesses. The simplest examples are fractional Brownian motion and sub-fractional fractional Brownian motion, the latter being intermediate between Brownian motion and fractional Brownian motion. In this paper we focus mainly on long- range dependence processes that arise from occupation time fluctuations of immigration particle systems with or without branching, and we study their properties. Some long-range dependence non-Gaussian processes that appear in a similar way are also mentioned. Keywords: long-range dependence, long memory, self-similar Gaussian process, fractional Brownian motion, sub- fractional Brownian motion, branching particle system, immigration, superprocess, occupation time, fluctuation JEL: C10 C40 URL: http://d.repec.org/n?u=RePEc:pqs:wpaper:0232005&r=all 193. Local Life and Municipal Services in Spain at the Beginning of the 20 th Century. Gregorio Nunez (Department of Economic Theory and Economic History (University of Granada) and “Grupo de Estudios Historicos sobre la Empresa”) The interpretation that still prevails of the political and economic history of Spain at the beginning of the century, emphasizes the basically rural and backward character of a society that grew and was modernized very slowly. Even as late as 1932-1936, during the Second Republic in Spain, political backwardness, industrial underdevelopment and engrained agrarian conflict are common factors stressed by many authors and, in contrast, there was a lack of a solid alternative politically and economically rooted in their as yet minority urban middle classes. 3 And «perhaps the sole outstanding fact in 1898 was the extent and unanimity of the malaise in the middle class» [PAN-MONTOJO, 1998, p.262]. Recently these ideas are being revised in search of «more subtle interpretations of the political reality which is more prosaic, but not for that reason less complex». Political historians such as Forner and Garcia argued that political fraud, corruption and backwardness cannot explain completely and convincingly early 20 th century Spain. On the contrary, they suggest that the implicit critical factor in the so-called «vieja politica» (old politics) was a more general lack of civic maturity, that might have filled the established rules of the political game with democratic content [FORNER & GARCIA, 1992, pp. 41 y ss.]; but in fact Spanish society only gradually began to fill this gap. They also add that, in such a process of growing maturity, cities played, as should be expected, a fundamental role. Keywords: City and Town Life - Spain - History, Cities and Towns Economic History – Spain – 1878-1944, Urban Life – Spain – 1878-1944, Urban policy, Urbanization - Spain. Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/15&r=all 194. Population Aging and Legal Retirement Age. Juan Antonio Lacomba (Department of Economic Theory and Economic History, University of Granada) Francisco Miguel Lagos (Department of Economic Theory and Economic History, University of Granada) This paper analyzes the effects of population aging on the preferred legal retirement age. What is revealed is the crucial role that the indirect ’macro’ effects resulting from a change in the legal retirement age play in the optimal decision. Two Social Security systems are studied. Under a defined contribution scheme aging lowers the preferred legal retirement age. However, under a defined pension scheme the retirement age is delayed. This result shows the relevance of correctly choosing the parameter affected by the dependency ratio in the design of the Social Security programme. Keywords: Social security, aging, legal retirement age JEL: H55 J26 Date: 2005-06-16 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/16&r=all 195. Credit Crunch in East Asia: A Retrospective Masahiro Enya (Faculty of Politics, Economics and Law, Osaka International University) Akira Kohsaka (Osaka School of International Public Policy, Osaka University) Mervin Pobre (Osaka School of International Public Policy, Osaka University) In this paper, we explore the issue on credit crunch from a comparative perspective. Utilizing longer time series data, we investigate the existence of credit crunch in selected crisis-hit economies in East Asia over the period 1980-2002. We detected some episodes of credit crunch both before and after the Asian economic crisis. These episodes after the Crisis are somewhat different from those detected by previous studies on the issue. We, then, review the credit-crunch episodes in the broad macroeconomic context in order to assess our results in the longer-run perspective. We are well aware that financial liberalization has changed the financial environments of these countries more or less in due course. Even so, the mixed results we obtained on the existence of credit crunch do not suggest that the impact of the austerity programs on financial intermediation after the Asian Crisis was ambiguous. On the contrary, they implied that the impact of the programs were so severe that credit crunch or supply retrenchment was overwhelmed by a sharp fall in credit demand because of real and expected persistent overall economic depression. Keywords: human capital; credit crunch, East Asia, Asian Economic Crisis, disequilibrium analysis JEL: E5 O11 O53 Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:osk:wpaper:04-04&r=all 196. Rational Addiction with an Optimal Inventory: Theory and Evidence from Japanese Daily and Monthly Purchases Junmin Wan (Graduate School of Economics, Institute of Social and Economic Research, Osaka University) A rational addiction model with an optimal inventory is developed and can be used as a new way to distinguish consumption from purchases when there is perfect foresight concerning price. The theoretical framework is tested using daily and monthly cigarette purchases in Japan. In Japan, the central government controls the price of cigarettes; this can be considered a natural experiment. The rational addiction model is not supported when inventory is not considered, as the inventory becomes an omitted variable and correlates with price and tax, while it is supported if the optimal inventory is included in the estimating equation. The timing of hoarding is clarified theoretically and empirically.Since the tax elasticity of hoarding exceeds 400 percent, the hoarding effect is very large just before a tax or price increase; a tax increase, therefore, is considered a good tool for temporary economic stimulation. Keywords: addiction, hoarding, tax increase, omitted variable JEL: C12 D11 D12 H31 Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:osk:wpaper:0401&r=all 197. The Effect of Partial Information Sharing in a Two-Level Supply Chain Huy Chhaing (Graduate School of Economics, Osaka University) Eiji Takeda (Graduate School of Economics, Osaka University) In many supply chains, the variance of orders may be considerably larger than that of sales, and this distortion tends to increase as one moves up a supply chain, this is known as "Bullwhip Effect". The Bullwhip phenomenon has recognized in many diverse markets. Procter & Gamble found that the diaper orders issued by the distributors have a degree of variability that cannot be explained by consumer demand fluctuations (Lee, Padamanabhan and Wang 1997a). Lee, Padamanabhan and Wang (1997a, b) developed a framework for explaining this phenomenon. Lee, So, and Tang (2000) showed that, within the context of a two-level supply chain consisting of single manufacturer and single retailer with AR(1) end demand, the manufacturer would benefit when the retailer shared its demand information. This paper considers the eRect of partial information sharing, within the framework of Lee, So and Tang, in one manufacturer and n retailers model, focusing on the variance of the manufacturer's "demand" (the retailers' order quantity). Keywords: Supply Chain Management, Information Sharing, Inventory JEL: C61 M11 Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:osk:wpaper:0402&r=all 198. Efficiency in Optimal Auctions with Common Uncertainty Lester M.K. Kwong (Department of Economics, Brock University) This paper considers optimal auctions where individuals' valuations have both a private and common value component. We show that when the set of potential buyers and seller are symmetrically uninformed regarding the common value component, it may be socially optimal not to resolve this common uncertainty. Under the sufficient conditions provided to generate this outcome, efficiency will be restored in the optimal auction. Keywords: Auctions, Efficiency, Common value, Uncertainty JEL: D44 D82 Date: 2005-01 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:brk:wpaper:0502&r=all 199. Globalization, the volatility of intermediate goods prices and economic growth Thomas M. Steger (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH)) Lucas Bretschger (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH)) We set up a dynamic stochastic model of a stylized economy comprising a final output sector (with traditional and modern firms) and an intermediate goods sector. It is shown that market integration reduces the volatility of the rate of return of capital invested in modern firms. The induced portfolio decision of households then leads to reallocation of capital from traditional to modern firms. Despite the presence of a reverse precautionary saving channel, the growth rate unambiguously increases due to the reallocation of capital. Empirical estimates for OECD countries confirm the theoretical results Keywords: globalization, trade in intermediate goods, portfolio decisions, economic growth JEL: F1 O4 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:eth:wpswif:05/40&r=all