---------------------------------------------------------------------------- NEP: New Economics Papers All new papers ---------------------------------------------------------------------------- Edited by: Marco Novarese http://ideas.repec.org/e/pno2.html Universita del Piemonte Orientale Date: 2005-05-29 Papers: 185 This document is in the public domain, feel free to circulate it. +++++++++++++++++++++++++++++++++++++++++++++++++++ + Access to full-text contents may be restricted. + +++++++++++++++++++++++++++++++++++++++++++++++++++ Dynamic Hedging of Financial Instruments When the Underlying Follows a Non-Gaussian Process Alvaro Cartea (School of Economics, Mathematics & Statistics, Birkbeck College) Traditional dynamic hedging strategies are based on local information (ie Delta and Gamma) of the financial instruments to be hedged. We propose a new dynamic hedging strategy that employs non-local information and compare the profit and loss (P&L) resulting from hedging vanilla options when the classical approach of Delta- and Gammaneutrality is employed, to the results delivered by what we label Delta- and Fractional-Gamma- hedging. For specific cases, such as the FMLS of Carr and Wu ( 2003a) and Merton’s Jump-Diffusion model, the volatility of the P&L is considerably lower (in some cases only 25%) than that resulting from Delta- and Gamma-neutrality. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:bbk:bbkefp:0508&r=all 2. Learning-by-Doing or Habit Formation? Hafedh Bouakez Takashi Kano In a recent paper, Chang, Gomes, and Schorfheide (2002) extend the standard real business cycle (RBC) model to allow for a learning-by-doing (LBD) mechanism whereby current labour supply affects future productivity. They show that this feature magnifies the propagation of shocks and improves the matching performance of the standard RBC model. In this paper, the authors show that the LBD model is nearly observationally equivalent to an RBC model with habit formation in labour (or, equivalently, in leisure). Under the same calibration of the parameters, the two models share the same equilibrium paths of output, consumption, and investment, but have different implications for hours worked. Using Bayesian techniques, the authors investigate which of the LBD and habit models fits the U.S. data best. Their results suggest that the habit specification is more strongly supported by the data. Keywords: Business fluctuations and cycles; Labour markets; Economic models; Econometric and statistical methods JEL: C52 E32 J22 Date: 2005 URL: http://d.repec.org/n?u=RePEc:bca:bocawp:05-15&r=all 3. On Testing Sample Selection Bias under the Multicollinearity Problem Takashi Yamagata This paper examines and compares the finite sample performance of the existing tests for sample selection bias, especially under the multi-collinearity problem pointed out by Nawata (1993). The results show that under such multicollinearity problem, (i) the t- test for sample selection bias based on the Heckman and Greene variance estimator can be unreliable; (ii) the standard t-test ( Heckman 1979) and the asymptotically efficient Lagrange multiplier test (Melino 1982) have correct size but very little power; (iii) however, the likelihood ratio test following the maximum likelihood estimation remains powerful. Keywords: Sample selection bias; t-test; Wald test, likelihood ratio test, Lagrange multiplier test JEL: C12 C24 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0522&r=all 4. Critical Decisions and Constitutional Rules Toke S. Aidt Francesco Giovannoni Many constitutions specify procedures that allow critical decisions to be made with a different rule from day-to-day decisions. We propose a theory of constitutional rules that explains why. The theory is based on the assumption that the type of decision can be observed, but not verified. We characterise two classes of second-best constitution, both with clear analogues in real world constitutions: i) incentive scheme (IS) constitutions that elicit information about the type of decision through costly decision rule switching procedures, and ii) linking scheme (LS) constitutions that grant limited veto powers to interested parties. We explore how the relative performance of the IS and LS constitution depends on the economic environment. Keywords: constitutions, social contracts, majority rules, vetoes, referenda JEL: H10 H11 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0523&r=all 5. A Competitive Fringe in the Shadow of a State Owned Incumbent: The Case of France Jean-Michel Glachant Dominique Finon We examine what kind of competitive fringe has been built in France around the State owned incumbent without destroying it or significantly weakening its dominant position; what impacts has this particular reform process on the market in which the incumbent monopolist is still overly dominant; and what more can be done to strengthen the opening of the market while staying in this typical French policy framework (no industrial restructuring and no forced divestiture by the monopolist). We wonder if a larger window of opportunity will open up at some later date for contesting the position of the monopolist, especially when investment in generation resumes. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0524&r=all 6. The Nordic Market: Signs of Stress? Nils-Henrik M. von der Fehr Eirik S. Amundsen Lars Bergman The supply shock that hit the Nordic electricity market in 2002- 2003 put the market to a severe test. A sharp reduction in inflow to hydro reservoirs during the normally wet months of late autumn pushed electricity prices to unprecedented levels. We take this event as the starting point for analysing some potential weaknesses of the Nordic market. We conclude that fears regarding supply security and adequacy are likely to be unfounded. Nevertheless, as inherited over-capacity is eroded, and new market-based environmental regulation takes effect, tighter market conditions are to be expected. It is then crucial that retail markets are fully developed so as to allow consumers to adequately protect themselves from occurrences of price spikes. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0525&r=all 7. Patterns of Transmission Investment Paul L. Joskow This paper examines a number of issues associated with alternative analytical approaches for evaluating investments in electricity transmission infrastructure, and institutional arrangements to govern network operation, maintenance and investment. The relationships between transmission investments driven by opportunities to reduce congestion and loss costs and transmission investment driven by traditional engineering reliability criteria are discussed. Reliability rules play a much more important role in transmission investment decisions today than do economic investment criteria as depicted in standard economic models of transmission networks. These models fail to capture key aspects of transmission operating and investment behaviour that are heavily influenced by uncertainty, contingency criteria and associated engineering reliability rules. I illustrate how the wholesale market and transmission investment frameworks have addressed these issues in England and Wales (E&W) since 1990 and in the PJM Regional Transmission Organization (RTO) in the U.S. since 2000. Keywords: L51, L14, L43, L94 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0527&r=all 8. Liberalising the Dutch Electricity Market: 1998-2004 Eric van Damme Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cam:camdae:0526&r=all 9. Responsible ownership, shareholder value and the new shareholder activism John Roberts Paul Sanderson John Hendry Richard Barker In this paper we use interview data to explore the Onew shareholder activism of mainstream UK institutional investors. We describe contemporary practices of corporate governance monitoring and engagement and how they vary across institutions, and explore the motivations behind them. Existing studies of shareholder activism mainly assume that it is motivated by a desire to maximise shareholder value, and we find some evidence both of this and of alternative political/moral motivations related to ideas of responsible ownership. We conclude, however, that in the current situation both these act primarily as rationalisations rather than as genuine motivators. The main driving force behind the new shareholder activism is the institutions own profit maximisation and the need to position themselves against competitor institutions in the context of political and regulatory changes that have significantly changed the non-financial expectations of their clients. Keywords: corporate governance, institutional investors, shareholder value, stock market JEL: G3 G2 G30 Date: 2204-12 URL: http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp666&r=all 10. The Construction and Related Industries in a Changing Socio- Economic Environment: The case of Hong Kong„X Charles Ka Yui Leung (Dept of Economics, Chinese University of Hong Kong, Hong Kong) Kelvin S. Wong (Dept of Real Estate and Construction, University of Hong Kong, Hong Kong) Hong Kong is well known for its "housing market bubble". Both theoretical and empirical studies point to the supply side being the "root of all evil". This paper takes a preliminary step in understanding the supply side of the Hong Kong market by investigating the construction and related industries. After taking into consideration of the unusual public expenditure, the construction industry seems to be "normal" in international standard. Its relationship with the aggregate economy is also examined. Directions for future research are also suggested. Keywords: housing, construction, government policy, employment, investment JEL: E0 E3 R0 Date: 2004-10 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:chk:cuhkdc:00011&r=all 11. On the Long-Run Variance Ratio Test for a Unit Root Ye Cai Mototsugu Shintani Date: 2005 URL: http://d.repec.org/n?u=RePEc:cla:levarc:122247000000000625&r=all 12. Testing for a Unit Root against Transitional Autoregressive Models Joon Y. Park Mototsugu Shintani Date: 2005 URL: http://d.repec.org/n?u=RePEc:cla:levarc:784828000000000072&r=all 13. Pareto Damaging Behaviors Ray Fisman Shachar Kariv Daniel Markovits Date: 2005-05-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000081&r=all 14. Supply Function Equilibrium in a Constrained Transmission System Robert Wilson Date: 2005-05-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000087&r=all 15. Choice from Lists Ariel Rubinstein Yuval Salant Date: 2005-05-21 URL: http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000091&r=all 16. FINANCING AND THE PROTECTION OF INNOVATORS Gerard Llobet Javier Suarez (CEMFI, Centro de Estudios Monetarios y Financieros) The protection that innovators obtain through intellectual property rights crucially depends on their incentives and ability to litigate infringers. Taking patents as a notable example, we study how the financing of legal costs can alter the incentives to litigate in defense of a petent and, thus, the prospects of infrigement and the effective protection of the innovator. We compare the resort to a financier once the infrigement has occurred (ex-post financing) with patent litigation insurance ( PLI) as well as other ex-ante arrangements based on leverage. We show that the ex-ante arrangements can be designed (for instance, in the case of PLI, by including an appropiate deductible) so as to implement the innovator's second-best outcome: a situation in which patent predaction is deterred without inducing excessive litigation. Keywords: Financial strategy, intellectual property, litigation, predation. JEL: G32 O34 O52 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2005_0502&r=all 17. ON INFORMATION AND COMPETITION IN PRIVATE VALUE AUCTIONS Juan-Jose Ganuza Jose S. Penalva Zuasti (CEMFI, Centro de Estudios Monetarios y Financieros) This paper studies the relationship between the auctioneer's provision of information and the level of competition in private value auctions. We use a general notion of informativeness which allows us to compare the efficient with the (privately) optimal amount of information provided by the auctioneer. We show that it is not optimal for the auctionner to provide the efficient level of information. We also look at the effect of competition as parameterized by the number of participants in the auction. We find that both the optimal and the efficient level of information increase with the number of participants in the auction, and both converge when the number of bidders goes to infinity. Keywords: Auctions, competition, private values, optimal and efficient provision of information. JEL: D44 D82 D83 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2005_0503&r=all 18. LIQUIDITY, RISK-TAKING, AND THE LENDER OF LAST RESORT Rafael Repullo (CEMFI, Centro de Estudios Monetarios y Financieros) This paper studies the strategic interaction between a bank whose deposits are randomly withdrawn, and a lender of last resort (LLR) that bases its decision on supervisory information on the quality of the bank's assets. The bank is subject to a capital requirement and chooses the liquidity buffer that it wants to hold and the risk of its loan portfolio. The equilibrium choice of risk is shown to be decreasing in the capital requirement, and increasing in the interest rate charged by the LLR. Moreover, when the LLR does not charge penalty rates, the bank chooses the same level of risk and a smaller liquidity buffer than in the absence of a LLR. Thus, in contrast with the general view, the existence of a LLR does not increase the incentives to take risk, while penalty rates do. Keywords: Central bank, lender of last resort, penalty rates, moral hazard, bank supervision, capital requirements, deposit insurance. JEL: E58 G21 G28 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2005_0504&r=all 19. TRANSIENT BAYESIAN INFERENCE FOR SHORT AND LONG-TAILED GI/G/1 QUEUEING SYSTEMS Maria Concepcion Ausin Michael Peter Wiper Rosa Elvira Lillo In this paper, we describe how to make Bayesian inference for the transient behaviour and busy period in a single server system with general and unknown distribution for the service and interarrival time. The dense family of Coxian distributions is used for the service and arrival process to the system. This distribution model is reparametrized such that it is possible to define a non-informative prior which allows for the approximation of heavytailed distributions. Reversible jump Markov chain Monte Carlo methods are used to estimate the predictive distribution of the interarrival and service time. Our procedure for estimating the system measures is based in recent results for known parameters which are frequently implemented by using symbolical packages. Alternatively, we propose a simple numerical technique that can be performed for every MCMC iteration so that we can estimate interesting measures, such as the transient queue length distribution. We illustrate our approach with simulated and real queues. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cte:wsrepe:ws053504&r=all 20. BAYESIAN ESTIMATION OF THE GAUSSIAN MIXTURE GARCH MODEL Maria Concepcion Ausin Pedro Galeano In this paper, we perform Bayesian inference and prediction for a GARCH model where the innovations are assumed to follow a mixture of two Gaussian distributions. This GARCH model can capture the patterns usually exhibited by many financial time series such as volatility clustering, large kurtosis and extreme observations. A Griddy-Gibbs sampler implementation is proposed for parameter estimation and volatility prediction. The method is illustrated using the Swiss Market Index. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cte:wsrepe:ws053605&r=all 21. Disaggregated Productivity Growth and Technological Progress in the interpretation of Spanish Economic Growth, 1958-1975 M? Teresa Sanchis Llopis Spanish economic records in terms of GDP growth and convergence to European levels in the sixties, provide an excellent opportunity to look at a central question underlying in the interpretation of any process of economic growth. The relevance of industrial specific technological progress is confronted to a general and multifaceted productivity change coming from a variety of sectors and causes. This paper exploits sectoral growth accounting methodology in two different ways in order to answer this crucial question revisited recently by historiography with reference to British Industrial Revolution and to Information and Telecommunications Technologies. First, we calculate TFP growth following the Kendrick approach (1961) and using four input-output tables corresponding to 1958, 1962, 1970 and 1975 disaggregated at 25 productive branches. And Second, we examine the impact of electricity and electric machinery and equipment as a General Purpose Technology (GPT) in Spanish economic growth. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cte:dilfrp:dilf0503&r=all 22. El coste de uso del capital en la explicacion del boom de la inversion europea de posguerra Antonio Cubel Maria Teresa Sanchis Post-war Europe provides an opportunity to study the importance of relative prices of capital, and the user cost of capital in particular, in explaining the convergence in investment rates between countries of similar “social capabilities” and income levels. After Second World War, at time as a new international order was established, European countries experienced a rapid process of income growth and convergence. In the interpretation of this process a prominent role has been attributed to technological progress and “catch-up” to the technological leader, the United States. Investment decisions are the way for embodying new technological progress, but investment takes place only when incentive exists. Among these incentives, recent empirical literature on economic growth highlights the role of relative prices of capital in explaining differences in investment rates and income growth between countries with very different income levels. But when we reduce the sample to countries closed in income levels and “social capabilities”, we can demonstrate that, although the relative cost of capital converged over time and could help to explain income convergence, other factors were more significant in explaining the increase in investment rates. More important than the user cost of capital in the investment decision, was general prosperity caused by the demand increase. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:cte:dilfrp:dilf0505&r=all 23. Identifying and Forecasting the Turning Points of the Belgian Business Cycle with Regime-Switching and Logit Models Vincent, BODART (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) Konstantin, KHOLODILIN Fati, SHADMAN-MEHTA (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) This paper seeks to elaborate econometric models that can be used to forecast the turning points of the Belgian business cycle. We begin by suggesting three reference cycle, which we hope will fill the void of an official reference chronology for Belgium. We then construct two different types of model to estimate the probabilities of recession : Markov-switching models, and Logit models. We apply each approach to a limited set of data, which are a good representation of the economy, are available early and are subject to only minor revisions. We then select the best performing model for each chronology and type of approach. The out-of-sample results show that the models provide useful indicators of business cycle turning points. They are however far from perfect forecasting tools, especially when it comes to forecasting periods of classical recession. Keywords: Refrence chronologies; Markov-Switching and Logit models, forecasting business cycle turning points JEL: C5 E32 E37 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005006&r=all 24. Equilibrium Evaluation of Active Labor Market Programmes Enhancing Matching Effectiveness Bruno, VAN DER LINDEN (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) This paper evaluates counselling programmes in an equilibrium matching model where workers are heterogeneous in skill levels. Job search effort, labour demand and wages are endogenous. When wages are bargained over, raising the effectiveness of or the access to counselling programmes pushes wages upwards and leads to lower search effort among nonparticipants. The effects of increasing the access of the low-skilled are evaluated numerically by enlarging sucessively the set of endogenous behaviours. Induced effects outweigh substantial positive micro effects on low-skilled employment when all ‘margins’ are taken into account. The inter-temporal utility of the low-skilled nevertheless increases because search effort declines. On the contrary, when the net wage of the low-skilled is a fixed proportion of the one bargained by the high-skilled, raising the access to counselling programmes has small positive effects on all criteria. Keywords: Active programmes; labour market policies; evaluation; policy complementarities; wage bargaining; equilibrum unemployment; equilibrium search JEL: J63 J64 J65 J68 Date: 2005-03-04 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005007&r=all 25. The impact of teachers’ wages on students’ performance in the presence of heterogeneity and endogeneity. Evidence from Brazil. Maresa, SPRIETSMA (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) Fabio, WALTENBERG In this paper we estimate the effect of teachers’ wages on students’ achievement in a developing country. We use test scores of pupils enrolled in the 8th grade of primary school, surveyed in 2001 in Brazil. We regress individual student test scores on gross monthly teacher wages allowing for nonlinearities. Given the strong heterogeneity of Brazilian pupils and teachers, we estimate quantile regressions (QR), which provide, instead of a constant mean coefficient, a detailed characterization of the effect of teachers’ wages on conditional pupils’s scores. For the same reason, we also run separate regressions for private and public schools. We then account for potential endogeneity of teachers’ wages through the estimation of instrumental variables models (IV). Finally, we estimate two-stage least absolute deviation models (2SLAD), that allow us to cope simultaneously with the heterogeneity of the student-teacher relationship and with the endogeneity of teachers’s wages. Our results show that wages of language teachers have a small, but positive and significant effect, on student test scores in private schools, controlling for endogeneity, but that they are insignificant, or even negative, in public schools. We also observe that teacher wages show a decreasing effect as we move along the conditional distribution of scores. The same effects are found for mathematics teachers, but the results are less robust and the coefficients are smaller. Keywords: economics of education; human capital; resource allocation; eduction production functions; instrumental variables; two-stage least-squares; quatile regression; two-stage least absolute deviation JEL: I2 J24 J31 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005008&r=all 26. Natural volatility, welfare and taxation Olaf, POSCH Klaus, WAELDE Cyclical components are analytically computed in a theoretical model of stochastic endogenous fluctuations and growth. Volatility is shown to depend on the speed of convergence of the cyclical component, the expected length of a cycle and on the attitude of the slump. Taxes affect these channels and can therefore explain cross-country differences and breaks over time in volatility. With exogenous sources of fluctuations, a special case of our model, decentralized factor allocation is efficient. With endogenous fluctuations and growth decentralized factor allocation is inefficient and (time invariant) taxes can (de-) stabilize the economy. No unambiguous link exists between volatility and welfare. Keywords: Endogenous fluctuations and growth; welfare analysis; taxation; stochastic continuous time model; Poisson uncertainty JEL: C65 E32 E62 H3 O33 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005009&r=all 27. Impacts d’une politique de depollution dans un modele a la Heckscher-Ohlin dynamique Marc, GERMAIN L’article vise a determiner les impacts d’une politique de reduction des emissions polluantes dans le cadre d’un modele d’une petite economie ouverte, comprenant deux regions et deux secteurs, avec croissance endogene. L’un des deux secteurs est relativement polluant et l’une des deux regions est plus specialisee dans la production de ce secteur. L’impact de la politique environnementale sur les secteurs depend crucialement de leurs taux de croissance respectifs, qui dependent a leur tour de leurs dotations initiales de capital respectives. Des resultats a priori contre-intuitifs sont possibles. Si le taux de croissance du secteur intensif en emissions polluantes est suffisamment faible et inversement pour l’autre secteur, alors le secteur relativement plus polluant est moins affecte par la politique environnementale que l’autre secteur. De meme, la region la plus specialisee dans la production du bien polluant est moins affectee que l’autre region par la politique de reduction des emissions, si elle se caracterise par des taux de croissance sectoriels suffisamment faibles en regard de ceux de l’autre region. Date: 2005-04-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005010&r=all 28. Did the market-clearing postulate pre-exist new classical economics ? The case of Marshallian theory Michel, DE VROEY Have new classicists invented market clearing or have they rehabilited it ? This is the question addressed in the present paper. It is generally agreed that market clearing underpins Walrasian theory, so my exploration is limited to the question of whether this is also true for Marshallian theory. I will claim that this is broadly the case : once Marshallian theory is properly reconstructed, it exhibits market clearing as a constantly present result. Still; an important difference between market a la Walras and market clearing a la Marshall exists : in the former market clearing is equilibrium, while in the latter market clearing can coexist with disequilibrium. Next, I investigate whether my conclusion extends to the labour market. Again the conclusion reached is affirmative both for Marshall’s theory and for present-day Marshallian models. As to the latter, I take Friedman’s Phillips Curve model as a case study. I show that this is a market clearing model in which, strictly speaking, there is no place for the concept of unemployment - quite an ironical result for the paper that introduced the notion of the natural rate of unemployment ! Keywords: market clearing; equilibrium; Lucas; Marshall; Friedman JEL: B20 B40 D50 Date: 2005-04-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005011&r=all 29. Illusionary Finance and Trading Behavior Malika, HAMADI Erick, RENGIFO Diego SALZMAN One important aspect of financial market is that there might be some traders that intentionally mislead other market participants by creating illusions in order to obtain a profit. We call this new concept illusionary finance. We present an analysis of how illusions can be created and disseminated in financial markets based on certain psychological principles that explain agents’ decisions under time pressure and polysemous signals. We develop a simple model that incorporates the illusions in the price formation process. Furthermore, using powerful simulations, we show how illusions can be incorporated, directly or indirectly, in the expected prices of the traders. Keywords: Illusionary Finance; Behavioral Finance; Evolutionary Finance; Neuroeconomics JEL: C32 C35 G10 Date: 2004-09-15 Date: 2005-01-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005012&r=all 30. Regional inequality and product variety Kristian, BEHRENS Jacques-Francois, THISSE We investigate how differences in set-up costs of various types affect the trade-off between global efficiency and spatial equity and show that the standard assumption of symmetry in fixed costs masks the existence of an interesting effect : the range of available varieties varies depends on the spatial distribution of firms. In such a setting, even when the market outcome leads to excessive agglomeration under symmetric fixed costs, a planner opts for asymmetric fixed costs and more agglomeration. The reason is that the losses induced by more agglomeration are offset by the gains due to additional product variety. Keywords: fixed costs; set-up costs; market size; international trade; homemarket effect JEL: F12 F15 R12 R38 Date: 2005-01-23 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005013&r=all 31. Commonalities in the order book Helena, BELTRAN Pierre, GIOT Joachim, GRAMMIG Recent contributions to microstructure theory hint a commonalities in the price-depth pairs which constitute the open limit order book. In this paper we provide empirical evidence that indeed a small number of latent factors, two for each side of the book, capture most of the variation the price-depth pairs. The results also indicate that a heterogeneous trader population is active on the buy and sell sides. The respective latent factors explaining the by and sell side variation exhibit specific dynamics. When we exploit results from microstructure theory to empirically assess whether the majority of the book variation is due to either informational effects or non- informational fluctuations of liquidity we obtain mixed results. Keywords: limit order book; commonalities; liquidity; market microstructure JEL: G10 C32 Date: 2005-01-26 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005014&r=all 32. Volatility regimes and the provisions of liquidity in order book markets Helena, BELTRAN Alain, DURRE Pierre, GIOT We analyze whether the liquidity provision in a pure order book market during normal market conditions (low volatility regime) differs from what is observed when the market is under stress ( high volatility regime). We show that the static relationship between liquidity and volatility is resilient to regime changes in volatility. Nevertheless, we do find that it is more costly to trade when volatility is large. A VAR analysis shows that the liquidity dynamics is similar in the low and high volatility regimes, although the drop in liquidity subsequent to volatility shocks is larger in the high volatility regime. Finally, the market is more resilient to volatility or liquidity shocks in periods of turnoils. Keywords: order book; volatility; liquidity JEL: G10 C32 Date: 2004-12-22 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005015&r=all 33. Strategic Privatization and Regulation Policy in Mixed Markets Denis, CLAUDE Jean, HINDRIKS In this paper we consider mixed oligopoly markets for differentiated goods where private and public firms compete either in prices or quantities. We then study the welfare effect of privatization interpreted as partial strategic delegation of the public firm to a private manager with profit concern. It is shown that partial privatization improves welfare with quantity competion when goods are subsitutes, and with price competition when goods are complements. However full privatization (complete delegation to private manager) can never be optimal. It is also shown that the public firm can make more profit than the private firm in equilibrium, and that this possibility is more likely under quantity competition. Turning to market regulation policy, we find : (i) that public and private firms should be taxed the same; and (ii) that price regulation is better than quantity regulation. Date: 2005-01-25 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005016&r=all 34. A simple model of economic geography a la Helpman-Tabuchi Yasuda, MURATA Jacques-Francois, THISSE This paper explores the interplay between commodities’ transportation costs and workers’ commuting costs within a general equilibrium framework a la Dixit-Stiglitz. Workers are mobile and choose a region where to work as well as an intraurban location to live. We sow that a more integrated economy need not be more agglomerated. Instead, low transportation costs lead to the dispersion of economic activities. This is because workers are able to alleviate the burden of urban costs by being dispersed, while retaining a good access to all varieties. By contrast, low commuting costs foster the agglomeration of economic activities. Keywords: Commuting costs; urban costs; transportation costs; economic geography; agglomeration JEL: F12 R12 Date: 2004-09-14 Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005017&r=all 35. Oligopolistic Competition as a Common Agency Game Claude, D’ASPREMONT Rodolphe, DOS SANTOS FERREIRA In applying the common agency framework to the context of an oligopolistic industry, we want to go beyond the classical dichotomy between Cournot and Bertrand competition. We define two games, the oligopolistic game and the corresponding concept of oligopolistic equilibrium, and an associated auxiliary game that can be interpreted as a common agency game and that has the same set of equilibria. The parameterization of the set of (potential) equilibria in terms of competitive thoughness is derived from the first order conditions of the auxiliary game. The enforceability of monopolistic competition, of price and quantity competition, and of collusion is examined in this framework. We then describe the (reduced) set of equilibria one would obtain, first in the non-intrinsic case and then in the case where a global approach would be adopted instead of partial equilibrium approach. Finally, we illustrate the use of the concept of oligopolistic equilibrium and of the corresponding parameterization by referring to the standard case of symmetric quadratic utility. Date: 2005-02-17 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005018&r=all 36. Assessing Strategic Risk R.J., AUMANN Jacques-Henri, DREZE In recent decades, the concept of subjective probability has been increasingly applied to an adversary’s choices in strategic games. A careful examination reveals that the standard construction of subjective probabilities does not apply in this context. We show how the difficulty may be overcome by means of a different construction, and provide an axiomatic fondation for it. Date: 2005-03-17 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005020&r=all 37. When All is Said and Done, How Should You Play and What Should You Expect ? R.J., AUMANN Jacques-Henri, DREZE Modern game theory was born in 1928, when John von Neumann published his Minimax Theorem. This theorem ascribes to all two- person zero-sum games a value - what rational players may expect - and optimal strategies - how they should play to achieve that expectation. Seventy-seven years later, strategic game theory has not gotten beyond that initial point, insofar as the basic questions of value and optimal strategies are concerned. Equilibrium theories do not tell players how to play and what to expect; even when there is a unique Nash equilibrium, it is not at all clear that the players “should” play this equilibrium, nor that they should expect its payoff. Here, we return to square one : abandon all ideas of equilibrium and simply ask, how should rational players play, and what should they expect. We provide answers to both questions, for all n-persons games in strategic form. URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005021&r=all 38. Should developing countries participate in the Clean Development Mechanism under the Kyoto Protocol ? The low- hanging fruits and baseline issues Marc, GERMAIN Alphonse, MAGNUS Vincent, VAN STEENBERGHE Under the Kyoto Protocol, industrialized countries committed to emission reductions may fullfil part of their obligations by implementing emission reduction projects in developing countries. In doing so, they make use of the so-called Clean Development Mechansim (CDM). Two important issues surround the implementation of the CDM. First, if the cheapest abatment measures are implemented for CDM projects, developing countries may be left with only more expensive measures when they have to meet their own commitments in the future (the so-called low-hanging fruits issue). Second, a choice must be made on the type of baseline against which emission reductions are measured : an absolute baseline or a relative (to output) one (the baseline issue). The purpose of this paper is to study the interactions between these two issues from the point of view of the developing country. Two major results are obtained. First, when possible future commitments for developing countries and irreversibility of abatement measures are taken into account, we show that the industry where CDM projects are implemented enjoys large profits under an absolute baseline than under a relative one. Second, concerning the low-hanging fruits problem, the financial compensation required by the developing country for implementing ‘too many’ CDM projects is larger under the relative baseline. Date: 2004-12-22 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005022&r=all 39. Early Literacy Achievements, Population Density and the Transition to Modern Growth Raouf, BOUCEKKINE David, DE LA CROIX Dominique, PEETERS The transition from economic stagnation to sustained growth is often modelled thanks to “population-induced” productivity improvements, which are assumed rather than derived from primary assumptions. In this paper the effect of population on productivity is derived from optimal behavior. More precisely, both the number and location of education facilities are chosen optimally by municipalities. Individuals determine their education investment depending on the distance to the nearest school, and also on technical progress and longevity. In this setting, higher population density enables the set-up costs of additional schools to be covered, opening the possibility to reach higher educational levels. Using conterfactual experiments we find that one third of the rise in literacy can be directly attributed to the effect of density, while one sixth is linked to higher longevity and one half to technical progress. Moreover, the effect of population density in the model is consistent with the available evidence from England, where it is shown that schools were established at a high rate over the period 1540-1620. Keywords: Human Capital; Population Density; Education Investment;School Location;Technical Progress JEL: O41 I21 R12 J11 Date: 2005-03-18 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005023&r=all 40. Multiple Lending and Constrained Efficiency in the Credit Market Andrea, ATTAR Eloisa, CAMPIONI Gwenael, PIASER In this paper we present a model of credit market with several homogeneous lenders competing to finance an investment project. Contracts are non-exclusive, hence the borrower can accept whatever subset of the offered loans. We use the model to discuss efficiency issues in competitive economies with asymmetric information and non-exclusive agreements. We characterize the equilibria of this common agency game with moral hazard and show that they all belong to the constrained Pareto frontier Keywords: Common Agency; Moral Hazard; Parto Efficiency; Second Best JEL: D43 D61 L13 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005024&r=all 41. Market Integration and Strike Activity Ana, MAULEON Vincent, VANNETELBOSCH We consider a two-country model of wage determination with private information in unionized imperfectly competitive industries. We investigate the effects of separated product markets opening up for competition as well as of further market integration on the negociated wage and the maximum delay in reaching an agreement. From an initial situation of reciprocal intra-industry trade, an increase in product market integration will decrease the maximal delay in reaching an agreement. However, markets opening up for competition have an ambiguous effect on both the wage outcome and the maximum real delay time in reaching an agreement. Keywords: economic integration; product market competition; wage bargaining; strike activity JEL: C78 J50 J52 L13 Date: 2005-04-15 URL: http://d.repec.org/n?u=RePEc:ctl:louvec:2005025&r=all 42. Impartiality and Priority. Part 1: The Veil of Ignorance Juan Moreno-Ternero John E. Roemer (Dept. of Political Science, Yale University) The veil of ignorance has been used often as a tool for recommending what justice requires with respect to the distribution of wealth. We complete Harsanyi’s model of the veil of ignorance by appending information permitting interpersonal comparability of welfare. We show that the veil-of- ignorance conception of John Harsanyi, so completed, and Ronald Dworkin’s, when modeled formally, recommend wealth allocations in conflict with the prominently espoused view that priority should be given to the worse off with respect to wealth allocation. Keywords: Impartiality, Priority, Veil of ignorance JEL: D63 D71 Date: 2004-08 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1477a&r=all 43. Impartiality and Priority. Part 2: A Characterization with Solidarity Juan Moreno-Ternero John E. Roemer (Dept. of Political Science, Yale University) The ethic of 'priority' is a compromise between the extremely compensatory ethic of 'welfare equality' and the needs-blind ethic of ‘income equality’. We propose an axiom of priority, and characterize resource allocation rules that are impartial, prioritarian, and solidaristic. They comprise a class of rules which equalize across individuals some index of resources and welfare. Consequently, we provide an ethical rationalization for the many applications in which such indices have been used (e.g., the 'human development index,' 'index of primary goods,' etc.). Keywords: Impartiality, Solidarity, Priority, Allocation rules, Characterization result JEL: D63 D71 Date: 2004-08 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1477b&r=all 44. 05-03 "Securing Social Security: Sensitivity to Economic Assumptions and Analysis of Policy Options" Brian Roach and Frank Ackerman Revamping the Social Security program has become a domestic policy priority of the Bush administration. The President has stated that the system is facing a “crisis” and will be “bankrupt” in 2041. His proposal to change Social Security is centered on the introduction of private accounts that would allow workers to direct a share of their Social Security taxes into investments such as stocks and bonds. In this paper we consider whether Social Security is really facing a crisis and whether any potential future shortfalls could be remedied without changing the basic structure of the existing program. URL: http://d.repec.org/n?u=RePEc:dae:daepap:05-03&r=all 45. 05-04 "Rationality and Humanity: A View from Feminist Economics" Julie A. Nelson Does Rational Choice Theory (RCT) have something important to contribute to the humanities? Jon Elster and others answer affirmatively, arguing that RCT is a powerful tool that will lend clarity and rigor to work in the humanities just as it ( presumably) has in economics. This essay examines the disciplinary values according to which the application of RCT in economics has been judged a “success,” and suggests that this value system does not deserve general approbation. Richness and realism must be retained as important values alongside precision and elegance, if anti-scientific dogmatism and absurd conclusions are to be avoided. URL: http://d.repec.org/n?u=RePEc:dae:daepap:05-04&r=all 46. Productivity differentials in the U.S. and EU distributive trade sector: Statistical myth or reality? Timmer, M.P. Inklaar, R. (Groningen University) In this paper we asses whether productivity growth differentials between the U.S. and Europe in the distributive trade sector are real or mainly a statistical myth. New estimates of retail trade productivity are constructed, taking into account purchase prices of goods sold. We also adjust U.S. wholesale productivity growth for the upward bias due to the use of constant-quality prices of ICT-goods sales. We find that multifactor productivity growth in the U.S. has been higher than in Europe after 1995, but that this lead is smaller than suggested by national accounts based estimates. This finding is robust for various productivity measurement models. Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugccs:200501&r=all 47. Putting new economic geography to the test: Free-ness of trade and agglomeration in the EU regions Brakman, S. Garretsen, H. Schramm, M. (Groningen University) Based on a new economic geography model by Puga (1999), we use the equilibrium wage equation to estimate two key structural model parameters for the NUTS II EU regions. The estimation of these parameters enables us to come up with an empirically based free-ness of trade parameter. We then confront the empirically grounded free-ness of trade parameter with the theoretical relationship between this parameter and the degree of agglomeration. This is done for two versions of our model: one in which labor is immobile between regions, and one in which labor is mobile between regions. Overall, and in line with related studies, our main finding is that agglomeration forces still have only a limited geographical reach in the EU. Agglomeration forces appear to be rather localized Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugccs:200502&r=all 48. Do daily retail gasoline prices adjust asymmetrically? Bettendorf, L. Geest, S.A. van der Kuper, G.H. (Groningen University) This paper analyzes adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996-2004 taking care of volatility clustering by estimating an EGARCH model. It turns out the volatility process is asymmetrical: an unexpected increase in the producer price has a larger effect on the variance of the producer price than an unexpected decrease. We do not find evidence for amount asymmetry, either for the long run or for the short run. However, there is a faster reaction to upward changes in spot prices than to downward changes in spot prices. This implies timing or pattern asymmetry. This asymmetry starts three days after the change in the spot price and lasts for four days. Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugccs:200503&r=all 49. Regional differences in productivity growth in the Netherlands: an industry-level growth accounting Broersma, L. Dijk, J. van (Groningen University) It is well known that the productivity growth in Europe is slowing down, against an increasing growth rate in the US. The Netherlands is one of countries in Europe with the lowest growth rates of productivity. This paper presents the results of a growth accounting exercise applied to regional industry data of The Netherlands between 1995-2002. We find that low productivity growth in The Netherlands is particularly situated in the economic core regions of the west and south and is caused by slow growth of MFP. Compared to the more peripheral regions, MFP- growth is lower in all industries, except social and non-market services. The high level of traffic congestion and relatively low labour effort in the core regions can explain part of this slow MFP-growth. Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugccs:200504&r=all 50. Gevolgen invoering waterketentarief voor de lastenontwikkeling van huishoudens Hoeben, C. Gerritsen, E. (Groningen University) Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:rugcoe:200405&r=all 51. Gevolgen van ontwikkelingen in de waterketen voor de lastendruk van huishoudens Hoeben, C. Gerritsen, E. (Groningen University) Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugcoe:200501&r=all 52. Belastingoverzicht grote gemeenten 2005 Allers, M.A. (Groningen University) Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugcoe:200502&r=all 53. Standard errors as weigths in multilateral price indices Hill, R. Timmer, M. (Groningen University) A number of multilateral methods for computing price indexes use bilateral comparisons as their basic building blocks. Some of these methods, such as the weighted-EKS and minimum-spanning-tree MST) methods, give greater weight to those bilateral comparisons that are deemed more reliable (an adjustment that is particularly important for a heterogeneous set of countries). No consensus currently exists in the literature as to the best measure of reliability. Diewert (2002), in particular, proposes a number of reliability measures in an axiomatic setting. Existing measures ( including all of Diewerts), however, fail to penalize bilateral comparisons when there is a small overlap in the products priced by each country. It is exactly in such situations that weighted methods are potentially most useful, but only if the reliability measure penalizes bilateral comparisons containing lots of gaps. Using a stochastic model, we show how the standard errors on bilateral price indexes provide a natural measure of reliability that automatically penalizes comparisons containing lots of gaps. Furthermore, we link these standard errors with the existing literature by showing that they are a generalization of one of Diewerts reliability measures. This finding provides an interesting new link between the axiomatic and stochastic approaches to index numbers. Also, these standard errors can be modified for use in consumer data sets below the basic-heading level (where no expenditure shares are available), a scenario of direct relevance to the latest round of the International Comparison Program (ICP) currently being undertaken at the World Bank. Finally, we apply our methodology to an international data set on agricultural production that contains a lot of gaps. Our results clearly demonstrate the appeal of weighted methods and the importance of adjusting the reliability measures for gaps in the data. Failure to do so may compromise weighted methods precisely in situations where they are most needed. Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:rugggd:200473&r=all 54. Cyclical productivity in Europe and the United States, evaluating the evidence on returns to scale and input utilization Inklaar, R. (Groningen University) This paper studies procyclical productivity growth at the industry level in the U.S. and in three European countries ( France, Germany and the Netherlands). Industry-specific demand- side instruments are used to examine the prevalence of non- constant returns to scale and unmeasured input utilization. For the aggregate U.S. economy, unmeasured input utilization seems to explain procyclical productivity. However, this correction still leaves one in three U.S. industries with procyclical productivity. This failure of the model can also be seen in Europe and is mostly concentrated in services industries. Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugggd:200574&r=all 55. Does the European Union need to revive productivity growth? Ark, Bart van (Groningen University) Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugggd:200575&r=all 56. Productivity differentials in the U.S. and EU distributive trade sector: Statistical myth or reality? Timmer, M. Inklaar, R. (Groningen University) In this paper we asses whether productivity growth differentials between the U.S. and Europe in the distributive trade sector are real or mainly a statistical myth. New estimates of retail trade productivity are constructed, taking into account purchase prices of goods sold. We also adjust U.S. wholesale productivity growth for the upward bias due to the use of constant-quality prices of ICT-goods sales. We find that multifactor productivity growth in the U.S. has been higher than in Europe after 1995, but that this lead is smaller than suggested by national accounts based estimates. This finding is robust for various productivity measurement models. Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugggd:200576&r=all 57. De toeristisch-economische impact van niet-commerciele recreatiewoningen Voogd, H. (Groningen University) Het beleid van het Ministerie van VROM ten aanzien van permanente bewoning van recreatiewoningen heeft veel gemeenten tot de keuze gedwongen om te legaliseren, formeel te gedogen, of te handhaven. Een argument in de discussie is de waarde van recreatiewoningen voor toerisme en recreatie. In deze studie is dit nader onderzocht. Er wordt een onderscheid gemaakt tussen commerciele en niet-commerciele recreatiewoningen. In de economische statistieken wordt voornamelijk gewerkt met gegevens van commerciele recreatieparken. Die laten zien dat de belangstelling van toeristen en recreanten voor een verblijf in deze recreatiewoningen de laatste jaren tanende is, wat een bewijs is voor een verzadigde markt. Permanente bewoning vindt hoofdzakelijk plaats in niet-commerciele recreatiewoningen. In dit rapport wordt vastgesteld naar aanleiding van een onderzoek in de drie noordelijke provincies dat de bezettingsgraad van dit type recreatiewoningen veel lager is en gemiddeld 3,4% is als uitgegaan wordt van gebruik door recreanten die niet de eigenaar zijn. Dit is het beeld dat verwacht mag worden als permanente bewoning wordt verboden. Vastgesteld wordt dat permanent bewoonde recreatiewoningen ruim 16 keer zoveel bijdragen aan de lokale economie, inclusief toeristisch-recreatieve sector, dan niet permanent bewoonde niet-commerciele recreatiewoningen. Per permanent bewoonde woning betekent dit een economische impuls tussen 15.000 en 28.000 euro, terwijl de gemiddelde niet- permanent bewoonde recreatiewoning jaarlijks tussen 900 en 1000 euro bijdraagt aan de economie van een regio. Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:rugurs:2005308&r=all 58. Systems of Innovation and Underdevelopment: An Institutional Perspective Oyelaran-Oyeyinka, Banji (United Nations University, Institute for New Technologies) This paper examines institutions and their role in supporting technical change as part of the development process, and asks how institutions shape the system of innovation (SI). The context of underdevelopment exhibits distinct system characteristics that differ markedly from those found under advanced economic conditions and as such deserves close empirical scrutiny. SIs differ significantly under the two sets of conditions, leading to uneven structural changes. The paper therefore explores what functions must be served by systems in developing countries in order to generate technical dynamism. To compare different contexts, it introduces the idea of a System of Learning Innovation in Development (SLID) that emphasizes individual and organizational competence building. The differences between “Advanced” Systems of Innovation (ASI) and two types of SLID are discussed. Infrastructure, one of the key components of institutions involved in development, is used as an illustration. The study found that dynamic SIs function best in a regime of high-quality infrastructure (telephone, Internet, computers and reliable electricity supplies). The case of sub-Saharan Africa serves to illustrate the point. Keywords: Innovation, Innovation Policy, Capacity Building, Learning, Economic Development, Infrastructure, Sub- Saharan Africa Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:unuint:200501&r=all 59. Financing development: debt versus equity Joel van der Weele In this paper we investigate the impact of the balance between debt and equity finance on the financial stability of developing countries. Employing extreme bounds analysis to deal with model uncertainty, we estimate a model of an exchange rate pressure index depending on various financial capital stocks and flows. We find evidence for a stabilizing effect of FDI and a destabilizing effect of short-term debt and publicly guaranteed flows to commercial banks. We also investigate the path dependency of different types of capital flows controlling for different push and pull factors. In general, we find that existing stocks of short-term debt make it harder for a country to obtain new finance. Furthermore, the level of capital market development has an important impact on the composition of capital flows to a country. Keywords: emerging markets; capital flows; currency crises; robust estimation JEL: C33 C52 F21 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:dnb:dnbwpp:038&r=all 60. Households' Demand for Higher Environmental Quality: The Case of Russia Blam Inna This paper employs the Russia Longitudinal Monitoring Survey ( RLMS) to examine changes in Russian households' averting behavior against air and drinking water pollution and their willingness to pay additional money to the federal or local government for cleaner environment over the period 1994–1998. The empirical analysis demonstrates that the households income and the local environmental pollution do influence the respondent's decision on both averting behavior and his or her willingness to pay for cleaner air and drinking water. Also, the individual's life expectancy, living conditions, and knowledge about the negative impact of polluted environment (higher or serious illness thought to be caused by pollution in the respondent's family) are found to be significant determinants of the probability of the willingness to pay for environmental goods. Keywords: Russia, willingness to pay for better higher environmental quality, averting behavior JEL: D12 Q53 Date: 2005-05-26 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-08e&r=all 61. Individual Behavior and Beliefs in Experimental Parimutuel Betting Markets Frederic Koessler Charles Noussair Anthony Ziegelmeyer We study experimental parimutuel betting markets with asymmetrically informed bettors. We propose a theoretical model, the Adaptive Model, which serves as our source of null hypotheses about individual behavior and the capacity of the markets to aggregate information. In one treatment, groups of eight participants bet against each other in twenty repetitions of a sequential betting market. The second treatment is identical, except that bets are observed by other participants who assess the winning probabilities of each outcome. In the third treatment, the same individuals place bets and assess the winning probabilities of the outcomes. A favorite-longshot bias is observed in the first and second treatments, but it is sharply reduced in the third treatment. Information aggregation is better in the third than in the other two treatments, because contrarian betting is almost completely eliminated by the belief elicitation procedure. Placing bets improves the accuracy of belief statements. A statistical generalization of the Adaptive Model explains the data very effectively. Keywords: belief elicitation, information aggregation, parimutuel betting, experiment JEL: C90 C91 C92 D40 D8 D82 URL: http://d.repec.org/n?u=RePEc:esi:discus:2005-12&r=all 62. Das Enable-Programm im Kontext der Europaischen Politik fur Unternehmerische Initiative Heike Grimm David B. Audretsch URL: http://d.repec.org/n?u=RePEc:esi:egpdis:2005-16&r=all 63. La situacion laboral de los inmigrantes en Espana: Un analisis descriptivo Ana Carolina Ortega Masague Over the last years, the immigration phenomenon has acquired a notable importance in Spain. Immigrants` insertion in the labor market has become one of the main factors, which will contribute to their social integration. For this reason, it is important to study the labor situation of the immigrant population in Spain, which is the aim of this paper. The data used in the present analysis are drawn from the labor register of the Social Security system and the demands for employment registered in the National Institute of Employment. These sources have some limitations, that are widely compensated for their covery of the immigrant population. When studying the characteristics of the individuals ( gender, age, level of studies, nationality) and their employments sector of activity, occupation), we observe that there are important differences between the immigrants, as well as between them and the Spanish workers. Moreover, there are also significant differences from the geographical distribution point of view. Within the next years, it will be neccesary to continue to look at the foreign workers?s labor reality, easing their integration in the production system in benefit of the society as a whole. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-08&r=all 64. The excess burden associated to characteristics of the goods: Application to housing demand Amelia Bilbao Celia Bilbao Jose M. Labeaga This paper shows that conditional subsidies aimed at certain kinds of goods do not merely generate the traditional excess burden: there is an alternative welfare loss as the distortion affects good characteristics rather than prices. We provide empirical evidence of the welfare loss after estimating a linear hedonic price model and using predicted prices in a quadratic almost ideal demand system for housing characteristics. We identify the sources of the losses and we also provide a monetary measure that suggests that, under plausible parameter values, it can be quantitatively high. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-09&r=all 65. Air pollution and the macroeconomy across European countries Francisco Alvarez Gustavo A. Marrero Luis A. Puch This paper analyzes the role of macroeconomic performance in shaping the evolution of air pollutants in a panel of European countries from 1990 to 2000. The analysis is addressed in connection with EU environmental regulation. We start by documenting the patterns of cross-country differences among different pollutants. We then interpret these differences within a neoclassical growth model with pollution. Three main pieces of evidence are presented. First, we analyze the existence of convergence of pollution levels within European economies. Second, we rank countries according to its performance in terms of emissions and growth. Third, we evaluate the evolution of emissions in terms of the targets signed for 2010. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-10&r=all 66. Demand for life annuities from married couples with a bequest motive Carlos Vidal-Melia Ana Lejarraga-Garcia This paper will try to explain the “annuities puzzle” in greater depth by introducing the bequest motive, both strategic and altruistic. It will try to determine whether this motive really is a relevant feature influencing the demand for lifetime annuities from married couples. With this aim in mind, we develop an optimization model of the utility provided by purchasing a lifetime annuity with contingent survivor benefit or a joint survivor life annuity. Our model is based on that first put forward by Brown & Poterba (2000), to which we add elements from other models such as Friedman and Warshawsky’s (1990) and Vidal & Lejarraga's (2004) which include the bequest motive. This enables us to calculate equivalent wealth in various contexts: the possibility of access to actuarially fair annuity markets, the inclusion of so-called market imperfections, and the assumption that couples already have part of their wealth in pre- existing lifetime annuities. Numerical results are presented for the case of Spain. The bequest motive is found not to be a significant factor influencing the demand for annuities from couples. Indeed very few couples would be willing to purchase them once we take into account the combined effects of market imperfections, the possibility of pre-existing annuities and the bequest motive. These findings have repercussions for policy- makers regulating defined contribution capitalization systems which are complementary to defined benefit systems. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-11&r=all 67. Wellbeing and dependency among European elderly: The role of social integration Corinne Mette This study aims at highlighting the importance of social integration on the well-being of dependent elderly living at home. This question is important because, as we can observe, favouring social activities is not a priority for social policies regarding dependent elderly in Europe. Now, social activities and contacts improve dependent elderly’s well-being. Therefore, as depression is one of the factors leading to a dependency situation, to attach greater importance to social measures favouring dependent elderly social integration should allow to decrease their depression rate and, consequently, should allow to decrease their demand for care too. The data used in this study stem from the European Community Household Panel (ECHP). Major results are: health perception is strongly and positively correlated with satisfaction with the main activity. The importance of the correlation decreases however a little when social integration variables are included in the model. Except for “owning a phone”, these latter variables have equally significant effects on satisfaction with the main activity. Dependent elderly who are member of a club, those who often meet their friends and relatives and those who often talk with their neighbours declare a higher satisfaction than the rest. Satisfaction is largely correlated with the country of residence. Dependent elderly from Southern countries and from Ireland declare to be less satisfied with their main activity than those from North or Central Europe. In terms of housing situation, having a comfortable dwelling leads to a higher satisfaction while living in a household composed by several persons leads to a lower satisfaction. The standard of living is linked with satisfaction: both household and personal income increase satisfaction. Lastly, dependency-related social transfers have no effect on satisfaction with the main activity. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-12&r=all 68. Board Independence and CEO Turnover Volker Laux It is widely believed that the ideal board in corporations is composed almost entirely of independent (outside) directors. In contrast, this paper shows that some lack of board independence can be in the interest of shareholders. This follows because a lack of board independence serves as a substitute for commitment. Boards that are dependent on the incumbent CEO adopt a less aggressive CEO replacement rule than independent boards. While this behavior is inefficient ex post, it has positive ex ante incentive effects. The model suggests that independent boards ( dependent boards) are most valuable to shareholders if the problem of providing appropriate incentives to the CEO is weak ( severe). Keywords: Corporate Governance; Board Independence; Severance Pay; CEO Turnover; Incentive Compensation Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fra:franaf:154&r=all 69. Turkey and the Ankara Treaty of 1963: What can Trade Integration Do for Turkish Exports? Felicitas Nowak-Lehmann D. Dierk Herzer Immaculada Martinez-Zarzoso Sebastian Vollmer This paper investigates the trade effects of Turkey’s trade integration into the EU. To this end sectoral trade flows to the EU based on panel data from the period 1988 to 2002 are examined concentrating on Turkey’s sixteen most important export sectors. Emphasis is placed on the role of price competition, EU protection, and transport costs in the export trade between Turkey and the EU. The empirical model used is an extended version of the gravity model. This study is also a contribution to the current discussion of whether Turkey should be granted full EU membership or a privileged partnership with the EU, which for Turkey would mean improved access to the EU market for its products, among other benefits. Our investigation focuses on the latter policy outcome: the impact of deepening the Customs Union between Turkey and the EU and applying the Common Agricultural Policy (CAP) to Turkish agricultural exports. To this end, the impact of the 1996 Customs Union covering most industrial goods and processed agricultural goods, is evaluated on a sectoral level. We also perform simulations to quantify the impact of the potential inclusion of agricultural goods, as well as iron and steel and products thereof, into the full Customs Union between Turkey and the EU which is still to come. Keywords: Trade integration, gravity model, sectoral trade flows, price competition, transport costs JEL: F Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:got:cegedp:43&r=all 70. L’evolution de la mobilite scolaire intergenerationnelle au Perou depuis un siecle Laure Pasquier-Doumer (DIAL, Paris) Le developpement considerable de l’enseignement qui caracterise le Perou depuis le debut du vingtieme siecle suggere que l’acces a l’education scolaire est devenu plus egalitaire. Dans cet article, je cherche a savoir si reellement le developpement a profite a tous de la meme maniere et s’il s’est accompagne d’une egalisation des opportunites scolaires. Pour cela, j’analyse l’evolution des inegalites sociales devant l’ecole tout au long du vingtieme siecle en etudiant l’evolution du lien entre le niveau d’education des personnes et leur origine culturelle. Ensuite, j’examine si le relachement de ce lien que l’on observe s’explique par une plus forte egalite d’opportunites scolaires ou s’il n’est que le resultat de l’allongement generalise des etudes. Enfin, j’etudie quelles politiques publiques pourraient etre conduites pour accroitre l’egalite des chances devant l’ecole. L’originalite de cet article est de pouvoir aborder cette problematique pour un pays en developpement grace a la base de donnees exceptionnelle dont on dispose ici. Keywords: inegalite d’opportunites, mobilite scolaire, exclusion, Perou, vingtieme siecle, modeles log- lineaires URL: http://d.repec.org/n?u=RePEc:got:iaidps:105&r=all 71. Dynamique de la pauvrete urbaine au Perou et a Madagascar 1997-1999: Une Analyse sur donnees de panel Javier Herrera (DIAL, Paris) Francois Roubaud (DIAL, Paris) Du fait du manque de donnees de panel, il existe peu d’etudes sur la dynamique de la pauvrete dans les pays en developpement. De plus, il est difficile d’en tirer des conclusions generales en raison des differences methodologiques entre elles. Notre etude sur la dynamique de la pauvrete urbaine a Madagascar et au Perou est basee sur un large panel de menages couvrant la periode 1997-1999. En appliquant des methodes rigoureusement comparables dans les deux pays, nous cherchons a identifier les traits generaux et specifiques de la pauvrete chronique et transitoire. L’importance des transitions de pauvrete, ainsi que les caracteristiques des menages pauvres (de maniere transitoire ou chronique), sont d’abord etudiees. A l’aide d’un modele logit multinomial, on mesure ensuite la contribution a la pauvrete chronique et aux transitions de pauvrete ( entrees/sorties) de trois groupes de variables : caracteristiques des menages (demographiques, capital humain et physique) ; chocs subis par les menages (demographiques et lies au marche du travail) ; variables geographiques liees au voisinage (fourniture de biens publics, niveau de revenu, capital humain et structure de l’emploi, etc.). Nos resultats infirment la these selon laquelle les chocs seraient la seule variable explicative des formes transitoires de pauvrete. Le mode d’entree sur le marche du travail, ainsi que les caracteristiques du voisinage apparaissent egalement pertinentes pour l’analyse de la dynamique de la pauvrete. Nos resultats suggerent que la dimension liee a l’inegalite spatiale meriterait d’etre analysee dans les analyses sur les dynamiques de pauvrete et de revenus. Keywords: dynamique de la pauvrete, inegalite, Perou, Madagascar, modele logit multinomial, panel JEL: I32 D63 D31 URL: http://d.repec.org/n?u=RePEc:got:iaidps:106&r=all 72. Colonization, Institutions, and Inequality: A Note on Some Suggestive Evidence Denis Cogneau (DIAL, Paris) Charlotte Guenard (DIAL, Paris) What is the kind of institutions that affect economic inequalities? Using a database on national income inequality for 73 non-European countries, we show that \'good governance\' not only contributes to the level of income but also to a more equal distribution by increasing the income share of the middle class. Beside this effect of the quality of capitalist institutions, we also find an inverted U relationship between inequalities and the extent of European settlement. We finally find a large and robust correlation between the pre-colonial population density and the present equality of income distribution. We argue that this latter correlation may have to do with institutional dimensions that are not captured by usual measures of institutional quality in available databases. Countries which were more densely populated in 1500 have indeed worse \'governance\' but give larger income shares to the poor. They had more structured pre- colonial States, more often resisted to colonisation, and more often adopted a mixed economic system. Many of them in fact ended with a more equal land distribution. The equality in the distribution of landholdings does appear as an important determinant of the overall equality of income and of poverty which is independent from \'usual\' governance issues. Keywords: Colonization, Inequalities, Institutions, Development JEL: N37 O40 P51 URL: http://d.repec.org/n?u=RePEc:got:iaidps:107&r=all 73. Agricultural surplus, division of labour and the emergence of cities: A spatial general equilibrium model Gilles Spielvogel (DIAL, Paris) n this paper, we expose the economic conditions of cities emergence in a spatial general equilibrium framework. The presence of increasing returns based on the division of labour, transport costs and the possible existence of an agricultural surplus are enough to generate different possible urban equilibrium. A city may not be sustainable if internal transport costs are too high. On the other hand, a persistent migratory pressure may exist between the city and the surrounding rural hinterland if the urban labour market is saturated. In addition, we study the conditions of stability of the monocentric equilibrium in the different cases. Keywords: Urbanization, division of labour, agricultural surplus, monocentric urban system JEL: R13 R14 O18 URL: http://d.repec.org/n?u=RePEc:got:iaidps:108&r=all 74. Labor Market Transitions in Peru Javier Herrera (DIAL, Paris) Gerardo David Rosas Shady (DIAL, Paris) Traditional labor market analysis based solely on the net unemployment rate fails to explain the apparent paradox between a relatively moderate unemployment rate in Peru (around 10%, with a weak sensibility to wide macroeconomic fluctuations), and the fact that unemployment is one of the major issues in Peru. One possible explanation is that this static indicator of cross section net unemployment balance is compatible with high flows in and out of employment states. To address these issues we needed to conduct a dynamic analysis using panel data. Using the Peruvian national household survey (ENAHO), we constructed a panel of working age individuals at the national level for the period 1997-1999. Like previous work in developing countries, we found that there is an important degree of job mobility in Peru. We also found that most of the transitions occur between employment and inactivity instead of between employment and unemployment. We also showed that the rate of permanent unemployment is very low so that unemployment would be essentially a frictional phenomenon. Further, considering the different transition states, we elaborated an unconditional transition profile, including individual and household characteristics, like gender, age and education levels for example, associated with each transition status. Finally, after examining these labor market transitions and the possible sample selection bias, we estimated a multinomial logit model. This model allowed us to appreciate the (conditional) incidence of individual and household characteristics as well as the effects of different shocks on the labor transition states. URL: http://d.repec.org/n?u=RePEc:got:iaidps:109&r=all 75. Who deserves aid? Equality of opportunity, international aid and poverty reduction Denis Cogneau (DIAL, Paris) David Naudet (DIAL, Paris) We build and implement a normative procedure to allocate international aid based on equality of opportunity concerning the risk of poverty. This is an alternative to Collier and Dollar’s proposal (2001) which stresses the impact of aid on worldwide poverty reduction. The big problem with their approach, as regards distributive justice, is that it leaves very great inequality in poverty risk between inhabitants of countries with widely varying structural disadvantages. We draw on post- welfarist theories of social justice, especially those of John Roemer. However our proposal is very different to that of Llavador and Roemer (2001), which has serious methodological errors and reaches contradictory conclusions. Our proposed allocations, like those of Collier and Dollar, differ from current aid allocation by giving more to the poorest countries. Apart from this agreement, our equality of opportunity principle takes account of structural disadvantages to growth rather than quality of past policies. Our kind of allocation shares out poverty risks much more fairly among the world’s population, while reducing global poverty almost as effectively as Collier and Dollar\'s. Keywords: International aid, Equality of Opportunity, Poverty Reduction JEL: F35 I30 D63 O19 O40 URL: http://d.repec.org/n?u=RePEc:got:iaidps:110&r=all 76. Social experiments and intrumental variables with duration outcomes Abbring, Jaap H (Free University Amsterdam) van den Berg, Gerard J (Free University Amsterdam) This paper examines the empirical analysis of treatment effects on duration outcomes from data that contain instrumental variation. We focus on social experiments in which an intention to treat is randomized and compliance may be imperfect. We distinguish between cases where the treatment starts at the moment of randomization and cases where it starts at a later point in time. We derive exclusion restrictions under various informational and behavioral assumptions and we analyze identifiability under these restrictions. It turns out that randomization (and by implication, instrumental variation) by itself is often insufficient for inference on interesting effects, and needs to be augmented by a semi-parametric structure. We develop corresponding non- and semi-parametric tests and estimation methods. Keywords: Event-history analysis; intention to treat; non- compliance; policy evaluation; selection JEL: C14 C31 C41 Date: 2005-05-03 URL: http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_011&r=all 77. Tax evasion and labour supply in Norway in 2003: Structural models versus flexible functional form models Due-Andresen, Kari (Dept. of Economics, University of Oslo) A Box-Cox structural utility model is estimated on tax evasion survey data and it is shown that this model gives a better representation of individual utility maximizing behavior than a flexible model, represented by a polynomial of degree 3. It is found that an overall wage increase has a positive impact on hours worked in the regular part of the economy and a negative impact on hours work in the irregular part. Keywords: Labor Supply; Tax Evasion; Survey Data; Microeconometrics JEL: C25 D12 D81 H26 J22 Date: 2005-05-10 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_011&r=all 78. How Close Can You Get - The Effect of Proxemics on LMX Rai Himanshu Kulkarni Vaibhavi The study of how human use space to communicate is termed as Proxemics. In an organizational setting, this behavior has been found to be culturally conditioned and thus may differentially affect the degree of mutual influence and obligation between superiors and subordinates. The hypothesis that differential informal interactional levels and dining arrangements would have different effects on the perceptions of leader-member exchange quality was tested with a sample of employees (N=142) from organizations across India. We have discussed the results and their implications in the present study. Keywords: Proxemics, LMX Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-05-01&r=all 79. Women and Formal and Informal Science Gupta Anil K Mashelkar R A Gender imbalance among various streams of professionals is a constant cause of concern to policy planners and institution builders. The situation becomes more serious when we notice that girls often perform much better academically at secondary school level and then there is a sharp decline in their performance at graduate and postgraduate levels. The situation in the field of science and technology is no less serious. There are very few scientific institutions, which have women scientists as directors, or senior leaders of programmes. In this paper, we compare our insights from the formal scientific sector with our investigations in informal scientific sector. The effort to blend excellence in formal and informal scientific sectors would require overcoming the gender imbalances in both these sectors. A review of the current status and offer of some policy and institutional suggestions are also included, which could help in overcoming asymmetry in the knowledge and power of women in formal and informal sciences. Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-05-02&r=all 80. Conditions in Which Microfinance has Emerged in Certain Regions and Consequent Policy Implications Sriram M S Kumar Radha The paper looks at some macro data on the availability of infrastructure, economic growth, density of population and the availability of formal financial services to examine if any of these factors explain the growth of microfinance in certain regions, while the other regions lag behind. For the study, data from the four southern states and three states from the western part of the country have been examined. We find that most of the indicators are not significant enough to explain the regional disparity in the growth of microfinance. However, anecdotal evidence and a perusal of the state policy pronouncements explain that the role of the state could be significant in promoting some of these initiatives. In case of Karnataka, we also find that the banking system seems to have played an additional role in rolling out microfinancial services. The paper concludes by indicating that possibly the sector is still insignificant in the rural economy to establish causality with macro variables. However, there could be possibility of growth in states like Rajasthan where most of the parameters that could foster microfinance seem to exist and with policy intervention on the routing of developmental projects, the movement could get a big boost. We also indicate that the existing network has the potential of unleashing more finance and financial products, and that initiative should be seized forthwith. Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-05-03&r=all 81. Competition of Multinationals from Different Cultural Backgrounds: Does Familiarity Breed Contempt? Kwon, Chul-Woo Lapan, Harvey E. This paper considers competition between two multinationals (U, J) who compete in a third market (K). The multinationals have similar cost structures, but differ in that J comes from a country that is “culturally similar” to K, and hence produces products that match more closely the preferences of K residents. This similarity gives J an advantage in K’s market and, if only one firm may enter, J can earn higher profits. However, we show: ( i)K may benefit more from the entry of the dissimilar firm (U), and (ii)in a strategic competition between the two firms, the cultural similarity may be a strategic disadvantage. JEL: F2 L1 Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:isu:genres:12361&r=all 82. Return Intentions of University-Educated Turkish Expatriates Nil Demet Gungor (Middle East Technical University) Aysit Tansel (Middle East Technical University and IZA Bonn) The study presents research findings on the return intentions of Turkish professionals residing abroad, where the targeted group comprises individuals working at a full time job abroad and possessing a tertiary-level degree. The data are obtained from an internet survey of Turkish professionals conducted by the authors during the first half of 2002. A total of 1224 usable responses were obtained from a combination of internet search and referral sampling methods. Student non-return appears to be more significant compared to professional migration, since participants with foreign degrees appear less likely to return. There is a strong, positive association between initial return intentions and current return intentions, although this weakens with the length of stay. The findings also tend to confirm that the recent economic crises in Turkey have had an adverse impact on the return intentions of university educated professionals working abroad. Keywords: skilled migration, brain drain, return intentions, higher education, Turkey JEL: F20 F22 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1604&r=all 83. The Effects of School Class Size on Length of Post- Compulsory Education: Some Cost-Benefit Analysis Paul Bingley (NCRR, University of Aarhus) Vibeke Myrup Jensen (NCRR, University of Aarhus) Ian Walker (University of Warwick, Institute for Fiscal Studies and IZA Bonn) This paper is concerned with the relationship between class size and the student outcome - length of time in post-compulsory schooling. Research on this topic has been problematic partly because omitted unobservables, like parents’ incomes and education levels, are likely to be correlated with class size. Two potential ways to resolve this problem are to exploit either experimental or instrumental variation. In both cases, the methods require that the variation in both class size and the outcome should not be contaminated by other unobservable factors that affect the outcome - like family background. An alternative approach, which we pursue here, is to take advantage of variation in class size between siblings which allows unobservable family effects to be differenced out. Our aim is to provide estimates of the effect of class size and use these to conduct an evaluation of the costs and benefits of a reduction in class sizes. Keywords: class size, regression discontinuity, sibling differences JEL: I22 C23 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1605&r=all 84. Do Government Subsidies Stimulate Training Expenditure? Microeconometric Evidence from Plant Level Data Holger Gorg (University of Nottingham, DIW Berlin and IZA Bonn) Eric Strobl (Universite de Paris X-Nanterre and IZA Bonn) This paper examines whether financial assistance provided by government induces firms to spend more of their own funds on training expenditures, using plant level data for the Republic of Ireland. We pay particular attention to the potential problems in such an evaluation study, namely selectivity and endogeneity, by first identifying a valid counterfactual for grant receiving plants via a matching estimator and then employing a difference- indifferences technique on this matched sample. Our results show that there are differences in causal effects between domestic and foreign owned plants. For the former we find clear evidence that grant receipt stimulates private expenditure, while there are no statistically significant effects for foreign-owned plants based in Ireland. Keywords: training, government grants, matching, difference-in- differences JEL: J24 H25 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1606&r=all 85. Marriage, Wealth, and Unemployment Duration: A Gender Asymmetry Puzzle Rasmus Lentz (Boston University) Torben Tran?s (Rockwool Foundation Research Unit, CESifo and IZA Bonn) This note presents evidence of the following gender asymmetry: the job-finding effort of married men and women is affected by the income of their spouses in opposite directions. For women, spouse income influences job finding negatively, just as own wealth does: the more the man earns and the wealthier the woman is, the longer it takes for her to find a job. The contrary is the case for men, where spouse income affects job finding positively: the more the wife earns, the faster the husband finds a job. This is so despite the fact that greater own wealth also prolongs unemployment spells for men. These findings are hard to reconcile with the traditional economic model of the family. Keywords: gender asymmetries, wealth effects on job finding, unemployment duration JEL: D1 J4 J6 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1607&r=all 86. "Der Noth gehorchend, nicht dem eignen Trieb" - Nascent Necessity and Opportunity Entrepreneurs in Germany: Evidence from the Regional Entrepreneurship Monitor (REM) Joachim Wagner (University of Lueneburg and IZA Bonn) Using a large recent representative sample of the adult German population this paper demonstrates that nascent necessity and nascent opportunity entrepreneurs are different with respect to some of the characteristics and attitudes considered to be important for becoming a nascent entrepreneur, and that they behave differently. Given the lack of longitudinal data, however, we have no information about the performance of entrepreneurs from both groups in the longer run. Keywords: necessity entrepreneurship, opportunity entrepreneurship, Germany, REM JEL: J23 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1608&r=all 87. Effect of Private Tutoring on University Entrance Examination Performance in Turkey Aysit Tansel (Middle East Technical University and IZA Bonn) Fatma Bircan (Middle East Technical University) There is an excess demand for university education in Turkey. Highly competitive university entrance examination which rations the available places at university programs is very central to the lives of young people. In order to increase the chances of success of their children in the university entrance examination parents spend large sums of money on private tutoring (dersane) of their children. In this study, we investigate the factors that determine participation in private tutoring and the effect of private tutoring on getting placed at a university program. We further examine the impact of private tutoring on the scores of the applicants in the university entrance examination. The results indicate that controlling for other factors those students who receive private tutoring perform better in the university entrance examination. Keywords: private tutoring, university entrance examination achievement, Turkey JEL: I2 J10 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1609&r=all 88. When and how to create a job: The survival of new jobs in Austrian firms Rene Boheim (Department of Economics, Johannes Kepler University Linz, Austria) Alfred Stiglbauer (Oesterreichische Nationalbank) Rudolf Winter-Ebmer (Department of Economics, Johannes Kepler University Linz, Austria) While the volatility of job creations has been studied extensively, the survival chances of new jobs are less researched. The question when and how to expand a firm is of importance, both from the firm’s and from a macro perspective. Adjustment cost theories and arguments about option values of investment in firm expansion make predictions about the timing, sequencing and form of firm expansions. When we analyze 21 years of job creation in Austria, we find that the survival of new jobs (and of new firms) depends upon the state of the business cycle at the time of job creation, on the number of jobs created, and on firm age. Jobs in new firms last longer than new jobs in continuing firms. Keywords: job creation; business cycle; reallocation; persistence JEL: J23 J63 E24 E32 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:jku:econwp:2005_04&r=all 89. The empirical test of the Aesthetic Matrix of Art Economics: the Magic Flute by W.A.Mozart Aldo SPRANZI In order to confront the problems of art marketing, the economist must trod on aesthetic terrain, and become concerned with all of the epistemological, aesthetic, critical and pedagogical aspects connected with the consumption of art. He can do it professional ly, without invading others’ fields, so that art itself - which he encountered in the guise of a simple consumer – reveals its na ture and the method with which every simple user might make it hi s or her own. The interpretation of Mozart’s The Magic Flute pres ented here shows how the art economics method works and the resul ts it leads to. It also shows that it does not require special sk ills of any kind. This working paper forms part of the forthcomin g publication: A. SPRANZI, Economics of the Arts. A new Approach t o Art Economics, Unicopli/Cuesp, Milano (cuesp@galactica.it) Keywords: Art Economics, Art Marketing, Cultural Industry, Opera, Mozart, Magic Flute URL: http://d.repec.org/n?u=RePEc:mil:wpdepa:2005-11&r=all 90. Is systematic downside beta risk really priced? Evidence in emerging market data Don U.A. Galagedera Robert D. Brooks Several studies advocating safety first as a major concern to investors propose downside beta risk as an alternative to the traditional systematic risk-beta. Downside measures are concerned with a subset of the data and therefore the results in the studies that consider the downside beta only may be biased. This study addresses this issue by including downside co-skewness risk in addition to the downside beta risk in the pricing model. In a sample of 27 emerging markets two-stage rolling regression analysis fails to support pricing models with downside risk measures. In a cross-sectional analysis inclusion of downside co- skewness improves model fit. When considered together, downside beta is potential and downside co-skewness is a risk to the rational investor. Even though our results are inconclusive the evidence strongly suggests a need for further investigation of co- skewness risk in pricing models that adopt a downside risk framework. Keywords: Beta, Downside risk, Emerging markets JEL: G12 G15 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:msh:ebswps:2005-11&r=all 91. Fifteen years of economic reform in Russia: what has been achieved? What remains to be done? Rudiger Ahrend William Tompson The paper provides an overview of the course of economic reform and the performance of the Russian economy since the early 1990s and an analysis of the structural reform challenges ahead. It assesses the contribution of institutional and structural reforms to economic performance over the period, before turning to the question of where further structural reforms could make the biggest contribution to improved performance. Three major conclusions emerge. First, there is still a great deal to be done to strengthen the basic institutions of the market economy. While the Russian authorities have embarked on some impressive - and often technically complex - 'second-generation' reforms, many 'first-generation' reforms have yet to be completed. Secondly, the central challenges of Russia's second decade of reform are primarily concerned with reforming state institutions. Thirdly, the pursuit of reforms across a broad front could enable Russia to profit from complementarities that exist among various strands of reform.

Quinze ans de reformes economiques en Russie: Qu'a-t-elle acquis? Que reste-t-il a faire?

L'article donne un apercu du deroulement des reformes economiques et des performances de l'economie russe depuis le debut des annees 90, ainsi qu'une analyse des enjeux des futures reformes structurelles. L'article considere la contribution des reformes institutionnelles et structurelles a la performance economique durant la periode, avant d'examiner dans quels domaines des reformes structurelles additionnelles pourraient avoir la plus grande contribution a l'amelioration de la performance economique. Il en resulte trois conclusions majeures. Premierement, il reste encore beaucoup a faire pour renforcer les institutions de base d'une economie de marche. Bien que les autorites russes aient commence quelques reformes de "seconde generation" qui sont impressionnantes - et souvent techniquement complexes-, il reste un bon nombre de reformes de "premiere generation" a achever. Deuxiemement, les defis centraux de la deuxieme decennie de reformes concernent en premiere ligne la reforme des institutions de l'Etat. Troisiemement, la poursuite des reformes sur un large front permettrait a la Russie de profiter des complementarites existantes entre les differents axes des reformes. Keywords: Russia; economy; reform; growth; stabilisation; transparency; corruption; state ownership; competition; transition JEL: H1 K2 P21 P26 P27 P31 P37 Date: 2005-05-11 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:430&r=all 92. Boosting growth through greater competition in Denmark Martin Jorgensen This paper discusses ways of strengthening the competitive environment in order to help boost productivity performance in various sectors of the Danish economy. It looks at a number of indicators of the strength of competition - including price levels, industrial concentration and product market regulation - and it discusses the appropriateness of the competition legislation framework. The paper then focuses on the large public sector, which has been slow to open up to competition, partly because of regulatory restrictions but also because some local governments are too small to handle tenders and provide an attractive market for private providers. The paper also looks at the process of liberalising network industries and at various regulations that still impede effective competition in a number of other sectors, including construction, housing, distribution and professional services.

Dynamiser la croissance en stimulant la concurrence au Danemark

Ce document examine les moyens de renforcer le cadre concurrentiel pour stimuler la productivite dans divers secteurs de l'economie du Danemark. Il passe en revue un certain nombre d'indicateurs de la vigueur de la concurrence - notamment le niveau des prix, la concentration industrielle et la reglementation des marches de produits - et evalue l'adequation du cadre legislatif de la concurrence. L'analyse se porte ensuite sur le vaste secteur public, qui a tarde a s'ouvrir a la concurrence, du fait de restrictions reglementaires mais aussi parce que certaines collectivites locales sont trop petites pour gerer des appels d'offres et offrir un marche attractif a des prestataires prives. Ce document examine aussi le processus de liberalisation des industries de reseau ainsi que differentes reglementations qui font encore obstacle a une concurrence efficace dans plusieurs autres secteurs, dont la construction, le logement, la distribution et les services professionnels. Keywords: Denmark;competition; regulation; product markets; network industries; retail distribution; construction; public sector; competitive neutrality; public procurement; privatisation JEL: H4 K21 L1 L32 L33 L41 L43 L44 L8 L9 O52 Date: 2005-05-18 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:431&r=all 93. Evidence of Environmental Migration: Housing values alone may not capture the full effects of local environmental disamenities Trudy Ann Cameron (Department of Economics, University of Oregon) Ian McConnaha (Student, Department of Economics, University of Oregon) In hedonic property value models, economists typically assume that changing perceptions of environmental risk should be captured by changes in housing prices. However, for long-lived environmental problems, we find that many other features of neighborhoods seem to change as well, because households relocate in response to changes in perceived environmental quality. We consider spatial patterns in census variables over three decades in the vicinity of four Superfund sites. We find many examples of moving and staying behavior, inferred from changes in the relative concentrations of a wide range of socio-demographic groups in census tracts near the site versus farther away. Keywords: hedonic property values, environmental disamenities JEL: Q53 R31 R11 Date: 2005-01-01 Date: 2005-01-01 URL: http://d.repec.org/n?u=RePEc:ore:uoecwp:2005-7&r=all 94. Efficient collusion in optimal auctions Dequiedt, V. In a first part, we provide a general approach to mechanism design subject to collusion. It is modeled as a Stackelberg game between the designer and a third-party which organizes collusion among the buyers. In this multi-principal context, the standard "Revelation principle" can be replaced by a "Collusion-proofness Principle" if, and only if, the collusion technology satisfies a transitivity condition. In a second part, we apply this approach to collusion in a private value auction where bidders' types are independent and study the optimal response of the seller to different threats of collusion between the buyers. We show that collusion in the optimal auction is efficient when the third- party can implement monetary transfers as well as when it can implement monetary transfers and reallocations of the goods. Keywords: COLLUSION PROOFNESS; MULTI PRINCIPAL; OPTIMAL CONTRACT JEL: D44 D82 L41 Date: 2004 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:200402&r=all 95. Biodiversity and international stakes : a question of access Trommetter, M. This paper examines three main questions: Is it possible to create a market for genetic resources? Is it a perfectly or an imperfectly competitive market? What impact could this market have on the management of Biodiversity in the context of sustainable development? The author analyses the conditions for "access" and "use" of knowledge of genetic resources and the genetic resources themselves. Then he considers the consequences on the management of genetic resources and social welfare trends in the context of sustainable development. He presents product and technology transfers in terms of access and user rights. He shows that the lack of information on the quality of biological resources and on their value on both the demand and supply sides lead to an imperfect market model. He examines how benefit- sharing can be achieved via public research institutions in developed countries and the conditions of their access to private patent licences. The main conclusion of this paper is that a valorisation of developing countries' genetic resources is a means, among others, of accomplishing a sustainable management of biodiversity by an equitable access and benefit-sharing from the use of biodiversity: direct use of natural and biological resources; valorisation of genetic resources; development of new economic sectors, Etc. Furthermore, it enables taking part in the economic and social development of these countries (increasing the social welfare in a context of sustainable development) by widening the access to genetic resources. Keywords: BIODIVERSITY; BIOLOGICAL DIVERSITY; GENETIC RESOURCES; INTELLECTUAL PROPERTY RIGHT; PATENT JEL: Q57 Q20 Date: 2004 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:200418&r=all 96. Market structure and environmental amenities in hedonic pricing of rural cottages Mollard, A. Rambonilaza, M. Vollet, D. Site-specific characteristics are attributes of tourism services for consumers and a factor influencing their costs and quality for producers. These services are a fine illustration of territorial rents. Using estimates from hedonic price equations, we test the role of environmental/territorial variables as services differentiation tools in the context of a non- competitive market, and recover the value of territorial rent generated by tourism managers' strategies. Two territories of reference are chosen, one currently benefiting from the renewed interest of the public, and a usual tourist destination. The results of a comparative analysis suggest that tourists' preferences for new destinations, combined with firms' strategies generate some catching up effect by emerging territories. Keywords: ENVIRONMENTAL VALUATION; HEDONIC METHOD; SERVICE DIFFERENTIATION; TOURISM JEL: Q21 Q26 R14 Date: 2004 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:200427&r=all 97. Variety and the evolution of refinery processing Nguyen, P. Saviotti, P.P. Trommetter, M. Bourgeois, B. Evolutionary theories of economic development stress the role of variety as both a determinant and a result of growth. In this paper we develop a measure of variety, based on Weitzman's maximum likelihood procedure. This measure is based on the distance between products, and indicates the degree of differentiation of a product population. We propose a generic method, which permits to regroup the products with very similar characteristics values before choosing randomly the product models to be used to calculate Weitzman's measure. We apply the variety measure to process characteristics of oil refining. The results obtained for this technology show classic evolutionary specialization patterns that can be understood on the basis of niche theory. Here the changes in variety are related to changes in the range of the services the technology considered can deliver, range which plays a role similar to that of the size of the habitat of a biological species. Keywords: TECHNOLOGICAL EVOLUTION; REFINERY PROCESSES; NICHE THEORY; WEITZMAN MEASURE JEL: L15 L93 Q40 Date: 2004 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:200428&r=all 98. Interest of site-specific pollution control policies Lacroix, A. Bel, F. Mollard, A. Sauboua, E. Owing to increasing environmental concerns the current trend is to bend technical production systems in order to adapt them to the specific characteristics of the milieu and diversify them. Inherent to such dynamics is the issue of how to design the accompanying environmental policies. Theoretically, spatially targeted environmental policies are considered optimal, since economic agents tune their efforts according to the sensitivity of the milieu where they operate. But, according to empirical analyses, this advantage is undermined by the high cost of implementation, monitoring and enforcement. This paper outlines the conditions required for site-specific policies to be effective at least cost. Our starting point is the nitrate pollution of water from agriculture, which varies according to climate, soil type and agricultural production system. Farm management practices enabling to reduce pollution depend on this variability. An interdisciplinary study of the efficiency of differentiating the way this pollution is regulated was carried out on two sites in France. It focussed on assessing the importance of spatial variability in physical parameters and in private and social costs. Keywords: NONPOINT POLLUTION; SITE SPECIFIC TECHNOLOGY; SITE SPECIFIC ENVIRONMENTAL POLICY; ABATEMENT COST; TRANSACTION COST JEL: C15 H71 Q16 Q25 Date: 2004 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:2004df&r=all 99. Le panier de biens : une construction patrimoniale et territoriale. L'exemple de la Bresse Berard, L. Hirczak, M. Marchenay, P. Mollard, A. Pecqueur, B. This paper proposes the study of a special case of the model of the " basket of territorialized goods and services ", the Bresse ( France). The agricultural dominating model, based on the modernization and the intensification of agriculture, coexists with many traditional productions. But the heterogeneity of these products asks the question of their relation and their coherence. How do products with different statute function together? How does quality exists in a territory where dominate sectoral and generic productions and forms of coordination? How to study the basket of goods in this context? To answer these questions we will associate ethnology and economy; the interdisciplinary dialogue allowing a basic thought on the evolution of the agricultural and food resources of Bresse. ...French Abstract: Cette communication propose l'etude d'un cas particulier du modele dit du " panier de biens et de services territorialises ", la Bresse (France). Le modele agricole dominant, base sur la modernisation et l'intensification de l'agriculture, coexiste avec de nombreuses productions traditionnelles. Mais l'heterogeneite de ces dernieres pose la question de leur coherence les unes par rapport aux autres. Comment des produits de statut differents fonctionnent-ils ensemble ? Comment se positionne la qualite dans un territoire ou dominent des productions et des formes de coordination sectorielles et generiques ? Comment raisonner le panier de biens dans ce contexte ? Pour repondre a ces questions nous associerons le regard de l'ethnologue et de l'economiste ; le dialogue interdisciplinaire permettant une reflexion de fond sur l'evolution des ressources agricoles et alimentaires de la Bresse. Keywords: AOC; LOCAL PRODUCT; BASKET OF GOODS; PATRIMONY; AGRO- FOOD SYSTEM; FRANCE JEL: Q12 Q13 Q20 R14 R20 R30 Date: 2005 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:200501&r=all 100. Start-ups, firm growth and the consolidation of the French biotech industry Avenel, E. Corolleur, F. Gauthier, C. Rieu, C. Based on an original dataset, we analyze empirically the determinants of firm growth in the French biotech industry during two periods, 1996-1999 and 1999-2002. We have two main results. First, Gibrat's law is violated. The growth of annual turnover is influenced by teh initial size of the firm. The effect is non- linear, negative for small firms. Second, location has a significant impact on growth. We use different sets of dummies to characterize location and different measures of firm growth. As a whole, our results point at Marseilles (and its region) and Nanterre (but not Paris and Evry) as favorable places for the growth of firms between 1999 and 2002. For the 1996-1999, the favorable places are Strasbourg (and Alsace) and Rhone-Alpes ( Lyon/Grenoble). Our analysis thus suggests that the changes in the (notably legal) environment of French biotech firms that took place in 1999 had a drastic effect of the comparative advantages of locations for biotech firms. Keywords: BIOTECHNOLOGY; INDUSTRIAL CLUSTERING; FIRM GROWTH; FRANCE JEL: L25 L65 R30 Date: 2005 URL: http://d.repec.org/n?u=RePEc:rea:gaelwp:200503&r=all 101. Matched asymptotic expansions in financial engineering Sam Howison Modern financial practice depends heavily on mathematics and a correspondingly large theory has grown up to meet this demand. This paper focuses on the use of matched asymptotic expansions in option pricing; it presents illustrations of the approach in `plain vanilla' option valuation, in valuation using a fast mean- reverting-stochastic volatility model, and in a model for illiquid markets. A tentative framework for matched asymptotic expansions applied directly to stochastic processes of diffusion type is also proposed. Date: 2005 URL: http://d.repec.org/n?u=RePEc:sbs:wpsefe:2005mf01&r=all 102. A matched asymptotic expansions approach to continuity corrections for discretely sampled options. Part 1: barrier options Sam Howison Mario Steinberg We discuss the `continuity correction' that should be applied to relate the prices of discretely sampled barrier options and their continuously-sampled equivalents. Using a matched asymptotic expansions approach we show that the correction of Broadie, Glasserman \& Kou (\emph{Mathematical Finance} {\bf 7}, 325 (1997) can be applied in a very wide variety of cases. We calculate the correction to higher order in terms of the expansion parameter (the scaled time between resets) and we show how to apply the correction in jump-diffusion and local volatility models. Date: 2005 URL: http://d.repec.org/n?u=RePEc:sbs:wpsefe:2005mf02&r=all 103. A matched asymptotic expansions approach to continuity corrections for discretely sampled options. Part 2: Bermudan options Sam Howison We discuss the `continuity correction' that should be applied to connect the prices of discretely sampled American put options (i. e. Bermudan options) and their continuously-sampled equivalents. Using a matched asymptotic expansions approach we compute the correction and relate it to that discussed by Broadie, Glasserman \& Kou (\emph{Mathematical Finance} {\bf 7}, 325 (1997)) for barrier options. In the Bermudan case, the continuity correction is an order of magnitude smaller than in the corresponding barrier problem. We also show that the optimal exercise boundary in the discrete case is slightly higher than in the continuously sampled case. Date: 2005 URL: http://d.repec.org/n?u=RePEc:sbs:wpsefe:2005mf03&r=all 104. Scientific and Technological Regimes in Nanotechnology: Combinatorial Inventors and Performance Andrea Bonaccorsi Grid Thoma Academics and policy makers are questioning about the relation between science and technology in the emerging field of nano science and technology (NST) and the effectiveness of different institutional regimes. We analyze the performance of inventors in the NST using multiple indicators. We clustered patents in three groups according to the scientific curricula of the inventors. The first two groups are composed by patents whose inventors respectively are all authors of at least one scientific publication in the NST and none of then has obtained a scientific publication in that field. Thirdly, we isolated those patents that have at least one inventor, who is also author of at least one scientific publication in the NST. The underlining presumption of this classification is that of a proxy of different institutional search regimes of the inventive activity; pure academic research, pure industrial R&D, and academic- industrial research partnerships. Keywords: Science-Technology Relation, Emerging Field, Nanotechnology, Patent Quality, Inventive Productivity. URL: http://d.repec.org/n?u=RePEc:ssa:lemwps:2005/13&r=all 105. Foreign aid and developing countries' creditworthiness Philipp Harms (Study Center Gerzensee and University of Konstanz) Michael Rauber (University of Konstanz) We explore whether foreign aid affects developing countries' creditworthiness, as proxied by the Institutional Investor's measure of country credit risk. Based on a simple model of international borrowing and lending, we develop the hypothesis that aid reduces the likelihood that borrowers in a given country default on their foreign debt. We then test this hypothesis, using a panel data set that covers a large number of developing countries in the 1980s and 1990s. Our empirical findings support the notion that aid improves countries' standing vis-a-vis international capital markets. However, the strength of this effect differs across types of aid and country groups. Date: 2004-07 URL: http://d.repec.org/n?u=RePEc:szg:worpap:0405&r=all 106. Timing Tax Evasion Dirk Niepelt (Study Center Gerzensee) Standard models of tax evasion implicitly assume that evasion is either fully detected, or not detected at all. Empirically, this is not the case, casting into doubt the traditional rationales for interior evasion choices. I propose two alternative, dynamic explanations for interior tax evasion rates: Fines depending on the duration of an evasion spell, and different vintages of income sources subject to aggregate risk and fixed costs when switched between evasion states. The dynamic approach yields a transparent representation of revenue losses and social costs due to tax evasion, novel findings on the effect of policy on tax evasion, and a tractable framework for the analysis of tax evasion dynamics. Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:szg:worpap:0407&r=all 107. Measuring Income Elasticity for Swiss Money Demand: What do the cantons say about financial innovation? Andreas Fischer (Swiss National Bank) Recent time-series evidence has re-confirmed the forecasting ability of Swiss broad money. The same money demand studies and others, however, find that the income elasticity is greater than one. Such parameter estimates are difficult to reconcile with transactions demand theory. This study re-examines the estimates for income elasticity in money demand based on cross-regional evidence for Switzerland. Particular attention is given to the influence of regional financial sophistication. The cross- cantonal results find that the income elasticity lies between 0.4 and 0.6. This discrepancy between the two empirical methodologies has important consequences for the conduct of Swiss monetary policy. Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:szg:worpap:0501&r=all 108. Shock Identification of Macroeconomic Forecasts based on Daily Panels Marlene Amstad (Swiss National Bank) Andreas Fischer (Swiss National Bank) This paper proposes a new procedure for shock identification of macroeconomic forecasts based on factor analysis. Our identification scheme for information shocks relies on data reduction techniques for daily panels and the recognition that macroeconomic releases exhibit a high level of clustering. A large number of data releases on a single day is of considerable practical interest not only for the estimation but also for the identification of the factor model. The clustering of cross- sectional information facilitates the interpretation of the forecast innovations as real or as nominal information shocks. An empirical application is provided for Swiss inflation. We show that (i) the monetary policy shocks generate an asymmetric response to inflation, (ii) the pass-through for consumer price index inflation is weak, and (iii) that the information shocks to inflation are not synchronized. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:szg:worpap:0502&r=all 109. Urban Growth Yannis Ioannides Esteban Rossi-Hansberg Urban growth refers to the process of growth and decline of economic agglomerations. The pattern of concentration of economic activity, and its evolution, has been found to be an important determinant, and in some cases the result, of urbanization, the structure of cities, the organization of economic activity, and national economic growth. The size distribution of cities is the result of the patterns of urbanization, which result in city growth and city creation. The evolution of the size distribution of cities is in turn closely linked to national economic growth. JEL: E0 O4 R0 Date: 2005 URL: http://d.repec.org/n?u=RePEc:tuf:tuftec:0513&r=all 110. The Effects of Critical Habitat Designation on Housing Supply: An Analysis of California Housing Construction Activity Robert W. Paterson Jeffrey E. Zabel Under the Endangered Species Act, the U.S. Fish and Wildlife Service is required to designate critical habitat for listed species. Designation could result in modification to or delay of residential development projects within habitat boundaries, generating concern over potential housing market impacts. This paper draws upon a large dataset of municipal-level (FIPS) building permit issuances and critical habitat designations in California over a 13-year period to identify changes in the spatial and temporal pattern of development activity associated with critical habitat designation. We find that the proposal of critical habitat results in a 20.5% decrease in the annual supply of housing permits in the short-run and a 32.6% decrease in the long-run. Further, the percent of the FIPS area that is designated as critical habitat significantly affects the number of permits issued. We also find that the impact varies across the two periods in which critical habitat is designated and by the number of years relative to when critical habitat was first proposed. Date: 2005 URL: http://d.repec.org/n?u=RePEc:tuf:tuftec:0514&r=all 111. Free entrance and social welfare. Explaining the causes of excessive entry bias. Francisco Galera (School of Economics and Business Administration, University of Navarra) Pedro Gracia-del-Barrio (School of Economics and Business Administration, University of Navarra) The economic theory has proved that free entry is not always advantageous from a social welfare point of view. Fro instance, a number of inefficiencies can arise from free entry in the presence of fixed set-up costs. Then, an excessive number of firms can usually be settled in homogeneous produc markets within an imperfect competition framework. The economic forces underlying the entry biases are somewhat obscure yet. This paper claims that capacity constraints and diseconomies of scale ought to be driving the discussion of this issue. The characteristics of the cost function, rather than other features, play the major role and should attract the attention of the future research effort. The paper develops an example with which to illustrate the discussion. JEL: D24 D43 L13 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:una:unccee:wp0505&r=all 112. Optimal Conditionally Unbiased Bounded-Influence Inference in Dynamic Location and Scale Models Fabio Trojani Elvezio Ronchetti Loriano Mancini This paper studies the local robustness of estimators and tests for the conditional location and scale parameters in a strictly stationary time series model. We first derive optimal bounded- influence estimators for such settings under a conditionally Gaussian reference model. Based on these results, optimal bounded- influence versions of the classical likelihood-based tests for parametric hypotheses are obtained. We propose a feasible and efficient algorithm for the computation of our robust estimators, which makes use of analytical Laplace approximations to estimate the auxiliary recentering vectors ensuring Fisher consistency in robust estimation. This strongly reduces the necessary computation time by avoiding the simulation of multidimensional integrals, a task that has typically to be addressed in the robust estimation of nonlinear models for time series. In some Monte Carlo simulations of an AR(1)-ARCH(1) process we show that our robust procedures maintain a very high efficiency under ideal model conditions and at the same time perform very satisfactorily under several forms of departure from conditional normality. On the contrary, classical Pseudo Maximum Likelihood inference procedures are found to be highly inefficient under such local model misspecifications. These patterns are confirmed by an application to robust testing for ARCH. JEL: C1 C13 C14 C15 C22 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-01&r=all 113. GENERAL ANALYTICAL SOLUTIONS FOR MERTONS'S-TYPE CONSUMPTION- INVESTMENT PROBLEMS Fabio Trojani Roberto G. Ferretti We solve analytically the Merton's problem of an investor with time additive power utility. For general state dynamics, we prove existence of two power series representations of the relevant optimal policies and value functions, which hold for all admissible risk aversion parameters. We characterize all terms in the power series by a recursive formula, allowing analytical computations to arbitrary order. Some applications to explicit model settings highlight a very satisfactory accuracy of finite order approximations provided by our power series solution approach. Keywords: Hamilton-Jacobi-Bellman equations, Higher Order Asymptotic Poli- cies, Merton's Model, Partial Equilibrium, Perturbation Theory JEL: C60 C61 G11 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-02&r=all 114. Learning and Asset Prices under Ambiguous Information Fabio Trojani Markus Leippold Paolo Vanini We propose a new continuous time framework to study asset prices under learning and ambiguity aversion. In a partial information Lucas economy with time additive power utility, a discount for ambiguity arises if and only if the elasticity of intertemporal substitution (EIS) is above one. Then, ambiguity increases equity premia and volatilities, and lowers interest rates. Very low EIS estimates are consistent with EIS parameters above one, because of a downward bias in Euler-equations-based least squares regressions. In our setting, ambiguity does not resolve asymptotically and, for high EIS, it is consistent with the equity premium, the low interest rate, and the excess volatility puzzles. JEL: C60 C61 G11 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-03&r=all 115. A general multivariate threshold GARCH model with dynamic conditional correlations Fabio Trojani Francesco Audrino We propose a new multivariate DCC-GARCH model that extends existing approaches by admitting multivariate thresholds in conditional volatilities and conditional correlations. Model estimation is numerically feasible in large dimensions and positive semi-definiteness of conditional covariance matrices is naturally ensured by the pure model structure. Conditional thresholds in volatilities and correlations are estimated from the data, together with all other model parameters. We study the performance of our approach in some Monte Carlo simulations, where it is shown that the model is able to fit correctly a GARCH- type dynamics and a complex threshold structure in conditional volatilities and correlations of simulated data. In a real data application to international equity markets, we observe estimated conditional volatilities that are strongly influenced by GARCH- type and multivariate threshold effects. Conditional correlations, instead, are determined by simple threshold structures where no GARCH-type effect could be identified. JEL: C12 C13 C51 C53 C61 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-04&r=all 116. Efficient Derivative Pricing by Extended Method of Moments Patrick Gagliardini C. Gourieroux E. Renault In this paper we consider an incomplete market framework and explain how to use jointly observed prices of the underlying asset and of some deriv- atives written on this asset for an efficient pricing of other derivatives. This question involves two types of moment restrictions, which can be written either for a given value of the conditioning variable, or can be uniform with respect to this conditioning variable. This distinction between local and uni- form conditional moment restrictions leads to an extension of the Generalized Method of Moments (GMM), a method in which all restrictions are assumed uniform. The Extended Method of Moments (XMM) provides estimators of the parameters with different rates of convergence: the rate is the standard parametric one for the parameters which are identifiable from the uniform restrictions, whereas the rate can be nonparametric for the risk premium parameters. We derive the ( kernel) nonparametric efficiency bounds for esti- mating a conditional moment of interest and prove the asymptotic efficiency of XMM. To avoid misleading arbitrage opportunities in estimated derivative prices, an XMM estimator based on an information criterion is introduced. The general results are applied in a stochastic volatility model to get effi- cient derivative prices, to measure the uncertainty of estimated prices and to estimate the risk premium parameters. JEL: C13 C14 G12 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-05&r=all 117. Labour Market Policy in Germany: Institutions, Instruments and Reforms since Unification Conny Wunsch Almost 15 years after Unification in 1990, Germany is still struggling with the economic consequences of this event. Although the East German economy has made considerable progress since its near-collapse after the German monetary, economic and social union in July 1990, the East German labour market has not yet recovered. Western Germany, which had to bear a substantial part of the fiscal cost of German Unification, is also faced with high unemployment though the rate is considerably lower than in the Eastern part. Expenditure for activation measures and income support during unemployment is substantial and one of the highest among OECD countries. In response to exploding cost of unemployment and continuing public pressure to solve the unemployment problem, the German Federal Government has started the largest social policy reform in the history of the Federal Republic. This paper reconstructs the development of the German labour market and the stepwise reform of German labour market policy since German Unification in 1990. It provides a detailed description of the instruments of German active labour market policy and reviews the existing econometric evidence on their effectiveness. JEL: J68 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-06&r=all 118. Welfare and Distribution Effects of Bank Secrecy Laws Frode Brevik Manfred Gartner We analyze an overlapping-generations world comprising two groups of small countries whose preferences for public spending differ. Key steady-state effects from introducing bank secrecy and a withholding tax in countries with low government spending are: a reduction of global capital and income, a shift of wealth towards bank-secrecy countries, and falling consumption, welfare and government spending despite rising tax rates in the rest of the world. Qualitative results are robust to changes in tax-payer honesty, the Leviathan effect (permitting governments to drive public spending higher than citizens prefer), and the fraction of withholding taxes repatriated to countries of residence. JEL: E2 E62 F42 H2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-07&r=all 119. Probabilistic Aging Dominik Grafenhofer Christian Jaag Christian Keuschnigg Mirela Keuschnigg The paper develops an overlapping generations model with probabilistic aging of households. We define age as a set of personal attributes such as earnings potential, health and tastes that are characteristic of a person's position in the life-cycle. In assuming a limited number of different states of age, we separate the concepts of age and time since birth. Agents may retain their age characteristics for several periods before they move with a given probability to another state of age. Different generations that share the same age characteristics are aggregated analytically to a low number of age groups. The probabilistic aging model thus allows for a very parsimonious yet rather accurate approximation of demographic change and of life- cycle differences in earnings, wealth and consumption. Existing classes of overlapping generations models follow as special cases. JEL: D58 D91 H55 J21 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-08&r=all 120. Why Forcing People to Save for Retirement May Backfire Monika Butler Olivia Huguenin Federica Teppa Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that an actuarially fair, but mandatory funded system may also distort optimal individual allocation. If individuals are credit constraint (or just reluctant to borrow), a higher than desired retirement capital induces people to retire earlier than they would have in the absence of such a scheme. Individuals thus retire as soon as the retirement income is deemed sufficient the pension plan avails withdrawal of benefits. We provide evidence using individual data from a selection of Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is indeed a key determinant in the retirement decisions. The fact that early retirement has become much more prevalent in the last 15 years is a strong indicator for the importance of affordability as the maturing the Swiss mandatory funded pension system over that period has led to an increase in the already high effective replacement rates. Moreover, even after controlling for the time trend, the higher the accumulated pension capital, the earlier men, and - to a smaller extent - women, tend to leave the work force. JEL: D91 H31 J26 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-09&r=all 121. The Impact of Direct Democracy on Public Education: Performance of Swiss Students in Reading Justina A.V. Fischer This paper analyzes the impact of direct legislation at the cantonal level on the quality of public education in Switzerland, using a cross-section of individual data on reading performance similar to that used in the OECD-PISA study. For this purpose, a structural and a reduced form of an educational production function is estimated. The OLS esti­mate of a composite index of direct democracy supports the findings previously ob­tained for U.S. states in which initiative-driven tax limits have had a deleterious effect on student performance in public schools. For a more complete picture, the impact of direct democracy on several portions of the conditional test score distribution is also in­vestigated using a quantile regression method. The negative impact appears to be equal in size between the estimated quantiles and to occur exclusively through the budgetary channel. Moreover, the equipment of schools is found to matter for student per­formance. Finally, no redistributive influence on students attending the same class is found. JEL: H41 I28 H10 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:usg:dp2005:2005-10&r=all 122. Failed States and Failed Economies: Nationalism and Economic Behavior, 1955-1995 Carl Mosk (Department of Economics, University of Victoria) Using data from the Failed State Task Force data set, this paper argues entering onto positive growth paths for income and infrastructure per capita depend upon a nation’s political stability and its geography. A nation’s achieving sustained long-run growth in both variables is essential to its capacity to converge towards countries with high levels of income per capita because high levels of per capita infrastructure are strongly correlated with high levels of income per capita. New nation states seem to face heavy burdens to avoiding negative feedback traps, partly because their youthfulness is associated with political stability; partly because their propinquity to other politically unstable neighbors hampers their capacity to grow through trade and their ability to avert domestic conflict; partly because they tend to be located in the tropics where the incidence of malaria is high. Keywords: Political economy, economic development, infrastructure, convergence JEL: F1 H1 H8 O5 Date: 2005-05-26 URL: http://d.repec.org/n?u=RePEc:vic:vicewp:0506&r=all 123. Global sourcing by mne’s: impact on domestic firms Coucke, Kristien The unequal situation of large global firms with extensive networks and smaller domestic firms has created a dual structure in many industries. In this paper we examine the competitive position of domestic single-plant firms under growing rivalry of global companies that source abroad and flexibly coordinate production activities within a multinational network. Growing rivalry is modelled as a decrease in sourcing costs for multinational firms. We separate a direct and an indirect effect – i.e. competitive strategic effect- of a lower sourcing cost on the production decision of multinational and domestic firms. We show how cost characteristics of domestic firms determine the impact of these effects. We theoretically find that, ceteris paribus, output flexible firms will be most vulnerable and exit first from the market. Product differentiation is found to reduce the strategic effect of global sourcing by MNE’s on the competitive position of domestic firms. Keywords: Sourcing, multinational firms, flexibility, exit Note Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:vlg:vlgwps:2005-7&r=all 124. A Bi-Population Based Genetic Algorithm for the Resource- Constrained Project Scheduling Problem Debels, Dieter Vanhoucke, Mario The resource-constrained project scheduling problem (RCPSP) is one of the most challenging problems in project scheduling. During the last couple of years many heuristic procedures have been developed for this problem, but still these procedures often fail in finding near-optimal solutions for more challenging problem instances. In this paper, we present a new genetic algorithm (GA) that, in contrast of a conventional GA, makes use of two separate populations. This bi-population genetic algorithm BPGA) operates on both a population of left-justified schedules and a population of right-justified schedules in order to fully exploit the features of the iterative forward/backward local search scheduling technique. Comparative computational results reveal that this procedure can be considered as today’s best performing RCPSP heuristic. Note Date: 2005-05-26 URL: http://d.repec.org/n?u=RePEc:vlg:vlgwps:2005-8&r=all 125. The Structure and Equilibrium Conditions of a Generalized Economic Canopy: A Note V. Heinrich S. Amavilah (REEPS & Glendale College) This note draws upon ecological models to describe the structure and equilibrium conditions of a generalized economic canopy consisting of three interactive economies assumed to be in competitive epiphytic, parasitic, and host relationships to each other. The maintained hypothesis is that generally (a) parasites are a drag on their hosts, (b) epiphytes interfere with normal functioning of both parasites and hosts, and (c) hosts must support their own performance as well as the survival of epiphytes and parasites. The results show that hosts must perform twice as better to support the other competitors, and question the notion that individual economies fend for themselves. The challenge is firmly grounded in ample real-life evidence; for example, primary sectors have historically supported economic growth of nations, especially in the early stages of development. In some cases, primary sectors transform themselves and other sectors, as in the lumber industry giving birth to Nokia, and thereby transforming both Finland and the world. In other cases the emergence of tertiary sectors consisting mainly of governments (parasites) has diminished the performance of other sectors and along with them economic growth. The world may be flatter today than it was even a decade ago, but how economies perform remain constrained and/or promoted by individual intra- actions as well as by the interactive dynamics between and among economies. Keywords: structure economic canopy, specific competition, equilibrium conditions JEL: D23 C62 P47 D74 Q19 E21 Z00 Date: 2005-05-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505015&r=all 126. Business Cycle Model on the Basis of Method of Systems Potential (english version). Grigorii Pushnoi (International Bogdanov Institute) The new business cycle three-dimensional model is formulated on the basis of new system approach known as the Method of Systems Potential. Cyclical dynamics with catastrophe jumps (alike to N. Kaldor (1940) model) and some stochastic properties is described. Properties of such cycles are similar to the properties of the typical business cycle. Keywords: business cycle model, catastrophe theory, economic potential JEL: O P Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505016&r=all 127. Tests for cointegration in panels with regime shifts Luciano Gutierrez (University of Sassari) In the paper we extend Gregory and Hansen’s (1996)ADF, Za, Zt cointegration tests to panel data, using the method proposed in Maddala and Wu (1999). We test the null hypothesis of no cointegration for all the units in the panel against the alternative hypothesis of cointegration, while allowing for a one- time regime shift of unknown timing for at least some regressions. We derive the panel tests for the ADF, Za, Zt tests , and compare these tests with Pedroni’s (1999) panel cointegration tests. We show that Gregory and Hansen’s (1996) panel tests have higher power to reject null when there is a structural change in the cointegration vector. We apply the statistics to the analysis of the well known Feldstein-Horioka puzzle for a sample of sixteen OCDE countries. After we allow for a structural break in the cointegration regression, we find strong evidence of cointegration between saving and investment rates. Keywords: Panel data, Panel cointegration tests, Structural breaks, Feldstein-Horioka puzzle JEL: C22 C23 F32 F41 Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0505007&r=all 128. Informatique, organisation du travail et interactions sociales Nathalie Greenan (Centre d'Etudes de l'Emploi) Emmanuelle Walkowiak (Centre d'Etudes de l'Emploi, Princeton Univ. & ADIS) Nous proposons un cadre d’analyse unifie des liens de complementarite entre usage de l’informatique et pratiques organisationnelles innovantes ainsi que des principes de selection qui sous-tendent leur diffusion au niveau des postes de travail. Nous montrons que les principes communs de selection, dans l’attribution de l’informatique et le design organisationnel du poste de travail, renvoient au choix de configuration du reseau d’interactions sociales au sein de la firme. Cette structure sociale d’interaction est analysee en reference au concept de « capital social ». Nous distinguons alors, dans la complementarite entre technologie et organisation, ce qui releve d’une pure coordination des choix dans ces deux dimensions de ce qui releve de la selection des salaries. Les tests econometriques, que nous avons menes en nous appuyant sur le volet « salaries » de l'enquete « Changements organisationnels et informatisation » (COI) realisee en 1997, permettent de verifier quatre propositions. Tout d’abord, nous montrons que le capital social des salaries favorise leur acces aux ordinateurs et plus generalement aux technologies de l’information et de la communication (TIC). Cette selection dans l’attribution de l’equipement semble specifique des TIC, puisqu’elle ne permet pas de caracteriser l’attribution d’une machine automatique. Deuxiemement, cette meme logique de selection anime l’acces a un poste ayant des caracteristiques productives et informationnelles innovantes. Troisiemement, l’informatique est correlee aux caracteristiques organisationnelles innovantes des postes de travail resultant de la diffusion des nouvelles formes d’organisation, mais ce lien n’est pas uniforme au sein des differents groupes de professions. Enfin, les caracteristiques organisationnelles innovantes qui integrent une dimension relationnelle entretiennent avec l’informatique une relation de complementarite qui puise essentiellement sa source dans la maniere dont les salaries ont ete selectionnes pour occuper un poste de travail modernise. Keywords: Informatisation, organisation du travail, complementarite, capital social JEL: L23 O33 Date: 2005-05-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0505008&r=all 129. Anomalous Price Behavior Following Earnings Surprises: Does Representativeness Cause Overreaction? Michael Kaestner (GESEM, Center for Research in Finance, Montpellier University, France) Behavioral Finance aims to provide a theoretical background to uncovered empirical anomalies by introducing investor psychology as a determinant of asset prices. Our work provides evidence in favor of representativeness as a potential explanation of anomalous price behavior following earnings announcements. We rely on one assumption made by Barberis, Shleifer, and Vishny ( 1998), which is that the overreaction phenomenon, uncovered by De Bondt and Thaler (1985), is due to a representativeness bias. We examine current and past earnings surprises and subsequent market reaction for listed US companies over the period 1983-1999. Our empirical results suggest that investors overreact to past earnings surprises. As, on average, extreme past surprises are not con?rmed by actual earnings ?gures, they are generally followed by stock market reactions of the opposite sign. Moreover, the longer the similar earnings surprise series, the higher the subsequent reversal. Keywords: Behavioral finance, overreaction, representativeness bias, earnings announcements JEL: G14 D84 Date: 2005-05-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505018&r=all 130. Menaxhmenti i politikes fiskale ne ekonomite e hapura Florije Govori Keywords: Politika Fiskale ne kushtet e ekonomise se hapur JEL: G Date: 2005-05-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505019&r=all 131. International Capital Markets and Exchange Rate Stabilization in the CIS Gunther Schnabl (Tuebingen University) In this paper, we examine the rationale for dollar and euro pegging in Russia and the CIS. We consider macroeconomic stabilization and transaction costs for international trade as rationales for pegging to the euro. Dollarization of international assets and liabilities are examined as determinants of exchange rate stabilization against the dollar. The impact of network externalities from a common anchor for all CIS countries is explored. Tests on de facto exchange rate stabilization reveal that dollar pegging has been pervasive in the CIS. Keywords: CIS, Exchange Rate Systems JEL: F31 F32 Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0505015&r=all 132. Spaced Out Monopolies: Theory and Empirics of Alternating Product Releases Arthur Zillante (ICES, George Mason University) An oft-neglected pattern of behavior occurs when firms time the release of their products so that they are not released on the same date. The practice is potentially collusive, so there may be legitimate antitrust concerns. This paper presents a model of this behavior, the alternating periods monopoly (APM). A comparison of the APM with other sustainable methods of collusion shows the conditions under which the APM is preferred. I develop an empirical test to detect the APM, and use data from the baseball card industry to investigate the possible use of an APM. Keywords: Noncooperative strategies, alternating periods monopoly, duration analysis JEL: L Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505008&r=all 133. Competition in Two-Sided Markets Mark Armstrong (University College London) There are many examples of markets involving two groups of agents who need to interact via 'platforms', and where one group's benefit from joining a platform depends on the number of agents from the other group who join the same platform. This paper presents theoretical models for three variants of such markets: a monopoly platform; a model of competing platforms where each agent must choose to join a single platform; and a model of 'competing bottlenecks', where one group wishes to join all platforms. The main determinants of equilibrium prices are (i) the relative sizes of the cross-group externalities, (ii) whether fees are levied on a lump-sum or per-transaction basis, and (iii) whether a group joins just one platform or joins all platforms. Keywords: Two-sided markets, network externalities, supermarkets, advertising JEL: L Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505009&r=all 134. The Effects of Higher Gasoline Prices on U.S. Light Vehicle Sales, Prices, and Variable Profit by Segment and Manufacturer Group, 2001 and 2004 Walter McManus (University of Michigan) The rising gasoline prices of the past few years were not associated with shifts from vehicles with lower MPG to vehicles with higher MPG. This has been seen as evidence that gasoline prices have little impact on the purchase choices of new-vehicle buyers. However, this paper presents new evidence that the shifts toward vehicles with higher MPG that the rising price of gasoline would have caused were not observed because they were offset by price cuts that were disproportionately applied to vehicles with lower MPG. Keywords: fuel economy; gasoline prices; automobile demand; nested multinomial logit; variable profit JEL: L62 Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505010&r=all 135. Regulation, Competition and Liberalization Mark Armstrong (University College London) David Sappington (University of Florida) In many countries throughout the world, regulators are struggling to determine whether and how to introduce competition into regulated industries. This essay examines the complexities involved in the liberalization process. While stressing the importance of case-specific analyses, this essay distinguishes liberalization policies that generally are pro-competitive from corresponding anti-competitive liberalization policies Keywords: Competition, Regulation, Liberalization JEL: L Date: 2005-05-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505011&r=all 136. Franchise Bidding in the Water Industry – Auction Schemes and Investment Incentives Urs Meister (University of Zurich) The periodical re-auction of a water monopoly concession causes the danger of underinvestment. If the life-time of specific assets such as water pipes exceeds the contract length and transferring the ownership of assets is difficult, the incumbent franchisee faces a hold-up problem. Using a simple auction model that considers the specifics of the piped water sector this paper shows that investment incentives may vary depending on the applied auction scheme. The model is designed as a two stage game, where the franchisee decides about investment on the first and competes with a potential market entrant on the second stage. Investment tends to be higher in sealed bid auctions than in an English auction, since the incumbent benefits from an information advantage. Additionally investment may vary in a first- and a second-price sealed bid auction depending on several factors such as costs or effectiveness of investment. The analysis is extended by a vertical separation. Keywords: Water, Networks, Franchise Bidding, Investment JEL: L95 L43 D21 Q25 Date: 2005-05-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505012&r=all 137. Is a Declining Dollar Good for Either the U.S. Economy or The Global Ecnomy? Paul Davidson (New School University) This paper explains why a declining dollar is likely to prove deleterious to both the US economy and the Global economy. It provides statistics to demonstrate that despite a 25 percent drop in the dollar in 3 years, the US trade deficit has doubled in value. It explains why this doubling has occurred in terms of the absence of the Marshall- Lerner condition. Finally, the paper provides a new alternative policy perscription that will alleviate the US trade dficit hile promoting more rapid global economic growth for the entire global economy. Keywords: Marshall-Lerner condition, trade deficits, flexible vs. fixed exchange rates JEL: F1 F2 Date: 2005-05-20 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0505012&r=all 138. Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction W.D. McCausland (University of Aberdeen) K. Pouliakas (University of Aberdeen) I. Theodossiou (University of Aberdeen) Using an econometric procedure that corrects for both self- selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance- related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations. Keywords: Performance-related pay, job satisfaction, self- selection JEL: J28 J33 Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505019&r=all 139. Pautas ciclicas en el desempleo europeo Raquel Llorente Heras (Institute Universitary of Economic & Social Analysis SERVILAB - University of Alcala - Spain) A traves del estudio de la dispersion entre las diferentes tasas de desempleo, el articulo comienza confirmando que existe un leve pero cierto proceso de convergencia. A partir de este punto se pretende cuantificar en que medida la evolucion ciclica del desempleo dentro de cada uno de los paises miembros de la UE esta contribuyendo a dicho proceso. Es decir, se trata de ver si se puede aproximar un proceso de acercamiento o no entre los ciclos del desempleo europeos. Si los ciclos europeos fueran proximos implicaria cierta aproximacion a la existencia de un mercado de trabajo unico donde se puedan desarrollar politicas laborales comunes y similares a todos los paises miembros. Por otra parte, si todos los paises europeos estuvieran dominados por el mismo ciclo la existencia de shock asimetricos seria mas dificil de producirse. La estructura del articulo sigue el siguiente esquema. En primer lugar, se desarrolla un analisis de cointegracion para conocer cual es la evolucion tendencial del desempleo. Posteriormente, a traves del desarrollo del filtro de Hodrick y Prescott (1977) se analiza cual es la evolucion ciclica del desempleo. Y por ultimo, se calculan una serie de funciones impulso-respuesta en un intento por descubrir la existencia de un comportamiento similar a nivel europeo ante un mismo shock en el desempleo. Keywords: desempleo, ciclos, cointegracion, UE, JEL: E32 J64 Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505020&r=all 140. Ndervaresia e politikes monetare dhe fiskale dhe koordinimi konsekuent i tyre Florije Govori Keywords: Politika monetare dhe fiskale e qendrueshme JEL: E Date: 2005-05-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505021&r=all 141. The Logarithm Model of Development Power: A Tool to Analyze the Motivity of Economic Growth Feng Dai (Zhengzhou Information Engineering University) Hui Liu (Zhengzhou Information Engineering University) Zifu Qin (Zhengzhou Information Engineering University) After the discussions to exponential and power model [F. Dai, 2005], this paper points out there are three kinds of basic modes in the macroeconomic process, i.e., the exponential, power and logarithm mode, and discusses the logarithm model of Development Power (DP). By the analysis on logarithm model of DP, we will see the reasons, of which there are anomaly cycles in economic process, are just the alternate motion of DP accumulating and releasing. And that is also the reasons that there are the economic fluctuations in production markets. The logarithm model of DP can also describe the different characters of DP motion at the different stage, and indicates in analytic way that the diffusion of DP and the diversifications of economic productivity also might occur after an economic recession. The empirical researches are done about the conclusions in this paper, and the results express that the logarithm model is better than the power model and exponential model of DP in many cases. These three models of DP can not be replaced one another. Keywords: Development Power (DP); Partial Distribution; logarithm model; macroeconomic analysis JEL: E Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505022&r=all 142. Making The Pact More Flexible: Can It Lead to Less Flexible Fiscal Policies? Michal Mackiewicz One of the most often discussed features of the Stability and Growth Pact is the rigidity of its 3% deficit rule. In the recent time several reform proposals aim at alleviating the rule in order to allow more room for the automatic stabilizers to operate. As the 3% limit became in the recent years the only binding (at least partially) rule of the Pact’s framework, such a reform is likely to cause even further deterioration of the member countries’ fiscal balances. The empirical evidence presented in the paper shows that in the past lowering the structural budget surplus had a strong negative impact on a degree of anti-cyclical fiscal stabilization. This, in turn, suggests that the Pact’s reform, through higher structural deficits, is likely to decrease, rather then increase, the scope of anti-cyclical fiscal actions undertaken by the EMU member countries. Keywords: fiscal policy, stabilization policy, fiscal rules, Stability and Growth Pact JEL: E60 E63 Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505023&r=all 143. La experiencia internacional en los planes hidrologicos nacionales Amelia Perez Zabaleta (UNED) Juan Luis Martinez Merino (UNED) Enrique San Martin Gonzalez (UNED) Hydrologic Planning has become a nned either b water quality ir quantity problems in many countries. Nonetheless, this planing responds to different schemes that meet different social, institutional, economic and environmental realities of resource related countries. This article analyzes five national or state water plans belonging to Spain, Portugal, Mexico, California and South Australia. In general, the state plab is understood as the greatest exponent of the hydrologic planning, which integrally involves all aspects related to the management of water resources. Its importance and significance are evident. By the time of releasing this article, the Spanish Hydrologic National Plan has been abolished and replaced by a new one, although its aprroval as a law is still pending. Keywords: water planning economic JEL: P Q Z Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505014&r=all 144. Nuevas tendencias en la politica de subvenciones para el agua Amelia Perez Zabaleta (UNED) This paper examines sater subsidies and their influence in consumption and demand on water. Actually, water prizes don't allow the full cost recovery as it's established in the Water Frame Directive of the European Union. In this sense, prizes policy doesn't give adequate information and incentives to consumers. There are different types of subsidies: Direct, indirect and cross subsidies between users ans indeed between countries. A new way of cross subsidies is due to chages of virtual water between countries because of the water that is incorporated in products. We describeb some examples of subsidies in Spain and all over the worl. Water subsidies are perverse when they don't pursuit an objective and the distort the market. Nevertheless, it's necessary to go to positive subsidies in order to achieve a water and an environmental sustainable policy. Keywords: water economics subsidies water policy JEL: P Q Z Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505015&r=all 145. Recursos hidricos y contabilidad verde Amelia Perez Zabaleta (UNED) Enrique San Martin Gonzalez (UNED) La gestion del agua requiere una informacion especifica que permita afrontar correctamente su particularidad. La contabilidad ambiental es uno de los sistemas que proporciona esta informacion. La contabiliad verde o ambiental pretende suministrarnos el conocimiento necesario sobre las relaciones entre el hombre y la naturaleza que nos permita gestionar de forma mas eficiente los recursos naturales, tanto en terminos cuantitativos y cualitativos como monetarios, tanto en terminos economicos como ambientales. En eta comunicacion vamos a analizar las principales experiencias internacionales en contabilizacion de recursos hidricos, analizando en mayor profundidad las de la Union Europea y, mas concretamente, el caso espanol. Para ello, nos centraremos en los dos trabajos mas completos sobre contabilidad del agua que se han realizado en Espana, Las Cuentas del Agua espanolas elaboradas por Naredo y Gasco en 1995 y las Cuentas Satelite del Agua del INE para el periodo 1997- 1999. Keywords: agua economia contabilidad ambiental cuentas del agua JEL: P Q Z Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505016&r=all 146. The Latin American and Caribbean Energy Review 2003 Mauricio Garron (Latin American Energy Organization) Alejandro Villarreal (Latin American Energy Organization) Byron Chiliquinga (Latin American Energy Organization) Annette Fitzpatrick (Latin American Energy Organization) Maria Sircia de Sousa (Latin American Energy Organization) The 2003 Energy review,contains information about the 2003 energy situation of each of our member countries, regional data, as well as economic and social indicators corrected and extended through historical series. It presents and innovative structure for analysis that allows the reader to easily find general information on the energy sectors of the 26th OLADE Member Countries. With the objective of enriching the statistical value that the document has presented since initial editions, this document contains the participation of our Technical Coordinators in the each of our specialized areas of our Organization: Energy Policy, Hydrocarbons, Electricity, Statistical Information, Renewable Energy and Environment. It is likely to emphasize in this occasion, for the first time the Energy Report is spread into the immediate year subsequent to the one of reference, as it was obtained thanks to the effort of our specialists and the cooperation of our Countries Members. The modern world presents us with constant changes and challenges for the security of supply that sets dynamic integration within the strategic areas. In this sense, we expect that this document will be a useful tool to face the challenges of the Energy Sector of our Region. Keywords: Energy, energy policy, hydrocarbons, natural gas, electricity, renewables, latin america, bolivia, argentina, chile, peru, uruguay, paraguay, brasil, ecuador, colombia, mexico, venezuela, costa rica, honduras, nicaragua, panama, el salvador, guatemala, trinidad y tobago, jamaica, barbados, haiti, cuba JEL: P Q Z Date: 2005-05-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505017&r=all 147. Reglas fiscales en Argentina: experiencias recientes y propuestas para mejorar su impacto en el nivel provincial Gerardo Una Nicolas Bertello Mucho se ha debatido sobre las causas que han dificultado el desarrollo de la Argentina y que han llevado a la crisis economica, politica y social de los ultimos anos. Los intentos para explicar el problema y proponer soluciones al mismo involucran diversos puntos de vista, al considerar aspectos economicos, politicos, sociales o historicos. Uno de los enfoques que ha cobrado fuerza en los ultimos tiempos, es el analisis de las instituciones como determinantes del desarrollo economico de una nacion. Desde esta perspectiva, las instituciones influyen sobre las relaciones establecidas entre los distintos actores, cuyas acciones afectan el desempeno del pais y presentan limitaciones a los posibles cursos de cambios en un momento dado, configurando de esta manera los “senderos de dependencia” (path dependence) del desarrollo de cada sociedad. Esta investigacion parte de ese marco conceptual, y se propone analizar un caso particular de las instituciones fiscales, aquellas relacionadas con la transparencia presupuestaria. Es conveniente aclarar que utilizamos el concepto de transparencia presupuestaria en un sentido restrictivo, cuyo principal objetivo es generar un adecuado acceso a la informacion fiscal que permita la comparabilidad de dicha informacion, ya sea entre los distintos niveles de gobierno, como dentro de cada uno de ellos, con el fin de lograr el enforcement para que los acuerdos establecidos entre los actores en relacion a los temas fiscales sean efectivamente cumplidos. Considerando el desempeno de Argentina en este campo, definimos la hipotesis central de este investigacion, en la cual planteamos que la existencia previa de transparencia en los presupuestos es un requisito indispensable para la implementacion efectiva de reglas fiscales, ya sean estas numericas y/o de procedimientos, y que la complementariedad, en el caso de Argentina, entre reglas presupuestarias de transparencia y reglas presupuestarias numericas y/o de procedimientos, es mas determinante para el logro de la solvencia fiscal, que la complementariedad entre reglas presupuestarias numericas y de procedimientos. Keywords: 'REGLAS FISCALES' 'RESPONSABILIDAD FISCAL' 'PROVINCIAS' 'PRESUPUESTO' 'TRANSPARENCIA' 'FINANZAS PUBLICAS' 'CUENTAS PUBLICAS' JEL: D6 D7 H Date: 2005-05-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0505010&r=all 148. Delegacion de facultades al Jefe de Gabinete de Ministros: Evolucion e impacto en el contexto fiscal actual Gerardo Una Gisell Cogliandro Nicolas Bertello El presente documento analiza los principales aspectos de la delegacion de facultades al Jefe de Gabinete de Ministros (JGM) en relacion al gasto publico contenidas en el Proyecto de Ley de Presupuesto 2005 remitido por el Poder Ejecutivo al Congreso de la Nacion y su impacto sobre el contexto fiscal actual. Pare ello, en la Seccion I se estudia la evolucion de las facultades delegadas al JGM en los ultimos anos, mientras que en la Seccion II se presentan los argumentos utilizados en el debate. Por su parte, en la Seccion III se explicita la interrelacion con los Decretos de Necesidad y Urgencia para culminar con las principales conclusiones y los lineamientos de propuestas, contenidos en la Seccion IV, donde se describe la tension entre problemas coyunturales y estructurales que enfrenta el pais, marco en el cual deben ser discutidas las facultades especiales otorgadas al Poder Ejecutivo sobre el Presupuesto. Keywords: 'DELEGACION' 'DECRETO' 'PRESUPUESTO' 'FACULTADES' 'JEFE DE GABINETE' 'DELEGACION DE FACULTADES' 'EJECUCION PRESUPUESTARIA' 'ACCOUNTABILITY' JEL: D6 D7 H Date: 2005-05-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0505011&r=all 149. Politicas publicas y toma de decisiones: Los think tanks en Argentina Gerardo Una Gisell Cogliandro Juan Labaqui La presente investigacion, constituye una aproximacion al estudio mas detallado de los think tanks, sus caracteristicas y su comportamiento en el caso argentino, haciendo especial hincapie en la manera que se involucran en el proceso de formulacion de politicas publicas, y considerando las diferencias existentes entre los distintos tipos de organizaciones. Este documento se encuentra estructurado en cuatro Capitulos. En el Capitulo I se elabora una definicion de los think tanks y su caracterizacion. Asimismo, se realiza una resena historica acerca del surgimiento de los think tanks en los Estados Unidos y en la Argentina. En el Capitulo II se detalla el listado de organizaciones relevadas, su clasificacion y una breve descripcion de cada una de ellas. En el Capitulo III se realiza el analisis de los distintos grupos de think tanks considerados en funcion de seis aspectos principales: organo de conduccion, financiamiento, recursos humanos, actividades y productos, los temas abordados en sus investigaciones y su posicionamiento publico. Finalmente, en el Capitulo IV se elaboran las principales conclusiones del analisis realizado. Keywords: 'THINK TANKS' 'ARGENTINA' 'ADVOCACY GROUPS' 'USINAS DE PENSAMIENTO' 'POLITICAS PUBLICAS' 'TOMA DE DECISIONES' JEL: D6 D7 H Date: 2005-05-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0505012&r=all 150. Politika Fiskale- Objektivat,instrumentet dhe efektet Florije Govori Keywords: Politika fiskale JEL: D6 D7 H Date: 2005-05-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0505013&r=all 151. The Poverty Concentration Implications of Housing Subsidies: A Cellular Automata Thought Experiment Kevin Jewell Looking at data from HUD’s low income housing tax credit database from 1987 to 2001, we examine how the US tax credit program has concentrated poverty in neighborhoods by offering advantages to developing low income housing projects in low income census tracts. We then use a simple Cellular Automata model to explore how alternative programs structures could impact economic diversity and poverty concentration. This model suggests that many widely dispersed fixed location affordable housing projects increase local economic diversity over alternative housing allocation rules. If policymakers wish align the Low Income Housing Tax Credit program with the goal of promoting economic diversity in our neighborhoods, they should restructure the bonus to reward to projects in areas without a concentration of subsidized housing. Keywords: low income housing tax credit; Residential Location; Simulation; segregation; cellular automata JEL: R14 R21 R31 Date: 2005-05-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpur:0505009&r=all 152. Consumption Externalities, Production Externalities and Efficient Capital Accumulation under Time Non-separable Preferences Stephen J Turnovsky Goncalo Monteiro We examine the effects of both consumption and production externalities on capital accumulation and economic performance under time non-separable preferences and a non-scale production technology. We show that a consumption externality in isolation has long-run distortionary effects if and only if labour is supplied elastically. With fixed labour supply, it has only transitional distortionary effects, though it may generate long- run distortions through its interaction with the production externality. Production externalities always generate long-run distortions, irrespective of labour supply. The optimal taxation to correct for the distortions is characterized. Further quantitative insights are obtained by supplementing the theoretical analysis with numerical simulations based on the calibration of a plausible macroeconomic growth model. Keywords: Time non-separable preferences; consumption and production externalities; capital accumulation; optimal tax policy JEL: D91 E21 O40 URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/08&r=all 153. Is Bank Portfolio Riskiness Procyclical? Evidence from Italy using a Vector Autoregression Juri Marcucci Mario Quagliariello This study analyzes the cyclical behaviour of the default rates of Italian bank borrowers over the last two decades. A vector autoregression (VAR) modelling technique is employed to assess the extent to which macroeconomic shocks affect the banking sector (first round effect). The VAR also helps to disentangle the feedback effects from the financial system to the real side of the economy. We find evidence of the first round effect and some support for the feedback effect which operates via the bank capital channel. Keywords: First-round effect; procyclicality; feedback effects; VAR; banks; default rate JEL: C32 E30 E32 E44 G28 URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/09&r=all 154. Indirect effects - a formal definition and degrees of dependency as an alternative to technical coefficients Francois Coppens (National Bank of Belgium, Microeconomic Analysis Division) The use of input-output analysis for the computation of secondary effects of final demand changes is well-known. These 'final demand effects' can be calculated using technical coefficients and the inverse of the Leontief matrix. This paper offers an alternative to the use of technical coefficients. Its goal is threefold. First of all degrees of dependency are defined and it is shown how they can be used to compute secondary effects. Their definition is based on an input-output table. Secondly the concept of secondary effects is extended to what is called indirect effects. These indirect effects are not only related to final demand but to total industry output. It is shown how these indirect effects can be calculated using technical coefficients or degrees of dependency. The method used is a variant of the so- called Hypothetical Extraction Methods. Double counting is avoided, as such the resulting multipliers are 'net multipliers'. It is formally demonstrated that technical coefficients and degrees of dependency give the same results when a recent input- output table is available. If this is not the case then the results are different. It is impossible to say which of the two estimates is better. Since technical coefficients are already broadly accepted, some examples are given to justify the use of degrees of dependency. Finally it is explained how the unavailability of an input-output table can be solved. Starting from the supply-use tables a 'quick and dirty method' to infer an input-output table is provided. This topic is justified by the fact that for Belgium input-output tables are only published for those years that are divisible by five, with a three year lag. A short empirical analysis, based on currently available data, shows that technical coefficients and degrees of dependency have comparable performance, with a slight advantage for the technical coefficients. This performance is measured relative to a 'right' result, being the indirect effects for the year 2000 computed using the now available input-output table for the year 2000. This result is called 'right' because it does not make any assumptions on stability of technical coefficients nor of degrees of dependency. The empirical analysis also compares the use of a recent supply-use table to the use of an old input-output table. Supply-use tables on average overestimate the 'right' result. They are however often closest to the 'right' result at the first level. Since these conclusions are based on limited data further analysis is required as more data becomes available. Keywords: indirect effects, input-output analysis, degrees of dependency, technical coefficients, net multiplier JEL: C67 D57 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbb:reswpp:200505-1&r=all 155. Noname – A new quarterly model for Belgium Philippe Jeanfils (National Bank of Belgium, Research Department) Koen Burggraeve (National Bank of Belgium, Research Department) This paper gives an overview of the present version of the quarterly model for the Belgian economy built at the National Bank of Belgium (NBB). This model can provide quantitative input into the policy analysis and projection processes within a framework that has explicit micro-foundations and expectations. This new version is also compatible with the ESA95 national accounts. This model called Noname is relatively compact. The intertemporal optimisation problem of households and firms is subject to polynomial adjustment costs, which yields richer dynamic specifications than the more usual quadratic cost function. Other characteristics are: pricing-to-market and hence flexible mark-ups and incomplete pass-through, a CES production function with an elasticity of substitution between capital and labour below one, time-dependent wage contracting a la Dotsey, King and Wollman. Most of the equations taken individually have acceptable statistical properties and diagnostic simulations suggest that the impulse responses of the model to exogenous shocks are reasonable. Its structure allows simulations to be conducted under the assumption of rational expectations as well as under alternative expectations formations. Keywords: Econometric modelling, Pricing-to-market, CES production function, Wage bargaining, Polynomial adjustment costs, Rational expectations. JEL: C5 E2 E3 F41 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbb:reswpp:200505-2&r=all 156. The Method of Endogenous Gridpoints for Solving Dynamic Stochastic Optimization Problems Christopher Carroll This paper introduces a method for solving numerical dynamic stochastic optimization problems that avoids rootfinding operations. The idea is applicable to many microeconomic and macroeconomic problems, including life cycle, buffer-stock, and stochastic growth problems. Software is provided. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:jhu:papers:520&r=all 157. Discontinuous Extraction of a Nonrenewable Resource Eric Iksoon Im (Department of Economics, University of Hawaii at Hilo) Ujjayant Chakravorty (Department of Economics, University of Central Florida, Orlando) James Roumasset (Department of Economics, University of Hawaii at Manoa) This paper examines the sequence of optimal extraction of nonrenewable resources in the presence of multiple demands. We provide conditions under which extraction of a nonrenewable resource may be discontinuous over the course of its depletion. Keywords: backstop technology, dynamic optimization, energy resources, Herfindahl principle, multiple demands JEL: Q3 Q4 Date: 2005 URL: http://d.repec.org/n?u=RePEc:hai:wpaper:200509&r=all 158. OPTIMAL TARIFFS WHEN PRODUCTION IS FIXED Jose Mendez Naya (Universidade da CoruA±a) Luciano Mendez Naya (Universidade de Santiago de Compostela) The effects of tariff wars on welfare are analysed for the case of trade between two countries with fixed outputs of the traded good. Assuming mild conditions, it is shown that if there are non- zero tariffs for which welfare-maximizing equilibrium holds, then free trade is not strictly preferable when the coutries' output are equal, and if there are not equal is strictly disadvantageous to the country with the smaller output. It is also shown that welfare-maximizing equilibria do exist if the demand function is linear. Keywords: Commercial policy; Trade negotiations; Market Structure and Firms Strategy; Multinational Firms, Free Trade URL: http://d.repec.org/n?u=RePEc:edg:anecon:0005&r=all 159. SPATIAL DISTRIBUTION OF PRODUCTION AND EDUCATION Olga Alonso-Villar (Dpto. de Economia Aplicada. Universidad de Vigo) There is no doubt that people like to migrate to large cities because they can acquire a wider range of products and jobs, but also because they can exchange information and ideas in an easier way. In this respect, we will attempt to explain the formation of metropolitan areas through a general equilibrium model in which concentration emerges not only from the interaction between increasing returns to scale at the rm level, transport costs and the mobility of labor, but also from human capital externalities. Our aim is to underline the role of human capital as a factor that fosters both the agglomeration of the economic activity and cities' growth. The paper shows that there is new scope for government activities. Keywords: Monopolistic Competition; Agglomeration; Human Capital; Education URL: http://d.repec.org/n?u=RePEc:edg:anecon:0008&r=all 160. Sustainable Endogenous Growth and Consumption Inertia: Old habits die hard Keywords Endogenous Growth, Sustainability, Environmental Preservation, Habit- Formation Jose Manuel Madeira Belbute (Department of Economics, University of Evora) Miguel Rocha de Sousa (Department of Economics, University of Evora) In this paper we study an endogenous growth model with habit- formation and address two questions that are, to the best of our knowledge, new for the sustainable endogenous growth literature: first, does the process of habit-formation in‡uence the stock of environmental capital? Second, does habit-formation a¤ects the long-term rate of economic growth? Using a simple and standard structure of the endogenous growth models, we first show that there may be multiple equilibria, not all stable. Second, the presence of habits in relation to the consumption goods lowers the long term equilibrium level of natural capital and the growth rate of the economy. Third, we highlight the possibility of "win-win" situations. Finally, we show that the presence of habits reduces the effectiveness of any environmental policy that is meant to improve environmental quality. In particular, the stronger the inertia effect, the lesser will be the equilibrium levels of natural capital and the greater will be the net flow of pollutant emissions. At the same time, the economy will grow at a lower rate. JEL: C61 D11 D90 Q21 Date: 2005 URL: http://d.repec.org/n?u=RePEc:evo:wpecon:8_2005&r=all 161. How to Classify a Government? Can a Neural Network do it? Antonio Caleiro (Department of Economics, University of Evora) An electoral cycle created by governments is a phenomenon that seems to characterise, at least in some particular occasions and/or circumstances, the democratic economies. As it is generally accepted, the short-run electorally-induced fluctuations prejudice the long-run welfare. Since the very first studies on the matter, some authors offered suggestions as to what should be done against this electorally-induced instability. A good alternative to the obvious proposal to increase the electoral period length is to consider that voters abandon a passive and naive behaviour and, instead, are willing to learn about government’s intentions. The electoral cycle literature has developed in two clearly distinct phases. The first one considered the existence of non-rational (naive) voters whereas the second one considered fully rational voters. It is our view that an intermediate approach is more appropriate, i.e. one that considers learning voters, which are boundedly rational. In this sense, one may consider neural networks as learning mechanisms used by voters to perform a classification of the incumbent in order to distinguish opportunistic (electorally motivated) from benevolent (non-electorally motivated) behaviour of the government. The paper explores precisely the problem of how to classify a government showing in which, if so, circumstances a neural network, namely a perceptron, can resolve that problem. Keywords: Classification, Elections, Government, Neural Networks, Output Persistence, Perceptrons JEL: C45 D72 E32 Date: 2005 URL: http://d.repec.org/n?u=RePEc:evo:wpecon:9_2005&r=all 162. Demystifying the German "Armament Miracle" During World War II. New Insights from the Annual Audits of German Aircraft Producers Lutz Budrab (University of Bochum) Jonas Scherner (University of Mannheim) Jochen Streb (University of Hohenheim) Armament minister Albert Speer is usually credited with causing the boom in German armament production after 1941. This paper uses the annual audit reports of the Deutsche Revisions- und Treuhand AG for seven firms which together represented about 50 % of the German aircraft producers. We question the received view by showing that in the German aircraft industry the crucial changes that triggered the upswing in aircraft production already occurred before World War II. The government decided in 1938 that aircraft producers had to concentrate on a few different types, and in 1937 that cost-plus contracts were replaced with fixed price contracts. What followed was not a sudden production miracle but a continuous development which was fuelled first by learning-by-doing and then by the ongoing growth of the capital and labor endowment. Keywords: German armament miracle, World War II, Albert Speer, Aircraft industry, Learning-by-doing, Fixed-price Contract, Labor productivity JEL: H57 L64 N44 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:905&r=all 163. Are Household Production Decisions Cooperative? Evidence on Pastoral Migration and Milk Sales from Northern Kenya Cheryl R. Doss (Yale University) John G. McPeak (Syracuse University) Market-based development efforts frequently create opportunities to generate income from goods previously produced and consumed within the household. Production within the household is often characterized by a gender and age division of labor. Market development efforts to improve well being may lead to unanticipated outcomes if household production decisions are non- cooperative. We develop and test models of household decision- making to investigate intra-household decision making in a nomadic pastoral setting from Kenya. Our results suggest that household decisions are contested, with husbands using migration decisions to resist wives' ability to market milk. Keywords: Intrahousehold decision-making, household production, Kenya JEL: D13 O12 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:906&r=all 164. Trust: A Concept Too Many Timothy W. Guinnane (Economic Growth Center, Yale University) Research on "trust" now forms a prominent part of the research agenda in history and the social sciences. Although this research has generated useful insights, the idea of trust has been used so widely and loosely that it risks creating more confusion than clarity. This essay argues that to the extent that scholars have a clear idea of what trust actually means, the concept is, at least for economic questions, superfluous: the useful parts of the idea of trust are implicit in older notions of information and the ability to impose sanctions. I trust you in a transaction because of what I know about you, and because of what I can have done to you should you cheat me. This observation does not obviate what many scholars intend, which is to embed economic action within a framework that recognizes informal institutions and social ties. I illustrate the argument using three examples drawn from an area where trust has been seen as critical: credit for poor people. Keywords: Trust, Social Capital, Credit Cooperatives, Uniform Laws JEL: G2 N2 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:907&r=all 165. The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods Koichi Hamada (Economic Growth Center, Yale University) Asahi Noguchi (Senshu University) 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 prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interests 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, that dominantly influenced economic policy making. Keywords: Preconceived ideas, perception on economic mechanism, vested interests, great depression, deflation in contemporary Japan JEL: B2 F4 N2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:908&r=all 166. Using Experimental Economics to Measure Social Capital And Predict Financial Decisions Dean S. Karlan (Economic Growth Center, Yale University and Princeton University) Questions remain as to whether results from experimental economics games are generalizable to real decisions in non- laboratory settings. Furthermore, important questions persist about whether social capital can help solve seemingly missing credit markets. I conduct two experiments, a Trust game and a Public Goods game, and a survey to measure social capital. I then examine whether behavior in the games predicts repayment of loans to a Peruvian group lending microfinance program. Since the structure of these loans relies heavily on social capital to enforce repayment, this is a relevant and important test of the games, as well as of other measures of social capital. I find that individuals identified as "trustworthy" by the Trust game are in fact less likely to default on their loans. I do not find similar support for the Trust game as a measure of trust. Keywords: trust game, experimental economics, microfinance JEL: B4 C9 D8 O1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:909&r=all 167. Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies Koichi Hamada (Economic Growth Center, Yale University) Shyam Sunder (School of Management, Yale University) This paper studies the role of transfers among groups within a country as well as among countries in a two level game of nternational trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a transfer process uses up additional resources. The difficulty of making transfers renders it less likely that a nation would find it individually rational to participate as a member of an international institution. Costly transfers render the internal and international adjustment difficult, and serve as a barrier to trade liberalization. Costly international transfers harden the resistance against trade liberalization in the (potentially) recipient country and soften it in the (potentially) donor country. Keywords: International trade, tariff negotiation, asymmetric Information, transfer, WTO, common agency, two-level game JEL: F13 H21 H71 H77 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:910&r=all 168. Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Experiment Dean S. Karlan (Economic Growth Center, Yale University and Princeton University) Jonathan Zinman (Federal Reserve Bank of New York) Information asymmetries are important in theory but difficult to identify in practice. We estimate the empirical importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major South African lender along three dimensions: 1) the initial "offer interest rate" appearing on direct mail solicitations; 2) a "contract interest rate" equal to or less than the offer interest rate and revealed to the over 4,000 borrowers who agreed to the initial offer rate; and 3) a dynamic repayment incentive that extends preferential pricing on future loans to borrowers who remain in good standing. These three randomizations, combined with complete knowledge of the Lender's information set, permit identification of specific types of private information problems. Specifically, our setup distinguishes adverse selection from moral hazard effects on repayment, and thereby generates unique evidence on the existence and magnitudes of specific credit market failures. We find evidence of both adverse selection (among women) and moral hazard predominantly among men), and the findings suggest that about 20% of default is due to asymmetric information problems. This helps explain the prevalence of credit constraints even in a market that specializes in financing high-risk borrowers at very high rates. Keywords: Information asymmetries, field experiment, adverse selection, moral hazard, development finance, credit markets, microfinance JEL: C9 D8 G2 G3 O1 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:911&r=all 169. Inter-household Allocations within Extended Family: Evidence from the Indonesia Family Life Survey Firman Witoelar (Economic Growth Center, Yale University) This paper uses data from two waves of the Indonesia Family life Survey (IFLS2-1997 and IFLS3-2000) to investigate whether households that belong to the same extended families pool their income to smooth their consumption. We exploit the fact that the survey also tracks and interviews split-off households during the follow-up surveys, enabling us to construct a panel of extended families. The findings suggest that in contradiction to the null hypothesis of extended-family income pooling, household own income still matters to household consumption even after controlling for extended family resources. The result stands after correcting for potential measurement error and endogeneity of income. More importantly, the findings also suggest that although the change in household own income matters to the change in household consumption, controlling for extended family resources, the magnitudes of the coefficients are small. We also find evidence that household consumption is affected by characteristics of other households in the same extended family. Keywords: Consumption smoothing, risk-sharing, extended families JEL: D13 J12 O12 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:912&r=all 170. Adjusting Household Structure: School Enrollment Impacts of Child Fostering in Burkina Faso Richard Akresh (University of Illinois at Urbana-Champaign) Researchers claim that children growing up away from their biological parents may be at a disadvantage and have lower human capital investment. This paper measures the impact of child fostering on school enrollment and uses household and child fixed effects regressions to address the endogeneity of fostering. Data collection by the author involved tracking and interviewing the sending and receiving household participating in each fostering exchange, allowing a comparison of foster children with their non- fostered biological siblings. Foster children are equally likely as their host siblings to be enrolled after fostering and are 3.6 percent more likely to be enrolled than their biological siblings. Relative to children from non-fostering households, host siblings, biological siblings, and foster children all experience increased enrollment after the fostering exchange, indicating fostering may help insulate poor households from adverse shocks. This Pareto improvement in schooling translates into a long-run improvement in educational and occupational attainment. Keywords: Human capital investment, Child fostering, Household structure JEL: J12 I20 O15 D10 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:897&r=all 171. Consumption Smoothing? Livestock, Insurance and Drought in Rural Burkina Faso Harounan Kazianga (Columbia University) Christopher Udry (Yale University) This paper explores the extent of consumption smoothing between 1981 and 1985 in rural Burkina Faso. In particular, we examine the extent to which livestock, grain storage and interhousehold transfers are used to smooth consumption against income risk. The survey coincided with a period of severe drought, so that the results provide direct evidence on the effectiveness of these various insurance mechanisms when they are the most needed. We find evidence of little consumption smoothing. In particular, there is almost no risk sharing, and households rely almost exclusively on self-insurance in the form of adjustments to grain stocks to smooth out consumption. The outcome, however, is far from complete smoothing. Hence the main risk-coping strategies, which are hypothesized in the literature (risk sharing and buffer stock), were not effective during the survey period. Keywords: Livestock, consumption smoothing, permanent income hypothesis, precautionary saving, risk sharing JEL: D91 O16 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:898&r=all 172. The Food Problem and the Evolution of International Income Levels Douglas Gollin (Yale University and Williams College) Stephen L. Parente (University of Illinois) Richard Rogerson (Arizona State University) This paper examines the effect of agricultural development on a country's overall development and growth experience. In most poor countries, large fractions of land, labor, and other productive resources are devoted to producing food for subsistence needs. This "food problem" can delay a country's industrial development for a long period of time, causing its per capita income to fall far behind the world leader. Once industrialization begins, this trend is reversed. The extent to which a country catches up to the leader depends primarily on factors that affect productivity in non- agricultural activities: agricultural productivity is thus largely irrelevant in the very long run. But in the short run, a country that experiences large improvements in agricultural productivity (due to, say, a Green Revolution) will experience a rapid increase in its income relative to the leaders. Keywords: Agriculture, Economic Growth, Subsistence, Food Problem, Agricultural Technology, Long-run Growth JEL: E13 O40 O41 Q10 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:899&r=all 173. Labor Surplus Economies Gustav Ranis (Economic Growth Center, Yale University) The labor surplus economy model has as its basic premise the inability of unskilled agricultural labor markets to clear in countries with high man/land ratios. In such situations, the marginal product of labor is likely to fall below a bargaining wage, related to the average rather than the marginal product. The reallocation of such disguisedly unemployed workers by means of "balanced" intersectoral growth ultimately permits the entire economy to operate on neo-classical principles. Finally, the paper introduces open economy dimensions, indicates the existence of other labor surplus sub-sectors and briefly responds to neo- classical critiques on both theoretical and empirical grounds. Keywords: Development Theory, Labor Markets JEL: O10 O12 O17 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:900&r=all 174. Demographic Determinants of Savings: Estimating and Interpreting the Aggregate Association in Asia T. Paul Schultz (Economic Growth Center, Yale University) Life cycle savings is proposed as one explanation for much of the increase in savings and economic growth in Asia. The association between the age composition of a nation's population and its savings rate, observed within 16 Asian countries from 1952 to 1992, is re-estimated here to be less than a quarter the size reported in a seminal study, which assumed lagged savings is exogenous. Specification tests as well as common sense imply, moreover, that lagged savings is likely to be endogenous, and when estimated accordingly there remains no significant dependence of savings on the age composition, measured in several ways. Research should consider lifetime savings as a substitute for children, and model the causes for the decline in fertility which changes the age compositions and could thereby account for savings and growth in Asia. Keywords: Life Cycle Savings, Aging, Asian Growth, Demographic Transition JEL: D91 J11 O11 O53 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:901&r=all 175. Risk, Network Quality, and Family Structure: Child Fostering Decisions in Burkina Faso Richard Akresh (University of Illinois at Urbana-Champaign) Researchers often assume household structure is exogenous, but child fostering, the institution in which parents send their biological children to live with another family, is widespread in sub-Saharan Africa and provides evidence against this assumption. Using data I collected in Burkina Faso, I analyze a household's decision to adjust its size and composition through fostering. A household fosters children as a risk-coping mechanism in response to exogenous income shocks, if it has a good social network, and to satisfy labor demands within the household. Increases of one standard deviation in a household's agricultural shock, percentage of good network members, or number of older girls increase the probability of sending a child above the current fostering level by 29.1, 30.0, and 34.5 percent, respectively. Testing whether factors influencing the sending decision have an opposite impact on the receiving decision leads to a rejection of the symmetric, theoretical model for child fostering. Keywords: Child Fostering, Risk-coping, Social Networks, Household Structure JEL: O15 J12 D10 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:902&r=all 176. Productive Benefits of Health: Evidence from Low-Income Countries T. Paul Schultz (Economic Growth Center, Yale University) Various household survey indicators of adult nutrition and health status are analyzed as determinants of individual wages. However, survey indicators of health status may be heterogeneous, or a combination of health human capital formed by investment behavior and variation due to genotype, random shocks, and measurement error, which are uncontrolled by behavior. Although there are no definitive methods for distinguishing between human capital and genetic variation in health outcomes, alternative mappings of health status, such as height, on community health services, parent socioeconomic characteristics, and ethnic categories may be suggestive. Instrumental variable estimates of health human capital and residual sources of variation in measured health status are included in wage functions to assess empirically whether the productivity of both components of health are equal. Evidence from Ghana, Cote d'Ivoire and Brazil suggests that the health human capital effect on wages is substantially larger than that associated with residual health variation. Keywords: Health Human Capital, Wage Productivity, Brazil, Ghana, Cote D'Ivoire JEL: I12 J24 O12 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:egc:wpaper:903&r=all 177. Trade, Foreign Firms, and Economic Policy in Indonesian and Thai Manufacturing William E. James (Nathan Associates, Inc.) Eric D. Ramstetter (International Centre for the Study of East Asian Development and Kyushu University) This paper first examines the rapid growth and changing composition of manufactured exports in Indonesia and Thailand, highlighting the rapid growth of office and computer machinery and electric machinery, somewhat slower growth of non-electric and transportation machinery, as well as the low growth of previously large exports of textiles apparel. Second, the important contributions of foreign multinational enterprises ( MNEs) to export growth in the machinery industries, particularly in electric, office, and computing machinery, are documented. Third, the paper describes trade policies in all these industries in some detail, emphasizing how low protection was a key facilitator of rapid export growth in the MNEs that dominated the electric, office, and computing machinery industry, while high protection reduced incentives to export among MNEs in the transportation machinery industry. JEL: F13 F14 F23 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:ewc:wpaper:wp78&r=all 178. How inefficient are small-scale rice farmers in eastern India really?: Examining the effects of microtopography on technical efficiency estimates Nobuhiko Fuwa (Agricultural Economics, Chiba University) Christopher Edmonds (Economics Study Area, East-West Center) Pabitra Banik (Indian Statistical Institute, Kolkata, India) We focus on the impact of failing to control for differences in land types defined along toposequence on estimates of farm technical efficiency for small-scale rice farms in eastern India. In contrast with the existing literature, we find that those farms may be considerably more technically efficient than they appear from more aggregated analysis without such control. Farms planted with modern rice varieties are technically efficient. Furthermore, farms planted with traditional rice varieties operate close to the production frontier on less productive lands upland and mid-upland), but significant technical inefficiency exists on more productive lands (medium land and lowland). JEL: O13 O33 Q12 Q16 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:ewc:wpaper:wp79&r=all 179. On the Csorgo-Revesz increments of finite dimensional Gaussian random fields Yong-Kab Choi (Department of Mathematics, Gyeongsang National University and School of Mathematics and Statistics, Carleton University) Hwa-Sang Sung (Department of Mathematics, Gyeongsang National University) Kyo-Shin Hwang (Department of Mathematics, Gyeongsang National University) Hee-Jin Moon (Department of Mathematics, Gyeongsang National University) In this paper, we establish some limit theorems on the combined Csorgo-Revesz increments with moduli of continuity for finite dimensional Gaussian random fields under mild conditions, via estimating upper bounds of large deviation probabilities on suprema of the finite dimensional Gaussian random fields. Keywords: Csorgo-Revesz increment; Gaussian process; random field; modulus of continuity; quasi-increasing; regularly varying function; large deviation probability. JEL: C10 C40 Date: 2004-04-01 URL: http://d.repec.org/n?u=RePEc:pqs:wpaper:0202005&r=all 180. New evidence of scope economies among lending,deposit- taking, loan commitments and mutual fund activities. Santiago Carbo Valverde (Department of Economic Theory and Economic History, University of Granada) Francisco Rodriguez Fernandez (Department of Economic Theory and Economic History, University of Granada) Financial innovation and technology affect bank cost, revenue and profits. Most of the previous empirical studies have not found significant cost, profit or revenue scope economies or output pair complementarities either between traditional and non- traditional banking products or between traditional activities themselves. We study scope economies and output pair complementarities in a ‘broad banking’ environment: the Spanish banking sector. The results indicate that after including off-balance sheet business in the output mix, cost and profit scope economies rise and are statistically significant. Besides, consumer valuation of financial services is only detected when the off-balance sheet business is added to the output definition. Keywords: banking, scope economies, off-balance sheet. JEL: G21 L11 Date: 2005-05-22 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/01&r=all 181. "Si el lo necesita": Gypsy fairness in Vallecas Pablo Branas Garza (Department of Economic Theory and Economic History, University of Granada) Ramon Cobo-Reyes Almudena Dominguez (Universidad Autonoma de Madrid.) "Si el lo necesita" (if he really needs it) was the most common argument given by the subjects who accepted the zero o?er in the ultimatum game during experiments were conducted among illiterate (adult) gypsies in Vallecas, Madrid. Interestingly the acceptance of the zero offer was not a rare case but, in contrast, it was the modal value. This is even more remarkable if we consider that the 97% of the subjects proposed the equal split. Keywords: Gypsies, fairness, social welfare, strategy method ultimatum game, bargaining. JEL: D63 D64 C93 J15 Date: 2005-01-11 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/02&r=all 182. Do non-financial firms react to monetary policy actions as banks do? Santiago Carbo Valverde (Department of Economic Theory and Economic History, University of Granada) Rafael Lopez del Paso (Department of Economic Theory and Economic History, University of Granada) The theory of the bank lending channel indicates that financial institutions with larger size, higher capitalisation and higher liquidity present a greater capacity to maintain their levels of credit supply in a situation of monetary contraction. However, there is a paucity of (European) studies that analyse the bank lending channel from the non-financial firms’ perspective. This paper analyzes the impact of monetary policy actions on a large sample of Spanish firms. The empirical evidence for Spain shows that the impact of size, solvency and liquidity are similar for banks and non-financial firms. Keywords: monetary policy transmission, bank lending channel, liquidity, non-financial firms, banks. JEL: E51 G21 D21 Date: 2005-05-22 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/03&r=all 183. I do not play lotteries Pablo Branas Garza (Department of Economic Theory and Economic History, University of Granada) Nikolaos Georgantzis (Universidad Jaume I) Pablo Guillen (Harvard Business School) We study individual decision making in a lottery-choice task performed by three subject populations: gamblers under psychological treatment (“addicts”), gamblers’ relatives ( “victims”), and normal (as far as gambling is considered) individuals. We find that addicts are willing to take less risk than normal individuals, but the large majority of victims reports themselves unwilling to take any risk at all. Furthermore, both addicts and victims maintain their choices invariant across di ?erent scenarios concerning the risk-return tradeoff. Keywords: risky decision making, pathological gambling, attraction and re-pulsion to chance. JEL: C91 Date: 2005-05-16 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/04&r=all 184. Tejiendo Redes Empresariales en Andalucia Oriental:Vida y Obra de Alfredo Velasco y Sotillos (1872-1936). Gregorio Nunez (Department of Economic Theory and Economic History (University of Granada) and “Grupo de Estudios Historicos sobre la Empresa”) En las paginas que siguen se estudia, siguiendo las vicisitudes biograficas de un ingeniero militar madrileno y mas tarde director de empresas, la formacion de un grupo empresarial que se ocupo de la promocion industrial y de la gestion de servicios publicos en las provincias de Granada y de Almeria. A lo largo del trabajo se presenta la construccion gradual de sucesivas redes sociales formadas por contactos personales y profesionales y se muestra la emergencia en su seno de conflictos y tensiones entre los diferentes grupos. Keywords: Army - Engineers – Spain; Business and Financial Networks - Spain – 20 th (1900-1936); Business History - Spain – 20 th Century (1900-1936); Businesspersons –Spain – Biographies; Economic History - Andalusia (Spain) – 20 th Century (1900- 1936); Social capital – Business Networks. JEL: N13 N14 N43 N44 N83 N84 Date: 2005-05-22 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/05&r=all 185. Moral Framing in Dictator Games by Short Sentences. Pablo Branas Garza (Department of Economic Theory and Economic History, University of Granada) Antonio Morales (Universidad de Malaga) Recent papers on double-blind dictator games have obtained significant generous behavior when information regarding recipient is provided. But the lack of information disincentives other-regarding behavior and then, the subject’s behavior closely approximates the game theoretic prediction based on the selfishness assumption. This paper conducted four treatment of dictator games. We used one-room design, between-subjects anonymity and extra-credit point as rewards. Two treatments were used as baseline whereas the other two were aimed at reinforcing the recipient powerlessness and positive reciprocity. To promote these environments we include a “non—neutral” sentence to the instructions. Our baseline and modified DG are statistically di ?erent from each other, indicating that the additional sentences promote other—regarding behaviour. In fact, pure- selfish behavior vanishes. Keywords: dictator game, framing e ?ect, social issues, fairness, reciprocity. JEL: D63 D64 C91 URL: http://d.repec.org/n?u=RePEc:gra:wpaper:05/06&r=all