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NEP: New Economics Papers
All new papers
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Edited by: Marco Novarese
           http://ideas.repec.org/e/pno2.html
           Universita  del Piemonte Orientale
Date:      2005-02-27
Papers:	   140

This document is in the public domain, feel free to circulate it.

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1. Intra-firm Coordination and Horizontal Merger
  
    Michael Higl (University of Augsburg, Department of 
      Economics)
    Peter Welzel (University of Augsburg, Department of 
      Economics)

We look at an industry of Cournot oligopolists each of which 
consists of production facilities which enjoy some degree of 
freedom in deciding their output quantities and that way 
influence the total output of a firm. This structure can be 
motivated e.g. the existence of profit centers or by the 
specifics of a cooperative firm. The extent of coordination 
inside the firms is captured in a simple way, and market 
equilibrium is derived for potentially asymmetric firms using the 
concept of a replacement function. We use this model to address 
the question of profitability of horizontal mergers and of the 
welfare consequences of such mergers. Contrary to the standard 
literature, we find a wide range of potentially profitable 
mergers without having to refer to cost synergies. This result is 
driven by the effect of size in terms of the number of production 
facilities and by the strategic consequences of intra-firm 
decentralization. A number of seemingly conflicting results from 
the literature can be considered special cases of our model.
 
Keywords: merger, oligopoly, organization, vertical coordination
JEL:      L22 L13
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:aug:augsbe:0269&r=all




2. U.S. Domestic Money, Inflation and Output
  
    Yunus Aksoy (School of Economics, Mathematics & Statistics, 
      Birkbeck College)
    Tomasz Piskorski

Recent empirical research documents that the strong short-term 
relationship between U.S. monetary aggregates on one side and 
inflation and real output on the other has mostly disappeared 
since the early 1980s. Using the direct estimate of flows of USD 
abroad we find that domestic money (currency corrected for the 
foreign holdings of dollars) contains valuable information about 
future movements of U.S. inflation and real output. Statistical 
evidence suggests that the Friedman-Schwartz stylized facts can 
be reestablished once the focus of analysis is back on the 
correct measure of domestic monetary aggregates.
 
Keywords: foreign holdings, domestic money, monetary aggregates, 
          information value
JEL:      E3 E4 E5
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:bbk:bbkefp:0506&r=all



3. Pre-Bid Run-Ups Ahead of Canadian Takeovers: How Big Is the 
   Problem?
  
    Michael R. King and Maksym Padalko

The authors study the price–--volume dynamics ahead of the 
first public announcement of a takeover for 420 Canadian firms 
from 1985 to 2002. Pre-bid price run-ups in a target firm's 
shares may be caused by some combination of information leakage 
due to illegal insider trading or market anticipation based on 
rumours in the press. The authors review empirical studies of 
illegal insider trading and trading ahead of unscheduled 
announcements to generate predictions for abnormal returns and 
abnormal volume ahead of the takeover announcement. They observe 
serially correlated volume and a pattern of return reversals in 
their sample. Pre-bid run-ups occur shortly before the actual 
announcement, accompanied by significantly positive abnormal 
returns and share volume. The stock prices of the target firm 
react significantly to the actual announcement, with both 
positive and negative reactions. These price–volume dynamics 
are more consistent with the predictions of the market 
anticipation hypothesis than the hypothesis of illegal insider 
trading.
 
Keywords: Financial markets
JEL:      G14 G18 G34
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:bca:bocawp:05-3&r=all



4. El Impacto Economico de un Acuerdo Parcial de Libre Comercio 
   entre Colombia y Estados Unidos
  
    Clara Patricia Martin
    Juan Mauricio Ramirez

En este trabajo se hace una evaluacion cuantitativa de los 
posibles efectos de un acuerdo de libre comercio (TLC) con 
Estados Unidos sobre la economia colombiana. Con este objetivo 
se utiliza un modelo de equilibrio general que representa el 
funcionamiento de la economia colombiana en condiciones de 
sustitucion imperfecta entre los bienes domesticos y los bienes 
importados y exportados, rigideces salariales en el mercado 
laboral, y competencia imperfecta en los sectores industriales. 
Los resultados muestran que los efectos de un TLC sobre la 
economia colombiana dependen criticamente del grado en el cual 
se logren afectar las barreras no arancelarias vigentes en los 
Estados Unidos. Un TLC con disminucion en estas barreras no 
arancelarias beneficiaria a los mas pobres y tendria un efecto 
progresivo sobre la distribucion del ingreso, contrario a lo que 
sostienen diferentes criticos. Sin embargo, esto depende del 
alcance del acuerdo. En especial, un TLC que mantenga las BNA 
sobre el sector agricola en Estados Unidos tendria efectos 
negativos sobre los ingresos y el consumo de los trabajadores 
rurales, y en general sobre el sector agricola colombiano.
 
URL:      http://d.repec.org/n?u=RePEc:bdr:borrec:326&r=all



5. A Note on the Existence of Nash Equilibrium in Games with 
   Discontinuous Payoffs
  
    J. Rupert J. Gatti

This paper generalises the approach taken by Dasgupta & Maskin (
1986) and Simon (1989) and provides necessary and sufficient 
conditions for the existence of pure and mixed strategy Nash 
equilibrium in games with continuous strategy spaces and 
discontinuous payoff functions. The conditions can be applied 
widely, and examples for existence of pure strategy and monotonic 
equilibria in First-Price auctions are provided. The conditions 
are also appropriate for ensuring that computer generated 
equilibrium solutions can be extended to continuous strategy 
spaces.
 
Keywords: Nash Equilibrium, Discontinuous Payoff Function, First-
          price Auctions
JEL:      C70 D44
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:cam:camdae:0510&r=all



6. Diversity and Security in UK Electricity Generation: The 
   Influence of Low Carbon Objectives
  
    Michael Grubb
    Lucy Butler
    Graham Sinden

We explore the relationship between low carbon objectives and 
the strategic security of electricity in the context of the UK 
Electricity System. We consider diversity of fuel source mix to 
represent one dimension of security - robustness against 
interruptions of any one source - and apply two different 
diversity indices to the range of electricity system scenarios 
produced by the UK government and independent researchers. Using 
data on wind generation we also consider whether a second 
dimension of security - the reliability of generation 
availability - is compromised by intermittency of renewable 
generation. Our results show that low carbon objectives are 
uniformly associated with greater long-term diversity in UK 
electricity. We discuss reasons for this result, explore 
sensitivities, and briefly discuss possible policy instruments 
associated with diversity and their limitations.
 
Keywords: Diversity, Security, Low Carbon, Wind Generation, 
          Electricity
JEL:      Q40 Q42
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:cam:camdae:0511&r=all



7. Corporate Rent-Seeking and the managerial soft-budget 
   constraint
  
    Rodolfo Apreda

This paper seeks to expand on two topical strands in Government 
Finance and Political Science literature, rent-seeking and the 
soft-budget constraint, so as to bring forth a strong linkage 
with corporate governance environments. It will attempt to 
accomplish this task by setting up a distinctive framework of 
analysis that hinges on incremental cash flows. Firstly, it 
claims that both rent-seeking behavior and the soft-budget 
constraint are worthy of being applied to corporate governance 
learning and practice. Secondly, the paper contributes to focus 
on cash-flows reliability and managers’ accountability. Thirdly,
it is shown how conflicts of interest underlie rent-seeking 
behavior, and how the latter relates to the soft-budget 
constraint.
 
Keywords: Rent-Seeking, Soft-Budget Constraint, Corporate 
          Governance, Incremental Cash Flow model, Conflicts of 
          Interest.
JEL:      G30 G34 D72 D74 D82
Date:     2004-12
URL:      http://d.repec.org/n?u=RePEc:cem:doctra:283&r=all



8. The Sources of Quality in the Pharmaceutical Industry
  
    Enrique Yacuzzi
    Fernando Martin
    Gabriel Vignola
    Veronica Mayochi
    Dante Tollio

This paper analyzes the sources of quality of a pharmaceutical 
product. After identifying eight quality dimensions, a framework 
of hypothetical sources that contribute the most to shape those 
dimensions is established. The framework, based on Garvin’s 
pioneering work, is applied to case studies of laboratories 
operating in Argentina. Framework relevance is considered using 
correlation analysis. Laboratories are ranked through expert 
opinion by the quality of its products using the eight dimensions 
mentioned above; it is observed that there is no perfect 
parallelism in ranking along all dimensions, possibly revealing 
different managerial priorities and uses of resources among 
laboratories, as well as different sources of quality and 
different business strategies. Correlation analysis also suggests 
that the study of a pharmaceutical product is a complex task when 
a modern concept of quality is considered. Once the existence of 
different quality dimensions is accepted, the following two 
questions are investigated: (1) Are there specific sources of 
quality that support some dimensions (and not others) and that 
are based on identifiable organizational aspects or specific 
technologies? (2) What are the generic sources of quality (
affecting all dimensions) and in what way do they contribute to 
improve performance or highlight quality dimensions? It is 
assumed as a starting point that among the sources of quality 
there are generic sources, affecting all dimensions, and specific 
sources, which affect only some dimensions. In concrete cases, 
specific quality sources are identified, although the search for 
specific quality sources for each dimension is not conclusive. 
The study of generic quality sources, however, suggests that 
corporate systems, corporate culture, and management policies 
contribute to incorporate quality in a product. Thus quality 
results from the interaction between generic and specific sources.
In the final part of the paper, recommendations for academics 
and industrialists are provided, as well as some conclusions.
 
Keywords: Pharmaceutical product, Garvin’s quality dimensions, 
          quality sources, pharmaceutical laboratories in 
          Argentina, corporate systems, corporate culture.
JEL:      M10 M11 M14
Date:     2004-12
URL:      http://d.repec.org/n?u=RePEc:cem:doctra:284&r=all



9. Discretional political budget cycles and separation of powers
  
    Jorge Streb
    Daniel Lema
    Gustavo Torrens

In contrast to previous empirical work on electoral cycles, 
which implicitly assumes the executive has full discretion over 
fiscal policy, this paper contends that under separation of 
powers an unaligned legislature may have a moderating role. 
Focusing on the budget surplus, we find that stronger effective 
checks and balances explain why cycles are weaker in developed 
and established democracies. Once the discretional component of 
executive power is isolated, there are significant cycles in all 
democracies. Whether the political system is presidential or 
parliamentary, or the electoral rules are majoritarian or 
proportional, does not change the basic results.
 
Keywords: political budget cycles, asymmetric information, 
          discretion, separation of powers, checks and balances, 
          veto players, rule of law
JEL:      D72 D78
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:cem:doctra:286&r=all



10. Perfectly Competitive Innovation (Growth)
  
    Michele Boldrin
    David K Levine

Date:     2005-02-22
URL:      http://d.repec.org/n?u=RePEc:cla:levarc:122247000000000886&r=all



11. Bargaining and markets
  
    Martin J. Osborne
    Ariel Rubinstein

Date:     2005-02-21
URL:      http://d.repec.org/n?u=RePEc:cla:levrem:666156000000000515&r=all



12. Tranching
  
    Guillaume Plantin

Date:     2005-11
URL:      http://d.repec.org/n?u=RePEc:cmu:gsiawp:-279887783&r=all



13. Dynamic Security Design
  
    Guillaume Plantin
    Bruno Biais
    Thomas Mariotti
    Jean-Charles Rochet

Date:     2005-11
URL:      http://d.repec.org/n?u=RePEc:cmu:gsiawp:-862815164&r=all



14. Does Reinsurance Need Reinsurers?
  
    Guillaume Plantin

Date:     2005-11
URL:      http://d.repec.org/n?u=RePEc:cmu:gsiawp:1108152504&r=all



15. Marking to Market: Panacea or Pandora’s Box ?
  
    Guillaume Plantin
    Haresh Sapra
    Hyun Shin

Date:     2005-11
URL:      http://d.repec.org/n?u=RePEc:cmu:gsiawp:1805083183&r=all



16. Self-Fulfilling Liquidity and the Coordination Premium
  
    Guillaume Plantin

Date:     2005-11
URL:      http://d.repec.org/n?u=RePEc:cmu:gsiawp:710428070&r=all



17. Assessing Brand Image through Communalitites and Asymmetries 
    Brand-to-Attribute and Attribute-to-Brand Associations.
  
    Anna Torres
    Tammo Bijmolt

Brand image is a key component of customer-based brand equity, 
and refers to the associations a consumer holds in memory. Such 
associations are often directional; one should distinguish 
between brand-to-attribute and attribute-to-brand associations. 
Information on these associations arise from two ways of 
collecting data respectively: brand-by-brand evaluations of all 
attributes and attribute-by-attribute evaluations of all brands. 
In this paper, the authors present a methodological approach, 
namely correspondence analysis of matched matrices, to assess the 
communalitites as well as asymmetries between brand-to-attribute 
and attribute-to-brand associations. The methodology results in 
perceptual maps visualizing brand image. The approach is 
illustrated in an empirical market research project in which two 
samples of consumers evaluated ten brands of deodorants and 
eleven attributes.
 
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:cte:wbrepe:wb050604.pdf&r=all



18. On the Design of Artificial Stock Markets
  
    Boer-Sorban, K.
    Bruin, A. de
    Kaymak, U. (Erasmus Research Institute of Management (ERIM), 
      RSM Erasmus University)

Artificial stock markets are designed with the aim to study and 
understand market dynamics by representing (part of) real stock 
markets. Since there is a large variety of real stock markets 
with several partially observable elements and hidden processes, 
artificial markets differ regarding their structure and 
implementation. In this paper we analyze to what degree current 
artificial stock markets reflect the workings of real stock 
markets. In order to conduct this analysis we set up a list of 
factors which influence market dynamics and are as a consequence 
important to consider for designing market models. We 
differentiate two categories of factors: general, well-defined 
aspects that characterize the organization of a market and hidden 
aspects that characterize the functioning of the markets and the 
behaviour of the traders.
 
Keywords: Market microstructure;financial markets;agent-based 
          computational economics;artificial stock markets;
          uncertainty modeling;
Date:     2005-02-18
URL:      http://d.repec.org/n?u=RePEc:dgr:eureri:30002042&r=all



19. Vintage Modelling for Dummies using the Putty-Practically-
    Clay Approach
  
    Zon,Adriaan ,van (MERIT)

Vintage models have been around for a long time now. Since their 
conception in the late Fifties and early Sixties they have been 
adopted by economists interested in the connection between 
technical change and economic growth, because they highlight a 
number of important insights regarding the complementarity 
between productivity growth and investment. First of all, 
productivity growth is positively influenced by gross investment. 
In the hitherto standard aggregate production function approach 
towards explaining labour productivity growth, the latter was as 
much the result of the growth in capital per head (and therefore 
linked to net investment per head rather than gross investment), 
as of (labour saving) technical change itself. And even though 
Abramowitz in his reaction to Solow’s paper (Solow 1957) on the 
contribution of technical change to productivity growth already 
noted that the overriding importance of technical change was also 
a clear measure of our ignorance, it was only with the advent of 
new growth theory in the late Eighties and early Nineties, that 
economists took up the challenge implicit in Abramowitz’s 
remark. In the mean time, i.e. in the late Sixties and Seventies, 
economists all over the world had a look at how technical change 
got diffused in the economy rather than having a closer look at 
the sources of technical change....
 
Keywords: economics of technology ;
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:dgr:umamer:2005005&r=all



20. A ‘putty-practically-clay’ vintage model with R&D driven 
    biases in energy-saving technical change
  
    Zon,Adriaan,van
    Lontzek,Thomas (MERIT)

This paper deals with the problem of tackling the adverse effect 
of output growth on environmental quality. For this purpose we 
use an intermediate sector that builds ‘putty-practically-
clay’ capital consisting of an energy-raw capital amalgam used 
for final goods production. The putty-practically-clay model is a 
strongly simplified version of a full putty-clay model, that 
mimics all the relevant behaviour of a full putty-clay model, but 
that does not entail the administrative hassle of a full putty-
clay vintage model. In addition to this, we introduce an R&D 
sector that develops renewable- and conventional energy-based 
technologies. The allocation of R&D activities over these two 
uses of R&D gives rise to an induced bias in technical change 
very much as in Kennedy (1964). In the context of our model, this 
implies that technological progress is primarily driven by the 
desire to counteract the upward pressure on production cost 
implied by a continuing price increase of conventional energy 
resources. Hotelling’s rule suggests that this price rise is 
unavoidable in the face of the ongoing depletion of conventional 
energy reserves. By means of some illustrative model simulations 
we study the effects of energy policy on the dynamics of the 
model for alternative policy options aimed at achieving GHG 
emission reductions. We identify the conditions under which 
energy policy might partly backfire and present some non-standard 
policy implications.
 
Keywords: macroeconomics ;
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:dgr:umamer:2005006&r=all



21. Situation Variation in Consumers’ Media Channel 
    Consideration
  
    Wendel,Sonja
    Dellaert,Benedict G.C. (METEOR)

In this article, the authors investigate consumers’ 
consideration of media channels during different usage situations.
They develop a model that explains consumers’ media channel 
consideration as a function of the media channel’s perceived 
benefits. In addition, they hypothesize that the usage situation 
affects consumers’ media channel consideration and that 
situation-based benefit requirements moderate the effect of the 
benefits on their channel consideration. The authors test the 
hypothesized relationships using survey data from 341 consumers 
regarding their consideration of 12 different media channels used 
by manufacturers to communicate product information across three 
product-related usage situations. The results of the analyses 
support the proposed model structure and confirm the expected 
relationships among perceived media channel benefits, usage 
situations, media channel requirements, and consumers’ media 
channel consideration.
 
Keywords: marketing ;
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:dgr:umamet:2005005&r=all



22. The Impact of Price Disclosure on Dynamic Shopping Decisions
  
    Dellaert,Benedict G.C.
    Golounov,Vladislav Y.
    Prabhu,Jaideep (METEOR)

A potentially powerful way to assist consumers in making dynamic 
shopping decisions is to disclose price information to them 
before they shop, for example by posting prices on the Internet. 
This paper addresses the differential impact of disclosing either 
only current, or both current and future prices, on consumer 
shopping decisions in multi-period tasks involving multiple 
product purchases. In the context of an Internet-based experiment,
we find that consumer expenditure deviates more strongly from 
that of a normative model when both current and future prices are 
disclosed than if only current prices are disclosed. We 
investigate the behavioral effects underlying this finding by 
estimating a model that allows for variations in consumer 
discounting, strength of store price format preferences, as well 
as choice consistency between different price disclosure 
conditions.
 
Keywords: marketing ;
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:dgr:umamet:2005006&r=all



23. Expectations Hypotheses Tests and Predictive Regressions at 
    Long Horizons
  
    Rossi, Barbara

Many rational expectations models state that an economic 
variable is determined as the present value of future variables. 
These restrictions have traditionally been tested on VARs where 
variables appear either in levels (or cointegrating relationships)
or first differences. Commonly used test statistics may lead to 
over-rejections in small samples in the presence of highly 
persistent variables. Similar problems occur in longhorizon 
predictive regressions. We propose an alternative method based on 
local-tounity asymptotic approximations. We apply this method to 
long-horizon Predictive Regressions, Uncovered Interest Rate 
Parity, the Term Structure, and the Permanent Income Hypothesis.
 
Keywords: expectation hypotheses; present value models; long-
          horizon; local to unity
JEL:      F30 F40
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:duk:dukeec:05-03&r=all



24. Going Multinational under Exchange Rate Uncertainty.
  
    Henry Aray (Universidad del Pais Vasco)
    Javier Gardeazabal (Universidad del Pais Vasco)

Keywords: Foreign Direct Investment, Option Pricing, Exchange 
          rate volatility
JEL:      F23 F31
Date:     2005-02-24
URL:      http://d.repec.org/n?u=RePEc:ehu:dfaeii:200505&r=all



25. Fifty ways to leave your protection: comparing applied 
    models of the Euro-Mediterannean association agreements
  
    Marijke Kuiper (LEI Agricultural Economics Research 
      Institute)

Recent increases in the number of multilateral and preferential 
trade agreements have sparked the development of applied models 
to quantify the impact of trade agreements. Outcomes generally 
support the theoretical notion that liberalising trade increases 
welfare. The increase in aggregate welfare is attained through a 
restructuring of the economy, with possible painful effects for 
certain economic sectors or parts of the population. The current 
debate on trade liberalisation focuses on the distribution of 
costs and benefits. Applied models can provide an understanding 
of the distribution of costs and benefits. Their outcomes, 
however, are determined by the way in which the economy and the 
liberalisation measures are modelled. The aim of this study is to 
compare different ways of quantifying the impact of the Euro-
Mediterranean Association Agreements (EMAAs). Based on the 
assessment of key model features and analysed scenarios we assess 
to what extent existing studies address key policy issues related 
to the EMAAs and identify directions for future research.
 
Date:     2004-04
URL:      http://d.repec.org/n?u=RePEc:ena:enawpp:006&r=all



26. Scenarios for Examining General Trade Agreements
  
    Chantal Pohl Nielsen
    Hans Grinsted Jensen
    Martina Brockmeier (FOI Danish Research Institute of Food 
      Economics)

The aim of this working paper is to formulate a set of scenarios 
reflecting the regional and multilateral trade agreements already 
concluded, currently under negotiation or simply put forth as 
proposals that involve or affect the European Union (EU). A 
selection of these scenarios will subsequently be analysed by the 
Danish Research Institute of Food Economics (FOI) and the German 
Federal Agricultural Research Centre (FAL) within the framework 
of the European Network of Agricultural and Rural Policy Research 
Institutes (ENARPRI). To ensure the relevance of the suggested 
scenarios in addressing the current challenges facing the EU, the 
scenarios presented here take account of the most recent reform 
proposals, negotiation positions and political statements 
concerning multilateral, regional and bilateral trade agreements. 
They focus on market-access policies, the effects of domestic-
support policies on developing countries and export subsidies.
 
Date:     2004-07
URL:      http://d.repec.org/n?u=RePEc:ena:enawpp:008&r=all



27. Different Roads to Liberalization: Scenarios for a Moroccan 
    Case Study of the Euro-Mediterannean association agreements
  
    Marijke Kuiper
    Crescenzo dell' Aquila (LEI Agricultural Economics Research 
      Institute)

Based on an earlier study of existing analyses of the EMAAs, we 
defined two scenarios suited for a quantitative analysis of the 
EMAAs. Because of the need to rely on existing models, the focus 
is on analysing the impact of the EMAA on Morocco in detail. In a 
subsequent study we will use an aggregated representation of 
other North African MPCs as a reference point to assess whether 
the conclusions derived for Morocco may be extended to the MPCs 
as a whole. The two scenarios reflect the current focus on the 
economic interests of the EU and the political objectives served 
by the EMAAs. Comparison of these scenarios will provide an idea 
as to what extent the security concerns of the EU are in conflict 
with the economic interests of the different EU member states.
 
Date:     2004-10
URL:      http://d.repec.org/n?u=RePEc:ena:enawpp:009&r=all



28. Scenarios for modelling trade policy effects on the 
    multifunctionality of european agriculture
  
    Janet Dwyer
    David Baldock
    Herve Guyomard
    Jerzy Wilkin
    Dorota Klepacka (IEEP)

The ENARPRI partners agreed in February 2004 to prepare a 
precise specification for the scenarios that partners would 
attempt to model in their own national contexts, to examine the 
impacts of trade-related changes upon the multifunctionality of 
EU agriculture. This paper outlines a suite of five scenarios 
covering anticipated domestic (EU) policy under different 
possible outcomes from the Doha round, broadly based upon the 
status quo (with mid-term review), full decoupling of domestic 
support and full decoupling plus reductions in (decoupled) 
domestic support, with variants in relation to export subsidies 
and the scale of pillar 2 measures. In all cases it is recognised 
that national or sub-national models will require an additional 
level of national or regional specification before they can be 
run, and that each national team will be required to do this 
drawing upon their own domestic knowledge and discussion with 
relevant experts. Each of the models that will be used to 
undertake these analyses is then briefly reviewed to identify its 
general approach and the multifunctionality indicators that can 
be covered. These indicators are then set in the broader context 
that considers other potential indicators of multifunctionality 
and their rationales. The paper concludes with some additional 
commentary about the significant differences, and thus the 
difficulties, of attempting to undertake this exercise for any of 
the new member states.
 
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:ena:enawpp:010&r=all



29. Multilateral market-access reforms of the Doha Round: a 
    preliminary assessment of implications for EU agricultural 
    trade
  
    Wusheng Yu
    Hans G. Hensen (FOI Food and Resource Economics Institute)

The July package of the Doha Round of trade negotiations 
stipulates that a tiered-formula approach should be used to 
significantly reduce market access barriers across countries, 
implying that the EU would have to make larger cuts to its high 
external tariffs, in comparison with many other WTO members such 
as the US. This paper provides a preliminary assessment of the 
likely impact of the tiered-formula reform approach on EU 
agricultural sectors. Numerical simulations of a multilateral 
market-access reform scenario show that such cuts would lead to 
across-the-board decreases in intra-EU trade flows, as compared 
with a baseline projection. While intra-EU trade flows would 
decrease, the EU’s trade with the rest of the world would 
increase. Yet such increases would not be symmetric – imports 
into the EU would increase more than exports, resulting in larger 
external trade deficits or smaller external trade surpluses in 
many EU agricultural products. Further, the resulting adjustments 
in member states’ production and net trade positions are not 
equal: the new member states would generally lose part of their 
export shares in the EU market to external competitors, as 
highlighted in the cases of bovine meat and dairy products. 
Finally, simulation results show that although EU welfare as a 
whole improves, the distribution of such gains across EU member 
states is uneven. EU-15 countries generally gain from improved 
efficiency as a result of the reform. The new member states, 
however, will only experience marginal efficiency improvements 
but will likely suffer terms-of-trade losses, thereby losing some 
of the related benefits of joining the EU (as projected in the 
baseline case).
 
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:ena:enawpp:011&r=all



30. WTO Agricultural Negotiations: a comparison of the Harbinson 
    proposal and the Swiss Formula
  
    Martina Brockmeier
    Marianne Kurzweil
    Janine Pelikan
    Petra Salamon (FAL Federal Agricultural Research Centre)

The WTO negotiations of the Doha round are a key issue in the 
public debate. This paper analysis the effects of different 
market access option on the basis of general equilibrium model. 
An extended version of the GTAP model is used to firstly project 
a base run including the Agenda 2000, the EU enlargement, the EBA 
agreement and the MTR. The policy simula-tion includes the WTO 
negotiations. Here, it is differentiated between three different 
experi-ments. While the first experiment simply implements the 
HARBINSON 1? proposal, the sec-ond one additionally takes into 
account an adoption of the EBA agreement by all industrial-ized 
countries. In the third experiment, the tariff cuts are based on 
the Swiss Formula using a coefficient of 33 instead of the tiered 
approach of HARBINSON. Based on the experiments, it can be shown 
that world wide the high protected sectors experiences severe 
losses relative to the application of the HARBINSON 1? approach. 
The comparison also shows that the highly protected beef and 
other processed food products sectors of the EU are particularly 
affected by the Swiss Formula.
 
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:ena:enawpp:012&r=all



31. Loss aversion and learning to bid
  
    Dennis A. V. Dittrich
    Werner Guth
    Martin Kocher
    Paul Pezanis-Christou

Bidding challenges learning theories since experiences for the 
same bid vary stochastically: the same choice can result in a 
gain or a loss. In such an environment the question arises how 
the nearly universally documented phenomenon of loss aversion 
affects the adaptive dynamics. We analyze the impact of loss 
aversion in a simple auction for different learning theories. Our 
experimental results suggest that a version of reinforcement 
learning which accounts for loss aversion fares as well as more 
sophisticated alternatives.
 
Keywords: loss aversion, bidding, auction, experiment, learning
URL:      http://d.repec.org/n?u=RePEc:esi:discus:2005-03&r=all



32. Effective equity experiences from an ultimatum experiment
  
    Judit Kovacs
    Werner Guth

Fairness like other social norms is usually stabilized by 
punishing norm deviations. Reward uncertainty, however, questions 
whether norm deviations can be detected and thus punished. By 
investing in information acquisition, a responder in an ultimatum 
experiment determines endogenously whether unfair offers are 
detected and sanctionable. In our experiment a proposer and a 
responder can distribute among themselves 12 black and 12 white 
chips where the monetary value of a white chip for the proposer 
can be rather high ('high payoff mode') or low ('low payoff mode')
 The responder can buy information about the proposer's reward 
type, resulting in commonly known monetary rewards. According to 
our results more than half of the responders did not buy reward 
information (30 out of 55). Buying reward information on average 
did not help the responder nor did it improve efficiency. 
Surprisingly, commonly known reward information resulted in a 
lower share of efficient offers. A possible explanation is that 
mistrust distracts attention.
 
URL:      http://d.repec.org/n?u=RePEc:esi:discus:2005-04&r=all



33. Logit estimation of conditional cooperation in a repeated 
    public goods experiment
  
    Luis G. Gonzalez
    Vittoria Levati
    Graciela Gonzalez-Farias

A conditional cooperator in a public goods game wants to match 
his partners' expected contribution. We investigate theoretically 
and empirically, whether (and to what extent) conditional 
cooperation can explain how individual contributions evolve in a 
repeated two-person public goods experiment using a perfect 
strangers design. To identify a random utility model including 
non-pecuniary preferences we also elicit participants' beliefs. 
Our econometric results show that the distribution of preferences 
in the population can be captured by a latent-class mixed logit 
specification with three subpopulations, and that 55 % of 
participants can be regarded as conditional cooperators. Thus, 
the decline in average contribution levels may be attributed to 
the presence of conditional cooperators who have to revise their 
expectations about the others' behavior.
 
URL:      http://d.repec.org/n?u=RePEc:esi:discus:2005-05&r=all



34. The Effect of Group Identity in an Investment Game
  
    Werner Guth
    Matteo Ploner
    Vittoria Levati

The present research experimentally examines the influence of 
group identity on trust behavior in an investment game. In one 
treatment, group identity is manipulated only through the 
creation of artificial (minimal) groups. In other treatments 
group members are additionally related by outcome interdependence 
established in a prior public goods game. In moving from the 
standard investment game (where no group identity is prompted) to 
minimal group identity to two-dimensional group identity, we find 
no significant differences in trust decisions. However, trust is 
significantly positively correlated with contribution decisions. 
This suggests that cooperative attitudes are idiosyncratic 
preferences, which are not affected by the creation of an 
arbitrary group identity.
 
Keywords: trust, group identity, outcome interdependence, 
          experiment
URL:      http://d.repec.org/n?u=RePEc:esi:discus:2005-06&r=all



35. Dynamic Efficiency of Emission Trading Markets: An 
    Experimental Study
  
    Andreas Nicklisch
    Leon Zucchini

This study investigates the dynamic efficiency of an emission 
regulation regime where companies competitively pay for emission 
licences. We embed the emission licence market in a Cournot model 
where the price of emission licences is subject to strategic 
tradeoff between licences and abatement technologies. Unlike the 
standard Cournot model, agents have two action parameters, 
quantities bought on the licence market and investments into 
abatement technology. We want to investigate the implications of 
this market design on the strategic behavior regarding companies' 
incentives to invest in those technologies. Data from a series of 
laboratory experiments supports the theoretical predictions for 
subjects' investment into abatement technology. With respect to 
the adaptation process of individual quantities for licences we 
find that a majority of subjects adjusts on the market by 
imitation while a minority entertains a trial and error notion.
 
Keywords: Cournot market, emission regulation, experimental 
          economics, dynamic efficiency, learning
JEL:      Q52 Q53 Q55
URL:      http://d.repec.org/n?u=RePEc:esi:discus:2005-07&r=all



36. Useful Knowledge as an Evolving System: the view from 
    Economic History.
  
    J. Mokyr

The process of modern growth is different from the kind of 
growth experienced in Europe and the Orient before 1800 in that 
it is sustained. Whereas in the premodern past, growth spurts 
would always run into negative feedback, no such ceiling seems to 
have been limiting the economic expansion of the past two 
centuries. The enigma of modern growth has led to a great deal of 
modeling and speculation amongst economists interested in the 
topic. One important strand in the literature has been that the 
Malthusian models that provided much of the negative feedback 
before 1800, have been short-circuited by the desire and ability 
of a growing number of individuals to reduce their fertility. 
Another has been institutional change, which has reduced 
opportunistic behavior and uncertainty. What has not been 
stressed enough is that the new technology was made possible by 
ever increasing "useful knowledge" as Kuznets called it. The 
sources of this growth in knowledge, surprisingly, have not been 
fully analyzed. How does "useful knowledge" emerge and develop? 
Why does it occur in one society and not another, at one time, 
and why does it take the form it does? This paper examines the 
details of how new knowledge is created by various combinations 
of luck, trial and error, inference, and experiment. To analyze 
the history of useful knowledge, an evolutionary framework to the 
economic history of useful knowledge is employed.
 
URL:      http://d.repec.org/n?u=RePEc:esi:evopap:2004-23&r=all



37. The Nature and Units of Social Selection.
  
    G. Hodgson
    T. Knudsen

On the basis of the technical definition of selection developed 
by George Price (1995), we describe two forms of selection that 
commonly occur at the social level, subset selection and 
generative selection. Both forms of selection are abstract and 
general, and therefore also incomplete; both leave aside the 
question of explaining the selection criterion and why entities 
possess stable traits. However, an important difference between 
the two kinds of selection is that generative selection can 
accommodate an explanation of how new variation is created, while 
subset selection cannot. An evolutionary process involving 
repeated cycles of generative selection can, in principle, 
continue indefinitely because imperfect replication generates new 
variation along the way, whereas subset selection reduces 
variation and eventually grinds to a halt. Even if the two kinds 
of selection examined here are very different, they share a 
number of features. First, neither subset selection nor 
generative selection implies improvement. Neither kind of 
selection necessarily lead to efficiency or imply systematic 
outcomes. Second, both subset selection and generative selection 
can lead to extremely rapid effects in a social population. Third,
in the social domain, both generative selection and subset 
selection involve choice and preference. Neither form of 
selection necessarily excludes intentionality. In concluding the 
article, we single out a challenge for future research in 
identifying the role of various units of culture in selection 
processes and the multiple levels at which social selection 
processes take place.
 
Keywords: Subset selection, generative selection, generalized 
          selection, Price equation
JEL:      B25 B52 D20 D83 L20
URL:      http://d.repec.org/n?u=RePEc:esi:evopap:2004-24&r=all



38. An Experimental Study of Leniency Programs
  
    Yasuyo Hamaguchi
    Toshiji Kawagoe

Antitrust authorities of many countries have been trying to 
establish appropriate competition policies based on economic 
analysis. Recently an anti-cartel policy called a "leniency 
program" has been introduced in many countries as an effective 
policy to dissolve cartels. In this paper, we studied several 
kinds of leniency programs through laboratory experiments. We 
experimentally controlled for two factors: 1) cartel size: the 
number of cartel members in a group, small (two-person) or large (
seven-person), 2) schedule of reduced fine: the number of firms 
that are given reduced fines. The experimental results showed 
that (1) an increase in the number of cartel members in a group 
increased the number of cartels dissolved, (2) changing the 
coverage of reduced fine had no significant effect both in two-
player case and in seven-player case.
 
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:eti:dpaper:05003&r=all



39. Why Did Japan's TFP Growth Slow Down in the Lost Decade? An 
    Empirical Analysis Based on Firm-Level Data of Manufacturing 
    Firms
  
    Kyoji Fukao
    Hyeog Ug Kwon

Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:eti:dpaper:05004&r=all



40. Do Out-In M&As Bring Higher TFP to Japan? An Empirical 
    Analysis Based on Micro-data on Japanese Manufacturing Firms
  
    Kyoji Fukao
    Keiko Ito
    Hyeog Ug Kwon

This paper compares the performance of foreign-owned and 
domestically-owned firms, using micro data on Japanese firms in 
the manufacturing sector for the period 1994-2000. The overall 
comparison between foreign-owned and Japanese companies shows 
that foreign-owned companies enjoyed 5% higher TFP as well as 
higher earnings and returns on capital. They also displayed a 
higher capital-labor ratio and higher R&D intensity. Reflecting 
their higher TFP and labor-saving production patterns, foreign-
owned companies showed higher labor productivity and wage rates 
as well. By estimating Probit models, we found that foreign firms 
acquire Japanese firms with higher TFP levels and higher profit 
rates. In contrast, in-in M&As seem to have the characteristics 
of rescue missions. Small firms with a higher total 
liability/total asset ratio tend to be chosen as targets of in-in 
M&As. We also estimated the dynamic effects of M&As on target 
firms. The results indicate that out-in M&As improve target 
firms' TFP level and current profit/sales ratio. Compared with in-
in M&As, out-in M&As bring a larger and quicker improvement in 
TFP and the profit rate but no increase in target firms' 
employment two years after the acquisition.
 
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:eti:dpaper:05005&r=all



41. Banks and German Corporate Governance: On the Way to a 
    Capital Market-Based System?
  
    Andreas Hackethal
    Reinhard H. Schmidt
    Marcel Tyrell

The German corporate governance system has long been cited as 
the standard example of an insider-controlled and stakeholder-
oriented system. We argue that despite important reforms and 
substantial changes of individual elements of the German 
corporate governance system the main characteristics of the 
traditional German system as a whole are still in place. However, 
in our opinion the changing role of the big universal banks in 
the governance undermines the stability of the corporate 
governance system in Germany. Therefore a breakdown of the 
traditional system leading to a control vacuum or a fundamental 
change to a capital market-based system could be in the offing.
 
JEL:      G32 G34 G3
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:fra:franaf:146&r=all



42. Hartz IV - The German "Word of the Year 2004" and the 
    Country's Hope to overcome its Problem of Unemployment
  
    Lohse, Tim

When the centre-left government came into power in Germany in 
1998, a core promise of the new Chancellor, Schroeder, was to 
reduce the lack of jobs and to increase welfare. Facing 
persistently increasing unemployment rates from then on, the 
government finally launched Hartz IV in 2004; the largest social 
reform project in the history of the Federal Republic. This 
reform, that took effect at the beginning of 2005, aims to 
increase employment in Europe's biggest but slowest growing 
economy, whilst avoiding the financial collapse of its social 
systems. Its main aim is to strengthen individual responsibility 
whilst lowering transfers for those unemployed individuals that 
are capable of work. Therefore, it is also the most disputed 
reform of the German social welfare system. By characterising 
effects and defects of the German welfare system, we identify 
some of the most important obstacles facing higher employment. We 
provide an outline of the government's endeavours to handle the 
problem of unemployment and of the main changes in the country's 
laws of social contributions. Particular focus is given to the 
newly established unemployment benefit II and to the 
reasonableness of work, which reflects a new social valuation of 
labour. To conclude, potential welfare and employment effects 
under the new system are discussed.
 
Keywords: Welfare, Unemployment, Poverty.
JEL:      I38 J64
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:han:dpaper:dp-311&r=all



43. 09/11 on the USD/EUR Foreign Exchange Market
  
    Mende, Alexander

We study the relationship between foreign exchange trading 
activity and volatility on the USD/EUR foreign exchange market on 
the basis of a unique data set around the events of 09/11/2001. 
We find that volatility and bid-ask spreads are by far larger at 
that time, but the shock is not persistent. The positive 
correlation between volume and volatility does not break up, but 
intensifies strongly indicating the arrival of new information 
and increased price risk. We conclude that the USD/EUR foreign 
exchange market maintains its liquid structure and its efficient 
processing of exogenous shocks.
 
Keywords: foreign exchange, market microstructure, liquidity, 
          sudden events
JEL:      F31 G14 G15
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:han:dpaper:dp-312&r=all



44. Separating uncertainty from heterogeneity in life cycle 
    earnings
  
    Cunha, Flavio (University of Chicago)
    Heckman, James (University of Chicago)
    Navarro, Salvador (University of Chicago)

This paper develops and applies a method for decomposing cross 
section variability of earnings into components that are 
forecastable at the time students decide to go to college (
heterogeneity) and components that are unforecastable. About 60 % 
of variability in returns to schooling is forecastable. This has 
important implications for using measured variability to price 
risk and predict college attendance.
 
Keywords: earnings; unforecastable; forecastable
JEL:      C33 D84 I21
Date:     2004-12-10
URL:      http://d.repec.org/n?u=RePEc:hhs:ifauwp:2006_006&r=all



45. School choice and segregation: evidence from an admission 
    reform
  
    Soderstrom, Martin (Uppsala University)
    Uusitalo, Roope (Labour Institute for Economic Research)

This paper studies the effects of school choice on segregation. 
We analyze the effect of a reform in Stockholm that changed the 
admission system of public upper secondary schools. Before the 
year 2000, students had priority to the school situated closest 
to where they lived, but from the fall of 2000 and onwards, 
admission is based on grades only. We show that the distribution 
of students over schools changed dramatically as a response to 
extending school choice. As expected, the new admission policy 
increased segregation by ability. However, segregation by family 
background, as well as, segregation between immigrants and 
natives also increased significantly.
 
Keywords: School choice; segregation
JEL:      I21 I28 J24
Date:     2005-01-28
URL:      http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_007&r=all



46. Testing for Stationarity in Panel Data when Errors are 
    Serially Correlated. Finite-Sample Results
  
    Jonsson , Kristian (Department of Economics, Lund 
      University)

Abstract: In this paper, we study the small sample properties of 
the panel data stationarity test of Hadri (2000). We find that 
the previously suggested moments, that are to be used when 
standardizing the panel data stationarity test, cause size 
distortions when samples are small and serial correlation in the 
disturbance terms is allowed for. Instead, we supply 
standardizing moments that are to be used in a panel data 
stationarity test when samples are small and serial correlation 
in the disturbances may be an issue. We also document a serious 
small-sample bias in the panel data stationarity test when a 
linear trend is present in the data.
 
Keywords: Panel Data; Stationarity; Serial Correlation; Monte 
          Carlo Simulation
JEL:      C15 C23 C32 C33
Date:     2005-02-18
URL:      http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_016&r=all



47. Expected Life-Time Utility and Hedging Demands in a 
    Partially Observable Economy
  
    Lundtofte, Frederik (Department of Economics, Lund 
      University)

This paper analyzes the expected life-time utility and the 
hedging demands in a Lucas (1978) economy, in which the dividend 
drift term is unknown and mean-reverting. An expression for the 
individual investor’s expected life-time utility in equilibrium 
is derived, and his hedging demand is analyzed. The hedging 
demand consists of two components, which could work in opposite 
directions so that a conservative investor may end up having a 
positive hedging demand. Interestingly, this differs from the 
theoretical findings in Brennan (1998), who analyzes the 
portfolio choice problem of an agent who learns about a constant 
expected stock return.
 
Keywords: learning; incomplete information; equilibrium; hedging 
          demands
JEL:      C13 G11 G12
Date:     2005-02-24
URL:      http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_017&r=all



48. Can An ”Estimation Factor” Help Explain Cross-Sectional 
    Returns?
  
    Lundtofte, Frederik (Department of Economics, Lund 
      University)

We show in a theoretical model that the expected excess return 
on any asset depends on its covariance not only with the market 
portfolio, but also with changes in the representative agent’s 
estimate. In the empirical specification, this ”estimation 
factor” is based on realized growth in aggregate dividends and 
earnings. We test our model by using GMM and compare it to the 
Fama-French model. The results suggest that the estimation factor 
is priced. Moreover, the Hansen-Jagannathan distances show that 
the conditional and static versions of our derived model perform 
on a par with the corresponding versions of the Fama-French model.
 
Keywords: learning; incomplete information; equilibrium; factor 
          pricing models
JEL:      C13 G12
Date:     2005-02-24
URL:      http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_018&r=all



49. Legislative Malapportionment and the Politicization of 
    Germany's Intergovernmental Transfer System
  
    Hans Pitlik
    Friedrich Schneider
    Harald Strotmann

JEL:      D7 H77
URL:      http://d.repec.org/n?u=RePEc:hoh:hohdip:254&r=all



50. Do Firms Benefit from Multiple Banking Relationships?: 
    Evidence from Small and Medium-Sized Firms in Japan
  
    Masayo Shikimi (Tomiyama)

This paper examines empirically the effects of multiple banking 
relationships on the cost and availability of credit. The 
analysis is based on an unbalanced panel data set for Japanese 
small and medium-sized firms over the period 2000-2002. The 
Hausman-Taylor estimator is used to allow for possible 
correlation between unobservable heterogeneity among firms and 
multiple banking relationships. The results suggest that the cost 
of credit is positively correlated with the number of banking 
relationships when the endogeneity of the banking relationships 
is considered. Multiple banking relationships have a positive 
effect on the availability of credit for financially constrained 
firms.
 
URL:      http://d.repec.org/n?u=RePEc:hst:hstdps:d04-70&r=all



51. The Utility Standard and the Patentability of Intermediate 
    Technology
  
    Reiko Aoki
    Sadao Nagaoka

We explore the consequences of the utility requirement on speed 
of innovation and welfare. A weak utility requirement means that 
an intermediate technology with no immediate application or 
commercial value is patentable. Using a model of two stage 
innovation with free entry and trade secrecy, we identify cases 
when patentability is beneficial to society. Although a firm may 
undertake basic research protected by trade secrecy, 
patentability is still desirable when spillover is high and 
innovation costs are high. However, patentability becomes less 
desirable as basic research costs decrease. We also show that 
high value of final technology by itself does not favor non-
patentability and identify condition when it does.
 
Keywords: utility requirement, basic research, patentability, 
          innovation
JEL:      O34 O31
URL:      http://d.repec.org/n?u=RePEc:hst:hstdps:d04-75&r=all



52. Explaining Foreign Direct Investments in Gujarat: A Study 
    based on an Opinion Survey of Persons Involved in the Foreign 
    Direct Investment Process
  
    Morris Sebastian

Gujarat has attracted more foreign direct investment (FDD than 
what its GDP size alone would suggest. But relative to its peer 
states (especially Tamilnadu, Delhi, Maharashtra and Karnataka, 
and possibly Andhra Pradesh) it has fallen short significantly. 
The above findings which we made in an earlier study are further 
confirmed through a survey of opinions and views of CEOs and 
others intimately concerned with the foreign investment decision 
process. The survey also brought out the crucial importance of 
infrastructure, and the quality of governance. Interestingly most 
of the problems are capable of being corrected through 
appropriate government action. The intrinsic exploitable 
advantages of the state remain large. Electricity supply - its 
poor quality, inadequacy and high price; the adverse law and 
order situation including the impact of the communal strife and 
riots and the perception of biases in the implementation of law 
have been important in adversely affecting FDI. The large 
comparative advantage of the state in industry and manufacturing 
implies that the states' future is intimately dependent upon the 
growth of manufacturing in India. Success therefore involves 
coordination with the central government, because many of the 
difficulties in moving forward and in evolving into modern 
industries faced by Gujarat's existing manufacturing involve 
policy infirmities at the central/macroeconomic level. Important 
among these are the. `inverted tariff structures' that many of 
Gujarat's manufacturing, especially those in the small and medium 
scale industries, face and the tame pricing of the Indian rupee, 
in contrast to East Asian countries’ strategy of undervaluing 
their currencies. There is much that Gujarat can do to attract 
the new manufacturing and service industries (offshore industries 
of a wide variety, IT and biotechnology industries). Besides the 
improvement of Governance especially with regard to control over 
communal strife, it would need to improve the quality of life in 
cities and overcome the infrastructural constraints especially 
with regard to education and availability of technical skills. If 
Ahmedabad its principal city, can improve its ranking in the 
hierarchy of central places, Gujarat could successfully attract a 
lot more FDl, and other non-equity forms of collaboration in the 
new manufacturing and service industries.
 
Date:     2005-02-20
URL:      http://d.repec.org/n?u=RePEc:iim:iimawp:2005-02-01&r=all



53. A Decomposition of total factor productivity growth: A 
    Regional analysis of Indian industrial manufacturing growth
  
    Surender Kumar (National Institute of Public Finance and 
      Policy)

Total factor productivity (TFP) growth in industrial 
manufacturing is measured for 15 major Indian states for the 
period 1982-83 to 2000-01 using non-parametric linear programming 
methods. TFP growth is decomposed into efficiency and 
technological changes and also measure for the bias in technical 
change. The resulting information is used to examine whether the 
post-reform period shows any improvement in productivity and 
efficiency in comparison to the pre-reform one. Findings of the 
present exercise indicate the improvement in TFP. The recent 
change in TFP is governed by the technical progress in contrast 
to similar gain caused by the improvement in technical efficiency 
in the pre-reform regime. The technological progress in state 
manufacturing exhibited a capital using bias during the study 
period. Regional differences in TFP persist, although the 
magnitude of variation has declined in the post-reform period. 
Moreover, it is also found that there is a tendency of 
convergence in terms of TFP growth rate among Indian states 
during the post-reform years and only the states that were 
technically efficient at the beginning of the reform remain 
innovative.
 
Date:     2004-12
URL:      http://d.repec.org/n?u=RePEc:ind:nipfwp:22&r=all



54. Cities with suburbs: Evidence from India
  
    Kala Seetharam Sridhar (National Institute of Public Finance 
      and Policy)

For a country like India that contains a large number of Urban 
Agglomerations (UAs), suburbanisation has drawn little attention 
of the literature. I focus on this sparsely studied issue in this 
work. I calculate population, household and employment density 
gradients for India's UAs, using Mills' two-point technique. Next,
I estimate population, household and employment gradient 
regressions. I find that the size of UA and lagged value of the 
population gradient explain population suburbanisation, as we 
would expect. I find evidence from the employment suburbanisation 
equation that it is the jobs that follow people, and not vice-
versa, consistent with what has been found in the literature. In 
the employment sub-sector regressions, I find that the skills of 
the labor force are the most important factor explaining 
suburbanisation of manufacturing, transport, communications and 
trade/commerce jobs in India's urban areas. I conclude with 
policy implications.
 
Keywords: India, Suburbanisation, Density Gradient, Mills' two-
          point technique, Population gradient, Employment 
          gradient, Household gradient, Gradient regressions, 
          Exponential density function
JEL:      R11 R12 R23 O18
Date:     2004-12
URL:      http://d.repec.org/n?u=RePEc:ind:nipfwp:23&r=all



55. Projection of quarterly corporate and income tax collection
  
    A. L. Nagar (National Institute of Public Finance and Policy)
    Sanjay Kumar (Department of Income Tax, New Delhi)
    Dev Ashish (National Institute of Public Finance and Policy)

Date:     2004-12
URL:      http://d.repec.org/n?u=RePEc:ind:nipfwp:24&r=all



56. Multiple board appointments and firm performance in emerging 
    economies: Evidence from India
  
    Jayati Sarkar (Indira Gandhi Institute of Development 
      Research)
    Subrata Sarkar (Indira Gandhi Institute of Development 
      Research)

The relation between multiple directorships, busy directors and 
firm performance has been researched predominantly in the context 
of developed economies, notably the US. This paper extends the 
existing literature on multiple directorships in two ways; first, 
by providing additional evidence on its effect on firm 
performance, but with respect to an emerging economy, India, and 
secondly, by suggesting an alternative measure of directorial 
"busyness" that is more general in its applicability compared to 
those that have been applied in the existing literature. Using a 
sample of 500 large firms from the Indian corporate sector for 
the year 2002-03, the paper finds multiple directorships by 
independent directors to correlate positively with firm value 
thereby supporting the "quality hypothesis" that busy directors 
are likely to be better directors, a result that is different 
from the existing evidence on busy directors. Multiple 
directorships by insider directors are, however, negatively 
related to firm performance. Estimation of group and non-group 
companies separately reveals that the quality effect of 
independent directors persists for the former but disappears for 
the latter. In general, the results suggest that the relation 
between "busy" directors and firm performance may depend on the 
institutional context and on the type of director.
 
Keywords: Multiple Directorships, Busy Directors, Firm 
          Performance
JEL:      G30 G39 K22
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:ind:igiwpp:2005-001&r=all



57. Income inequality and self-rated health status: Evidence 
    from the European Community Household Panel
  
    Hildebrand, Vincent (Department of Economics, Glendon 
      College, York University, Canada and CEPS/INSTEAD, G.-D. 
      Luxembourg)
    Van Kerm, Philippe (CEPS/INSTEAD, G.-D. Luxembourg)

We examine the effect of income inequality on individual self-
rated health status in a pooled sample of 10 member states of the 
European Union using longitudinal data from the European 
Community Household Panel (ECHP) survey. Taking advantage of the 
longitudinal and cross-national nature of our data, and carefully 
modelling the self-reported health information, we avoid several 
of the pitfalls suffered by earlier studies on this topic. We 
calculate income inequality indices measured at two standard 
levels of geography (NUTS-0 and NUTS-1) and find consistent 
evidence that income inequality is negatively related to self-
rated health status in the European Union for both men and women. 
However, despite its statistical significance, the magnitude of 
the impact of inequality on health is small.
 
Keywords: Self-rated health; Income inequality; European Union; 
          Panel data
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:irs:iriswp:2005-01&r=all



58. Tariff Equivalent of Technical Barriers to Trade with 
    Imperfect Substitution and Trade Costs
  
    Yue, Chengyan
    Beghin, John C.
    Jensen, Helen H.

The price-wedge method yields a tariff-equivalent estimate of 
technical barriers to trade (TBT). An extension of this method 
accounts for imperfect substitution between domestic and imported 
goods and incorporates recent findings on trade costs. We explore 
the sensitivity of this revamped tariff-equivalent estimate to 
its determinants (substitution elasticity, preference for home 
good, trade cost, and to the reference data chosen). We use the 
approach to investigate the ongoing U.S.-Japan apple trade 
dispute and find that removing the Japanese TBT would yield 
limited export gains to the United States. We then draw policy 
implications of our findings.
 
Date:     2005-02-21
URL:      http://d.repec.org/n?u=RePEc:isu:genres:12252&r=all



59. Economic and Environmental Co-benefits of Carbon 
    Sequestration in Agricultural Soils: Retiring Agricultural 
    Land in the Upper Mississippi River Basin
  
    Feng, Hong-Li
    Kurkalova, Lyubov
    Kling, Catherine L.
    Gassman, Philip W.

This study investigates the carbon sequestration potential and 
co-benefits from policies aimed at retiring agricultural land in 
the Upper Mississippi River Basin, a large, heavily agricultural 
area. We extend the empirical measurement of co-benefits from the 
previous focus on environmental benefits to include economic 
transfers. These transfers have often been mentioned as a co-
benefit, but little empirical work measuring the potential 
magnitude of these transfers has previously been undertaken. We 
compare and contrast five targeting schemes, each based on 
maximizing different physical environmental measures, including 
carbon sequestration, soil erosion, nitrogen runoff, nitrogen 
leaching, as well as the area enrolled in the program. In each 
case, the other environmental benefits and economic transfers are 
computed. We find that the geographic distribution of co-benefits 
including economic transfers) varies significantly with the 
benefit targeted, implying that policy design related to 
targeting can have very important implications for both 
environmental conditions and income distributions in sub-regions.
 
Date:     2005-02-22
URL:      http://d.repec.org/n?u=RePEc:isu:genres:12253&r=all



60. Evaluating the Saskatchewan Short-Term Hog Loan Program
  
    Lien, Donald
    Hennessy, David A.

The Saskatchewan short-term hog loan program of 2002 provided a 
non-market credit line to participating hog producers. The 
repayment conditions for cash advances committed to by the 
provincial government depend on later hog prices, and so the 
program has derivative contract attributes. We model the 
contracts and use an estimated spot price stochastic process to 
establish summary statistics for producer benefits from the 
program.
 
Date:     2005-02-24
URL:      http://d.repec.org/n?u=RePEc:isu:genres:12254&r=all



61. Profiting from innovative user communities: How firms 
    organize the production of user modifications in the computer 
    games industry
  
    Lars Bo Jeppesen

Modding – the modification of existing products by consumers 
– is increasingly exploited by manufacturers to enhance product 
development and sales. In the computer games industry modding has 
evolved into a development model in which users act as unpaid 
“complementors” to manufacturers’ product platforms. This 
article explains how manufacturers can profit from their 
abilities to organize and facilitate a process of innovation by 
user communities and capture the value of the innovations 
produced in such communities. When managed strategically, two 
distinct, but not mutually exclusive business models appear from 
the production of user complements: firstly, a manufacturer can 
let the (free) user complements “drift” in the user 
communities, where they increase the value to consumers of owning 
the given platform and thus can be expected to generate increased 
platform sales, and secondly, a manufacturer can incorporate and 
commercialize the best complements found in the user communities.
 
Keywords: Innovation, modding, user communities, software 
          platform, business model
JEL:      L21 L23 O31 O32
URL:      http://d.repec.org/n?u=RePEc:ivs:iivswp:04-03&r=all



62. The Management of Projects and Product Experimentation: 
    Lessons from the Entertainment Industries
  
    Mark Lorenzen & Lars Frederiksen

The paper analyses management of product innovation in project-
based industries, offering a view on management not only of firms,
but also of markets. It first argues that projects are prominent 
in industries where the nature of consumer demand means that 
product innovation takes place as experimentation. Then, the 
paper argues that if skills needed for projects are very diverse 
and projects are complex, there are few internal managerial 
economies of projects, and the scope for management then 
transcends the boundaries of firms. In these cases, markets 
become organized in combinations of people, contracts, and other 
institutions, in order to facilitate the coordination of market-
based projects. While contracts play a role, a continuous, active 
role of knowledgeable managers (leaders and boundary spanners) is 
also often necessary. Such managers ? and thus (core parts of) 
whole industries ? are embedded in project ecologies at 
particular places, which is why we see geographical clusters in 
many project-based industries. The paper is mainly conceptual, 
but develops its argument by drawing examples from the 
Entertainment industries throughout.
 
Keywords: Project organization, product innovation, portfolio 
          management of projects, entertainment
JEL:      L22 O31 L82
URL:      http://d.repec.org/n?u=RePEc:ivs:iivswp:05-01&r=all



63. Marriage and the City
  
    Gautier, Pieter A. (Free University of Amsterdam, Tinbergen 
      Institute and IZA Bonn)
    Svarer, Michael (University of Aarhus)
    Teulings, Coen N. (SEO, University of Amsterdam and 
      Tinbergen Institute)

Do people move to cities because of marriage market 
considerations? In cities singles can meet more potential 
partners than in rural areas. Singles are therefore prepared to 
pay a premium in terms of higher housing prices. Once married, 
the marriage market benefits disappear while the housing premium 
remains. We extend the model of Burdett and Coles (1997) with a 
distinction between efficient (cities) and less efficient (non-
cities) search markets. One implication of the model is that 
singles are more likely to move from rural areas to cities while 
married couples are more likely to make the reverse movement. A 
second prediction of the model is that attractive singles benefit 
most from a dense market (i.e. from being choosy). Those 
predictions are tested with a unique Danish dataset.
 
Keywords: marriage, search, mobility, city
JEL:      J12 J64
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1491&r=all



64. Downward Nominal Wage Rigidity in Europe: An Analysis of 
    European Micro Data from the ECHP 1994-2001
  
    Knoppik, Christoph (University of Regensburg)
    Beissinger, Thomas (University of Kaiserslautern, University 
      of Regensburg and IZA Bonn)

This paper substantially extends the limited available evidence 
on existence and extent of downward nominal wage rigidity in the 
European Union and the Euro Area. For this purpose we develop an 
econometric multi-country model based on Kahn’s (1997) 
histogram-location approach and apply it to employee micro data 
from the European Community Household Panel (ECHP) for twelve of 
the EU’s current member states. Our estimates for the degree of 
downward nominal wage rigidity on the national as well as the EU-
wide level point to marked downward nominal wage rigidity within 
the European Union.
 
Keywords: downward nominal wage rigidity, wage stickiness, 
          European Community Household Panel, ECHP, histogram-
          location approach; European Union, Euro area
JEL:      J30 E24
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1492&r=all



65. Retained State Shareholding in Chinese PLCs: Does Government 
    Ownership Reduce Corporate Value?
  
    Tian, Lihui (London Business School and Peking University)
    Estrin, Saul (London Business School and IZA Bonn)

The role of government shareholding in corporate performance is 
central to an understanding of China’s newly privatized large 
firms. In this paper, we analyze shareholders as agents that can 
both harm and benefit companies. We examine the ownership 
structure of 826 listed corporations and find that government 
shareholding is surprisingly large. Its effect on corporate value 
is found to be negative, but non-monotonic. Up to a certain 
threshold, corporate value decreases as government shareholding 
stakes increase, but beyond this corporate value begins to 
increase. We interpret this in terms of ownership concentration 
and the advantages of government partiality.
 
Keywords: government shareholding, corporate governance, China
JEL:      G32 G34 G15 L33
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1493&r=all



66. People People: Social Capital and the Labor-Market Outcomes 
    of Underrepresented Groups
  
    Borghans, Lex (ROA, Maastricht University and IZA Bonn)
    ter Weel, Bas (MERIT, Maastricht University and IZA Bonn)
    Weinberg, Bruce A. (Ohio State University and IZA Bonn)

Despite indications that interpersonal interactions are 
important for understanding individual labor-market outcomes and 
have become more important over the last decades, there is little 
analysis by economists. This paper shows that interpersonal 
interactions are important determinants of labor-market outcomes, 
including occupations and wages. We show that technological and 
organizational changes have increased the importance of 
interpersonal interactions in the workplace. We particularly 
focus on how the increased importance of interpersonal 
interactions has affected the labor-market outcomes of 
underrepresented groups. We show that the acceleration in the 
rate of increase in the importance of interpersonal interactions 
between the late 1970s and early 1990s can help explain why 
women’s wages increased more rapidly, while the wages of blacks 
grew more slowly over these years relative to earlier years.
 
Keywords: interpersonal interactions, wage level and structure, 
          economics of minorities and races and gender, social 
          capital
JEL:      J16 J21 J24 J31
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1494&r=all



67. Following Germany's Lead: Using International Monetary 
    Linkages to Identify the Effect of Monetary Policy on the 
    Economy
  
    di Giovanni, Julian (IMF)
    McCrary, Justin (University of Michigan)
    von Wachter, Till (Columbia University and IZA Bonn)

Forward-looking behavior on the part of the monetary authority 
leads least squares estimates to understate the true growth 
consequences of monetary policy interventions. We present 
instrumental variables estimates of the impact of interest rates 
on real output growth for several European countries, using 
German interest rates as the instrument. We compare this 
identification strategy to the vector autoregression approach, 
and give an interpretation of our estimates that is appropriate 
in a dynamic context. Moreover, we show that the difference 
between least squares and instrumental variables estimates 
provides bounds for the degree of endogeneity in monetary policy. 
The results confirm a considerable downward bias of estimates 
that do not account for potential forward-looking monetary policy 
decisions. The bias is higher for countries whose monetary policy 
was more independent of Germany.
 
Keywords: monetary policy, forward looking bias, instrumental 
          variables
JEL:      E52 J60
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1495&r=all



68. The Impact of Parental Income and Education on the Schooling 
    of Their Children
  
    Chevalier, Arnaud (University of Kent, London School of 
      Economics and IZA Bonn)
    Harmon, Colm (University College Dublin, CEPR and IZA Bonn)
    O’Sullivan, Vincent (University College London)
    Walker, Ian (University of Warwick, Institute of Fiscal 
      Studies and IZA Bonn)

This paper addresses the intergeneration transmission of 
education and investigates the extent to which early school 
leaving (at age 16) may be due to variations in permanent income, 
parental education levels, and shocks to income at this age. 
Least squares estimation reveals conventional results - stronger 
effects of maternal education than paternal, and stronger effects 
on sons than daughters. We find that the education effects remain 
significant even when household income is included. Moreover, 
decomposing the income when the child is 16 between a permanent 
component and shocks to income at age 16 only the latter is 
significant. It would appear that education is an important input 
even when we control for permanent income but that credit 
constraints at age 16 are also influential. However, when we use 
instrumental variable methods to simultaneously account for the 
endogeneity of parental education and paternal income, we find 
that the strong effects of parental education become 
insignificant and permanent income matters much more, while the 
effects of shocks to household income at 16 remain important. A 
similar pattern of results are reflected in the main measure of 
scholastic achievement at age 16. These findings have important 
implications for the design of policies aimed at encouraging 
pupils to remain in school longer.
 
Keywords: early school leaving, intergenerational transmission
JEL:      I20 J62
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1496&r=all



69. The Spot Market Matters: Evidence on Implicit Contracts from 
    Britain
  
    Devereux, Paul J. (UCLA and IZA Bonn)
    Hart, Robert A. (University of Stirling and IZA Bonn)

Based on the methodology of Beaudry and DiNardo (1991), this 
paper investigates the relative importance of the spot market and 
implicit contracts in the determination of British real wages. 
Empirical work is carried out separately for males and females 
with individuallevel data taken from the New Earnings Survey 
Panel for the years 1976 to 2001. In contrast to previous studies 
that used North American data, the spot market is found to be 
more important than implicit contracts in determining real wages. 
Indeed, there is very little support for implicit contracts in 
these data. Further evidence is provided through the analysis of 
individual wage sequences. These suggest that the downwardly 
rigid wage sequences implied by implicit contracts with costless 
worker mobility are not prevalent in Britain.
 
Keywords: spot market wages, implicit contracts, unemployment, 
          wage sequences
JEL:      E24 E32 J31
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1497&r=all



70. Why So Unhappy? The Effects of Unionisation on Job 
    Satisfaction
  
    Bryson, Alex (Policy Studies Institute and CEP)
    Cappellari, Lorenzo (Catholic University of Milan, CESifo 
      and IZA Bonn)
    Lucifora, Claudio (Catholic University of Milan and IZA Bonn)

We use linked employer-employee data to investigate the job 
satisfaction effect of unionisation in Britain. We depart from 
previous studies by developing a model that simultaneously 
controls for the endogeneity of union membership and union 
recognition. We show that a negative association between 
membership and satisfaction only emerges where there is a union 
recognised for bargaining, and that such an effect vanishes when 
the simultaneous selection into membership and recognition is 
taken into account. We also show that ignoring endogenous 
recognition would lead to conclude that membership has a positive 
effect on satisfaction. Our estimates indicate that the 
unobserved factors that lead to sorting across workplaces are 
negatively related to the ones determining membership and 
positively related with those generating satisfaction, a result 
that we interpret as being consistent with the existence of 
queues for union jobs.
 
Keywords: job satisfaction, union membership, union recognition, 
          endogeneity
JEL:      J28 J51
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1498&r=all



71. A Quantitative Investigation of the Laffer Curve on the 
    Continued Work Tax: The French Case
  
    Hairault, Jean-Olivier (University of Paris I, EUREQUA, 
      CEPREMAP and IZA Bonn)
    Langot, Francois (University of Maine, GAINS and CEPREMAP)
    Sopraseuth, Thepthida (University of Evry, EPEE and CEPREMAP)

It is often argued that the tax on continued work should be 
removed by implementing actuarially fair schemes. However, these 
schemes cannot help fund the expected Social Security deficit. 
This paper proposes to give individuals only a fraction of the 
marginal actuarially fair incentives in case of postponed 
retirement. Social Security then faces a tradeoff between giving 
enough incentives to make individuals actually delay retirement 
and giving little increase in pensions in order to help finance 
its expected deficit. This trade-off is captured by a Laffer 
curve that we quantify on French data. Furthermore, we analyze 
the interactions between wealth and retirement behavior.
 
Keywords: retirement behavior and wealth, actuarially fair 
          benefits
JEL:      H31 H55 J26
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1499&r=all



72. Does Teacher Testing Raise Teacher Quality? Evidence from 
    State Certification Requirements
  
    Angrist, Joshua D. (MIT, NBER and IZA Bonn)
    Guryan, Jonathan (University of Chicago and NBER)

The education reform movement includes efforts to raise teacher 
quality through stricter certification and licensing provisions. 
Most US states now require public school teachers to pass a 
standardized test such as the Praxis. Although any barrier to 
entry is likely to raise wages in the affected occupation, the 
theoretical effects of such requirements on teacher quality are 
ambiguous. Teacher testing places a floor on whatever skills are 
measured by the required test, but testing is also costly for 
applicants. These costs shift teacher supply to the left and may 
be especially likely to deter high-quality applicants from 
teaching in public schools. Moreover, test requirements may 
disqualify some applicants that schools would otherwise want to 
hire. We use the Schools and Staffing Survey to estimate the 
effect of state teacher testing requirements on teacher wages and 
teacher quality as measured by educational background. The 
results suggest that state-mandated teacher testing increases 
teacher wages with no corresponding increase in quality.
 
Keywords: occupational licensure, education reform, worker 
          screening
JEL:      I28 J44 J45
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1500&r=all



73. Accounting for Differences in Labour Market Outcomes in 
    Great Britain: Regional Analysis Using the Labour Force Survey
  
    O'Leary, Nigel (University of Wales Swansea)
    Murphy, Philip D. (University of Wales Swansea)
    Latreille, Paul (University of Wales Swansea)
    Blackaby, David H. (University of Wales Swansea)
    Sloane, Peter J. (University of Wales Swansea and IZA Bonn)

Regional unemployment rates in Great Britain have narrowed 
dramatically in recent years. However, significant differences 
still remain in terms of both employment and economic inactivity 
rates, which may now better reflect relative labour market 
performance. This paper examines these differences in labour 
market outcomes using a unified empirical framework that 
decomposes regional differences in employment, economic 
inactivity and unemployment into components due to either 
structural or composition effects. The analysis highlights the 
important role that ill health and structural deficits currently 
play in accounting for regional differences in both employment 
and economic inactivity rates.
 
Keywords: regions, employment, unemployment, inactivity
JEL:      J21
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1501&r=all



74. Beware of Workaholics: Household Preferences and Individual 
    Equilibrium Utility
  
    Gersbach, Hans (University of Heidelberg and IZA Bonn)
    Haller, Hans (Virginia Tech)

This paper analyzes the effects of sociological changes in the 
form of a shift of influence within two-member households 
participating in labor and product markets. The most striking 
effects occur when household members differ in individual 
preferences and enjoy positive leisure-dependent externalities. 
For instance, a global sociological change where the 
“workaholic" member becomes more influential in each working 
class household can render the working class worse off. A binding 
restriction on the number of hours an individual is allowed to 
work can benefit all workers.
 
Keywords: household behavior, general equilibrium, externalities,
          labor supply
JEL:      D10 D50 J22
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1502&r=all



75. The Knowledge Lift: The Swedish Adult Education Program That 
    Aimed to Eliminate Low Worker Skill Levels
  
    Albrecht, James (Georgetown University and IZA Bonn)
    van den Berg, Gerard J. (Free University Amsterdam, IFAU 
      Uppsala, Tinbergen Institute, CEPR, IFS and IZA Bonn)
    Vroman, Susan (Georgetown University and IZA Bonn)

The Swedish adult education program known as the Knowledge Lift 
is unprecedented in its size and scope, aiming to raise the skill 
level of all low-skilled workers towards the medium level. This 
paper evaluates the effects of program participation on 
individual labor market outcomes, notably employment and annual 
income, as well as on the labor market equilibrium. For the 
effects at the individual level, we apply fixed effect methods 
allowing for treatment effect heterogeneity. The data are based 
on a number of matched longitudinal administrative data sets 
covering the full population of Sweden. For the equilibrium 
effects, we analyze an equilibrium search model with 
heterogeneous worker skills. This model is calibrated using pre-
program observations.
 
Keywords: returns to education, training, program evaluation, 
          wages, participation, unemployment, schooling, Swedish 
          labor market, selectivity bias, treatment effect
JEL:      J24 I28
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1503&r=all



76. Vive la Revolution! Long Term Returns of 1968 to the Angry 
    Students
  
    Maurin, Eric (Paris-Jourdan Sciences Economiques (PSE), CEPR 
      and IZA Bonn)
    McNally, Sandra (CEP, CEE, London School of Economics and 
      IZA Bonn)

The famous events of May 1968, starting with student riots, 
threw France into a state of turmoil. The period of 
‘revolution’ coincided with the time in which important 
examinations are undertaken. Normal procedures were abandoned and 
the pass-rate for various qualifications increased enormously. 
These events were particularly important for students at an early 
and highly selective) phase of higher education. They are shown 
to have pursued further years of education because thresholds 
were lowered at critical stages. These historic events provide a 
natural experiment to analyse the returns to years of higher 
education for the affected generation and to consider 
consequences for their children. Thus, we contribute to debate on 
two very controversial questions: What is the true causal 
relationship between educational attainment and its labour market 
value? Is there a causal relationship between the education of 
parents and that of their children? Unlike most of the literature,
we consider the effect of an intervention which alters an 
individual’s years of higher education rather than compulsory 
schooling. The results show a relatively high return, which might 
indicate that private returns are higher for the former. 
Furthermore, the treatment group is on the margin of the higher 
education system. This study suggests that expanding the 
university system to accommodate such people can yield very high 
private returns. Hence our study suggests very positive effects 
of the ‘1968 events’ for affected cohorts and is of 
contemporary relevance given the current debate in many countries 
about widening access to higher education.
 
Keywords: higher education, intergenerational, wages
JEL:      I2
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:iza:izadps:dp1504&r=all



77. Competition and Growth in a Vintage Knowledge Model
  
    Peter Funk

This paper models the relationship between growth, technology-
lifetime, entry, and competition in a vintage-knowledge model of 
endogenous growth and perfect competition. The model has a unique 
steady state REE equilibrium. Variations of R&D-efficiency lead 
to a negative relation between growth and vintage-lifetime and 
indicate a non-monotonic relation between growth and competition. 
A shift of population size and its growth rates have 
qualitatively different consequences here than in standard models.
The extent of entry constitutes a buffer, neutralizing the 
effect of population size or population growth rates on per-
capita income levels and growth rates.
 
Keywords: Endogenous Growth, Vintage-Model, Perfect Competition
JEL:      D40 D90 O30 O40
Date:     2005-01-30
URL:      http://d.repec.org/n?u=RePEc:kls:series:0015&r=all



78. Inflation and Innovation-driven Growth
  
    Peter Funk
    Bettina Kromen

This paper models the relationship between inflation and steady 
state growth in a model combining standard Schumpeterian growth 
with a standard New Keynesian specification of nominal price 
rigidity. Positive money growth has two clear-cut countervailing 
effects on the incentive to innovate. Past price rigidity causes 
the use of an inefficiently large quantity of cheap old 
intermediate goods, reducing demand for new ones and hence, the 
incentive to innovate. Future price rigidity erodes the new 
good’s relative price, increasing demand and therefore the 
current incentive to innovate. In numerical calibrations the 
negative effect of inflation on growth dominates.
 
Keywords: Inflation, endogenous growth, price rigidity
JEL:      E31 O30 O42
Date:     2005-02-15
URL:      http://d.repec.org/n?u=RePEc:kls:series:0016&r=all



79. The Law of one Price in the Russian Economy
  
    Konstantin Gluschenko

Taking the law of one price as a test for market integration, 
the spatial set-up of Russia’s market integration over 1994-
2000 is analyzed with the use of time series of the cost of a 
staples basket across Russian regions. The law is found to hold 
for about 50% to 60% of Russian regions, estimates of a threshold 
model suggesting rather high barriers to inter-regional trade. To 
reveal whether there is a movement towards market integration 
among non-integrated regions, dynamics of cross-sectional 
distribution of prices receives study. The results indicate that 
such a tendency does take place. An effort is made to identify 
forces responsible for Enter-regional price disparities.
 
Keywords: market integration, price dispersion, price 
          convergence, Russia, Russian regions
JEL:      P22 P25 R15 R19
URL:      http://d.repec.org/n?u=RePEc:lic:licosd:15204&r=all



80. On the Evolution of Size and Productivity in Transition: 
    Evidence from Slovenian Manufacturing Firms
  
    Saso Polanec

This paper compiles a set of stylized facts on the evolution of 
Firm size and labor and total factor productivity distributions 
during the process of transition. These facts are based on the 
data for all Slovenian manufacturing firms active between 1994 
and 2003. Stylized picture of transition can be summarized as 
follows. Initially, we can distinguish between two types of firms:
small and on average more productive and large and on average 
less productive firms. Removal of institutional restrictions has 
spurred growth of small firms and entry of new firms on one hand 
and decline and exit of large firms on the other. These 
simultaneous shifts have transformed the shape of firm size 
distribution from bimodal into unimodal. While labor and total 
factor productivity distributions exhibit large right-hand shifts 
and lower heterogeneity over time, firm productivity rankings 
changed substantially. Smaller firms, which were initially more 
productive, exhibited lower productivity growth rates and thus 
gradually lost their advantage. Commonly held view of transition 
as a process of reallocation of resources from inefficient state 
to efficient private firms is at odds with our results of 
aggregate labor and total factor productivity decompositions. 
Almost half of aggregate labor productivity growth can be 
explained by within firm growth and the rest by reallocation. Our 
evidence suggests that within firm growth seems to be related to 
the process of technological catching up of less productivelarge 
firms. These stylized facts may give a wrong impression of 
transition being a deterministic process, while it is not. The 
process is stochastic and thus similar to those found for 
established market economies. Hence theoretical models of 
transition should reflect deterministic features that we outlined 
and preserve stochastic elements introduced in now standard 
models of industrial dynamics.
 
Keywords: manufacturing, size, labor productivity, total factor 
          productivity, catching up, distributions, transition
JEL:      L11 L16 L60
URL:      http://d.repec.org/n?u=RePEc:lic:licosd:15404&r=all



81. Listen to the Radio! Monitoring, Media and Capture of Public 
    Funds in Madagascar
  
    Nathalie Francken
    Bart Minten
    Johan F.M. Swinnen

Local capture of public expenditures is an important problem for 
service delivery and poverty reduction in developing countries. 
Standard anticorruption institutions may not be effective, as 
these tend often to be corrupt themselves. This paper analyses 
the impact of monitoring and information distribution through the 
mass media on local capture of public expenditures on education 
in Madagascar in 2002-2003. We use survey data to assess capture 
in both cash and in-kind programs, at district and at school 
level. We find that local capture can be successfully constrained 
through a combination of monitoring and media programs. In 
addition to monitoring by the beneficiaries (“from below”), 
central monitoring (“from above”) is important. More 
transparent funding mechanisms and access to mass media reduce 
capture. However, the impact of the media is conditional on the 
characteristics of the population. In communes characterized by 
high illiteracy, the impact of newspaper and poster campaigns is 
limited, and radios are more important to reduce capture.
 
URL:      http://d.repec.org/n?u=RePEc:lic:licosd:15505&r=all



82. Bargaining under Incomplete Information, Fairness, and the 
    Hold-Up Problem
  
    von Siemens, Ferdinand

In the hold-up problem incomplete contracts cause the proceeds 
of relation specific investments to be allocated by ex-post 
bargaining. The present paper investigates the efficiency of 
incomplete contracts if individuals have heterogeneous 
preferences implying heterogeneous bargaining behavior and - 
equally important - preferences are private information. As the 
sunk investment costs can thus potentially signal preferences, 
they can influence beliefs and consequently bargaining outcomes. 
The necessities of signalling are shown to generate very strong 
investment incentives. These incentives are based on the desire 
not to reveal information that is unfavorable in the ensuing 
bargaining. After finding all perfect Bayesian equilibria in pure 
strategies, the paper derives the necessary and sufficient 
conditions under which it is optimal to invest and trade 
efficiently.
 
JEL:      L22 K12 J33 D82 D63 D23 C70
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:lmu:muenec:518&r=all



83. On the Early Holocene: Foraging to Early Agriculture
  
    Nicolas Marceau
    Gordon Myers

We consider a world in which the mode of food production, 
foraging or agriculture, is endogenous, and in which technology 
grows exogenously. Within a model of coalition formation, we 
allow individuals to rationally form cooperative communities (
bands) of foragers or farmers. At the lowest levels of technology,
equilibrium entails the grand coalition of foragers, a 
cooperative structure which avoids over-exploitation of the 
environment. But at a critical state of technology, the 
cooperative structure breaks down through an individually 
rational splintering of the band. At this stage, there can be an 
increase in work and through the over-exploitation of the 
environment, a food crisis. In the end, technological growth may 
lead to a one-way transition from foraging to agriculture.
 
Keywords: Foraging, Agriculture, Transition, Coalition Formation,
          Cooperation
JEL:      N50 O13
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:lvl:lacicr:0502&r=all



84. Growth, Uncertainty and Finance.
  
    K Blackburn
    D Varvarigos

We study the effects of uncertainty on long-run growth in two 
model economies, where households fund risky investment projects 
of entrepreneurs in the presence of financial market 
imperfections. Imperfections in the first model are due to 
asymmetric information which is resolved through costly state 
verification. In this case, some entrepreneurs may decide at the 
outset not to borrow and not to run projects. Imperfections in 
the second model are due to incomplete enforceability of loan 
contracts. In this case, all entrepreneurs are willing to borrow, 
but some of them may choose not to run projects, preferring to 
abscond with their loans, instead. We show that, in both cases, 
an increase in uncertainty increases the rate of interest on 
loans which increases the number of entrepreneurs who abstain 
from running projects. This reduces capital accumulation and 
growth. We also show that financial market frictions have similar 
effects, and that the effects of uncertainty disappear when these 
frictions are absent.
 
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:man:cgbcrp:48&r=all



85. Elderly Households and Housing Wealth: Do They Use It or 
    Lose It?
  
    Lina Walker (Unversity of Michigan)

Over 80 percent of households in their 50s are homeowners and 
housing wealth accounts for over half of total household wealth 
for most of these homeowners. The evidence in the literature on 
whether the elderly are consuming their housing wealth has been 
mixed. Because home sales are infrequent and a high proportion of 
the elderly continue to own in old age, it appears that the 
elderly are not consuming housing wealth. There are, however, 
indications that housing wealth may be a form of self-insurance 
and that housing wealth is consumed, albeit at very old ages. To 
date, however, the evidence to support that hypothesis has been 
weak. This paper examines whether predictors of housing sales are 
consistent with the insurance story by looking at the extent to 
which indicators of changes in economic status and access to 
alternate insurance explain housing sales. The paper also 
examines the extent to which changes in health status predict 
housing sales. The results of the probit appear to indicate that, 
by and large, housing sales in old age for single households is 
mostly driven by worsening health. Widowhood has a large effect 
on increasing the probability of selling the house and the effect 
is larger if the husband is the surviving spouse. There are 
indications that poor married homeowners are consuming housing 
wealth and also indications that married households are 
responding to Medicaid tax incentives. This evidence seems to 
suggest that, at least among married households, housing 
decisions are financially motivated; however, the evidence does 
not by itself validate the insurance story.
 
Date:     2004-01
URL:      http://d.repec.org/n?u=RePEc:mrr:papers:wp070&r=all



86. Life, Death, and the Economy: Mortality Change in 
    Overlapping-Generations Model
  
    Qi Li (Stanford University)
    Shripad Tuljapurkar (Stanford University)

Demographers have shown that there are regularities in mortality 
change overtime, and have used these to forecast changes due to 
population aging. Such models leave out potential economic 
feedbacks that should be captured by dynamic models such as the 
general-equilibrium, overlapping-generations model first studied 
by Yaari and Blanchard. Previous analytical and simple numerical 
work by economists has focused on comparative statics and used 
simplistic representations of mortality, such as the assumption 
of a constant age-independent death rate, or some parametric 
approximation to a survival curve. We show that it is straight 
forward to analyze equilibria in such models if we work with the 
probability distribution of the age at death. US and other data 
show that this distribution can be plausibly described by a 
normal distribution {for this case we obtain analytical results. 
For the general case we have numerical results. We show that a 
proper accounting for the uncertainty of when one dies has 
significant qualitative and quantitative effects on the 
equilibria of such economic models. There are, in turn, 
significant lessons to be drawn for models of future fiscal 
policy.
 
Date:     2004-01
URL:      http://d.repec.org/n?u=RePEc:mrr:papers:wp072&r=all



87. Small Concentration Asymptotics and Instrumental Variables 
    Inference
  
    D. S. Poskitt
    C. L. Skeels

Poskitt and Skeels (2003) provide a new approximation to the 
sampling distribution of the IV estimator in a simultaneous 
equations model, the approximation is appropriate when the 
concentration parameter associated with the reduced form model is 
small. A basic purpose of this paper is to provide the 
practitioner with easily implemented inferential tools based upon 
extensions to these small concentration asymptotic results. We 
present various approximations to the sampling distribution of 
functions of the IV estimator based upon small concentration 
asymptotics, and investigate hypothesis testing procedures and 
confidence region construction using these approximations. It is 
shown that the test statistics advanced are asymptotically 
pivotal and that the associated critical regions generate locally 
uniformly most powerful invariant tests. The confidence regions 
are also shown to be valid. The small-concentration asymptotic 
approximations lead to a non-standard application of standard 
distributions, facilitating numerical implementation using 
commonly available software.
 
Keywords: IV estimator, concentration parameter, small 
          concentration asymptotics, hypothesis testing, 
          confidence region construction, valid inference.
JEL:      C12 C16 C30 C50
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:msh:ebswps:2005-4&r=all



88. The Globalization of Trade and Democracy, 1870-2000
  
    J. Ernesto Lopez-Cordova
    Christopher M. Meissner

We study whether international trade fosters democracy. The 
likely endogeneity between democracy and trade is addressed via 
the gravity model of trade, allowing us to obtain a measure of 
natural openness. This serves as our instrumental variable for 
actual trade openness a la Frankel and Romer (1999). We use this 
powerful instrument to obtain estimates of the causal impact of 
openness on democratization. A positive impact of openness on 
democracy is apparent from about 1895 onwards. Late nineteenth 
century trade globalization may have helped generate the "first 
wave" of democratization. Between 1920 and 1938 countries more 
exposed to international trade were less likely to become 
authoritarian. Finally, our post-World War II results suggest 
that a one standard deviation increase in trade with other 
countries could bring countries like Indonesia, Russia or 
Venezuela to be as democratic as the US, Great Britain or France. 
We also see some variation in the impact of openness by region 
and note that commodity exporters and petroleum producers do not 
seem to become more democratic by exporting more of such items.
 
JEL:      F1 N0
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11117&r=all



89. Lessons from the Technology of Skill Formation
  
    James J. Heckman

This paper discusses recent advances in our understanding of 
differences in human abilities and skills, their sources, and 
their evolution over the lifecycle.
 
JEL:      J24 J31 I20
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11142&r=all



90. Trade Protection and Industry Wage Structure in Poland
  
    Chor-ching Goh
    Beata Smarzynska Javorcik

This study examines the impact of Poland%u2019s trade 
liberalization 1994-2001 on the industry wage structure. The 
liberalization was undertaken in preparation for Poland%u2019s 
accession to the European Union and was more pronounced in 
industries with larger shares of unskilled labor. Our analysis 
indicates that a decrease in an industry tariff was associated 
with higher wages being earned by workers employed in the 
industry, controlling for worker characteristics and geographic 
variables. The result is robust to including year and industry 
fixed effects, controlling for industry-level exports, imports, 
concentration, stock of foreign direct investment and capital 
accumulation. The finding is consistent with liberalization 
increasing competitive pressures, forcing firms to restructure 
and improve their productivity, which in turn translates into 
higher profits being shared with workers. It could also be 
potentially attributed to trade liberalization lowering the costs 
of imported inputs which enhances firm profitability. The result 
holds when skilled workers are excluded from the sample, thus 
suggesting that reductions in trade barriers benefited the 
unskilled in terms of an increase in wages.
 
JEL:      F16
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11143&r=all



91. Why is Long-Horizon Equity Less Risky? A Duration-Based 
    Explanation of the Value Premium
  
    Martin Lettau
    Jessica Wachter

This paper proposes a dynamic risk-based model that captures the 
high expected returns on value stocks relative to growth stocks, 
and the failure of the capital asset pricing model to explain 
these expected returns. To model the difference between value and 
growth stocks, we introduce a cross-section of long-lived firms 
distinguished by the timing of their cash flows. Firms with cash 
flows weighted more to the future have high price ratios, while 
firms with cash flows weighted more to the present have low price 
ratios. We model how investors perceive the risks of these cash 
flows by specifying a stochastic discount factor for the economy. 
The stochastic discount factor implies that shocks to aggregate 
dividends are priced, but that shocks to the time-varying price 
of risk are not. As long-horizon equity, growth stocks covary 
more with this time-varying price of risk than value stocks, 
which covary more with shocks to cash flows. When the model is 
calibrated to explain aggregate stock market behavior, we find 
that it can also account for the observed value premium, the high 
Sharpe ratios on value stocks relative to growth stocks, and the 
outperformance of value (and underperformance of growth) relative 
to the CAPM.
 
JEL:      G1
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11144&r=all



92. Financial Liberalization in Latin-America in the 1990s: A 
    Reassessment
  
    Joshua Aizenman

This paper studies the experience of Latin-America [LATAM] with 
financial liberalization in the 1990s. The rush towards financial 
liberalizations in the early 1990s was associated with 
expectations that external financing would alleviate the scarcity 
of saving in LATAM, thereby increasing investment and growth. Yet,
the data and several case studies suggest that the gains from 
external financing are overrated. The bottleneck inhibiting 
economic growth is less the scarcity of saving, and more the 
scarcity of good governance. A possible interpretation for these 
findings is that in countries where private savings and 
investments were taxed in an arbitrary and unpredictable way, the 
credibility of a new regime could not be assumed or imposed. 
Instead, credibility must be acquired as an outcome of a learning 
process. Consequently, increasing the saving and investment rates 
tends to be a time consuming process. This also suggests that 
greater political instability and polarization would induce 
consumers to be more cautious in increasing their saving and 
investment rates following a reform. Hence, reaching a sustained 
take-off in Latin-America is a harder task to accomplish than in 
Asia.
 
JEL:      F21 F23 F36 F43
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11145&r=all



93. Fertility and Social Security
  
    Michele Boldrin
    Mariacristina De Nardi
    Larry E. Jones

The data show that an increase in government provided old-age 
pensions is strongly correlated with a reduction in fertility. 
What type of model is consistent with this finding? We explore 
this question using two models of fertility, the one by Barro and 
Becker (1989), and the one inspired by Caldwell and developed by 
Boldrin and Jones (2002). In the Barro and Becker model parents 
have children because they perceive their children's lives as a 
continuation of their own. In the Boldrin and Jones' framework 
parents procreate because the children care about their old 
parents' utility, and thus provide them with old age transfers. 
The effect of increases in government provided pensions on 
fertility in the Barro and Becker model is very small, and 
inconsistent with the empirical findings. The effect on fertility 
in the Boldrin and Jones model is sizeable and accounts for 
between 55 and 65% of the observed Europe-US fertility 
differences both across countries and across time and over 80% of 
the observed variation seen in a broad cross-section of countries.
Another key factor affecting fertility the Boldrin and Jones 
model is the access to capital markets, which can account for the 
other half of the observed change in fertility in developed 
countries over the last 70 years.
 
JEL:      E10 J10 J13 O10
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11146&r=all



94. Why Inflation Rose and Fell: Policymakers' Beliefs and US 
    Postwar Stabilization Policy
  
    Giorgio Primiceri

This paper provides an explanation for the run-up of U.S. 
inflation in the 1960s and 1970s and the sharp disinflation in 
the early 1980s, which standard macroeconomic models have 
difficulties in addressing. I present a model in which rational 
policymakers learn about the behavior of the economy in real time 
and set stabilization policy optimally, conditional on their 
current beliefs. The steady state associated with the self-
confirming equilibrium of the model is characterized by low 
inflation. However, prolonged episodes of high inflation ending 
with rapid disinflations can occur when policymakers 
underestimate both the natural rate of unemployment and the 
persistence of inflation in the Phillips curve. I estimate the 
model using likelihood methods. The estimation results show that 
the model accounts remarkably well for the evolution of 
policymakers%u2019 beliefs, stabilization policy and the postwar 
behavior of inflation and unemployment in the United States.
 
JEL:      E31 E32 E5
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11147&r=all



95. Investment Timing, Agency, and Information
  
    Steven R. Grenadier
    Neng Wang

This paper provides a model of investment timing by managers in 
a decentralized firm in the presence of agency conflicts and 
information asymmetries. When investment decisions are delegated 
to managers, contracts must be designed to provide incentives for 
managers to both extend effort and truthfully reveal private 
information. Using a real options approach, we show that an 
underlying option to invest can be decomposed into two components:
a manager's option and an owner's option. The implied investment 
behavior differs significantly from that of the first-best no-
agency solution. In particular, greater inertia occurs in 
investment, as the model predicts that the manager will have a 
more valuable option to wait than the owner.
 
JEL:      E31 E32 E5
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11148&r=all



96. Firm-Specific Capital and the New-Keynesian Phillips Curve
  
    Michael Woodford

A relation between inflation and the path of average marginal 
cost (often measured by unit labor cost) implied by the Calvo (
1983) model of staggered pricing --- sometimes referred to as the 
%u201Cnew-Keynesian Phillips curve%u201D --- has been the subject 
of extensive econometric estimation and testing. Standard 
theoretical justifications of this form of aggregate-supply 
relation, however, either assume (i) the existence of a 
competitive rental market for capital services, so that the 
shadow cost of capital services is equated across firms and 
sectors at all points in time, despite the fact that prices are 
set at different times, or (ii) that the capital stock of each 
firm is constant, or at any rate exogenously given, and so 
independent of the firm's pricing decision. But neither 
assumption is realistic. The present paper examines the extent to 
which existing empirical specifications and interpretations of 
parameter estimates are compromised by reliance on either of 
these assumptions. The paper derives an aggregate-supply relation 
for a model with monopolistic competition and Calvo pricing in 
which capital is firm-specific and endogenous, and investment is 
subject to convex adjustment costs. The aggregate-supply relation 
is shown to again take the standard "new-Keynesian" form, but 
with an elasticity of inflation with respect to real marginal 
cost that is a different function of underlying parameters than 
in the simpler cases studied earlier. Thus the relations 
estimated in the empirical literature remain correctly specified 
under the assumptions proposed here, but the interpretation of 
the estimated elasticity is different; in particular, the 
implications of the estimated Phillips-curve slope for the 
frequency of price adjustment is changed. Assuming a rental 
market for capital results in a substantial exaggeration of the 
infrequency of price adjustment; assuming exogenous capital 
instead results in a smaller under-estimate.
 
JEL:      E30
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11149&r=all



97. Understanding Rules of Origin
  
    Kala Krishna

This paper surveys recent work on the economic effects, both 
theoretical and empirical, of Rules of Origin (RoO) in a Free 
Trade Area (FTA).
 
JEL:      F13 F15
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11150&r=all



98. Monetary and Fiscal Policy in a Liquidity Trap: The Japanese 
    Experience 1999-2004
  
    Mitsuru Iwamara
    Takeshi Kudo
    Tsutomu Watanabe

We characterize monetary and fiscal policy rules to implement 
optimal responses to a substantial decline in the natural rate of 
interest, and compare them with policy decisions made by the 
Japanese central bank and government in 1999%u20142004. First, we 
find that the Bank of Japan%u2019s policy commitment to 
continuing monetary easing until some prespecified conditions are 
satisfied lacks history dependence, a key feature of the optimal 
monetary policy rule. Second, the term structure of the interest 
rate gap (the spread between the actual real interest rate and 
its natural rate counterpart) was not downward sloping, 
indicating that the Bank of Japan%u2019s commitment failed to 
have su.cient influence on the market%u2019s expectations about 
the future course of monetary policy. Third, we find that the 
primary surplus in 1999%u20142002 was higher than predicted by 
the historical regularity, implying that the Japanese government 
deviated from the Ricardian rule toward fiscal tightening. These 
findings suggest that inappropriate conduct of monetary and 
fiscal policy during this period delayed the timing to escape 
from the liquidity trap.
 
JEL:      E31 E52 E58 E61 E62
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11151&r=all



99. Anticipating Artistic Success (or, How to Beat the Art 
    Market): Lessons from History
  
    David W. Galenson

The recent history of modern art provides clues as to how 
important artists can be identified before their work becomes 
generally known. Advanced art has been dominated by conceptual 
innovators since the late 1950s, and the importance of formal art 
education in the training of leading artists has also increased 
during this period. A few schools have been particularly 
prominent. Auction market records reveal that during the past 
five decades the Yale School of Art has produced a series of 
graduates who have achieved great success commercially as well as 
critically. Recognizing Yale%u2019s role can allow collectors to 
identify important artists before they become widely recognized, 
and therefore before their early innovative work rises in value.
 
JEL:      J4
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11152&r=all



100. Sudden Stop, Financial Factors and Economic Collpase in 
     Latin America: Learning from Argentina and Chile
  
    Guillermo A. Calvo
    Ernesto Talvi

This paper shows that the Russian 1998 crisis had a big impact 
on capital flows to Emerging Market Economies, EMs, especially in 
Latin America, and that the impact of the Russian shock differs 
quite markedly across EMs. To illustrate this statement, we 
compare the polar cases of Chile and Argentina. While Chile 
exhibited a significant economic slowdown after August 1998, it 
did not suffer the excruciating collapse suffered by Argentina, 
where even the payments system came to a full stop. We attribute 
their difference to the fact that Chile is more open to trade 
than Argentina, and that it appears to suffer much less from 
balance-sheet currency-denomination mismatch that was rampant in 
Argentina before the 2002 crisis (due to large domestic liability 
dollarization). The paper is essentially descriptive but is in 
line with and, thus, complements econometric studies like Calvo, 
Izquierdo and Mejia (NBER Working Paper 10520). The final section 
addresses policy issues in light of the paper's findings and 
conjectures.
 
JEL:      F31 F32 F34 F41
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11153&r=all



101. The Market for Teacher Quality
  
    Eric A. Hanushek
    John F. Kain
    Daniel M. O'Brien
    Steven G. Rivkin

Much of education policy focuses on improving teacher quality, 
but most policies lack strong research support. We use student 
achievement gains to estimate teacher value-added, our measure of 
teacher quality. The analysis reveals substantial variation in 
the quality of instruction, most of which occurs within rather 
than between schools. Although teacher quality appears to be 
unrelated to advanced degrees or certification, experience does 
matter -- but only in the first year of teaching. We also find 
that good teachers tend to be effective with all student ability 
levels but that there is a positive value of matching students 
and teachers by race. In the second part of the analysis, we show 
that teachers staying in our sample of urban schools tend to be 
as good as or better than those who exit. Thus, the main cost of 
large turnover is the introduction of more first year teachers. 
Finally, there is little or no evidence that districts that offer 
higher salaries and have better working conditions attract the 
higher quality teachers among those who depart the central city 
district. The overall results have a variety of direct policy 
implications for the design of school accountability and the 
compensation of teachers.
 
JEL:      I2 J4 H4
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11154&r=all



102. International Financial Adjustment
  
    Pierre-Olivier Gourinchas
    Helene Rey

The paper proposes a unified framework to study the dynamics of 
net foreign assets and exchange rate movements. We show that 
deteriorations in a country's net exports or net foreign asset 
position have to be matched either by future net export growth (
trade adjustment channel) or by future increases in the returns 
of the net foreign asset portfolio (hitherto unexplored financial 
adjustment channel). Using a newly constructed data set on US 
gross foreign positions, we find that stabilizing valuation 
effects contribute as much as 31% of the external adjustment. Our 
theory also has asset pricing implications. Deviations from trend 
of the ratio of net exports to net foreign assets predict net 
foreign asset portfolio returns one quarter to two years ahead 
and net exports at longer horizons. The exchange rate affects the 
trade balance and the valuation of net foreign assets. It is 
forecastable in and out of sample at one quarter and beyond. A 
one standard deviation decrease of the ratio of net exports to 
net foreign assets predicts an annualized 4% depreciation of the 
exchange rate over the next quarter.
 
JEL:      F3
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:nbr:nberwo:11155&r=all



103. Structural policy reforms and external imbalances
  
    Mike Kennedy
    Torsten Slok

It has been argued that one solution to global current account 
imbalances is for countries with current account surpluses to 
undertake structural reforms. This would raise their potential 
growth, which is assumed to put downward pressure on the current 
account position. This paper takes a closer look at how such 
structural reforms in labour markets, product markets, and 
financial markets could be expected to affect current accounts. 
It also tests empirically, using pooled time-series techniques (
that control for the influence of relative cyclical positions, 
government fiscal balances and the real exchange rate), whether 
or not reforms in these areas would have any significant 
relationship with current accounts. The overall finding is that 
indicators of structural reforms do have a significant 
relationship with the current account but the contribution of 
these variables to explain current account positions is quite 
limited. <p> Politique de reformes structurelles et balances 
exterieures <p> Il a ete demontre qu’une solution au 
desequilibre de la balance des operations courantes dans les 
pays ayant un excedent serait d’entreprendre des reformes 
structurelles. Cela devrait augmenter leur potentiel de 
croissance, ce qui est suppose soulager la pression sur la 
situation de la balance des operations courantes. Cet article 
examine de pres comment de telles reformes structurelles dans 
les marches financiers, du travail et de la production sont 
susceptibles d’influer les comptes courants. Il verifie aussi 
empiriquement, au moyen d’un ensemble de series temporelles 
techniques (lesquelles controlent l’influence des situations 
conjoncturelles relatives, l’equilibre budgetaire et le taux 
de changes reel) si des reformes dans ces secteurs ont une 
relation significative avec les comptes courants. Il en ressort 
que ces indicateurs de reformes structurelles ont une relation 
significative avec les comptes courants, mais que la contribution 
de ces variables a l'explication de la situation de la balance 
des operations courantes est tres limitee.
 
Keywords: current accounts; structural reforms
JEL:      F32 J40
Date:     2005-01-24
URL:      http://d.repec.org/n?u=RePEc:oed:oecdec:415&r=all



104. Getting the most out of public sector decentralisation in 
     Japan
  
    Isabelle Joumard
    Tadashi Yokoyama

Revamping fiscal relations across levels of government is of 
paramount importance in supporting fiscal consolidation and 
public sector effectiveness. This paper analyses a number of 
problems, including regulations that limit local governments’ 
ability to innovate and respond to local citizens’ preferences, 
the inefficient system of intergovernmental grants, the complex 
structure of local taxes and fiscal rules which are too lenient 
to secure fiscal discipline. The paper concludes that the grant 
system should be reformed to promote local governments’ 
incentives to introduce innovations so as to better respond to 
needs at lower cost. Barriers to the effective use of sub-
national governments’ taxing powers should be removed while 
efforts should be made to keep the tax system as simple and 
neutral as possible. Existing fiscal rules and market instruments 
should be hardened. This would require that the central 
government state clearly that it will not intervene as a lender 
of last resort to local government and ensure adequate 
information on local governments’ outstanding and implicit 
liabilities is available. This Working Paper relates to the 2005 
OECD Economic Survey of Japan (www.oecd.org/eco/surveys/japan). 
<p> Optimiser l’impact de la decentralisation au Japon <p> La 
reforme des relations financieres entre l’Etat et les 
collectivites territoriales est essentielle pour soutenir le 
processus d’assainissement budgetaire et l’efficacite du 
secteur public. Ce document met en lumiere un certain nombre de 
problemes, notamment les reglementations qui limitent la 
capacite des collectivites territoriales a innover et a 
repondre aux preferences des citoyens, un systeme inefficace 
de transferts intergouvernementaux, une fiscalite locale 
excessivement complexe et des regles budgetaires trop laxistes. 
Ce document conclut qu’une reforme du systeme des transferts 
est necessaire pour inciter les collectivites territoriales a 
innover afin de repondre mieux et a moindre cout aux besoins 
des citoyens. Les dispositions institutionnelles qui limitent 
l’utilisation effective des pouvoirs des collectivites 
territoriales en matiere d’impots doivent etre eliminees 
tout en s’assurant que le systeme fiscal soit le plus simple 
et le plus neutre possible. Les regles budgetaires en vigueur 
doivent etre rendues plus strictes et le fonctionnement des 
marches financiers ameliore. Cela requiert que l’Etat 
annonce clairement qu’il ne jouera pas le role de preteur en 
dernier ressort en cas de difficultes financieres des 
collectivites territoriales et qu’il s’assure de la qualite 
des informations concernant leurs engagements explicites et 
implicites. Ce Document de travail se rapporte a l'Etude 
economique de l'OCDE du Japon 2005 (www.oecd.
org/eco/etudes/japon).
 
Keywords: Fiscal federalism;local government;intergovernmental 
          grants;fiscal discipline;Japan
JEL:      H2 H7 R58
Date:     2005-01-27
URL:      http://d.repec.org/n?u=RePEc:oed:oecdec:416&r=all



105. Product market regulation in OECD countries: 1998 to 2003
  
    Paul Conway
    Veronique Janod
    Giuseppe Nicoletti

This paper describes trends in product market regulation in OECD 
countries over the period 1998 to 2003. The analysis is based on 
summary indicators of product market regulation that measure the 
degree to which policies promote or inhibit competition. The 
results suggest that regulatory impediments to competition have 
declined in all OECD countries in recent years. Regulation has 
also become more homogenous across the OECD as countries with 
relatively restrictive policies have, in some areas, moved 
towards the regulatory environment of the more liberalized 
countries. Within some countries product market policies have 
become more consistent across different regulatory provisions, 
although relatively restrictive countries still tend to have a 
more heterogeneous approach to competition. In general, domestic 
barriers to competition tend to be higher in countries that have 
higher barriers to foreign trade and investment, and high levels 
of state control and barriers to competition tend to be 
associated with cumbersome administrative procedures and policies 
that reduce the adaptability of labour markets. Notwithstanding 
recent progress in product market reform, a 'hard core' of 
regulations that impede competition still persists in virtually 
all countries. <p> La reglementation des marches de produits 
dans les pays de l'OCDE, 1998-2003 <p> Ce document decrit les 
evolutions de la reglementation encadrant les marches de 
produits dans les pays de l'OCDE sur la periode 1998-2003. 
L'analyse est basee sur des indicateurs synthetiques de la 
reglementation des marches de produits qui mesurent 
l'intensite avec laquelle les politiques favorisent ou 
restreignent la concurrence. Les resultats suggerent que les 
entraves a la concurrence resultant de la reglementation ont 
decline dans tous pays de l'OCDE ces dernieres annees. La 
reglementation est aussi devenue plus homogene a travers 
l'OCDE, les pays disposant de politiques relativement 
restrictives, s'etant rallies, dans certains domaines, a 
l'environnement reglementaire des pays plus liberaux. Dans 
certains pays, les politiques concernant les marches de produits 
sont devenues plus coherentes au regard des differents 
dispositifs reglementaires, meme si les pays relativement 
restrictifs ont toujours tendance a disposer d'une approche plus 
disparate de la concurrence. De facon generale, les barrieres 
a la concurrence resultant de politiques a vocation 
interieure ont tendance a etre plus importantes dans les pays 
disposant d'importants obstacles aux echanges internationaux et 
a l'investissement ; de meme de hauts niveaux de controles 
etatiques et d'importants obstacles a la concurrence ont 
tendance a etre associes avec d'encombrantes procedures 
administratives et des politiques qui reduisent la capacite 
d'adaptation du marche du travail. En depit des recents 
progres accomplis par les reformes des marches de produits, un 
'noyau dur' de reglements, entravant la concurrence, persiste 
toujours dans pratiquement tous les pays.
 
Keywords: indicators; product market regulation
JEL:      K2 L5
Date:     2005-02-14
URL:      http://d.repec.org/n?u=RePEc:oed:oecdec:419&r=all



106. Population Dynamics in a Microfounded Predator-Prey Model
  
    Thomas Christiaans

This paper analyzes the dynamics of a two-dimensional 
microfounded predator-prey model. It is shown that the dynamics 
closely resemble those of a model commonly used in mathematical 
biology if parameters of the latter are suitably restricted. The 
positive equilibrium of the microfounded model is globally 
asymptotically stable for positive initial values largely 
irrespective of the parameter values chosen. If a version of 
Allee’s Law is included, however, species extinction becomes 
possible.
 
Keywords: Population dynamics; ratio dependence; species 
          extinction
JEL:      Q20
Date:     2004-10
URL:      http://d.repec.org/n?u=RePEc:sie:siegen:118-04&r=all



107. Cultural Goods Production, Cultural Capital Formation and 
     the Provision of Cultural Services
  
    Sao-Wen Cheng

Cultural capital is assumed to benefit all members of society. 
It is accumulated through the consumption of cultural goods, 
cultural services are provided by cultural services industry; the 
stock of cultural goods is enlarged by the flow of new cultural 
goods created by individuals who are both consumers and creators 
of culture and whose utility is positively affected by the 
cultural goods they created. In the no-policy market economy, 
individuals tend to ignore the positive external effects of their 
cultural services consumption and creation of cultural goods on 
other individuals via augmenting cultural capital and cultural-
goods stock. Consequently, less cultural capital and cultural-
goods stock will be accumulated. The efficient allocation can be 
restored by introducing an appropriate subsidy that stimulates 
the consumers’ demand for cultural services, and the creation 
of new cultural goods, promotes the accumulation of cultural 
capital and cultural goods.
 
Keywords: cultural capital, cultural services, cultural goods
JEL:      H2 H3 Z1
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:sie:siegen:119-05&r=all



108. "The Genesis and the Development of the Pre-war Japanese 
     Stock Market"
  
    Yasushi Hamao (Marshall School of Business, University of 
      Southern California)
    Takeo Hoshi (Graduate School of International Relations and 
      Pacific Studies, University of California, San Diego)
    Tetsuji Okazaki (Faculty of Economics, University of Tokyo)

This paper examines the development of the Tokyo Stock Exchange 
since its inception in 1878 to the mid-1930s. Special attention 
is paid to the increases in the number of listed stocks 
throughout this period. By the mid-1930s, the Tokyo Stock 
Exchange had grown to a market bigger (measured relative to GDP) 
than many contemporary stock exchanges in major economies. Even 
compared with the stock exchanges in major countries today, the 
pre-war Tokyo Stock Exchange was quite large. New listings in the 
spot market section of the Tokyo Stock Exchange were not 
restricted for most of this period. Our regression analysis 
reveals that many firms decided to list their stocks on the Tokyo 
Stock Exchange as they became older and bigger. The commercial 
code change in 1911, which increased the protection of outside 
shareholders, also had a positive impact on the listings on the 
Tokyo Stock Exchange. The Tokyo Stock Exchange reform of 1918 
that aimed at standardization of the spot transactions increased 
the listings on the Exchange. The analysis also suggests that in 
the earlier period, there was a "home bias" that the companies 
located in the Eastern part of Japan (closer to the Tokyo Stock 
Exchange) were more likely to be listed in the Tokyo Stock 
Exchange, but the effect diminished after the Exchange reform of 
1918.
 
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:tky:fseres:2005cf320&r=all



109. How Fiscal Decentralization Flattens Progressive Taxes
  
    Kurt Schmidheiny

We study the tension between fiscal decentralization and 
progressive taxation. We present a multi-community model in which 
the local income tax rate is determined by an exogenous 
progressive tax schedule and a tax shifter that can differ across 
communities. The progressivity of the tax schedule induces a self-
sorting process that results in substantial though imperfect 
income sorting. Rich households are more likely to locate 
themselves in low tax communities than poor households. The 
actual tax structure is thus less progressive than the exogenous 
tax schedule. To investigate the quantitative implications of our 
model, we calibrate a fully-specified version to the largest 
metropolitan area in Switzerland. The equilibrium values of the 
simulation show the same pattern across communities as we observe 
in this area. The theoretical result is challenged by estimating 
the actual tax structure faced by the households in this area. We 
find that the actual tax structure is indeed substantially less 
progressive than the fixed tax schedule.
 
Keywords: Progressive Taxation, Fiscal Decentralization, Income 
          Segregation
URL:      http://d.repec.org/n?u=RePEc:tuf:tuftec:0508&r=all



110. Income Segregation from Local Income Taxation When 
     Households Differ in Both Preferences and Incomes
  
    Kurt Schmidheiny

This paper presents a model of an urban area with local income 
taxes used to finance a local public good. Households differ in 
both incomes and their taste for housing. The existence of a 
segregated equilibrium is shown in a calibrated two-community 
model assuming single-peaked distributions for both income and 
housing taste. The equilibrium features income segregation of the 
population across the communities. The segregation is, however, 
imperfect: some rich households can also be found in poor 
communities and vice-versa. The calibrated model is able to 
explain the substantial differences in local income tax levels 
and average incomes across communities as observed in e.g. 
Switzerland. The numerical investigation reveals that the 
ordering of community characteristics critically depends on the 
substitutability between the public and the private good. The 
numerical investigation also suggests that taste heterogeneity 
reduces the distributional effects of local tax differences. The 
numerical investigation furthermore suggests that the rich 
community is able to set lower taxes when it is small.
 
Keywords: Income Segregation, Income Sorting, Fiscal 
          Decentralization, Income Taxation, Local Public Goods
JEL:      H71 H73 R13
URL:      http://d.repec.org/n?u=RePEc:tuf:tuftec:0509&r=all



111. Knowledge, networks of cities and growth in regional urban 
     systems
  
    Joan Trullen Thomas (Departament d'Economia Aplicada, 
      Universitat Autonoma de Barcelona)
    Rafel Boix Domenech (Departament d'Economia Aplicada, 
      Universitat Autonoma de Barcelona)

The objective of this paper is to measure the impact of 
different kinds of knowledge and external economies on urban 
growth in an intraregional context. The main hypothesis is that 
knowledge leads to growth, and that this knowledge is related to 
the existence of agglomeration and network externalities in 
cities. We develop a three-stage methodology: first, we measure 
the amount and growth of knowledge in cities using the OCDE (2003)
classification and employment data; second, we identify the 
spatial structure of the area of analysis (networks of cities); 
third, we combine the Glaeser - Henderson - De Lucio models with 
spatial econometric specifications in order to contrast the 
existence of spatially static (agglomeration) and spatially 
dynamic (network) external economies in an urban growth model. 
Results suggest that higher growth rates are associated to higher 
levels of technology and knowledge. The growth of the different 
kinds of knowledge is related to local and spatial factors (
agglomeration and network externalities) and each knowledge 
intensity shows a particular response to these factors. These 
results have implications for policy design, since we can 
forecast and intervene on local knowledge development paths.
 
Keywords: Knowledge city, networks of cities, urban growth, 
          external economies, spatial econometrics.
JEL:      R11 R12 O3
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0504&r=all



112. A General Benchmark Model for Stochastic Jump Sizes
  
    Morten Christensen
    Eckhard Platen (School of Finance and Economics, University 
      of Technology, Sydney)

This paper extends the benchmark framework of Platen (2002) by 
introducing a sequence of incomplete markets, having uncertainty 
driven by a Wiener process and a marked point process. By 
introducing an idealized market, in which all relevant economical 
variables are observed, but may not all be traded, a generalized 
growth optimal portfolio (GOP) is obtained and calculated 
explicitly. The problem of determining the GOP is solved in a 
general setting which extends existing treatments and provides a 
clear link to the market prices of risk. The connection between 
traded securities, arbitrage and market incompleteness is 
analyzed. This provides a framework for analyzing the degree of 
incompleteness associated with jump processes, a problem well-
known from insurance and credit risk modeling. By staying under 
the empirical measure, the resulting benchmark model has 
potential advantages for various applications in finance and 
insurance.
 
Date:     2004-11-01
URL:      http://d.repec.org/n?u=RePEc:uts:rpaper:139&r=all



113. An Intraday Empirical Analysis of Electricity Price 
     Behaviour
  
    Eckhard Platen (School of Finance and Economics, University 
      of Technology, Sydney)
    Jason West
    Wolfgang Breymann

This paper proposes an approach to the intraday analysis of the 
dynamics of electricity prices. The Growth Optimal Portfolio (GOP)
is used as a reference unit in a continuous financial 
electricity price model. A diversified global portfolio in the 
form of a market capitalisation weighted index aproximates the 
GOP. The GOP, measured in units of electricity, is normalised and 
then modeled as a time transformed square root process of 
dimension four. The dynamics of the resulting process is 
empirically verified. Intraday spot electricity prices from the 
US and Australian markets are used for this analysis. The 
empirical findings identify a simple but realistic model for 
examining the volatile behaviours of electricity prices. The 
proposed model reflects the historical price evolution reasonably 
well by using a only a few robust but readily observable 
parameters. The evolution of the tranformed times is modeled via 
a rapidly evolving market activity. A periodic, ergodic process 
with deterministic volatility is used to model market activity.
 
Keywords: intraday analysis; electricity price model; growth 
          optimal portfolio; market activity
JEL:      G10 G13
Date:     2004-11-01
URL:      http://d.repec.org/n?u=RePEc:uts:rpaper:140&r=all



114. Asset Price Dynamics with Time-Varying Second Moment
  
    Carl Chiarella (School of Finance and Economics, University 
      of Technology, Sydney)
    Xue-Zhong He (School of Finance and Economics, University of 
      Technology, Sydney)
    Duo Wang

We develop a simple behavioural asset pricing model with 
fundamentalists and chartists to study price behaviour in 
financial markets. Within our model, the market impact of the 
weighting process of the conditional mean and variance of the 
chartists and investors' reactions are analysed. Price dynamics 
of the deterministic model under/over-reactions are analyzed. It 
shows different price dynamics and routes to complicated price 
behaviour when the chartists act as either trend followers or 
contrarians. It is found that (in a separate paper Chiarella et 
al (2004)) this analysis can be used to establish some 
connections between the statistical properties of the nonlinear 
stochastic system (such as distribution density and 
autocorrelation patterns of returns, in particular the stylised 
facts, such as fat tails, skewness, high kurtosis and long memory,
observed in high frequency financial data) and the stability and 
bifurcation of the underlying deterministic system are 
established.
 
Keywords: fundamentalists; chartists, stability; bifurcation; 
          investors' under- and over-reactions; stylized facts
JEL:      D83 D84 E21 E32 C60
Date:     2004-11-01
URL:      http://d.repec.org/n?u=RePEc:uts:rpaper:141&r=all



115. Statistical Properties of a Heterogeneous Asset Price Model 
     with Time-Varying Second Moment
  
    Carl Chiarella (School of Finance and Economics, University 
      of Technology, Sydney)
    Xue-Zhong He (School of Finance and Economics, University of 
      Technology, Sydney)
    Duo Wang

Stability and bifurcation analysis of deterministic systems has 
been widely used in modeling financial markets. However, the 
impact of such dynamic phenomena on various statistical 
properties of the corresponding stochastic model, including 
skewness and excess kurtosis, various autocorrelation (AC) 
patterns of under and over reactions, and volatility clustering 
characterised by the long-range dependence of ACs, is not clear 
and has been very little studied. This paper aims to study this 
issue. Through a simple behavioural asset pricing model with 
fundamentalists and chartists, we examine the statistical 
properties of the model and their connection to the dynamics of 
the underlying deterministic model. In particular, our analysis 
leads to some insights into the type of mechanism that may be 
generating some of the stylised facts, such as fat tails, 
skewness, high kurtosis and long memory, observed in high 
frequency financial data.
 
Keywords: fundamentalists; chartists, stability; bifurcation; 
          investors' under- and over-reactions; stylized facts
JEL:      D83 D84 E21 E32 C60
Date:     2004-11-01
URL:      http://d.repec.org/n?u=RePEc:uts:rpaper:142&r=all



116. Capital Asset Pricing for Markets with Intensity Based Jumps
  
    Eckhard Platen (School of Finance and Economics, University 
      of Technology, Sydney)

This paper proposes a unified framework for portfolio 
optimization, derivative pricing, modeling and risk measurement 
in financial markets with security price processes that exhibit 
intensity based jumps. It is based on the natural assumption that 
investors prefer more for less, in the sense that for two given 
portfolios with the same variance of its increments, the one with 
the higher expected increment is preferred. If one additionally 
assumes that the market together with its monetary authority acts 
to maximize the long term growth of the market portfolio, then 
this portfolio exhibits a very particular dynamics. In a market 
without jumps the resulting dynamics equals that of the growth 
optimal portfolio (GOP). Conditions are formulated under which 
the well-known capital asset pricing model is generalized for 
markets with intensity based jumps. Furthermore, the Markowitz 
efficient frontier and the Sharpe ratio are recovered in this 
continuous time setting. In this paper the numeraire for 
derivative pricing is chosen to be the GOP. Primary security 
account prices, when expressed in units of the GOP, turn out to 
be supermartingales. In the proposed framework an equivalent risk 
neutral martingale measure need not exist. Fair derivative prices 
are obtained as conditional expectations of future payoff 
structures under the real world probability measure. The concept 
of fair pricing is shown to generalize the classical risk neutral 
and the actuarial net present value pricing methodologies.
 
Keywords: benchmark model; jump diffusions; growth optimal 
          portfolio; market portfolio; effiient frontier; Sharpe 
          ratio; fair pricing; actuarial pricing
JEL:      G10 G13
Date:     2004-12-01
URL:      http://d.repec.org/n?u=RePEc:uts:rpaper:143&r=all



117. How Do Political Changes Influence U.S. Bilateral Aid 
     Allocations? Evidence from Panel Data
  
    Fleck, Robert K. (Montana State University Department of 
      Agricultural Economics and Economics)
    Kilby, Christopher (Vassar College Department of Economics)

The allocation of development aid depends on political factors 
in countries that provide aid and in countries that receive aid. 
To provide new insight into the role of these factors, this paper 
conducts an econometric analysis of panel data on U.S. bilateral 
aid to 119 countries from 1960 to 1997. For each aid-receiving 
country, we employ variables to proxy for four aid allocation 
criteria: development concerns, strategic importance to the U.S., 
commercial importance to the U.S., and the degree of 
democratization. We find evidence that each of these variables 
influences the allocation of aid, although the evidence is 
stronger for some criteria (development concerns, commercial 
importance) than for others (strategic importance, degree of 
democratization). Furthermore, we find that the pattern of aid 
allocation depends on the composition of the U.S. government. 
When the president and Congress are liberal, development concerns 
appear to have more weight in the allocation process than when 
the president and/or Congress are more conservative. When the 
Congress is more conservative, commercial concerns appear to have 
more weight than when the Congress is liberal. These findings 
have practical importance in light of current attempts to 
overhaul the allocation of both bilateral and multilateral aid.
 
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:vas:papers:67&r=all



118. Endogenous Public Policy and Long-Run Growth: Some Simple 
     Analytics
  
    Christos Koulovatianos
    Leonard J. Mirman

We study the determinants of voting outcomes on the provision of 
public consumption through marginal income taxes in the context 
of the simple linear growth model. We provide analytical results 
on how the dynamic politicoeconomic equilibrium maps the economic 
fundamentals to policies and long-run growth. We find that in a 
deterministic growth environment voters internalize, although 
imperfectly, the deadweight losses of taxation and vote for lower 
taxes when the productivity of capital is higher. Therefore, the 
politicoeconomic channel reinforces the positive role of 
productivity for growth. In a stochastic linear-growth 
environment where business cycles are driven by productivity 
shocks, in line with existing evidence, we find that the level of 
endogenous public consumption is procyclical but its share of GDP 
is countercyclical.
 
JEL:      C73 D72 E61 E62 O23
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:vie:viennp:0502&r=all



119. Properties of Equivalence Scales in Different Countries
  
    Christos Koulovatianos
    Carsten Schroder
    Ulrich Schmidt

Recent studies in high-income industrialized countries have 
shown that equivalence scales are income-dependent. We 
investigate whether this dependence also holds in poorer, 
services oriented countries, by considering the example of Cyprus.
We also examine whether household economies of scale and 
relative children costs differ.
 
JEL:      C42 C90 D31 D63 I31
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:vie:viennp:0503&r=all



120. Evaluating Public Expenditures: Does It Matter How They are 
     Financed?
  
    Richard M. Bird (International Tax Program, Business 
      Economics, Rotman School of Management, University of 
      Toronto)

This paper reviews the relationship, or lack of it, between two 
bodies of literature dealing, respectively, with cost-benefit 
analysis and the marginal cost of public funds (MCF). It argues 
that, while there are no simple answers to the question of how, 
or to what extent, different methods of financing public 
expenditures should enter formally into the analysis of 
particular public expenditure decisions, the question is 
nonetheless important. When the financing of a project can firmly 
be linked to certain types of finance with low or no 
distortionary effects, it is inappropriate to apply a correction 
for the shadow price of fiscal resources (MCF). On the other hand,
except in such cases as a practical matter an MCF correction of (
say) 20 percent or so at the least does no harm and may be useful.
The principal conclusion emerging from this review, however, is 
that far more attention needs to be paid in general not only to 
links between financing and spending decisions but also, more 
importantly, to ensuring that the process by which spending 
decisions are made is structured to ensure that those who make 
the decisions are as fully informed as possible and, equally 
important, that those who are affected by the decisions are also 
made as aware as possible of all the relevant consequences, both 
on the spending and financing sides of the decision.
 
Keywords: benefit-cost analysis, marginal cost of public funds, 
          Wicksellian connection
JEL:      H43 H21
Date:     2005-02
URL:      http://d.repec.org/n?u=RePEc:ttp:itpwps:0506&r=all



121. Are Illegal Drugs Inferior Goods?
  
    Suryadipta Roy (Department of Economics, West Virginia 
      University)

Using data from the National Survey on Drug Use and Health, 
evidence of income inferiority in illegal drug consumption is 
presented. This is done by estimation of binary choice probit 
models with endogenous regressors. The simultaneity issue between 
drug consumption and income has been addressed by using a two-
step estimation procedure. The results indicate that accounting 
for simultaneity shows income inferiority with regard to drug 
consumption. An implication of this study is that income 
distributive policies might be effective in controlling drug 
consumption. It also points out the regressive nature of the 
government’s substance abuse program.
 
Keywords: income inferiority, illegal drugs, public policy
JEL:      H51 I12
URL:      http://d.repec.org/n?u=RePEc:wvu:wpaper:05-01&r=all



122. Why doesn’t Capital Flow from Rich to Poor Countries? An 
     Empirical Investigation
  
    Sebnem Kalemli-Ozcan (Department of Economics, University of 
      Houston)
    Laura Alfaro (Department of Economics, Harvard Business 
      School)
    Vadym Volosovych (Department of Economics, University of 
      Houston)

We examine the role of different explanations for the lack of 
flows of capital from rich to poor countries—the “Lucas 
paradox”—in an empirical framework. Broadly speaking, the 
theoretical explanations for this paradox include differences in 
fundamentals affecting the production structure versus 
international capital market imperfections. Our cross-country 
regressions show that, for the period 1971-1998, institutional 
quality is the most important causal variable explaining the 
“Lucas paradox”. Human capital and asymmetric information 
play a role as determinants of capital inflows but these 
variables cannot fully account for the paradox.
 
Keywords: capital inflows, fundamentals, institutions, 
          international capital market imperfections, 
          neoclassical model
JEL:      F21 F41 O1
Date:     2003-12
URL:      http://d.repec.org/n?u=RePEc:hou:wpaper:2003-01&r=all



123. The Expansion of College Education in the United States: Is 
     There Evidence of Declining Cohort Quality?
  
    Chinhui Juhn (Department of Economics, University of Houston)
    Dae-Il Kim (School of Economics, Seoul National University)
    Francis Vella (Department of Economics, European University 
      Institute)

This paper documents the expansion of college education in the U.
S. and examines to what extent the increase in the number of 
college graduates may have lead to a decline in the average 
quality of college graduates. Using the 1940-1990 Census, we 
compare across birth year cohorts with varying levels of college 
completion. We find some weak evidence that college graduate men 
from highly educated cohorts earn a relatively smaller wage 
premium even controlling for the relative supply effect. However, 
these cohort quality effects account for only a small fraction of 
the recent fluctuation in the college wage premium.
 
JEL:      I20 J24 J31
Date:     2004-09
URL:      http://d.repec.org/n?u=RePEc:hou:wpaper:2004-02&r=all



124. Technical Change and the Wage Structure During the Second 
     Industrial Revolution: Evidence from the Merchant Marine, 
     1865-1912
  
    Chinhui Juhn (Department of Economics, University of Houston)
    Aimee Chin (Department of Economics, University of Houston)
    Peter Thompson (Department of Economics, Florida 
      International University)

Using a large, individual-level wage data set, we examine the 
impact of a major technological innovation—the steam 
engine—on skill demand and the wage structure in the merchant 
shipping industry. We find that the technical change created a 
new demand for skilled workers, the engineers, while destroying 
demand for workers with skills relevant only to sail. It had a 
deskilling effect on production work—able-bodied seamen (
essentially, artisans) were replaced by unskilled engine room 
operatives. On the other hand, mates and able-bodied seamen 
employed on steam earned a premium relative to their counterparts 
on sail. A wholesale switch from sail to steam would increase the 
90/10 wage ratio by 40%, with most of the rise in inequality 
coming from the creation of the engineer occupation.
 
JEL:      I20 J24 J31
Date:     2004-08
URL:      http://d.repec.org/n?u=RePEc:hou:wpaper:2004-03&r=all



125. Mortality Change, the Uncertainty Effect, and Retirement
  
    Sebnem Kalemli-Ozcan (Department of Economics, University of 
      Houston)
    David N. Weil

We examine the role of declining mortality in explaining the 
rise of retirement over the course of the 20th century. We 
construct a model in which individuals make labor/leisure choices 
over their lifetimes subject to uncertainty about their date of 
death. In an environment in which mortality is high, an 
individual who saved up for retirement would face a high risk of 
dying before he could enjoy his planned leisure. In this case, 
the optimal plan is for people to work until they die. As 
mortality falls, however, it becomes optimal to plan, and save 
for, retirement. We simulate our model using actual changes in 
the US life table over the last century, and show that this 
“uncertainty effect” of declining mortality would have more 
than outweighed the “horizon effect” by which rising life 
expectancy would have led to later retirement. A calibration 
exercise, allowing for heterogeneity in tastes and other non-
mortality factors influencing retirement, shows that falling 
mortality plausibly had a quantitatively significant effect on 
retirement.
 
JEL:      E21 I12 J11 J26
Date:     2004-08
URL:      http://d.repec.org/n?u=RePEc:hou:wpaper:2004-04&r=all



126. Asymmetric Shocks and Risk Sharing in a Monetary Union: 
     Updated Evidence and Policy Implications for Europe
  
    Sebnem Kalemli-Ozcan (Department of Economics, University of 
      Houston)
    Bent E. Sorensen (Department of Economics, University of 
      Houston)
    Oved Yosha (Tel Aviv University)

We find that risk sharing in the European Union (EU) has been 
increasing over the past decade due to increased cross-ownership 
of assets across countries. Industrial special- ization has also 
been increasing over the last decade and we conjecture that risk 
sharing plays an important causal effect by allowing countries to 
specialize without being subject to higher income risk even 
though the variability of output may increase. We believe that 
lower trade barriers may not have played a dominant causal role 
during this decade be- cause the effect of lower trade barriers 
has probably already played itself out. We further find that the 
asymmetry of GDP fluctuations in the EU has declined steeply over 
the last two decades. This may be due to economic policies 
becoming more similar as countries were adjusting fiscal policy 
in order to meet the Maastricht criteria, but a similar result 
was found for U.S. states so the finding may be due to a 
different nature of the shocks to the world economy in the 1990s. 
We expect to see a further rise in risk sharing between EU 
countries, accompanied by more specialization. However, the 
resulting increase in GDP asymmetry should be minor and will have 
small welfare costs because increased risk sharing should lower 
income (GNP) asymmetry.
 
Keywords: financial integration, regional specialization, 
          international portfolio diversification, income 
          insurance
JEL:      F15 F2 F36 F43
Date:     2004-02
URL:      http://d.repec.org/n?u=RePEc:hou:wpaper:2004-05&r=all



127. Wage Inequality in Post-Reform Mexico
  
    Chinhui Juhn (Department of Economics, University of Houston)
    Jim Airola (Naval Postgraduate School)

Using the Mexican Household Income and Expenditure Survey (ENIGH)
covering 1984-2000 we analyze wages and employment in Mexico 
after trade liberalization and domestic reforms. We find that 
wage inequality and returns to postsecondary schooling increased 
rapidly during 1984-1994 but stabilized since that period. The 
end of inequality growth was due to a severe macroeconomic crisis 
which adversely impacted the better educated, an increase in 
education levels at the end of the 1990s, and a slowdown in skill 
demand in the latter half of the 1990s. Between-industry shifts, 
consistent with trade-based explanations, account for a part of 
the increase in skill demand during 1984-1994, but these types of 
movements actually reduced the demand for skill in the latter 
part of the 1990s. The equalizing impact of trade was offset by 
within-industry demand shifts which continued to favor more 
educated workers. The Mexican experience in the 1990s suggests 
that market-oriented reforms have a sharp initial impact on 
inequality which dissipates over time. However, the opening of 
the economy to trade, foreign capital, and global markets also 
leads to a more long-run increase in the demand for skill.
 
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:hou:wpaper:2005-01&r=all



128. High Corruption Income in Ming and Qing China
  
    Shawn Ni (Department of Economics, University of Missouri-
      Columbia)
    Pham Hoang Van (Department of Economics, University of 
      Missouri-Columbia)

We develop an economic model that explains historical data on 
government corruption in Ming and Qing China. In our model, 
officials’ extensive powers result in corrupt income matching 
land’s share in output. We estimate corrupt income to be 
between 14 to 22 times official income resulting in about 22% of 
agricultural output accruing to 0.4% of the population. The 
results suggest that eliminating corruption through salary reform 
was possible in early Ming but impossible by mid-Qing rule. Land 
reform may also be ineffective because officials could extract 
the same rents regardless of ownership. High officials’ incomes 
and the resulting inequality may have also created distortions 
and barriers to change that could have contributed to China’s 
stagnation over the five centuries 1400-1900s.
 
Keywords: Corruption, China
JEL:      O10 O53
Date:     2005-02-18
URL:      http://d.repec.org/n?u=RePEc:umc:wpaper:0503&r=all



129. Combining the Water Framework Directive with Agricultural 
     Policy Scenarios: A Multi-Objective Analysis for the Future 
     of Irrigated Agricultural in Portugal
  
    Antonio Cipriano Pinheiro (Department of Economics, 
      University of Evora)
    Joao Paulo Saraiva (Department of Environmental Science and 
      Technology, Imperial College London)

It is clear that the successful management of water resources 
must take into account the influence of policies affecting the 
irrigated agriculture sector. Among these, the importance of the 
Common Agricultural Policy (CAP) and of the Water Framework 
Directive (WFD) is well recognised. In Portugal, more than 606,
000 hectares (INE 2001b) are allocated to irrigated agriculture, 
which accounts for 74.8% of all water uses (INAG 2002). To study 
the combined effect of these policies, two irrigated regions of 
Portugal, Baixo Alentejo and Leziria do Tejo, were analysed in 
case studies. Multi-Criteria Decision Making models (MCDM) were 
applied to characterise farmers’ decision-making attitudes of 
the main irrigated agriculture systems of these regions. The 
implications of environmental (WFD) and agricultural (CAP) policy 
change are assessed by reproducing farmers’ decision-making 
behaviour. Simulation results indicate that changes in these 
policies are conducive to substantial adjustments within the 
irrigated agriculture sector. This study demonstrates that the 
consequences of implementing the WFD are dependent both on the 
water price level set by the WFD and on the agricultural policy 
strategy in place.
 
Keywords: Water Framework Directive; Multi-objective Programming;
          Irrigated Agriculture; Water Economics; Portugal
JEL:      Q25 Q15 C61
Date:     2005
URL:      http://d.repec.org/n?u=RePEc:evo:wpecon:2_2005&r=all



130. Cultural Attitudes and Economic Development: arguments for 
     a pluralist political economy of development
  
    Manuel Couret Branco (Department of Economics, University of 
      Evora)

Date:     2005
URL:      http://d.repec.org/n?u=RePEc:evo:wpecon:3_2005&r=all



131. On some of the consequences of being possible to call early 
     elections
  
    Antonio Caleiro (Department of Economics, University of 
      Evora)

Date:     2005
URL:      http://d.repec.org/n?u=RePEc:evo:wpecon:4_2005&r=all



132. Are Semi-Autonomous Revenue Authorities the Answer to Tax 
     Administration Problems in Developing Countries?—A 
     Practical Guide
  
    Arthur Mann

This paper describes and analyzes the experiences of several 
developing countries that have adopted the growing trend toward 
establishing semi-autonomous revenue authorities (SARAs) to 
administer tax collections. By removing the basic tax 
administration functions from the traditional line departments in 
the ministry of finance and granting the SARA a greater degree of 
autonomy to administer its own internal systems, the expectation 
has been that real revenue collections will be enhanced, tax-
related corruption and evasion will be reduced, and taxpayer 
services will be improved. After carrying out an in-depth 
analysis of five SARA cases and taking into account the results 
of studies done by others, this paper concludes that SARAs have 
neither lived up to expectations nor can they be categorized as 
having failed. Tax administration efficiencies have risen and 
receded, and SARAs have not proven to be quick-fix panaceas. They 
do provide a platform from which tax administration efficiencies 
can be generated, but their mere establishment offers no 
guarantee of success.
 
Date:     2004-08
URL:      http://d.repec.org/n?u=RePEc:dai:wpaper:fr1002&r=all



133. Corruption, Fiscal Policy, and Fiscal Management
  
    Jorge Martinez-Vazquez
    F. Javier Arze
    Jameson Boex

This study seeks to assess the current state of knowledge and 
contribute to the understanding of how fiscal policies and 
management interact with corruption issues by integrating 
concrete and practical issues with theoretical and quantitative 
analysis of their nature and consequences. The study presents a 
comprehensive analysis of corruption that not only highlights the 
problems, but also potential solutions for a broad range of 
fiscal policy and fiscal reform issues. The analysis and 
discussion is supported and clarified by relevant real-world 
examples and empirical analysis. In particular, country-specific 
examples prove to be quite useful to identify key issues or 
valuable lessons in minimizing corruption.
 
Date:     2004-10
URL:      http://d.repec.org/n?u=RePEc:dai:wpaper:fr1003&r=all



134. Trade Liberalization and Fiscal Reform: Evidence from Two 
     Case Studies—Morocco and Jamaica—and a General Cross-
     Country Econometric Analysis
  
    Joseph Pelzman

This study seeks to answer a number of basic questions about the 
relationship between tariff liberalization and the domestic tax 
responses. First among these is the revenue impact of tariff 
liberalization. Second is the question about the domestic fiscal 
response: Will a country which undertakes a reduction in duties 
raise alternative trade taxes, widen the tax base, or find 
alternative domestic taxes to substitute for tariffs? In order to 
answer these questions, this study evaluates the experiences of 
Morocco and Jamaica during their respective periods of tariff 
liberalizations. It also presents a cross-country econometric 
analysis of the impact of reduced revenues which are associated 
with tariff liberalization..
 
Date:     2004-10
URL:      http://d.repec.org/n?u=RePEc:dai:wpaper:fr1004&r=all



135. Consumption growth and spatial poverty traps: an analysis 
     of the effects of social services and community 
     infrastructures on living standards in rural Peru
  
    Philippe De Vreyer (Universite de Lille II, DIAL)
    Javier Herrera (DIAL, IRD, Paris)
    Sandrine Mesple-Somps (DIAL, IRD, Paris)

We test the effect of local geographic endowment of capital on 
household growth in living standards in rural Peru, using a four 
years unbalanced panel data set. Our theoretical model of 
household consumption growth allows for the effect of community 
variables to modify the returns to augmented capital in the 
household production function. Data are coming from three 
different sources: ENAHO 1997-2000 household surveys, the 
population census of 1993 and the district infrastructure census 
of 1997. Altogether the addition of these different data sources 
makes an unusually rich data set, at least when considered with 
developing country standards. As in Jalan and Ravallion (2002), 
we use a quasi-differencing method to identify the impact of 
locally determined geographic and socioeconomic variables, while 
removing unobserved household and community level fixed effects. 
GMM are then used to estimate the model parameters. Several 
significant interesting results appear, confirming that private 
consumption growth depends on local geographic variables. 
_________________________________ A partir d’un panel non 
cylindre de 4 annees nous testons l’effet du capital 
geographique local sur la croissance du bien-etre des menages 
ruraux au Perou. Le modele theorique de croissance de la 
consommation autorise les variables mesurees au niveau 
communautaire a modifier le rendement du capital augmente dans 
la fonction de production du menage. Les donnees proviennent de 
trois sources : les enquetes menages ENAHO 1997-2000, le 
recensement de la population de 1993 et le recensement sur les 
infrastructures des municipalites de 1997. L’ensemble 
constitue une base de donnees d’une richesse exceptionnelle 
dans le contexte d’une economie en developpement. A 
l’instar de Jalan et Ravallion (2002), nous utilisons la 
methode de quasi-differenciation pour identifier les effets des 
variables geographiques tout en eliminant les effets fixes 
geographiques et individuels inobserves. L’estimation est 
effectuee moyennant l’emploi de la methode des moments 
generalises. Plusieurs resultats interessants sont obtenus, 
confirmant l’hypothese selon laquelle la croissance de la 
consommation des menages depend de facteurs geographiques 
locaux.
 
Keywords: Politiques de lutte contre la pauvrete, croissance, 
          externalites, econometrie des donnees de panel
JEL:      C33 H23 I18 I32 I38 O12
Date:     2002-12
Date:     2003-10
URL:      http://d.repec.org/n?u=RePEc:dia:wpaper:dt200217&r=all



136. Colonisation, School and Development in Africa. An 
     empirical analysis
  
    Denis Cogneau (DIAL, IRD, Paris)

Macroeconomic data on 45 countries are combined with 
microeconomic data on 4 case-study countries to reveal 
significant differences in the levels of education attained under 
the different colonial powers in Africa during the colonial 
period. In 1960, former British colonies exhibited higher 
educational performance. These differences are robust to the 
control of some pre-colonial factors and have persisted over time 
until 1990. However, the education differential did not give rise 
to either income per capita or life expectancy differentials. 
Urbanisation occurred at a faster rate in the former French 
colonies. Microeconomic data for the case-study countries show 
indeed that private returns to education tend to be lower in the 
former British colonies. _________________________________ En 
combinant des donnees macro-economiques sur 45 pays et des 
donnees micro-economiques sur 4 pays comparables, nous 
revelons l’existence de differences entre les niveaux 
d’education atteints en Afrique selon l’identite du 
colonisateur. En 1960, les ex-colonies britanniques affichaient 
une performance educative superieure. Ces differences sont 
robustes au controle de certains facteurs pre-coloniaux et ont 
persiste dans le temps jusqu’en 1990. Cependant, le 
differentiel d’education ne s’est pas transforme en 
differences de revenu ou d’esperance de vie. Les ex-colonies 
francaises se sont urbanisees plus rapidement. Les donnees 
microeconomiques sur les pays d’etude montrent bien que les 
rendements prives de l’education tendent a etre moins 
eleves dans les ex-colonies britanniques.
 
Keywords: Colonization, School, Development, Growth, Africa, 
          Colonisation, Ecole, Developpement, Croissance, 
          Afrique.
JEL:      N37 O40 P51
Date:     2003-03
URL:      http://d.repec.org/n?u=RePEc:dia:wpaper:dt200301&r=all



137. Episodes of Collective Invention
  
    Peter B. Meyer (U.S. Bureau of Labor Statistics)

The process of developing technology through open discussion has 
been called collective invention. Open source software projects 
have this form. This paper documents two earlier episodes of 
collective invention and proposes a general model based on search 
theory. One episode was the development of mass production steel 
in the U.S. (1866-1885), and the second with early personal 
computers (1975-1985). Technical people openly discussed and 
shared these developing technologies between firms. Collective 
invention episodes begin with an invention or a change in legal 
restrictions. Hobbyists and startup firms experiment with 
practical methods of production and share their results through a 
social network whose members gradually form a new industry. The 
network itself may disappear if the firms then keep their R&D 
secret. A model of an innovation search can describe this process 
if it is expanded to include independent hobbyists and 
consultants as well as profit-seeking firms.
 
Keywords: technological change, uncertainty, search, innovation
JEL:      O31 O34 N10 D83
Date:     2003-08
URL:      http://d.repec.org/n?u=RePEc:bls:wpaper:ec030050&r=all



138. How Does a Global Disinflation Drag Inflation in Small Open 
     Economies?
  
    Marco Vega (LSE and Central Bank of Peru)
    Diego Winkelreid (Central Bank of Peru)

This paper shows how persistent world inflation shocks hitting a 
small open economy can re-weight the importance of domestic and 
foreign factors in the determination of prices. In particular, we 
study why a global disinflation environment may imply a weakening 
of the channels whereby domestic shocks affect inflation. We 
derive a state-dependent Phillips curve based on translog 
preferences that make the elasticity of substitution of domestic 
goods sensitive to foreign prices. With this approach we are able 
to replicate this dragging effect of global disinflation on 
domestic inflation. We also provide empirical evidence from a 
wide panel of countries to support the significance of such an 
effect.
 
Keywords: Phillips Curve, Translog Aggregator, Competitiveness
JEL:      E31 E52
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:rbp:wpaper:2005-001&r=all



139. Can Fluctuations in the Consumption-Wealth Ratio Help to 
     Predict Exchange Rates?
  
    Jorge Selaive (Central Bank of Chile)
    Vicente Tuesta R (Central Bank of Peru)

It is well documented that macroeconomic fundamentals are little 
help in predicting changes in nominal exchange rates compared to 
the predictions made by a simple random walk. Lettau and 
Ludvigson (2001) find that fluctuations in the common long-term 
trend in consumption, asset wealth, and labor income (hereby, 
consumption-wealth ratio) is a strong predictor of the excess 
returns. In this paper, we study the role of the consumption-
wealth ratio in predicting the change in the nominal exchange 
rate of a large set of countries. We find evidence that 
fluctuations in the consumption-wealth ratio help to predict in-
sample all the currencies. In terms of out-of-sample forecasts, 
our results suggest that the consumption-wealth ratio may play a 
significant role at predicting the Canadian dollar at all 
horizons and at short-intermediate horizons for some currencies.
 
Keywords: Exchange Rates, Consumption-Wealth Ratio, 
          Predictability
JEL:      C52 F31
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:rbp:wpaper:2005-002&r=all



140. REEXAMINING THE DISTRIBUTION OF WEALTH IN 1870
  
    Joshua L. Rosenbloom
    Gregory W. Stutes

We use data from the IPUMS sample of the 1870 US Population 
Census to analyze the distribution of real and personal property 
wealth. Wealth was relatively more equally distributed near the 
beginning of U.S. industrialization than it would be 50 years 
later. Disaggregating the data by demographic groups and 
spatially we find evidence consistent with Kuznets?? conjecture 
that urbanization and industrialization were associated with 
rising inequality in the nineteenth century. But we also find 
that inequality was high in the South, even though it remained in 
1870 highly rural and agricultural. Finally we find evidence that 
increasing literacy may have helped to reduce inequality.
 
Date:     2005-01
Date:     2005-01
URL:      http://d.repec.org/n?u=RePEc:kan:wpaper:200501&r=all