The measurements on redistribution are carried out using the level of educational attainment to classify the population. For an average, representative person of each level of education we measure, in terms of present values, the average net benefit from government.
The results show that the net benefits are positive for the lower levels of education and negative for the higher levels. The figures indicate a sizable redistribution from the rich to the poor and a significant reduction of welfare inequality. The net effect on income inequality is, however, substantially smaller than when it is measured on an annual basis. Keywords: redistribution; lifetime redistribution; comprehensive measurement; government; tax; taxes; social security; health insurance; pension; pensions; disability; unemployment; education JEL: D31 H24 H52 H53 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cpb:docmnt:79&r=all 25. STRATEGIC PROFIT SHARING BETWEEN FIRMS: A PRIMER Roberts Waddle This paper builds a theory of profit sharing between two firms in a duopoly market through which firms seek to increase their profits and, in turn, to limit the competition. We use a general model to show the direct (negative) and indirect (positive) effects of this strategy. We then focus on some oligopolistic models to analyze more deeply and more precisely these two opposite effects in search of the dominant one. We thus show that giving away profits is a rewarding strategy for firms in some ( but not all) models of oligopolistic competition. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we050801&r=all 26. STRATEGIC PROFIT SHARING BETWEEN FIRMS: THE BERTRAND MODEL Roberts Waddle The present paper first considers two firms in a homogeneous market competing in a two-stage game. Using a particular strategy, it shows that firms may be able to set prices above the marginal costs and thus get positive profits. This remarkable result is robust to the number of firms and to cost asymmetries. Furthermore and more importantly, when firms' costs are different, firms obtain positive profits even though they set prices at the highest marginal cost. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we050902&r=all 27. STRATEGIC PROFIT SHARING BETWEEN FIRMS: AN APLLICATION TO JOINT VENTURES Roberts Waddle Our companion article developed a clear conceptual framework of profit sharing between two rival firms and studied the effects of this strategy on each firm's profit under the assumption that each firm decides unilaterally to give away voluntarily a part of its profit to its rival. This article relaxes totally this assumption and allows firms to invest rather a fraction of their profits in a joint venture. As in the previous article, it shows how and when forming a joint venture may be a successful strategy. Furthermore and more importantly, it brings to light that joint venture may be used to conceal the profit-sharing (maybe forbidden) strategy. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we051003&r=all 28. STRATEGIC PROFIT SHARING BETWEEN FIRMS: A WIN-WIN STRATEGY Roberts Waddle Our companion article developed a clear conceptual framework of profit sharing between two rival firms and studied the positive effects of this strategy on each firm's profit under the assumption that each firm decides unilaterally to give away voluntarily a part of its profit to its rival. This article relaxes partially this assumption by letting only one firm to share its profit whereas the other firm keeps its entire profit. Contrary to the previous article, we show that no firm wins by adopting such an opportunistic behavior. This suggests that profit sharing between firms is a win-win (dominant) strategy if both firms are involved and compete in prices. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we051104&r=all 29. ON THE COMPARISON OF TIME SERIES USING SUBSAMPLING Andres M. Alonso Elizabeth A. Maharaj In this paper we propose a procedure based on the subsampling techniques for the comparison of stationary time series that are not necessarily independent. We study a test based on the Euclidean distance between the autocorrelation functions of two series. Consistency of the proposed method is established. We present a Monte Carlo study with the size and the power of the proposed test. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:cte:wsrepe:ws050702&r=all 30. The impact of overnight periods on option pricing Boes,Mark-Jan Drost,Feike C. Werker,Bas J.M. (Tilburg University, Center for Economic Research) This paper investigates the effect of closed overnight exchanges on option prices. During the trading day asset prices follow the literature s standard affine model which allows asset prices to exhibit stochastic volatility and random jumps. Independently, the overnight asset price process is modelled by a single jump. We find that the overnight component reduces the variation in the random jump process significantly. However, neither the random jumps nor the overnight jumps alone are able to empirically describe all features of asset prices. We conclude that both random jumps during the day and overnight jumps are important in explaining option prices, where the latter account for about one quarter of total jump risk. JEL: G11 G13 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20051&r=all 31. Asset allocation in the euro-zone: industry or country based? Eiling,Esther Gerad,Bruno Roon,Frans de (Tilburg University, Center for Economic Research) We investigate the relative importance of country and industry factors as determinants of international equity returns in the Euro-zone over the period 1990 to 2003. We conduct our analysis from a portfolio performance perspective, using mean-variance spanning and efficiency tests as well as style analysis, and show how to adjust the tests for time varying market wide volatility. Although unconditional analysis over the full sample suggests that country-based or industry-based EMU-wide portfolios provide similar risk-return trade-offs, a rolling window analysis indicates a striking change in the structure of equity returns in the Euro-zone over the last decade. From 1992 to 1998 country- based strategies outperform industry-based strategies: country based strategies offer higher Sharpe ratios and higher diversification potential as indicated by both spanning tests and style analysis. In the preconvergence period, equity returns in the EMU-zone clearly had a country structure. In contrast, after the introduction of the Euro the country outperformance has disappeared, both in terms of mean-variance efficiency and in terms of mimicking abilities. Industry factors and country factors are now equally important. Our findings suggest that following the adoption of the single currency, Euro-zone sector- based strategies, while not dominating country-based strategies, offer similar risk return trade-offs and diversification benefits. JEL: G11 G15 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20052&r=all 32. A linear programming reformulation of the standard quadratic optimization problem Klerk,E. de Pasechnik,D.V. (Tilburg University, Center for Economic Research) The problem of minimizing a quadratic form over the standard simplex is known as the standard quadratic optimization problem ( SQO). It is NPhard, and contains the maximum stable set problem in graphs as a special case. In this note we show that the SQO problem may be reformulated as an (exponentially sized) linear program. JEL: C61 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200524&r=all 33. Environmental Kuznetz curves for CO2 : heterogeneity versus homogeneity Vollebergh,Herman R.J. Dijkgraag,Elbert Melenberg,Bertrand (Tilburg University, Center for Economic Research) We explore the emissions income relationship for CO2 in OECD countries using various modelling strategies. Even for this relatively homogeneous sample, we find that the inverted-U-shaped curve is quite sensitive to the degree of heterogeneity included in the panel estimations. This finding is robust, not only across different model specifications but also across estimation techniques, including the more flexible non-parametric approach. Differences in restrictions applied in panel estimations are therefore responsible for the widely divergent findings for an inverted-U shape for CO2. Our findings suggest that allowing for enough heterogeneity is essential to prevent spurious correlation from reduced-form panel estimations. Moreover, this inverted U for CO2 is likely to exist for many, but not for all, countries. JEL: C33 Q50 Q50 O50 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200525&r=all 34. The value of fighting irreversible demise by softening the irreversible cost Magis,Paul Sbuelz,Alessandro (Tilburg University, Center for Economic Research) We study a novel issue in the real-options-based technology innovation literature by means of double barrier contingent claims analysis. We show how much a ?rm with the monopoly over a project is willing to spend in investment technology innovation that softens the irreversible cost of accessing the project before its irreversible demise. The answer depends on the project's characteristics and on the e®ectiveness demanded from technology innovation. JEL: G12 G13 G31 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200526&r=all 35. Assessing credit with equity : a CEV model with jump to default Campi,Luciano Polbennikov,Simon Sbuelz,Alessandro (Tilburg University, Center for Economic Research) Unlike in structural and reduced-form models, we use equity as a liquid and observable primitive to analytically value corporate bonds and credit default swaps. Restrictive assumptions on the . rm.s capital structure are avoided. Default is parsimoniously represented by equity value hitting the zero barrier either di¤usively or with a jump, which implies non-zero credit spreads for short maturities. Easy cross-asset hedging is enabled. By means of a tersely speci.ed pricing kernel, we also make analytic credit-risk management possible under systematic jump-to-default risk. JEL: G12 G33 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200527&r=all 36. Close-form pricing of benchmark equity default swaps under the CEV assumption Campi,Luciano Sbuelz,Alessandro (Tilburg University, Center for Economic Research) Equity Default Swaps are new equity derivatives designed as a product for credit investors. Equipped with a novel pricing result, we provide closedform values that give an analytic contribution to the viability of cross-asset trading related to credit risk. JEL: G12 G33 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:200528&r=all 37. The Bird core for minimum cost spanning tree problems revisited: monotonicity and additivity aspects Tijs,Stef Moretti,Stefano Branzei,Rodica Norde,Henk (Tilburg University, Center for Economic Research) A new way is presented to de?ne for minimum cost spanning tree ( mcst-) games the irreducible core, which is introduced by Bird in 1976. The Bird core correspondence turns out to have interesting monotonicity and additivity properties and each stable cost monotonic allocation rule for mcst-problems is a selection of the Bird core correspondence. Using the additivity property an axiomatic characterization of the Bird core correspondence is obtained. JEL: C71 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20053&r=all 38. A fixed point theorem for discontinuous functions Herings,Jean-Jacques Laan,Gerard van der Talman,Dolf Yang,Zaifu (Tilburg University, Center for Economic Research) In this paper we prove the following fixed point theorem. Consider a non-empty bounded polyhedron P and a function f: P ? P such that for every x ? P for which f(x) ? x there exists d > 0 such that for all y, z ? B(x,d)n P it holds that (f(y)-y)T(f(z)-z) =0, where B(x,d) is the ball in ... JEL: C62 C63 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20054&r=all 39. Computing integral solutions of complementarity problems Laan,Gerard van der Talman,Dolf Yang,Zaifu (Tilburg University, Center for Economic Research) In this paper an algorithm is proposed to find an integral solution of (nonlinear) complementarity problems. The algorithm starts with a nonnegative integral point and generates a unique sequence of adjacent integral simplices of varying dimension. Conditions are stated under which the algorithm terminates with a simplex one of whose vertices is an integral solution of the complementarity problem under consideration. JEL: C61 C62 C68 C72 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20055&r=all 40. Birth spacing and neonatal mortality in India: dynamics, frailty and fecundity Bahiotra,Sonia Soest,Arthur van (Tilburg University, Center for Economic Research) A dynamic panel data model of neonatal mortality and birth spacing is analyzed, accounting for causal effects of birth spacing on subsequent mortality and of mortality on the next birth interval, while controlling for unobserved heterogeneity in mortality (frailty) and birth spacing (fecundity). The model is estimated using micro data on about 29000 children of 6700 Indian mothers, for whom a complete retrospective record of fertility and child mortality is available. Information on sterilization is used to identify an equation for completion of family formation that is needed to account for right-censoring in the data. We find clear evidence of frailty, fecundity, and causal effects of birth spacing on mortality and vice versa, but find that birth interval effects can explain only a limited share of the correlation between neonatal mortality of successive children in a family. JEL: J12 J13 C33 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20056&r=all 41. Dominated families of shifted palm distributions Nieuwenhuis,Gert (Tilburg University, Center for Economic Research) In stationary point process theory, the concept Palm distribution plays an important role. Many important results ( like for instance Little s law, so important in many fields) arise from it. However, in the non-stationary case a whole family of local Palm distributions (PD s) has to be considered and the concept seems to loose its importance. The present paper mainly considers non-stationary point processes, and studies relations between the distribution P of a point process, the family {Px} of PD s, and the family {P0,x} of shifted PD s. Here P0,x is the probability distribution that is experienced from an occurrence ( arrival, point, transaction) at x. It is attempted to regain some of the glance of the concept Palm distribution by considering generalizations of results that are basic for stationary point processes. Starting point is a refined version of Campbell s equation, which expresses the general relationship between the distribution P of the point process and the family {Px} of PD s. It is used to generalize the inversion formula, well known from stationary point process theory. This generalization is basic; it leads to several relations regarding the above distributions. In the second part of the research domination assumptions are imposed: either the null-sets of a time-stationary distribution are also null-sets of P or the nullsets of one event-stationary distribution are also null-sets of almost all shifted PD s. Under such domination regulations, P0,x can explicitly be expressed in terms of P and several stationary-case long-run properties can be generalized. The relationship between the two types of domination assumptions is carefully studied. JEL: C49 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20057&r=all 42. Maximin Latin hypercube designs in two dimensions Dam,Edwin van Husslage,Bart Hertog,Dick den Melissen,Hans (Tilburg University, Center for Economic Research) The problem of finding a maximin Latin hypercube design in two dimensions can be described as positioning n non-attacking rooks on an n x n chessboard such that the minimal distance between pairs of rooks is maximized. Maximin Latin hypercube designs are important for the approximation and optimization of black box functions. In this paper general formulas are derived for maximin Latin hypercube designs for general n, when the distance measure is l8 or l1. Furthermore, for the distance measure l2 we obtain maximin Latin hypercube designs for n = 70 and approximate maximin Latin hypercube designs for the values of n. We show the reduction in the maximin distance caused by imposing the Latin hypercube design structure is small. This justifies the use of maximin Latin hypercube designs instead of unrestricted designs. JEL: C90 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20058&r=all 43. Pollution standards, costly monitoring and fines Arguedas,Carmen (Tilburg University, Center for Economic Research) We investigate the features of optimal regulatory policies composed of pollution standards and probabilities of inspection, where fines for non-compliance depend not only on the degree of violation but alson on nongravity factors. We show that optimal policies can induce either compliance or noncompliance with the standards, the latter being more plausible when monitoring costs are large and, surprisingly, when gravity-based fines are large. Also, both tghe convexity of the sanctions and the level of the non-gravity-based penalties play a key role as to whether optimal policies induce noncompliance. JEL: D82 K32 K42 L51 Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20059&r=all 44. Measuring Externalities in Program Evaluation Wendy Janssens (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam) Impact evaluations of development programmes usually focus on a comparison of participants with a control group. However, if the programme generates externalities for non-participants such an approach will capture only part of the programme’s impact. Based on a unique large-scale quantitative survey we estimate the direct as well as the spillover effects of a women’s empowerment programme in rural India on child immunization and school enrolment. The survey covers both participants and non- participants living in programme villages, as well as respondents in control villages where the programme is not yet active. We account for participation selection bias using instrumental variables. The control villages allow us to test the exclusion restriction and provide us with an effective control group to analyze programme impact. We find both direct effects and significant spillovers on non-participants. The impact of interventions might be substantially underestimated if such external effects were not taken into account. Keywords: program evaluation; externalities; education; immunization; India; women's empowerment JEL: I12 I21 O12 Z13 C31 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:20050017&r=all 45. Reply to "Comment on the value of tax shields is NOT equal to the present value of tax shields" Fernandez, Pablo (IESE Business School) The Comment is thought provoking and helps a lot in rethinking the value of tax shields. However, the conclusion of Fieten, Kruschwitz, Laitenberger, Loffler, Tham, Velez-Pareja and Wonder (2005) is not correct because, as will be proven below, the main result of Fernandez (2004) is correct for several situations. Equation (16a) shows that the value of tax shields depends only upon the nature of the stochastic process of the net increase of debt. Keywords: Value of tax shields; present value of the net increases of debt; JEL: G12 G31 G32 Date: 2005-01-15 URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0579&r=all 46. The value of tax shields is not equal to the present value of tax shields: A correction Fernandez, Pablo (IESE Business School) I correct some expressions in Fernandez (2004) and provide a more general expression for the value of tax shields. This expression is the difference between the present values of two different cash flows, each with its own risk: the present value of taxes for the unlevered company and the present value of taxes for the levered company. The value of tax shields in a world with no leverage cost is the tax rate times the current debt, plus the tax rate times the present value of the net increases of debt. The value of tax shields depends only on the nature of the stochastic process of the net increase of debt; it does not depend on the nature of the stochastic process of the free cash flow. Keywords: Value of tax shields; present value of the net increases of debt; required return to equity; JEL: G12 G31 G32 Date: 2005-02-14 URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0581&r=all 47. Boutique Fuels and Market Power Ujjayant Chakravorty Celine Nauges The US Clean Air Act allows individual states to implement their own clean fuel programs to address local or regional air quality concerns. These regulations have led to a proliferation of fuel blends known as “boutique fuels.” For each of the three grades of gasoline, more than 15 types of boutique fuels are currently in use, leading to about 45 different fuel blends in use nationally. These fuels are costly to produce, but they also segment the market and increase the market power of refiners. Using measures that differentiate gasoline regulation in a given state from those in neighboring states, we find that both cost and market segmentation significantly affect wholesale gasoline prices. In particular, the greater the regulatory “distance” between a state and its neighboring states, the higher the wholesale price in that state. Simulations suggest that for some states regulating a single boutique fuel nationally may lead to a counter-intuitive outcome: gasoline prices may decline, even though a larger share of their market will be under regulation. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:emo:wp2003:0511&r=all 48. Altneuland : The EU Constitution in a Contextual Perspective Neil Walker;Philip Pettit; Andras Sajo; Mark Tushnet; Ran Hirschl; Antje Wiener; Armin von Bogdandy; Miguel Poiares Maduro; Gianluigi Palombella; Otto Pfersmann; Luis Diez- Picazo; Paul Craig; George Bermann; Damian Chalmers; Mattias Kumm; Victor Ferreres Comella; Franz Mayer; Wolfgang Wessels Altneuland: The European Constitutional Terrain It is in many respects a New Land - for the first time the Union is openly, officially using the word Constitution in its formal self- understanding. But this, in turn, places it, at least lexically, in the age old terrain of constitutionalism which has been around in its modern guise at least since the American and French Revolutions. Altneuland captures another sense of the current constitutional moment. For some, to judge from the hype, we are at the dawn of a monumental change, historic in its implications. For others, if we were to strike the odd word "Constitution" from the text of the Pending Draft, what we would find is just the latest, quite (but not very) important Treaty revision, in a series of revisions which has characterized the European Union for some time. Indeed, it could be argued, that there is nothing in the content of this Draft to justify the appellation "Constitution," all the more so, after the cannibalism of the June IGC. Not, then, a New Land but Old Hat. There is no Old Hat in the series of Papers which we present here, the results of a collaboration of NYU Law and Princeton. These are not 'Reports' on the various developments to be found in the Draft which will now go before the European peoples. Practicing lawyers will not reach out to these Working Papers when they ponder the significance of Article X or Y. We invited the contributors to engage in a reflection au fond , critically to examine the broader and deeper meanings of the process and its resulting text. We then seduced them to New York City and Princeton and once here threw them into a Lion's Den of American and European political scientists, comparative constitutionalists and historians who all had the instruction to go for the jugular. The results, I believe, vindicate the ordeal. The papers are arranged in three sections. In Part One, we included papers that looked at the project as a whole in a comparative, historical and/or political context. Part Two includes the papers that examined some broad, horizontal constitutional items within the text itself. Part Three is given to papers which look at the architectural, institutional and constitutional landmarks within the text. All repay careful study. Keywords: constitution building; constitutional change; democracy; democratization; democratization; European identity; Europeanization; Europeanization; governance; multilevel governance; multilevel governance; national autonomy; Nation-state; Nation-state; participation; pluralism; policy coordination; policy coordination; policy coordination; polity building; polity building; public administration; regulation; social democracy; supranationalism; competences; European citizenship; European law; subsidiarity; transparency; supremacy; Amsterdam Treaty; Constitution for Europe; enlargement; European Convention; founding Treaties; IGC 1996; IGC 2000; intergovernmental conferences; Maastricht Social Protocol; Maastricht Treaty; Nice Treaty; Social Charter; Treaty on European Union; treaty reform; institutions; legislative procedure; national parliaments; European Commission; European Council; European Court of Justice; European Parliament; history; law; political science Date: 2004-09-13 URL: http://d.repec.org/n?u=RePEc:erp:jeanmo:p0158&r=all 49. Participation in the Peruvian reformed pension system Carmen Li Javier Olivera One of the important aspects in the design of social protection is coverage. In Peru, as in most Latin American countries, social security participation is compulsory only for workers in the formal sector. There is a large sector of the population for which participation is voluntary. This paper investigates the determinants of enrolment to the pension system in Peru. In particular, we found that a selected group of people i.e. married males with at least secondary education, high income and with other family members already participating in the pension system, have a higher likelihood of participation. Moreover, the results also suggest that family based safety nets have a negative effect on the probability of pension participation. Date: 2005-02-25 URL: http://d.repec.org/n?u=RePEc:esx:essedp:592&r=all 50. The Unwinding of Cross-shareholding: Causes, Effects, and Implications Miyajima Hideaki Kuroki Fumiaki Considering that the ownership structure of Japanese corporations has changed dramatically in the 1990s, this paper address a series of question related to this changes. Why is cross-shareholding, which has been in place for almost three decades, now beginning to unwind (and the mechanisms of the unwinding)? What explains the increasing diversity in the patterns of cross-shareholding among Japanese firms? Lastly what are the implications of the changing ownership structure on firm performance? Using the detailed and comprehensive data on ownership structure including individual cross-shareholding relationship and other variable (Tobin's q) developed by Nissai Life Insurance Research Institute and Waseda university, we highlight the determinants of the choice between holding or selling shares for both banks and firms. We show that profitable firms with easy access to capital markets and high foreign ownership prior to the banking crisis tend to unwind cross- shareholdings, while low-profit firms with difficulty accessing capital markets and low foreign ownership in the early 1990s tend to keep the cross shareholding with bank. For the effect of changing ownership structure on performance, we show that high intuitional shareholding and, somehow surprisingly, block shareholding of corporation have positive effect on firms performance, while the bank ownership had consistently have negative effect on firm performance since the middle of 1980s. Through these findings, we provide some policy implication and perspective on future ownership structure in Japanese firms. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05006&r=all 51. Increasing Complexity and Limits of Organization in the Microlithography Industry: Implications for Japanese Science- based Industries Hiroyuki Chuma The purpose of this paper is to identify characteristics of the complexities and organizational limits that science-based industries in Japan are facing, to clarify the causes and effects of those characteristics and to show how they are related to the recent decline in global competitiveness in these industries. The microlithography industry is used for this purpose as a typical example of science-based industries. In this industry, Nikon and Canon were quite dominant until around the mid 1990s, while ASML of the Netherlands began to increase its competitive strength rapidly in the mid 1990s. The paper introduces the new concept of "interim modularity" vis-a-vis "ex ante modularity" a la Baldwin and Clark (2000) to explain how ASML tries to cope effectively with the drastically increasing complexity of such a technology. The concept of interim modularity is defined as the communication benefits induced by the modular architecture during trial-and- error development processes, no matter how incomplete such architecture may be. The paper emphasizes that extremely complex tools like microlithography require interim modularity to effectively orchestrate the dispersion of specialized knowledge and know-how over a wide range of professionals inside and outside of corporations and that interim modularity is more effectively pursued by ASML than by Nikon or Canon. The paper also indicates that the insufficient cognition of the importance of interim modularity has been widely weakening the competitiveness especially in Japanese science-based industries. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05007&r=all 52. The Internationalization and Performance of Korean and Japanese Firms: An Empirical Analysis Based on Micro-data Sanghoon Ahn Kyoji Fukao Hyeog Ug Kwon Both Korea and Japan are leading exporting countries of advanced manufactured products, and the competitive and efficient manufacturing activities are important pillars of the affluence of the two economies. Yet, comparing the manufacturing sectors of the two countries in the 1990s brings to light a startling contrast in their performance. Applying the same empirical method to the analysis of micro-data for Japanese manufacturing firms for 1994-2001 and Korean manufacturing plants for 1990-98, this paper examines differentials in Japanese and Korean productivity growth. This paper focuses on the role of competition in firm dynamics and on the importance of internationalization as a major determinant of firm performance. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05008&r=all 53. Monetary and Fiscal Policy in a Liquidity Trap: The Japanese Experience 1999-2004 Mitsuru Iwamura 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 1999-2004. First, we find that the Bank of Japan's 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's commitment failed to have suffcient influence on the market's expectations about the future course of monetary policy. Third, we find that the primary surplus in 1999-2002 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. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05009&r=all 54. CHINA'S ROLE IN THE CURRENT GLOBAL ECONOMIC IMBALANCE Li-Gang Liu This paper argues that the triangular trade established among China, the US, and the rest of the East Asia suggests that a unilateral renminbi revaluation will not help reduce the large US- China trade deficit. The paper shows further that China's economic overheating over the last two years had little to do with its "undervalued" currency. In fact, incentives to expand balance sheets, interest rate margin and liberalization, and continued interferences on bank lending by local governments contributed to rapid credit expansion and overinvestment. In light of the unsustainable US current account deficit, China and the rest of the East Asia is likely to experience continued and large capital inflows, which will make further sterilization less effective. China's exit from the current exchange rate regime could thus be coordinated with the currencies of the East Asia region as they together would have to make major adjustments. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05010&r=all 55. Monetary policy transmission mechanisms in the CEECs: How important are the differences with the euro area? Jerome Creel (Observatoire Francais des Conjonctures Economiques) Sandrine Levasseur (Observatoire Francais des Conjonctures Economiques) We use a structural VAR model with short-term restrictions to investigate the relative importance of interest rate, exchange rate and credit channels in the monetary policy transmission (MPT) for the Czech Republic, Hungary and Poland over 1993:1-2004:3. Main results are as follows. First, in the three countries, following a positive shock on the interest rate, prices increase instead of decreasing, due to the immediate depreciation of the nominal exchange rate. The results thus exhibit an "exchange rate" puzzle conducing to the appearance of a "price-puzzle". Second, none channel is very powerful for the MPT in the three countries. Nevertheless, the exchange rate and the interest rate channels play a growing role over the recent period in Poland, compared with the same channels in the Czech Republic and Hungary. As nominal exchange rate fluctuations allow for greater real shocks dampening in Poland, the cost of entering EMU may be more costly for this country than for the Czech Republic or Hungary. Keywords: monetary policy transmission, VAR models, exchange rate regimes JEL: E52 E58 F47 Date: 2005 URL: http://d.repec.org/n?u=RePEc:fce:doctra:0502&r=all 56. The Measurement of Income Distribution Dynamics when Demographics are correlated with Income Michael Grimm (University of Goettingen) Denis Cogneau (DIAL-IRD, Paris) The purpose of our paper is to derive instructive analytics on how to account for differentials in demographic variables, in particular mortality, when performing welfare comparisons over time. The idea is to apply various ways of ‘correcting’ estimated income distribution measures for ‘sample selection’ due to differential mortality. We implement our approach empirically using three waves of the Indonesian Family Life Surveys (IFLS). We distinguish the direct effect of mortality, i. e. individuals who die leave the population and no longer contribute to monetary welfare, from the indirect effect, i.e. the impact on survivors in the deceased’s household who may experience a decrease or increase in monetary welfare. In the case of Indonesia, we show that the direct and indirect effects of mortality on income distribution have opposite signs, but are roughly the same in magnitude. We also show that the effects of other demographic changes—such as changes in the structure of fertility, migration and educational attainment—dominate the effects of mortality, whether direct or indirect. However, we find that none of these demographic developments is substantial enough to explain a significant part of the change in income distribution, regardless of whether the pre-crisis period (1993- 1997) or the post-crisis period (1997-2000) is considered. Keywords: Differential Mortality, Income Distribution Dynamics, Welfare Comparisons, Decomposition JEL: D10 D63 J17 Date: 2005-01-25 URL: http://d.repec.org/n?u=RePEc:got:vwldps:122&r=all 57. Demand for Coffee: The Role of Prices, Preferences and Market Power Durevall, Dick (Department of Economics, School of Economics and Commercial Law, Goteborg University) The purpose of this paper is to evaluate the role of prices in determining demand for roasted coffee in Sweden. This is of interest because many believe that consumer prices are high relative to green coffee-bean prices, and that lower consumer prices would increase demand for coffee beans. Coffee demand is estimated on data for the period 1968-2002. In the long run, changing preferences appear to determine demand for roasted coffee, and a reduction in consumer prices would only have a temporary impact on consumption. Hence a permanent decrease in consumer prices would only increase exports of coffee beans to Sweden for a couple of years.
Keywords: Coffee exports; Coffee Prices; Market Power; Multinationals; Preferences; Sweden JEL: F14 F23 L13 L66 L81 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:hhs:gunwpe:0162&r=all 58. Demand and Distance: Evidence on Cross-Border Shopping Friberg, Richard (Dept. of Economic Statistics, Stockholm School of Economics) Asplund, Marcus (London Business School) Wilander, Fredrik (Dept. of Economic Statistics, Stockholm School of Economics) While many studies have documented deviations from the Law of One Price in international settings, evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping. We use data from 287 Swedish municipalities to estimate how responsive alcohol sales are to foreign prices, and relate the sensitivity to the location’s distance to the border. Typical results suggest that the elasticity with respect to the foreign price is around 0.4 in the border region; moving 200 (400) kilometers inland reduces it to 0. 2 (0.1). Given that cross country price differences for alcohol and other products are often caused by taxes, our evidence has implications for the debate on tax competition/harmonization. Keywords: Law of one price; tax competition; tax harmonization; cross border shopping; European integration. JEL: F15 H20 H77 R12 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:hhs:hastef:0587&r=all 59. Group selection and social preferences Weibull, Jorgen (Dept. of Economics, Stockholm School of Economics) Salomonsson, Marcus (Dept. of Economics, Stockholm School of Economics) Suppose that a large number of individuals are randomly matched into groups where each group plays a finite symmetric game. Individuals breed true according to their individual material payoffs, but the expected number of surviving offspring may depend on the material payoff vector to the whole group. We show that the mean-field equation for the induced population dynamic is equivalent to the replicator dynamic for a game with payoffs derived from those in the original game. We apply this selection dynamic to a number of examples, including prisoners' dilemma games, coordination games, hawk-dove games, public-goods provision games with and without punishment options, mini- ultimatum games, and common-pool games. For each of these, we provide conditions under which our selection dynamic leads to other outcomes than those obtained under the usual replicator dynamic. By way of a revealed-preference argument, we show how our selection dynamic can explain certain stable behaviors that are consistent with individuals having social preferences. Keywords: Group selection; social preferences; altruism; fairness. JEL: C72 C73 D64 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:hhs:hastef:0588&r=all 60. Ethnic enclaves and welfare cultures - quasi-experimental evidence Aslund, Olof (IFAU - Institute for Labour Market Policy Evaluation) Fredriksson, Peter (IFAU - Institute for Labour Market Policy Evaluation) We examine peer effects in welfare use among immigrants to Sweden by exploiting a governmental refugee placement policy. We distinguish between the quantity of contacts – the number of individuals of the same ethnicity – and the quality of contacts – welfare use among members of the ethnic group. OLS regressions suggest that both these factors are positively related to individual welfare use. Instrumental variables estimations yield the conclusion that only the quality of contacts matter. An increase of the fraction of the ethnic group on welfare by 10 percent raises the individual probability of welfare use by almost 7 percent. Keywords: Ethnic enclaves; welfare use; immigrants JEL: I38 J15 J18 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_008&r=all 61. Can We Trust Private Firms as Suppliers of Vaccine for the Avian Influenza? Forslid, Rikard (Dept. of Economics, Stockholm University) Using a simple monopoly model, this note analyses the incentives of a vaccine producer. Because a vaccine tends to eradicate the disease for wich it is intended, it also tends to destroy its own market. This means that monopolistic producers may be tempted, in a socially non-optimal way, to delay the introduction of vaccines against new infections until the disease has spread. Keywords: Vaccines JEL: D42 D62 H10 I18 L10 Date: 2005-02-22 URL: http://d.repec.org/n?u=RePEc:hhs:sunrpe:2005_0002&r=all 62. Demand and Welfare Effects in Recreational Travel Models: A Bivariate Count Data Approach Hellstrom, Jorgen (Department of Economics, Umea University) Nordstrom, Jonas (Department of Economics, Umea University) In this paper we present a non-linear demand system for households' joint choice of number of trips and days to spend at a destination. The approach, which facilitates welfare analysis of exogenous policy and price changes, is used empirically to study the effects of an increased CO2 tax. In the empirical study, a bivariate zero-inflated Poisson lognormal regression model is introduced in order to accommodate the large number of zeroes in the sample. The welfare analysis reveals that the equivalent variation (EV) measure, for the count data demand system, can be seen as an upper bound for the households welfare loss. Approximating the welfare loss by the change in consumer surplus, accounting for the positive effect from longer stays, imposes a lower bound on the households welfare loss. From a distributional point of view, the results reveal that the CO2 tax reform is regressive, in the sense that low income households carry a larger part of the tax burden. Keywords: demand analysis; welfare effects; count data; bivariate zero inflation JEL: C15 C34 C35 C51 D12 Date: 2005-02-25 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0648&r=all 63. Tax Avoidance and Intra-Family Transfers Nordblom, Katarina (Department of Economics) Ohlsson, Henry (Department of Economics) To what extent do people avoid taxes on intra-family transfers ( bequests and gifts), and how would integration (unification) of the different transfers taxes affect tax avoidance? These issues are important for families and their welfare, as well as for governments and their possibilities of raising revenue from transfer taxes. In this paper we study the effects of transfer taxes on altruistic parents’ transfers to their children. Using a theoretical model we find that altruistic parents do not necessarily tax minimize. However, in some cases when they do, there is an infinitely large excess burden of a transfer tax. We also find that integration of transfer taxes reduces tax avoidance. All tax avoidance is eliminated with complete integration. Keywords: tax avoidance; bequests; inheritances; inter vivos gifts; altruism JEL: D10 D64 D91 Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_006&r=all 64. The Dynamics of Carbon Sequestration and Alternative Carbon Accounting, with an Application to the Upper Mississippi River Basin Feng, HongLi Carbon sequestration is a temporal process in which carbon is continuously being stored/released over time. Different methods of carbon accounting can be used to account for this temporal nature, including annual average carbon, annualized carbon, and ton-year carbon. In this paper, starting by exposing the underlying connections among these methods, we examine how the comparisons of sequestration projects are affected by these methods and the major factors affecting them. We explore the empirical implications for carbon sequestration policies by applying these accounting methods to the Upper Mississippi River Basin, a large and important agriculture area in the United States. We find that the differences are significant in terms of the location of land that might be chosen and the distribution of carbon sequestration over the area, although the total amount of carbon sequestered does not differ considerably across programs that use different accounting methods or different values of the major factors. Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:isu:genres:12258&r=all 65. Do Public Sector Employees in Iowa Earn More Than Private Sector Employees? Swenson, David A. Eathington, Liesl This research reveals that, when controlling for full-time and year-round workers and the average education of workers, private sector workers are compensated at higher rates than public sector workers Date: 2005-03-03 URL: http://d.repec.org/n?u=RePEc:isu:genres:12259&r=all 66. Does Wage Rank Affect Employees’ Wellbeing? Brown, Gordon D. A. (University of Warwick) Gardner, Jonathan (Watson Wyatt LLP) Oswald, Andrew (University of Warwick and IZA Bonn) Qian, Jing (University of Warwick) What makes workers happy? Here we argue that pure ‘rank’ matters. It is currently believed that wellbeing is determined partly by an individual’s absolute wage (say, 30,000 dollars a year) and partly by the individual’s relative wage (say, 30,000 dollars compared to an average in the company or neighborhood of 25,000 dollars). Our evidence shows that this is inadequate. The paper demonstrates that range-frequency theory – a model developed independently within psychology and unknown to most economists – predicts that wellbeing is gained partly from the individual’s ranked position of a wage within a comparison set ( say, whether the individual is number 4 or 14 in the wage hierarchy of the company). We report an experimental study and an analysis of a survey of 16,000 employees’ wage satisfaction ratings. We find evidence of rank-dependence in workers’ pay satisfaction. Keywords: job satisfaction, wages, rank, wellbeing JEL: J28 J30 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1505&r=all 67. Collective Female Labour Supply: Theory and Application Donni, Olivier (University of Cergy-Pontoise, THEMA, CIRPEE and IZA Bonn) In this paper, we deal with female labour supply in the collective framework. We study married couples and start from the empirical observation that the husband’s labour supply is generally fixed at full-time. We then show that, in this case, structural elements of the decision process, such as individual preferences or the rule that determines the intrahousehold distribution of welfare, can be identified if household demand for at least one commodity, together with the wife’s labour supply, is observed. These theoretical considerations are followed by an empirical application using French data. Keywords: collective decisions, female labour supply, commodity demands JEL: D12 J22 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1506&r=all 68. The Effect of Age at School Entry on Educational Attainment in Germany Fertig, Michael (RWI Essen and IZA Bonn) Kluve, Jochen (RWI Essen and IZA Bonn) Determining the optimal age at which a child should enter school is a controversial topic in education policy. In particular, German policy makers, pedagogues, parents, and teachers have since long discussed whether the traditional, established age of school entry at 6 years remains appropriate. Policies of encouraging early school entry or increased consideration of a particular child's competency for school ("Schulfahigkeit") have been suggested. Using a dataset capturing children who entered school in the late 1960s through the late 1970s, a time when delaying enrolment was common, we investigate the effect of age at school entry on educational attainment for West and East Germany. Empirical results from linear probability models and matching suggest a qualitatively negative relation between the age at school entry and educational outcomes both in terms of schooling degree and probability of having to repeat a grade. These findings are likely driven by unobserved ability differences between early and late entrants. We therefore use a cut-off date rule and the corresponding age at school entry according to the regulation to instrument the actual age at school entry. The IV estimates suggest there is no effect of age at school entry on educational performance. Keywords: schooling, matching, instrumental variables JEL: I21 J13 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1507&r=all 69. Assessing the External Validity of an Experimental Wage Subsidy Kamionka, Thierry (CRNS and CREST) Lacroix, Guy (Universite Laval, CIRPEE, CIRANO and IZA Bonn) In Canada, a policy aiming at helping single parents on social assistance become self-reliant was implemented on an experimental basis. The Self-Sufficiency Entry Effects Demonstration randomly selected a sample of 4,134 single parents who had applied for welfare between January 1994 and March 1995. It turned out only 3, 315 took part in the experiment despite a 50% chance of receiving a generous, time-limited, earnings supplement conditional on finding a full-time job and leaving income assistance within a year. The purpose of this paper is to determine whether a non- response rate of 20% is likely to harm the external validity of the experiment. We compare the estimated impact of the program using experimental data only to that obtained using additional data on individuals not taking part in the experiment. We find strong evidence of non-response bias in the data. When we correct for the bias, we find that estimates that rely on experimental data only significantly underestimate the true impact of the program. Keywords: social experiments, external validity, duration analysis JEL: I38 C41 C93 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1508&r=all 70. Child Poverty and Family Transfers in Southern Europe Matsaganis, Manos (Matsaganis) Levy, Horacio (Autonomous University of Barcelona) Mercader-Prats, Magda (Autonomous University of Barcelona) Toso, Stefano (University of Bologna) O’Donoghue, Cathal (National University of Ireland at Galway and IZA Bonn) Coromaldi, Manuela (University of Rome "Tor Vergata") Rodrigues, Carlos Farinha (Technical University of Lisbon) Tsakloglou, Panos (Athens University of Economics & Business and IZA Bonn) The drive to reduce child poverty is of particular interest in southern Europe, where the subsidiary role of the State in matters of family policy has implied that programmes of public assistance to poor families with children are often meagre or not available at all. The paper examines the effect of family transfers (used broadly to include contributory family allowances, non-contributory child benefits and tax credits or allowances) on child poverty in Greece, Italy, Spain and Portugal. Using the European microsimulation model EUROMOD, the paper first assesses the distributional impact of existing family transfers and then explores the scope for policy reforms. By way of illustration, the effects of universal child benefit schemes similar to those in Britain, Denmark and Sweden are simulated. The paper concludes with a discussion of key findings and policy implications. Keywords: child poverty, social transfers, fiscal benefits, south Europe, microsimulation JEL: C81 D31 I38 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1509&r=all 71. Incentives to Work: The Case of Germany Alfred Boss Thomas Elendner Based on a description of the German system of taxes and transfers, the incentives to work are analyzed for several groups of the labor force. The effects of the “Hartz IV” reform ( effective from 2005 onwards) on the incentives receive particular attention. It turns out that the marginal (explicit and implicit) tax rates for most groups of the labor force remain high. It is concluded that employment probably will not be affected significantly by that part of the reform which aims at strengthening the incentives to work. Other elements of “Hartz IV” are only touched on. Keywords: Income tax rates, contributions to social security, unemployment benefits, implicit tax rates, incentives to work JEL: H24 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:kie:kieliw:1237&r=all 72. Technology Spillover through Trade and TFP Convergence: 120 Years of Evidence for the OECD Countries Jakob Brochner Madsen (Institute of Economics, University of Copenhagen) Using a new dataset on imports of technology and total factor productivity (TFP) over more than a century for the OECD countries, this paper tests for international technological transmission through trade. The empirical estimates suggest that imports of knowledge have been responsible for an almost 200% increase in TFP over the past century, but that the spillover effect has been highly unevenly distributed across countries, but has contributed to TFP convergence among the OECD countries. Keywords: technology spillovers; imports; TFP convergence JEL: E13 E22 E23 O11 O3 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:kud:epruwp:05-01&r=all 73. The Nature and Costs of Dis-Equilibrium Trade: The Case of Transatlantic Grain Exports in the 19th Century Mette Ejrn?s (Institute of Economics, University of Copenhagen) Karl Gunnar Persson (Institute of Economics, University of Copenhagen) The essential issue addressed in this paper is whether inefficient spatial arbitrage has significant welfare effects. The paper looks at the gains from improved market efficiency in transatlantic grain trade in the period 1855-1895. It shows that there is a law of one price equilibrium but that markets display spells of demand- or supply- constrained trade. Over time adjustments back to equilibrium as measured by the half-life of a shock become faster, and adjustment parameters are much larger than routinely reported in the PPP-literature. There are also significant gains from improved market efficiency but most of that improvement takes place in one step after the information ‘regime’ shifts from pre-telegraphic communication to a regime with swift transmission of information in an era with a sophisticated commercial press and telegraphic communication. Improved market efficiency probably stimulated trade more than falling transport costs. Keywords: market integration; error correction; law of one price JEL: F1 C5 N7 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:kud:kuiedp:0502&r=all 74. Re-examining the Consumption-Wealth Relationship: The Role of Model Uncertainty Gary Koop Simon M. Potter Rodney W. Strachan This paper discusses the consumption-wealth relationship. Following the recent influential work of Lettau and Ludvigson [e. g. Lettau and Ludvigson (2001), (2004)], we use data on consumption, assets and labor income and a vector error correction framework. Key findings of their work are that consumption does respond to permanent changes in wealth in the expected manner, but that most changes in wealth are transitory and have no effect on consumption. We investigate the robustness of these results to model uncertainty and argue for the use of Bayesian model averaging. We find that there is model uncertainty with regards to the number of cointegrating vectors, the form of deterministic components, lag length and whether the cointegrating residuals affect consumption and income directly. Whether this uncertainty has important empirical implications depends on the researcher's attitude towards the economic theory used by Lettau and Ludvigson. If we work with their model, our findings are very similar to theirs. However, if we work with a broader set of models and let the data speak, we obtain somewhat different results. In the latter case, we find that the exact magnitude of the role of permanent shocks is hard to estimate precisely. Thus, although some support exists for the view that their role is small, we cannot rule out the possibility that they have a substantive role to play. Keywords: wealth effect; vector error correction model; Bayesian model averaging; cointegration; variance decomposition. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:lec:leecon:05/3&r=all 75. Policy Variability in Models of Endogenous Growth with Productive Spending. D Varvarigos Existing theoretical analyses have shown that if policy variables affect investmentdecisions in either physical or human capital then an increase in policy variability results in higher trend output growth as individuals respond to higher uncertainty with a precautionary increase in these types of investment. In this paper I present two models in which policy variability arises from randomness in the provision of productive spending. In the first model, public spending enters as an input in the production technology of the economy. In this case I find that the sign of the policy variability-growth relationship depends critically on the technological parameters of the production function. In the second model, public spending is an input on the education sector of the economy. In this case I find that policy variability is always growth retarding as individuals respond to increased uncertainty by actually reducing rather than increasing their investment in human capital. Date: 2005 URL: http://d.repec.org/n?u=RePEc:man:cgbcrp:49&r=all 76. The Rules of Standard Setting Organizations: An Empirical Analysis Benjamin Chiao Josh Lerner Jean Tirole This paper empirically explores the procedures employed by standard-setting organizations. Consistent with Lerner-Tirole ( 2004), we find (a) a negative relationship between the extent to which an SSO is oriented to technology sponsors and the concession level required of sponsors and (b) a positive correlation between the sponsor-friendliness of the selected SSO and the quality of the standard. We also develop and test two extensions of the earlier model: the presence of provisions mandating royalty-free licensing is negatively associated with disclosure requirements, and when there are only a limited number of SSOs, the relationship between concessions and user friendliness is weaker. JEL: L2 O3 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11156&r=all 77. An Improved Annual Chronology of U.S. Business Cycles since the 1790's Joseph H. Davis The NBER's pre-WWI chronology of annual peaks and troughs has the remarkable implication that the U.S. economy spent nearly every other year in recession, although previous research has argued that the post-Civil War dates are flawed. This paper extends that research by redating annual peaks and troughs for the entire 1796-1914 period using a single metric: Davis' (2004) annual industrial production index. The new pre-WWI chronology alters more than 40% of the peak and troughs, and removes cycles long considered the most questionable. An important implication of the new chronology is the lack of discernible differences in the frequency and duration of industrial cycles among the pre- Civil War, Civil War to WWI, and post-WWII periods. Of course, my comparison between pre-WWI and post-WWII cycles is limited by its reliance on a single annual index (as opposed to many monthly series) that is less comprehensive than GDP. JEL: N1 E3 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11157&r=all 78. Outsourcing and Technological Change Ann Bartel Saul Lach Nachum Sicherman In this paper we argue that an important source of the recent increase in outsourcing is the computer and information technology revolution, characterized by increased rates of technological change. Our model shows that an increase in the pace of technological change increases outsourcing because it allows firms to use services based on leading edge technologies without incurring the sunk costs of adopting these new technologies. In addition, firms using more IT-intensive technologies face lower outsourcing costs of IT-based services generating a positive correlation between the IT level of the user and its outsourcing share of IT-based services. This implication is verified in the data. JEL: M55 O33 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11158&r=all 79. Selection, Investment, and Women's Relative Wages Since 1975 Casey B. Mulligan Yona Rubinstein In theory, growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce, thereby closing the measured gender gap even though women's wages might have grown less than men's had their behavior been held constant. Using the CPS repeated cross-sections between 1975 and 2001, we use control function (Heckit) methods to correct married women's conditional mean wages for selectivity and investment biases. Our estimates suggest that selection of women into the labor market has changed sign, from negative to positive, or at least that positive selectivity bias has come to overwhelm investment bias. The estimates also explain why measured women's relative wage growth coincided with growth of wage inequality within-gender, and attribute the measured gender wage gap closure to changing selectivity and investment biases, rather than relative increases in women's earning potential. Using PSID waves 1975-93 to control for the changing female workforce with person-fixed effects, we also find little growth in women's mean log wages. Finally, we make a first attempt to gauge the relative importance of selection versus investment biases, by examining the family and cognitive backgrounds of members of the female workforce. PSID, NLS, and NLSY data sets show how the cross-section correlation between female employment and family/cognitive background has changed from "negative" to "positive" over the last thirty years, in amounts that might be large enough to attribute most of women's relative wage growth to changing selectivity bias. JEL: J24 J31 J16 C34 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11159&r=all 80. The Labor Market Effects of Rising Health Insurance Premiums Katherine Baicker Amitabh Chandra Since 2000, premiums for employer-provided health insurance have increased by 59 percent with little corresponding increase in the generosity of coverage. The effect of this increase in costs on wages and employment will depend on workers' valuation of the benefit, the elasticities of labor supply and demand, and institutional constraints on employers' ability to lower wages. Measuring these effects is difficult, however, without a source of exogenous variation in the cost of benefits. We use variation in medical malpractice payments driven by the recent "medical malpractice crisis" to identify the causal effect of rising health insurance premiums on wages, employment, and health insurance coverage. We estimate that a 10 percent increase in health insurance premiums reduces the aggregate probability of being employed by 1.6 percent and hours worked by 1 percent, and increases the likelihood that a worker is employed only part-time by 1.9 percent. For workers covered by employer provided health insurance, this increase in premiums results in an offsetting decrease in wages of 2.3 percent. Thus, rising health insurance premiums may both increase the ranks of the unemployed and place an increasing burden on workers through decreased wages for workers with employer health insurance and decreased hours for workers moved from full time jobs with benefits to part time jobs without. JEL: I1 J0 J3 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11160&r=all 81. What's Real About the Business Cycle? James D. Hamilton This paper argues that a linear statistical model with homoskedastic errors cannot capture the nineteenth-century notion of a recurring cyclical pattern in key economic aggregates. A simple nonlinear alternative is proposed and used to illustrate that the dynamic behavior of unemployment seems to change over the business cycle, with the unemployment rate rising more quickly than it falls. Furthermore, many but not all economic downturns are also accompanied by a dramatic change in the dynamic behavior of short-term interest rates. It is suggested that these nonlinearities are most naturally interpreted as resulting from short-run failures in the employment and credit markets, and that understanding these short-run failures is the key to understanding the nature of the business cycle. JEL: E3 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11161&r=all 82. Sport Tourism: Regional Promotion Strategies Jose Cadima Ribeiro Jose Viseu Nuno Pereira (Universidade do Minho - NIPE) The main purposes of this paper are (i) to analyze the regional promotion strategies of the UEFA Euro 2004 and (ii) to contribute for the improvement of planning and implementation strategies of tourism marketing at regional level. Data regarding these strategies were collected and synthesided. We verified if these match some of the theoretical issues of promotion and tourism marketing. Despite the fact that already many studies have been made, internationally, on the impact of sport events, the present study contains something new as it introduces an ante analysis on the regional pronotion strategies of major sport events.Unlikely, the results show that no specific and integrated regional promotion strategy was pursuit, and no substantial additional financial effort was made. In what concerns the private regional tourism agents, no promotion could be found. The main tourism promotion competition came from across the boarder, whit dynamic promotion actions of the nearby Spanish regional responsibles. Keywords: UEFA Euro 2004, tourism, promotion, marketing, regional, Minho, Portugal, Spain and major sport events. JEL: L83 O18 R11 R58 Date: 2004 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:13/2004&r=all 83. UEFA Euro 2004 Visitors Analysis Jose Cadima Ribeiro Jose Viseu Cristina ROdrigues Tania Delalande (Universidade do Minho - NIPE) The purpose of this paper is to establish the profile of the foreign visitor that attwnded the UEFA Euro 2004 Championship in Portugal, namely in the Minho region. Data were collected through a one-to-one inquiry carried out before the matches that took place in Braga e Guimaraes. The survey instrument included aspects like the visitors?past comsuption behaviour, media audience and live attendance sport habits. The results we got show that sport event tourists living in countries with higher per capita income spent more in the UEFA Euro 2004. They also stayed in country longer than other visitors. Other valuable information for both tourism operators and tournament managers we got is that most sport event tourists decided to overnight on sites with efficient and direct accesses to the matches. Otherwise, they may be characterised as usual sport consumers in terms of active and passive sport comsumption behaviour. The return of visitors to the sites where the UEFA Euro 2004 took place remains unsolved. Future studies should concentrate on comunity reimbursement and mid/long term benefits. Keywords: UEFA Euro 2004, economic impact of major sport events, sports tourism. JEL: C42 R11 L83 O18 Date: 2004 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:15/2004&r=all 84. Short-Run Parameter Changes in a Cointegrated Vector Autoregressive Model Takamitsu Kurita (Dept of Economics, University of Oxford) Bent Nielsen (Dept of Economics, University of Oxford) This paper addresses the question of whether a conventional approach to cointegration is applicaple to the case where changes are allowed in the parameters for the short term dynamics. We reparametrise a vector autoregressive model such that the short- run parameters exhibiting changes at known points are explicitly given. We then show that the likelihood ratio test statistic for cointegration rank is based on reduced rank regression and has the usual asymptotic distribution. An empirical illustration using US gasoline prices is presented. Date: 2005-01-01 URL: http://d.repec.org/n?u=RePEc:nuf:econwp:0501&r=all 85. Tradeable Goods, Non-Tradeable Goods and Participation Chirstopher Bliss (Nuffield College, University of Oxford) Date: 2005-01-01 URL: http://d.repec.org/n?u=RePEc:nuf:econwp:0502&r=all 86. Axiomatic Foundations for Satisficing Behavior Christopher J.Tyson (Nuffield College, Oxford) A theory of decision making is proposed that supplies an axiomatic basis for the concept of "satisficing" postulated by Herbert Simon. After a detailed review of classical results that characterize several varieties of preference-maximizing choice behavior, the axiomatization proceeds by weakening the inter-menu contraction consistency condition involved in these characterizations. This exercise is shown to be logically equivalent to dropping the usual cognitive assumption that the decision maker fully perceives his preferences among available alternatives, and requiring instead merely that his ability to perceive a given preference be weakly decreasing with respect to the relative complexity (indicated by set inclusion) of the choice problem at hand. A version of Simon's hypothesis then emerges when the notion of "perceived preference" is endowed with sufficiently strong ordering properties, and the axiomatization leads as well to a constraint on the form of satisficing that the decision maker may legitimately employ. Date: 2005-01-06 URL: http://d.repec.org/n?u=RePEc:nuf:econwp:0503&r=all 87. Adjustment Costs and the Identification of Cobb Douglas Production Functions Stephen Bond (Institute for Fiscal Studies and Nuffield College, Oxford) Mans Soderbom (Centre for the Study of African Economies, Department of Economcis, University of Oxford, and Institute for Fiscal Studies) Cobb Douglas production function parameters are not identified from cross-section variation when inputs are perfectly flexible and chosen optimally, and input prices are common to all firms. We consider the role of adjustment costs for inputs in identifying these parameters in this context. The presence of adjustment costs for all inputs allows production function parameters to be identified, even in the absence of variation in input prices. This source of identification appears to be quite fragile when adjustment costs are deterministic, but more useful in the case of stochastic adjustment costs. We illustrate these issues using simulated production data. Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:nuf:econwp:0504&r=all 88. Fiscal gimmickry in Europe: one-off measures and creative accounting Vincent Koen Paul van den Noord Accounting conventions usually leave some room for judgment, which governments may be tempted to take advantage of, especially when fiscal rules bite or threaten to do so. The European experience over the past decade documented here in great detail illustrates that fiscal gimmicks come in many different guises, but also that some are less mischievous than others. Logit regression analysis confirms that when deficit rules or, to a lesser extent, debt thresholds tend to become more binding, recourse to gimmicks is more likely. It also suggests that more centralised budget systems are less prone to such gimmickry. The policy implications are clear as regards the virtues of transparent and consistent accounting practices, but more ambiguous regarding the merits or otherwise of one-off measures.
Astuces budgetaires en Europe: mesures non recurrentes et creativite comptable
En general, les conventions comptables sont sujettes a interpretation, et les gouvernements peuvent etre tentes d'en profiter, notamment lorsqu'ils sont contraints, ou en voie de l'etre, par des regles budgetaires. L'experience europeenne au cours de la decennie ecoulee decrite ici avec force details montre que les astuces budgetaires sont proteiformes, mais aussi que certaines posent moins de problemes que d'autres. Des regressions logit confirment que lorsque les regles sur les deficits ou, dans une moindre mesure, les seuils d'endettement deviennent plus contraignants, la probabilite d'un recours a des astuces augmente. Elles corroborent egalement l'idee que les astuces tendent a etre moins employees dans des systemes budgetaires plus centralises. Les implications de politique economique sont claires s'agissant des vertus de la transparence et de la coherence des comptes, mais plus ambigues concernant les merites ou inconvenients des mesures non recurrentes. Keywords: Budgets; Economic and Monetary Union; fiscal deficit; fiscal rules; fiscal gimmicks; national accounts; political economy; public debt; Stability and Growth Pact JEL: D78 E61 H6 H27 H74 H81 H82 H87 Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:417&r=all 89. Reforming Turkey's public expenditure management Rauf Gonenc Willi Leibfritz Erdal Yilmaz Fiscal imbalances were a main cause for chronic high inflation and macroeconomic instability before the 2000/2001 crisis. Fiscal consolidation is the cornerstone of post-crisis stabilization. It has been quite successful over the past three years as sizeable primary surpluses have been sustained and the fall in interest rates has reduced the interest cost of public debt. Fiscal targets have been achieved chiefly by raising revenues which has increased the tax burden; greater emphasis should now be placed on the control of public expenditure. At the same time, core public services such as education, justice, infrastructure and rural development will need to be upgraded. Social security costs may also rise with the planned shift to universal health insurance, and the ambitious administrative decentralization project could cause upward pressure on local spending. Far- reaching rationalization of public expenditures is therefore required to meet the quantitative fiscal targets while achieving the intended improvement in public governance. Turkey has made important steps in this direction with new fiscal laws and regulations but an integrated strategy is necessary to harness their full benefits. This Working Paper relates to the 2004 OECD Economic Survey of Turkey (www.oecd.org/eco/surveys/turkey).
Reformer la gestion des depenses budgetaires en Turquie
Les desequilibres fiscaux ont ete une cause majeure de
l'inflation forte et de l'instabilite macroeconomique avant la
crise de 2000-2001. La consolidation budgetaire a ete au c?ur
de la stabilisation apres la crise. Elle a ete mise en ?uvre
depuis trois ans avec des excedents primaires larges, et la
baisse des taux d'interet a reduit le cout du service de la
dette publique. Les objectifs budgetaires ont ete atteints
principalement par une hausse des revenus, augmentant la pression
fiscale, et plus d'attention devra etre accordee a l'avenir au
controle des depenses. En meme temps des services publics
majeurs comme l'education, la justice, les infrastructures et le
developpement rural devront etre ameliores. Les depenses de
securite sociale pourraient aussi augmenter avec le passage
annonce a la couverture medicale universelle, et l'ambitieux
projet de decentralisation administrative pourrait accroitre
les depenses locales. Une forte rationalisation des depenses
devient donc necessaire pour atteindre les objectifs
quantitatifs de la politique budgetaire tout en ameliorant la
qualite de la gouvernance publique. La Turquie a fait
d'importants pas dans cette direction avec de nouvelles lois et
reglementations budgetaires mais une strategie integree est
necessaire pour recueillir pleinement leurs fruits.
Keywords: Turkey; government expenditure; public sector
efficiency; budget systems; intergovernmental relations;
new public management
JEL: E62 H1 H4 H5 H7
Date: 2005-02-10
URL: http://d.repec.org/n?u=RePEc:oed:oecdec:418&r=all
90. Learning, the Forward Premium Puzzle and Market Efficiency
Avik Chakraborty (University of Oregon - Student)
The Forward Premium Puzzle is one of the most prominent
empirical anomalies in international finance. The forward premium
predicts exchange rate depreciation but typically with the
opposite sign and smaller magnitude than specified by rational
expectations, a result also considered to indicate inefficiency
in the foreign exchange market. This paper proposes a resolution
of the puzzle based on recursive least squares learning applied
to a simple model of exchange rate determination. The key
assumption is that risk neutral agents are not blessed with
rational expectations and do not have perfect knowledge about the
market. Agents learn about the parameters underlying the
stochastic process generating the exchange rate using constant
gain recursive least squares. When exchange rate data are
generated from the model and the empirical tests are performed,
for plausible parameter values the results replicate the anomaly
along with other observed empirical features of the forward and
spot exchange rate data.
Keywords: Spot Exchange Rate, Forward Rate, Constant-gain
Recursive Least Squares Learning.
Date: 2004-10-01
Date: 2004-10-01
URL: http://d.repec.org/n?u=RePEc:ore:uoecwp:2005-4&r=all
91. Electricity Derivatives and the Spot Market in Italy.
Mitigating Market Power in the Electricity Market
TERMINI VALERIA
CAVALLO LAURA
The increased uncertainty regarding electricity prices caused by
the liberalization of the sector and the launch of wholesale spot
electricity markets has led to the development of financial
derivatives both in regulated and over-the-counter markets. The
ability of the spot market to stimulate the economic efficiency
and competitiveness of the energy sector depends crucially on its
efficiency and liquidity. However, as the theoretical analyses
developed after the Californian crisis show, the concentration of
spot-market transactions in the day-ahead market in a non-
competitive industry exposes electricity prices to excessive
peaks and volatility. This is due to their higher exposure to the
exercise of market power by the dominant producer as well as to
contingent events. This paper argues that introducing a regulated
market for standardized derivatives, while giving consumers a
strategic role in the market, would contribute to solving the
trade-off between the liquidity of the market and the stability
of the system. Some interesting policy implications emerge
Date: 2003-04
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:190&r=all
92. Financial Constraints and Unemployment Equilibrium
CESARONI GIOVANNI
MESSORI MARCELLO
This paper aims to show (1) that the IS/LM model will be a
coherent solution to Keynes's analysis of unemployment, if the
relaxation of the general equilibrium framework is based solely
on exogenous price and quantity constraints; (2) that the
consequent determination of unemployment equilibria is
analytically fragile and does not support Keynes' attempt to
reduce the standard approach to a particular case of his "general
theory"; and (3) that a more robust determination of unemployment
equilibria has to be based on the integration of credit rationing
into a general equilibrium model. To illustrate points (1) and (2)
we review some of the traditional macroeconomic models of the
neoclassical synthesis, and we show that the problems bequeathed
by these models are only partially solved by the strand of the
new Keynesian economics based on market imperfections and
endogenous rigidities. To illustrate point (3) we build a simple
general equilibrium model in which prices are - in principle -
perfectly flexible and credit rationing implies unemployment
equilibria. Apart from the crucial role played by the credit
market, our model is very similar to that developed by the
neoclassical synthesis.
Date: 2003-05
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:191&r=all
93. A Learning Theory for the Concept of Harsanyi-Nash
Equilibrium in Stochastic Games with Bayesian Players
LEONI PATRICK
This paper investigates simultaneous learning about both nature
and others' actions in stochastic games, and identifies a set of
suffcient conditions assuring that equilibrium actions played by
Bayesian agents become eventually arbitrarily close to a Harsanyi-
Nash equilibrium. We assume that players have prior beliefs about
both nature' drawings and other players' strategies, which are
not necessarily exact. Provided that 1) every player maximizes
his own expected sum of discounted one-period utility against
their own beliefs, 2) every player updates his beliefs in a
Bayesian manner, 3) prior beliefs about both nature' drawings and
other players' strategies have a grain of truth and 4) beliefs
about nature' drawings are independent of actions taken by the
players during the game, we show that after some finite time the
equilibrium outcome of the above game is arbitrarily close to a
Harsanyi-Nash equilibrium, where priors beliefs are assumed to be
exact. Therefore, the result strictly extends the results in
Kalai and Lehrer [8] to stochastic games with learning about
nature as well as others' actions, and it provides a learning
theory for the concept of Harsanyi-Nash equilibrium in such games.
Date: 2003-05
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:192&r=all
94. On The Dynamic Programming Approach To Incentive Constraint
Problems
FAUSTO GOZZI
ROBERTO MONTE
M. ELISABETTA TESSITORE
In this paper we study a class of infinite horizon optimal
control problems with incentive constraints in the discrete time
case. More specifically, we establish suffcient conditions under
which the value function associated to such problems satisfies
the Dynamic Programming Principle.
Date: 2003-06
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:193&r=all
95. A virtuous interaction betweenpressure groups, firms and
institutions: a subsidiarity principle in a horizontal
differentiation model
BECCHETTI LEONARDO
PAGANETTO LUIGI
NAZARIA SOLFERINO
In this paper we analyse the relationship between producers'
ethical responsibility and consumers' welfare in a duopoly with
horizontal (ethical) differentiation. We show that the entry of
an ethically concerned (socially and environmentally responsible)
producer generates a Pareto improvement for all (both ethically
and non ethically) concerned consumers in the North in a
Hotelling game in which the incumbent and the ethical entrant
compete over prices and ethical features of their products. We
also show that the price reaction of the incumbent when his
location is fixed has additional positive welfare effects and
that - when we remove the fixed location hypothesis -incumbent's
ethical imitation adds to this even though it is compensated by
reduced price competition. We also analyse the relative
efficiency of tax financed direct aid to the South vis a vis a
policy of duty exemption for i) the socially and environmentally
responsible producer, ii) both producers. We therefore show under
different games how changes in costs of ethical distance, ethical
location of the incumbent and amount of the duty affect the
relative welfare-dominance of these three different policies.
Date: 2003-09
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:194&r=all
96. The Pricing Effect of Certification on Bank Loans:Evidence
from the Syndicated Credit Market
LUCA CASOLARO
DARIO FOCARELLI
ALBERTO FRANCO POZZOLO
This paper provides a direct test of banks' ability to mitigate
informational asymmetries. In syndicated loans, lenders'
incentive to screen borrowers ex ante and to monitor them ex post
increases with the share they retain; consequently, the higher
this share, the less risky the loan should be considered by
investors, and the lower should be the interest rate they require.
We analyze a large sample of syndicated loans arranged in over
80 countries during the nineties. We find that interest rates
decrease in the share of the facility retained by the arranger.
This certification effect is greater for smaller, more opaque
loans where screening and monitoring are more valuable.
Date: 2004-01
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:196&r=all
97. Political Risk in Syndicated Lending:Theory and Empirical
Evidence Regarding the Use of ProjectFinance
CHRISTA HAINZ
STEFANIE KLEIMEIER
Why do bank grant project finance loans to borrowers in risky
countries? Our double moral hazard model predicts that project
finance is optimal if the degree of moral hazard of the firm's
manager is high and either the project faces high levels of
political risk or the bank has influence over the political risk
exposure of the project. Using a global and a transition economy
sample of project finance loans from 1980 to 2003, we find
empirical support of our predictions regarding firm moral hazard
and political risk. Regarding the bank's role only the influence
of the IFC is significant.
Date: 2004-01
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:197&r=all
98. Pricing credit risk through equity options
MARCO FABIO DELZIO
In this paper we propose a new methodology for calculating the
risk-neutral default probability of a generic firm XYZ, using
equity options prices. This model can be used for the pricing and
risk management of corporate bonds and, more in general, credit
derivatives. We assume that the market is arbitrage-free but not
necessarily complete, meaning that many probability measure can
exist. We select the 'market' probability measure implied in the
equity options prices and use it for pricing single name credit
derivatives. Firstly, the equity probability density function is
inferred from equity implied volatilities with different strikes
and maturities. Then, the corresponding assets density function
and default probability are calculated, obtaining the option
implied default probability as the main output of the model. We
show that the option implied default probability can be expressed
as a function of a firm's assets volatility and debt nominal
value. Both variables are firm specific, the former being an
indicator of business risk, the latter of financial leverage (
indeed, financial risk) of the firm XYZ. This model can be used
either as a pricing tool, if credit derivatives are not traded,
or as a relative value analysis tool in liquid markets.
Date: 2004-02
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:198&r=all
99. Credit Risk Versus Capital Requirements Under Basel II: Are
SME Loans and Retail Credit Really Di Erent?
JESPER TOR JACOBSON
KASPER ROSZBACH LINDE
The new Basel II regulation contains a number of new regulatory
features. Most importantly, internal ratings will be given a
central role in the evaluation of bank loans' riskiness. Another
novelty is that retail credit and SME loans will receive a
special treatment in recognition of the fact that the riskiness
of such exposure derives to a greater extent from idiosyncratic
risk and much less from common factor risk. Much of the work done
on the differences between the risk properties of retail, SME and
corporate credit has been based on parameterized model of credit
risk. In this paper we present new quantitative evidence on the
implied credit loss distributions for two Swedish banks using a
non-parametric Monte Carlo re-sampling method following Carey
[1998]. Our results are based on a panel data set containing both
loan and internal rating data from the banks' complete business
loan portfolios over the period 1997-2000. We compute the credit
loss distributions that each rating system implies and compare
the required economic capital implied by these loss distributions
with the regulatory capital under Basel II. By exploiting the
fact that a subset of all businesses in the sample is rated by
both banks, we can generate loss distributions for SME, retail
and corporate credit portfolios with a constant risk profile. Our
findings suggest that a special treatment for retail credit and
SME loans may not be justified. We also investigate if any
alternative definition of SME's and retail credit would warrant
different risk weight functions for these types of exposure. Our
results indicate that it may be di?cult to find a simple risk
weight function that can account for the differences in portfolio
risk properties between banks and asset types.
Date: 2004-02
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:199&r=all
100. Real Balance Effects, Determinacy and Optimal Monetary
Policy
PIERGALLINI ALESSANDRO
This paper presents a dynamic New Keynesian macroeconomic model
with real balance effects. Both the conditions of equilibrium
determinacy under an interest rate rule of the Taylor-type and
the implications for optimal monetary policy are considered. We
find a number of results that would not appear in the traditional
framework. It is shown that the real balance effect makes the so-
called "Taylor principle" not necessary for determinacy of
rational expectations equilibrium. A relatively "passive"
monetary policy is found to be feasible also in the long run, but
not necessarily optimal. In particular, within a class of policy
rules constrained to be a linear function of state variables, an
"active" optimal interest rate rule is more likely to be verified
under commitment rather than under discretion.
Date: 2004-02
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:200&r=all
101. Welfare Effects of Monetary Policy Rules in a Model with
Nominal Rigidities and Credit Market Frictions
PAUSTIAN MATTHIAS
This paper evaluates monetary policy rules in a business cycle
model with staggered prices and wage setting a la Calvo and
asymmetric information in the credit market. Rules are compared
in a utility based welfare metric, the effects of the model's
nonlinear dynamics are captured by a quadratic approximation to
the policy function. The firms net worth crucially affects the
terms of obtaining outside finance. Financial frictions dampen
the economy's response to shocks and make them more persistent.
For the baseline calibration, the welfare costs of price
stickiness are found to be less than 0.04 per cent of steady
state consumption. However, wage stickiness can induce welfare
costs of up to 0.85 per cent of steady state consumption. An
interest rate rule that places high weight on stabilizing wage
inflation can eliminate most of these costs. These findings are
by and large independent of the existence of other real
distortions in the model, namely credit frictions.
Date: 2004-03
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:201&r=all
102. A behavioral model of consumption
GIAMBONI LUIGI
WALDMANN ROBERT
This paper studies whether anomalies in consumption can be
explained by a behavioral model in which agents do not have
rational expectations and make predictable errors in forecasting
income. We use a micro-data set containing subjective
expectations about future income. The paper shows that, the null
hypotheses of rational expectations is rejected in favor of the
behavioral model, as that consumption responds to predictable
forecast errors. On average agents who we predict are too
pessimistic increase consumption after the predictable positive
income shock. On average agents who are too optimistic reduce
consumption. (JEL classification: D11, D12, D84)
Date: 2004-04
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:202&r=all
103. Do husbands’ and wives’ predictions irrationally
diverge?
GIAMBONI LUIGI
This paper proposes a new version of the orthogonality test
where, the difference of spouses’ predictions over total net
family income is regressed on variables that are common knowledge
between the two. The test is consistent for the linex (and lin-
lin) class of asymmetric loss functions and is immune to
Chamberlain’s critique, of tests with short panels. The null of
rational expectations formation is rejected by both the standard
and the new orthogonality tests. Interestingly, my estimated
degree of asymmetry, is close to a quadratic loss function.(JEL
classification: C53, E47)
Date: 2004-04
URL: http://d.repec.org/n?u=RePEc:rtv:ceiswp:203&r=all
104. "A New Light from Old Wisdoms : Alternative Estimation
Methods of Simultaneous Equations and Microeconometric
Models"
Theodore W. Anderson (Department of Statistics and
Department of Economics, Stanford University)
Naoto Kunijtomo (Faculty of Economics, University of Tokyo)
Yukitoshi Matsushita (Graduate School of Economics,
University of Tokyo)
We compare four different estimation methods for a coefficient
of a linear structural equation with instrumental variables. As
the classical methods we consider the limited information maximum
likelihood (LIML) estimator and the two-stage least squares (TSLS)
estimator, and as the semi-parametric estimation methods we
consider the maximum empirical likelihood (MEL) estimator and a
generalized method of moments (GMM) (or the estimating equation)
estimator. Tables and figures are given for enough values of the
parameters to cover most of interest. We have found that the LIML
estimator has good performance when the number of instruments is
large, that is, the micro-econometric models with many
instruments or many weak instruments in the terminology of recent
econometric literatures. We give a new result on the asymptotic
optimality of the LIML estimator when the number of instruments
is large.
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:tky:fseres:2005cf321&r=all
105. "Risk, Transaction Costs, and Geographic Distribution of
Share Tenancy: A Case of Pre-War Japan"
Yutaka Arimoto (Graduate School of Agricultural and Life
Sciences, University of Tokyo)
Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
Masaki Nakabayashi (Graduate School of Economics, Osaka
University)
This paper investigates determinants of geographic distribution
of share tenancy and analyzes its efficiency implications in pre-
war Iwate prefecture, Japan. The distribution of share tenancy
was attributable to risk represented by yield variability, which
in turn was affected by seasonal winds called Yamase and
topographic features. That risk raised transaction costs of
adopting a fixed-rent tenancy associated with the common custom
of rent reduction in Japan that mitigated the problem of
risksharing. Estimation results suggest that risk, wealth, and
strength of community ties were the main determinants of contract
choice.
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:tky:fseres:2005cf322&r=all
106. "The New Development of Dispersed Production System: A Case
from the Japanese Toy Industry in the Inter-war Period" (in
Japanese)
Masayuki Tanimoto (Faculty of Economics, University of Tokyo)
This paper explores Japan's pre-war industrialization from the
viewpoint of small- scale businesses. A typical case can be seen
in the development of rural weaving industry before the World War
I. There functioned the production form besides factory such as
putting-out system based on the peasant's sideline work. After
the World War I, however, putting-out system in the weaving
industry rapidly gave way to factory system that equipped the
power looms. Contrastively, the industrial development in large
cities, especially in Tokyo during the Inter-war period, entailed
the increase of newly formed petty and small workshops. There
functioned the production system based on the complex transaction
of merchants, factories, small workshops and domestic works. Toy
manufacturing, which developed as an export industry in the Inter-
war Tokyo, was one of the typical industries based on that
production system. As the urban area lacked the peasants and the
intimate communities, urban small businesses stood on the
different foundations. The skill was trained in the quasi-
apprentice system where juvenile workers experienced a sort of on
the job training. Based on this skill formation, not a few
employees set up their own businesses and competed even with the
wholesalers. Their activities were supported by the positive
externality of the cluster. The formal and informal institutions
played significant roles to prevent the transactions from
disorder. The role of production organizer that combined the
function of the merchant was also important. The combination of
the merchant and the household economy, together with the social
and institutional basis, promoted an industrialization based on
the small businesses.
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:tky:jseres:2005cj125&r=all
107. How Robust Are the Linkages Between Religiosity and
Economic Growth
Chih Ming Tan
Steven N. Durlauf
Andros Kourtellos
Do variations in the degree of religiosity across countries
translate into predictable differences in cross-country growth
experiences? We apply a model averaging procedure to investigate
the empirical robustness of linkages between religiosity and
growth when other fundamental growth determinants, such as
institutions, fractionalization, and geography, are
simultaneously considered. Our results suggest that while
religiosity variables such as belief in hell, belief in heaven,
and monthly church attendance are potentially relevant to growth
there is no evidence to suggest that they are either
quantitatively significant or important.
Keywords: Economic growth, Religion, Model Uncertainty
JEL: O40 Z12 C59
URL: http://d.repec.org/n?u=RePEc:tuf:tuftec:0510&r=all
108. Understanding Preferences For Income Redestribution
Chih Ming Tan
Louise C. Keely
Recent research suggests that income redistribution preferences
vary across identity groups. We employ a new pattern recognition
technology, tree regression analysis, to uncover what these
groups are. Using data from the General Social Survey, we present
a new stylized fact that preferences for governmental provision
of income redistribution vary systematically with race, gender,
and class background. We explore the extent to which existing
theories of income redistribution can explain our results, but
conclude that current approaches do not fully explain the
findings.
URL: http://d.repec.org/n?u=RePEc:tuf:tuftec:0511&r=all
109. No One True Path: Uncovering the Interplay between
Geography, Institutions, and Fractionalization in Economic
Development
Chih Ming Tan
Do institutions “rule” when explaining cross-country
divergence? This paper finds that to a large extent they do.
However, the role of ethno-linguistic fractionalization cannot be
ignored. Sufficiently high-quality institutions are necessary if
the negative impact on development from high levels of ethno-
linguistic fractionalization is to be mitigated. Interestingly, I
find no role for geographic factors; neither those associated
with climate nor geographic isolation, in explaining divergence.
There is also no evidence to suggest a role for religious
fractionalization. Finally, my findings affirm earlier work in
the literature that sets apart Sub-Saharan Africa’s development
process from the rest of the world.
URL: http://d.repec.org/n?u=RePEc:tuf:tuftec:0512&r=all
110. Child poverty in rich countries 2005
UNICEF Innocenti Research Centre
The proportion of children living in poverty has risen in a
majority of the world's developed economies. No matter which of
the commonly-used poverty measures is applied, the situation of
children is seen to have deteriorated over the last decade. This
publication is the sixth in a series of Innocenti Report Cards,
designed to monitor and compare the performance of the OECD
countries in meeting the needs of their children. It is also the
first in what will be an annual Innocenti Report on Child Poverty
in Rich Countries.
Keywords: Child Poverty; Child Protection; Industrialized
Countries;
Keywords: Developed Countries;
JEL: I32
Date: 2005
URL: http://d.repec.org/n?u=RePEc:ucf:inreca:inreca05/9&r=all
111. Principles and practicalities for measuring child poverty
in the rich countries
Miles Corak
This paper has three objectives. The first is to discuss the
major issues involved in defining and measuring child poverty. I
clarify the choices that must be made, and state a set of six
principles to serve as a guide for public policy. The second
objective is to take stock of child poverty and changes in child
poverty in the majority of OECD countries since about 1990 when
the Convention on the Rights of the Child came into force.
Finally, the third objective is to formulate a number of
suggestions for the setting of credible targets for the
elimination of child poverty in the rich countries. This involves
a method for embodying the ideal of children having priority on
social resources into a particular set of child poverty reduction
targets, it involves the development of appropriate and timely
information sources, and finally it involves the clarification of
feasible targets that may vary across the OECD. Child poverty
rates vary by more than a factor of ten across the OECD, from
less than three percent to over 20 and almost 30%. These
countries fall into four broad groups, those with child poverty
rates less than 5%, those with higher rates but still less than
10%, those with rates higher than 10% and as high as 20%, and
finally two countries with more than one-in-five children being
poor. In the strong majority of countries child poverty rates
have actually gone up. In 17 of 24 OECD countries the child
poverty rate at the end of the 1990s was higher than at the
beginning, and in only four countries has it declined to a
measurable degree. An important challenge in reversing this trend
concerns the need to develop a clear definition of child poverty
for public policy in specific national contexts and to set
feasible and credible targets. Economic theory, accepted
statistical practice and best practice in the OECD suggest the
following six principles to guide decision making: (1) avoid
unnecessary complexity by using an income based measure of
resources; (2) complement this by measuring material deprivation
directly using a small set of indicators; (3) draw poverty lines
with regard to social norms; (4) establish a regular monitoring
system and update poverty lines within a five year period; (5)
set a both a backstop and a target by using fixed and moving
poverty lines; and (6) offer leadership and build public support
for poverty reduction.
Keywords: Child Poverty; Child-Related Policies;
Keywords: Developed Countries;
JEL: I32
Date: 2005
URL: http://d.repec.org/n?u=RePEc:ucf:inwopa:inwopa05/26&r=all
112. Child poverty and changes in child poverty in rich
countries since 1990
Miles Corak
Wen-Hao Chen
This paper documents levels and changes in child poverty rates
in 12 OECD countries using data from the Luxembourg Income Study
project, and focusing upon an analysis of the reasons for changes
over the 1990s. The objective is to uncover the relative role of
income transfers from the state in determining the magnitude and
direction of change in child poverty rates, holding other
demographic and labour market factors constant. As such the paper
offers a cross-country overview of child poverty, changes in
child poverty and the impact of public policy in North America
and Europe. The paper offers a set of country specific results,
and also attempts to draw general lessons. First, family and
demographic forces play only a limited role in determining
changes in child poverty rates. These forces change only
gradually and are limited in their ability to cushion children
from detrimental shocks originating in the labour market or in
the government sector, which are the sources of the major forces
determining the direction of change in child poverty. Second, in
countries facing severe economic crises it does not appear that
the amount of social transfers available were increased in a way
to cushion children from these changes and put a backstop on
their risk of low income. Indeed, just the opposite appears to
have occurred in countries experiencing the largest increases in
child poverty. Third, there is no single road to lower child
poverty rates. Changes in income transfers need to be thought
through in conjunction with the nature of labour markets. Reforms
intended to increase the labour supply and labour market
engagement of adults may or may not end up lowering child poverty
rates. At the same time increases in the level of support have
also been shown to be a central ingredient in lowering the child
poverty rate both when it is very high and when it is already
quite low. In the majority of the countries analyzed there has
been little progress in reducing child poverty rates. Child
poverty unambiguously fell in only three of the twelve countries
under study, the United Kingdom, the United States, and Norway.
In the remaining seven countries child poverty rates were
essentially unchanged since 1990 or rose significantly. The
analytical approach does not aim to consider the behavioural
interactions between the various variables on incomes.
Nonetheless the analysis might be seen as a starting point for
discussions of the extent to which children in some relatively
rich countries have experienced changes in the risk of living in
low income given the standards prevailing during the late 1980s
and early 1990s.
Keywords: Child Poverty; Child-Related Policies;
Keywords: Developed Countries;
JEL: I32
Date: 2005
URL: http://d.repec.org/n?u=RePEc:ucf:inwopa:inwopa05/27&r=all
113. A portrait of child poverty in Germany
Miles Corak
Michael Fertig
Marcus Tamm
This paper offers a descriptive portrait of income poverty among
children in Germany between the early 1980s and 2001, with a
focus on developments since unification in 1991. Data from the
German Socio-Economic Panel are used to estimate poverty rates,
rates of entry to and exit from poverty, and the duration of time
spent in and out of poverty. The analysis focuses upon
comparisons between East and West Germany, by family structure,
and citizenship status. Child poverty rates have drifted upward
since 1991, and have been increasing more than the rates for the
overall population since the mid-1990s. In part these changes are
due to increasing poverty among children from households headed
by non-citizens. Children in single parent households are by all
measures at considerable risk of living in poverty. There are
also substantial differences in the incidence of child poverty
and its dynamics between East and West Germany.
Keywords: Child Poverty; Child-Related Policies;
Keywords: Germany;
JEL: I32
Date: 2005
URL: http://d.repec.org/n?u=RePEc:ucf:inwopa:inwopa05/28&r=all
114. The impact of tax and transfer systems on children in the
European Union
Holly Sutherland
Miles Corak
Christine Lietz
The objective of this paper is to analyse the impact of fiscal
policy on the economic resources available to children, and on
the child poverty rate. A static microsimulation model
specifically designed for the purposes of comparative fiscal
analysis in the European Union, EUROMOD, is used to study the age
incidence of government taxes and transfers in 2001 in 15 EU
countries. Three related questions are addressed. First, what
priorities are currently embodied in government budgets across
age groups, and in particular to what degree do cash transfer and
tax systems benefit children relative to older groups? We find
that in most countries children receive a higher proportion of
their share of household income from government transfers than
young and middle-aged adults, but this is not universally the
case. Low income children receive 60 per cent to 80 per cent of
their income from transfers in all countries with child poverty
rates lower than 10 pr cent. But the proportion is much lower, 20
per cent to 30 per cent, in countries with higher child poverty
rates. Further, in many high child poverty countries the low
income population in their 50s receive a higher proportion of
household disposable income from state transfers than those
younger than 18. These results are based on the broadest possible
measure of public resources for children, one influenced not only
by government budgets but also by the number of co-resident
adults, transfer payments directed to them, and their labour
market behaviour. For this reason we also examine only those
payments from the state depending on the presence of children,
and ask: what fraction of the needs of children are supported by
elements of the tax and transfer systems directed explicitly to
them? There is considerable cross-country variation in the
fraction of the additional household needs arising from having
children which is supported through government transfers. It is
higher than 30 per cent in 10 out of the 15 countries we study,
but in the neighbourhood of 20 per cent in others, and in some
cases close to only 10 per cent. We also find that tax
concessions are an important component in many countries and
cannot be ignored in measuring public resources for children. Our
third set of findings has to do with the relationship between the
measures of public resources we calculate and child poverty: what
impact do measures of public resources for children have on child
poverty rates? We find that poverty rates would be much higher in
all countries if there were no child contingent transfers being
made. But countries with the lowest poverty rates are those in
which children benefit a good deal from other transfers not
necessarily directed to them. In some cases this is because of
public support to working mothers and fathers, in others because
of intra-household transfers from co-resident adults. In another
set of countries with low poverty rates child contingent payments
make a large contribution to child poverty reduction. These
countries mainly make use of universal benefits and tax
concessions. Though their systems are not particularly targeted
on low income children they nevertheless perform well in
protecting children from poverty. This is in contrast with
countries targeting income to children in poverty, where levels
of spending may be comparable but child poverty rates are higher.
Keywords: Child Poverty; Child-Related Policies;
Keywords: European Community;
JEL: I32
Date: 2005
URL: http://d.repec.org/n?u=RePEc:ucf:inwopa:inwopa05/29&r=all
115. Other Things Being Equal: A Paired Testing Study of
Discrimination in Mortgage Lending
Margery Austin Turner (Metropolitan Housing and Communities
Policy Center, Urban Institute)
Erin Godfrey (New York University)
Stephen L. Ross (University of Connecticut)
Robin R. Smith (Metropolitan Housing and Communities Policy
Center, Urban Institute)
This paper analyzes data from a recently completed study of
discrimination against African-American and Hispanic homebuyers
when they visit mortgage lending institutions in two major
metropolitan markets to make pre-application inquiries. It
represents the first application of paired testing to rigorously
measure discrimination in the mortgage lending process. The
paired tests isolated significant levels of differential
treatment on the basis of race and ethnicity in Chicago with
African Americans and Hispanics receiving less information and
assistance than comparable whites. Adverse treatment of African-
Americans and Hispanics is also observed in Los Angeles for
specific treatments, but the overall pattern of treatment
observed did not differ statistically from equal treatment.
Multivariate analyses for Chicago indicate that large lenders
treat minorities more favorably than small lenders and that
lenders with substantial numbers of applications from African-
Americans treat African Americans more favorably than lenders
with predominantly white application pools.
JEL: G21 J15 L85 R30
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:uct:uconnp:2005-03&r=all
116. Military Procurement, Industry Structure and Regional
Conflict
Paul Dunne
Maria del Carmen Garcia-Alonso
Paul Levine
Ron Smith
In this paper, we construct a model of market structure in the
global arms industry linking concentration, military procurement,
international trade and regional conflict. We show how
concentration depends on the willingness of producers to import
for their military needs and on the relative size of the external
market of non-producers. We show that there can be substantial
gains to producers from cooperation in the procurement process,
but also small gains to non-producers involved in regional arms
races. Arms export controls that limit the level of technology
that can be exported to non-producers distribute these
cooperative gains from producers to non-producers.
Keywords: military procurement; market structure; arms trade;
arms races
JEL: F12 H56 L10
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:ukc:ukcedp:0502&r=all
117. Strategic Procurement, Openness and Market Structure
Maria del Carmen Garcia-Alonso
Paul Levine
We examine strategic procurement behaviour by governments and
its effect on market structure in sectors, such as defence, where
the government is the dominant consumer. In a world economy with
trade between producers, and between producers and non-producers,
we use a modified Dixit-Stiglitz utility function with an
independent taste for variety. Governments can, in effect, choose
the number of domestic firms and their size by adjusting the
procurement price. Unlike the standard model with no independent
taste for variety and no external sector of non-producers, there
are incentives for subsidies, openness impacts on industrial
structure and there are potential gains from procurement
coordination between producer countries.
Keywords: procurement; openness; market structure; defence and
pharmaceutical sectors
JEL: F12 H56 L10
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:ukc:ukcedp:0503&r=all
118. Wage inequality and overeducation in a model with
efficiency wages
Peter Skott (University of Massachusetts Amherst)
This paper shows that the existence and persistence of
‘overeducation’ can be explained by an extension of the
efficiency wage model. When calibrated to fit the amounts of
overeducation found in most empirical studies, the model implies
that both the relative wage and the relative employment rate of
high-skill workers depend inversely on aggregate economic
activity. Keeping aggregate employment constant, furthermore, low-
skill unemployment rises following an increase in the relative
supply of high-skill labor, and relative wages may be insensitive
to changes in relative labor supplies. The model may help explain
rising wage inequality in some countries since the early 1970s.
JEL Categories: J31
Keywords: Wage inequality, overeducation, efficiency wages.
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:ums:papers:2005-06&r=all
119. GOODNESS-OF-FIT TESTS FOR LINEAR AND NON-LINEAR TIME SERIES
MODELS
Juan Carlos Escanciano Reyero (School of Economics and
Business Administration, University of Navarra)
In this article we study a general class of goodness-of-fit
tests for the conditional mean of a linear or nonlinear time
series model. Among the properties of the proposed tests are that
they are suitable when the conditioning set is infinite-
dimensional; are consistent against a broad class of alternatives
including Pitman's local alternatives converging at the
parametric rate ; and do not need to choose a lag order depending
on the sample size or to smooth the data. It turns out that the
asymptotic null distributions of the tests depend on the data
generating process, so a new bootstrap procedure is proposed and
theoretically justified. The proposed bootstrap tests are robust
to higher order dependence, in particular to conditional
heteroskedasticity of unknown form. A simulation study compares
the finite sample performance of the proposed and competing tests
and shows that our tests can play a valuable role in time series
modeling. Finally, an application to an economic price series
highlights the merits of our approach.
JEL: C12
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:una:unccee:wp0205&r=all
120. A Small-Sample Study of the New-Keynesian Macro Model
Seonghoon Cho (Korea Development Institute)
Antonio Moreno (School of Economics and Business
Administration, University of Navarra)
This paper presents a small-sample study of the threeequation-
three variable New-Keynesian macro model. While the point
estimates imply that the Fed has been stabilizing inflation
fluctuations since 1980, our econometric analysis suggests
considerable uncertainty regarding the stance of the Fed against
inflation. We show that, if we add first order autocorrelation to
the error terms of the New- Keynesian model, this is only
marginally rejected.
JEL: C32 E32 E52
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:una:unccee:wp0305&r=all
121. On the Role of the Growth Optimal Portfolio in Finance
Eckhard Platen (School of Finance and Economics, University
of Technology, Sydney)
The paper discusses various roles that the growth optimal
portfolio (GOP) plays in finance. For the case of a continuous
market we showhow the GOP can be interpreted as a fundamental
building block in financial market modeling, portfolio
optimization, contingent claim pricing and risk measurement. On
the basis of a portfolio selection theorem, optimal portfolios
are derived. These allocate funds into the GOP and the savings
account. A risk aversion coe±cient is introduced, controlling
the amount invested in the savings account, which allows to
characterize portfolio strategies that maximize expected
utilities. Natural conditions are formulated under which the GOP
appears as the market portfolio. A derivation of the
intertemporal capital asset pricing model is given without
relying on Markovianity, equilibrium arguments or utility
functions. Fair contingent claim pricing, with the GOP as
numeraire portfolio, is shown to generalize risk neutral and
actuarial pricing. Finally, the GOP is described in various ways
as the best performing portfolio.
Keywords: growth optimal portfolio; portfolio optimization;
market portfolio; fair pricing; risk aversion
coefficient
JEL: G10 G13
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:144&r=all
122. Pricing American Options on Jump-Diffusion Processes using
Fourier Hermite Series Expansions
Carl Chiarella (School of Finance and Economics, University
of Technology, Sydney)
Andrew Ziogas (School of Finance and Economics, University
of Technology, Sydney)
This paper presents a numerical method for pricing American call
options where the underlying asset price follows a jump-diffusion
process. The method is based on the Fourier-Hermite series
expansions of Chiarella, El-Hassan & Kucera (1999), which we
extend to allow for Poisson jumps, in the case where the jump
sizes are log-normally distributed. The series approximation is
applied to both European and American call options, and
algorithms are presented for calculating the option price in each
case. Since the series expansions only require discretisation in
time to be implemented, the resulting price approximations
require no asset price interpolation, and for certain maturities
are demonstrated to produce both accurate and efficient solutions
when compared with alternative methods, such as numerical
integration, the method of lines and finite difference schemes.
Keywords: American options; jump-diusion; Fourier-Hermite series
expansions; free boundary problem
JEL: C61 D11
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:145&r=all
123. Relative Volume as a Doubly Stochastic Binomial Point
Process
James McCulloch (School of Finance and Economics, University
of Technology, Sydney)
If intra-day volume is modelled as a Cox point process, then
relative intra-day cumulative volume (intra-day cumulative volume
divided by final total volume) is shown to be a novel
generalization of a binomial point process; the doubly stochastic
binomial point process. Re-scaling the intra-day traded volume to
a relative volume between 0 (no volume traded) and 1 (daily
trading completed) allows empirical intra-day volume distribution
information for all stocks to be used collectively to estimate
and identify the random intensity component of the binomial point
process and closely related Cox point process. This is useful for
Volume Weighted Average Price (VWAP) traders who require a
stochastic model of relative intra-day cumulative volume to
implement risk-optimal VWAP trading strategies.
Keywords: binomial; point process; doubly stochastic; relative
volume; Cox process, random probability measure; VWAP;
volume weighted average pricing; NYSE; New York Stock
Exchange
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:146&r=all
124. Heterogeneity, Profitability and Autocorrelations
Xue-Zhong He (School of Finance and Economics, University of
Technology, Sydney)
Youwei Li (Department of Econometrics and Operations
Research, Tilburg University)
This paper contributes to the development of recent literature
on the explanation power and calibration issue of heterogeneous
asset pricing models by presenting a simple stochastic market
fraction asset pricing model of two types of traders (
fundamentalists and trend followers) under a market maker
scenario. It seeks to explain aspects of financial market
behaviour (such as market dominance, under and over-reaction,
profitability and survivability) and to characterize various
statistical properties (including autocorrelation structure) of
the stochastic model by using the the dynamics of the underlying
deterministic system, traders? behaviour and market fractions.
Statistical analysis based on Monte Carlo simulations shows that
the long-run behaviour and convergence of the market prices, long
short)-run profitability of the fundamental (trend following)
trading strategy, survivability of chartists, and various under
and over-reaction autocorrelation patterns of returns can be
characterized by the stability and bifurcations of the underlying
deterministic system. Our analysis underpins mechanism on various
market behaviour (such as under/over-reactions), market dominance
and stylized facts in high frequency financial markets.
Keywords: asset pricing; heterogeneous beliefs; market fraction;
stability; bifurcation; market behaviour; profitability;
survivability; autocorrelation
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:147&r=all
125. Long Memory, Heterogeneity and Trend Chasing
Xue-Zhong He (School of Finance and Economics, University of
Technology, Sydney)
Youwei Li (Department of Econometrics and Operations
Research, Tilburg University)
Long-range dependence in volatility is one of the most prominent
examples of applications in financial market research involving
universal power laws. Its characterization has recently spurred
attempts at theoretical explanation of the underlying mechanism.
This paper contributes to this recent development by analyzing a
simple market fraction asset pricing model with two types of
traders?fundamentalists who trade on the price deviation from
estimated fundamental value and trend followers who follow a
trend which is updated through a geometric learning process. Our
analysis shows that the heterogeneity, trend chasing through
learning, and the interplay of noisy processes and a stable
deterministic equilibrium can be the source of power-law
distributed fluctuations. Statistical analysis based on Monte
Carlo simulations are conducted to characterize the long memory.
Realistic estimates of the power-law decay indices and the (FI)
GARCH parameters are found.
Keywords: asset pricing; fundamentalists and trend followers;
market fraction; stability; learning; long memory
JEL: C15 D84 G12
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:148&r=all
126. The Volatility Structure of the Fixed Income Market under
the HJM Framework: A Nonlinear Filtering Approach
Carl Chiarella (School of Finance and Economics, University
of Technology, Sydney)
Thuy-Duong To (School of Finance and Economics, University
of Technology, Sydney)
This paper seeks to estimate a multifactor volatility model so
as to describe the dynamics of interest rate markets, using data
from the highly liquid but short term futures markets. The
difficult problem of estimating such multifactor models is
resolved by using a genetic algorithm to carry out the
optimization procedure. The ability to successfully estimate a
multifactor volatility model also eliminates the need to include
a jump component, the existence of which would create
difficulties in the practical use of interest rate models, such
as pricing options or producing forecasts.
Keywords: term structure; volatility; mutlifactor; jump;
eurodollar futures; genetic algorithm
JEL: C51 C61 E43
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:150&r=all
127. The Volatility Structure of the Fixed Income Market under
the HJM Framework: A Nonlinear Filtering Approach
Carl Chiarella (School of Finance and Economics, University
of Technology, Sydney)
Hing Hung (School of Finance and Economics, University of
Technology, Sydney)
Thuy-Duong To (School of Finance and Economics, University
of Technology, Sydney)
This paper considers the dynamics for interest rate processes
within a multi-factor Heath, Jarrow and Morton (1992)
specification. Despite the flexibility of and the notable
advances in theoretical research about the HJM models, the number
of empirical studies is still inadequate. This paucity is
principally because of the difficulties in estimating models in
this class, which are not only high-dimensional, but also
nonlinear and involve latent state variables. This paper treats
the estimation of a fairly broad class of HJMmodels as a
nonlinear filtering problem, and adopts the local linearization
filter of Jimenez and Ozaki (2003), which is known to have some
desirable statistical and numerical features, to estimate the
model via the maximum likelihood method. The estimator is then
applied to the interbank offered-rates of the U.S, U.K,
Australian and Japanese markets. The two-factor model, with the
factors being the level and the slope effect, is found to be a
reasonable choice for all of the markets. However, the
contribution of each factor towards overall variability of the
interest rates and the financial reward each factor claims differ
considerably from one market to another.
Keywords: term structure; Heath-Jarrow-Morton; local
linearization; filtering
JEL: C51 E43 G12
Date: 2005-01-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:151&r=all
128. Continuous Time Model Estimation
Carl Chiarella (School of Finance and Economics, University
of Technology, Sydney)
Shenhuai Gao (School of Economics and Political Science,
University of Sydney)
This paper introduces an easy to follow method for continuous
time model estimation. It serves as an introduction on how to
convert a state space model from continuous time to discrete time,
how to decompose a hybrid stochastic model into a trend model
plus a noise model, how to estimate the trend model by simulation,
and how to calculate standard errors from estimation of the
noise model. It also discusses the numerical difficulties
involved in discrete time models that bring about the unit roots
illusion in econometrics.
Keywords: Continuous time model; Estimation; Trend and noise
decomposition; Unit roots illusion
JEL: C13 C22 C32 C51
Date: 2004-12-01
URL: http://d.repec.org/n?u=RePEc:uts:wpaper:138&r=all
129. Keynesian Dynamics and the Wage-Price Spiral: A Baseline
Disequilibrium Model
Toichiro Asada (Faculty of Economics, Chuo University
Faculty of Economics)
Pu Chen (Department of Economics, University of Bielefeld)
Carl Chiarella (School of Finance and Economics, University
of Technology, Sydney)
Peter Flaschel (Department of Economics, University of
Bielefeld)
We reformulate and extend the standard AS-AD growth model of the
Neoclassical Synthesis (stage I) with its traditional
microfoundations. The model retains an LM curve in the place of a
Taylor interest rate rule, exhibits sticky wages as well as
sticky prices, myopic perfect foresight of current inflation
rates and adaptively formed medium-run expectations concerning
the investment and the inflation climate in which the economy is
operating. The resulting nonlinear 5D model of labor and goods
market disequilibrium dynamics avoids the striking anomalies of
the standard AS-AD model of the Neoclassical synthesis (stage I).
It exhibits instead Keynesian feedback dynamics proper with, in
particular, asymptotic stability of its unique interior steady
state for low adjustment speeds and with cyclical loss of
stability ? by way of Hopf bifurcations ? when some adjustment
speeds are made suciently large, eventually leading to purely
explosive dynamics. In such cases, downward money wage rigidity
serves to make the overall dynamics bounded and thus viable. We
thus obtain and analyze a baseline D(isequilibrium)AS-AD model
characterised by Keynesian feedback channels with a rich set of
stability/instability features as the sources of the business
cycle. The outcomes of the model stand in stark contrast to those
of the currently fashionable baseline model of the New Keynesian
alternative (the Neoclassical Synthesis, stage II) that we
suggest is more limited in scope.
Keywords: DAS-AD growth; wage and price Phillips curves; real
interest eects; real wage effects; (in)stability;
persistent cycles; inflation and deflation
JEL: E24 E31 E32
Date: 2004-12-01
URL: http://d.repec.org/n?u=RePEc:uts:wpaper:139&r=all
130. Learning by Suing: Structural Estimates of Court Errors in
Patent Litigation
Marco, Alan C. (Vassar College Department of Economics)
This paper presents structural estimates of the probability of
validity, and the probability of Type I and Type II errors by
courts in patent litigation. Patents are modeled as uncertain
property rights, and implications of the model are tested using
stock market reactions to patent litigation decisions. The
estimation quantifies beliefs about patent validity and court
errors in a Bayesian context. I estimate that the underlying
beliefs about validity range from 0.6 to 0.7 for litigated
patents. Market beliefs about courts show that Type I errors (
finding a valid patent invalid) occur very frequently–an
estimated probability of 0.45. However, Type II errors (finding
an invalid patent valid) occur with near zero probability.
Additional implications of the model address patent value. My
results are the first structural estimates of court errors.
Additionally, this study is the first to perform event studies on
patent litigation.Creation-Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:vas:papers:68&r=all
131. DO PROFITS AFFECT INVESTMENT AND EMPLOYMENT? AN EMPRICAL
TEST BASED ON THE BHADURI-MARGLIN MODEL
Ozlem Onaran (Vienna University of Economics & B.A.)
Engelbert Stockhammer (Department of Economics, Vienna
University of Economics & B.A.)
In this study, a Kaleckian-Post-Keynesian macroeconomic model,
which is an extended version of the Bhaduri and Marglin (1990)
model, serves as the starting point. The merit of a Kaleckian
model for our purposes is that it highlights the dual function of
wages as a component of aggregate demand as well as a cost item
as opposed to the mainstream economics, which perceive wages
merely as a cost item. Depending on the relative magnitude of
these two effects, Kaleckian models distinguish between profit-
led and wage-led regimes, where the latter is defined as a low
rate of accumulation being caused by a high profit share. Are
actual economies wage-led or profit-led? Current orthodoxy
implicitly assumes that they are profit-led, and thus supports
the neoliberal policy agenda. The purpose of the paper is to
carry this discussion into the empirical terrain, and to test
whether accumulation and employment are profit-led in two groups
of countries. We do so by means of a structural vector
autoregression (VAR) model. The model is estimated for USA, UK
and France to represent the major developed countries, and for
Turkey and Korea to represent developing countries. The latter
are chosen since they represent two different export-oriented
growth experiences. The results of the adjustment experiences of
both countries are in striking contrast to orthodox theory,
however they also present counter-examples to each other in terms
of their ways of integrating into the world economy.
Keywords: Keynesian economics, macroeconomics, capital
accumulation, distribution, unemployment, structural
vectorautoregression, developed and developing countries
JEL: E1 E12 E2 E3
Date: 2005-01
URL: http://d.repec.org/n?u=RePEc:wiw:wiwgee:geewp44&r=all
132. The evolutionary theory of the firm: Routines, complexity
and change
Werner Holzl (Vienna University of Economics & B.A.)
This paper provides an overview on the evolutionary theory of
the firm. The specific feature of the evolutionary approach is
that it explains the adaptive behaviors of firms through the
tension between innovation and selection. It is suggested that
the evolutionary theory can provide a useful basis for a theory
of the firm which is concerned with change over time and
development.
Keywords: theory of the firm, complexity, routines, change of
routines
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:wiw:wiwgee:geewp46&r=all
133. Optimal Taxation of Gambling and Lotto
Walther Herbert (Department of Economics, Vienna University
of Economics & B.A.)
Bets are analyzed using an intertemporal, state dependent
expected utility model with non-linear probability weighting.
Gamblers face a tradeoff between long-run expected utility from
wealth and the short-run and fading emotional utility from
gambling. Different wager tax bets, including lotto, are compared
in various settings (fair bet versus monopoly). Reaction patterns
are analyzed with respect to tax rates, the price of tickets,
jackpots and the ’scale’ of the gamble. It is shown that
optimal tax rates are higher for larger lotto communities,
jackpots induce overshooting ’bubbles’ and taxes on lotto and
fix-prize gambles are regressive.
JEL: D H
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:wiw:wiwgee:geewp47&r=all
134. Distribution and Globalization: A Wage Bargaining Model
Ozlem Onaran (Vienna University of Economics & B.A.)
This paper develops a model of distribution to analyze the
effects of neoliberal globalization on labor in the developing
countries. Distribution is determined via wage bargaining by
workers, price setting by firms, and improvements in productivity.
The full model has the nature of a Post-Keynesian conflicting
claims model for an open economy under the pressure of
globalization. The conflict inflation is extended to an open
economy case with imported inputs, where the pass through effect
of the depreciation of the local currency also becomes important.
The variables that reflect the macroeconomic effects of
globalization are modeled as parameters that affect the
bargaining power of labor on two levels: the first group is
related with the interaction with the global economy, i.e.
international trade, and FDI. The second is about the domestic
fiscal and monetary policy variables, which are particularly
related to the specific form that globalization takes in the era
of neoliberalism, i.e. government expenditures, and the interest
rate. Then the model is solved for distribution of income, i.e.
the wage share, thus a reduced form of the model is obtained,
which is estimated in a companion paper to test whether the
change in the international and domestic macroeconomic
environment has affected the decline the labor’s share.
Keywords: Labor’s share, neoliberal policies, globalization
JEL: E24 O15 O19 J23 J30 F02
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:wiw:wiwgee:geewp48&r=all
135. Informational Cascades Elicit Private Information
Olivier Gossner
Nicolas Melissas
We introduce cheap talk in a dynamic investment model with
information externalities. We first show how social learning
adversely affects the credibility of cheap talk messages. Next,
we show how an informational cascade makes thruthtelling
incentive compatible. A separating equilibrium only exists for
high surplus projects. Both an investment subsidy and an
investment tax can increase welfare. The more precise the
sender’s information, the higher her incentives to truthfully
reveal her private information.
ZUSAMMENFASSUNG - (
Informationskaskaden bei Investitionsentscheidungen)
Wir
modellieren eine zweistufige dynamische Investitionsentscheidung
mit Informationsexternalitaten und ‚Cheap Talk’. Dabei
konnen wir zunachst zeigen, dass die Glaubwurdigkeit von
'Cheap Talk'-Aussagen darunter leidet, wenn die
Investitionsentscheidung von solchen Informationen beeinflusst
wird, die sich eher aus dem Handeln der Mitakteure als durch ihre
verbalen Bekundungen ableiten. Dann zeigen wir, dass
Informationskaskaden, die alle Akteure dieselbe Handlung aufgrund
offentlicher Information ohne Berucksichtigung ihrer privaten
Informationen ausfuhren lassen, dazu fuhren, das Offenbaren der
wahren Praferenzen der Investoren - optimistisch oder
pessimistisch - anreizkompatibel zu machen. Vergleicht man
Projekte mit niedrigen und hohen Uberschussen, existiert ein
Trenngleichgewicht nur bei letzteren, so dass glaubwurdige
Kommunikation eher uber Worte als uber Taten funktioniert. Will
ein sozialer Planer die Investitionsentscheidungen beeinflussen,
kann er sowohl durch eine Subventionierung als auch durch eine
Besteuerung der Investitionen die Wohlfahrt vergro?ern.
Keywords: Gravity Cheap Talk, Information Externality,
Informational Cascades, Social Learning, Herd Behaviour
JEL: D62 D83
Date: 2004-12
URL: http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2004-19&r=all
136. Banks as Delegated Risk Managers
Hakenes, Hendrik (Sonderforschungsbereich 504)
Risk management, although of major importance in the banking
industry in practice, plays only a minor role in the theory of
banking. We reduce this gap by putting forward a model in which
risk managers - specialists that can find out correlations
between risky assets - endogenously take over typical functions
of banks. They grant loans, they consult on financial questions
with firms that are threatened by bankruptcy, and they sign
tailor-made hedge transactions with these firms. Delegation costs
are innately low if banks assume the function of risk managers in
an economy. Risk management can be seen as a core competence of
banks.
Date: 2003-09-11
URL: http://d.repec.org/n?u=RePEc:xrs:sfbmaa:03-13&r=all
137. Fixed Rent Contracts in English Agriculture, 1750-1850: A
Conjecture
David R Stead
This article conjectures a parsimonious explanation for the
choice of fixed cash rent contracts in late eighteenth- and early
nineteenth-century English agriculture. Tenant farmers, it is
suggested, bore the brunt of the income risk because they were
less risk averse than landowners. The latter's acute risk
aversion may have been produced by acute loss aversion brought
about by their substantial fixed liabilities, part of which arose
from signalling status. Limited quantitative evidence that
landlords gave their tenants a risk premium, in the form of a low
rent, is presented. Landowners apparently did not make especially
frequent use of the formal short-term credit market as an
alternative means of smoothing income, perhaps because the
transactions costs of doing so were non-trivial.
URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/01&r=all
138. Base-Rate Neglect and Imperfect Information Acquisition
Philipp C. Wichardt
Pavlo R. Blavatskyy
Base-rate neglect is a robust experimental finding that
individuals do not update their prior beliefs according to the
Bayes' rule and, typically, underestimate their posterior
probabilities. Another empirical finding is that individuals
often do not acquire information even when there are no strategic
considerations and the cost of new information is justifiable
economically. This paper combines these two different fields of
research. Specifically, it is demonstrated that base-rate neglect
may lead to imperfect information acquisition. An application to
the pricing of new financial assets as well as general
implications for the socially optimal pricing of information are
discussed.
Keywords: Bayes' rule, base-rate neglect, decision making,
information acquisition
JEL: C91 D83
URL: http://d.repec.org/n?u=RePEc:zur:iewwpx:233&r=all
139. Learning in and about Games
Anke Gerber
We study finitely repeated 2 / 2 normal form games, where
players have incomplete information about their opponents’
payoffs. In a laboratory experiment we investigate whether
players (a) learn the game they are playing, (b) learn to predict
the behavior of their opponent, and (c) learn to play according
to a Nash equilibrium of the repeated game. Our results show that
the success in learning the opponent’s type depends on the
characteristics of the true game. The learning success is much
higher for games with pure strategy Nash equilibria than for
games with a unique mixed strategy Nash equilibrium, and it is
higher for games with symmetric pure strategy Nash equilibria
than for games with asymmetric equilibria. Moreover, subjects
learn to predict the opponents’ behavior very well. However,
they rarely play according to a Nash equilibrium and we observe
no correlation between equilibrium play and learning about the
game.
Keywords: Learning, game theory, incomplete information,
experiments
JEL: C72 C92 D83
URL: http://d.repec.org/n?u=RePEc:zur:iewwpx:234&r=all
140. Accounting for Fluctuations in Social Network Usage and
Migration Dynamics
Joseph H. Haslag (Department of Economics, University of
Missouri-Columbia)
Mark G. Guzman
Pia M. Orrenius
In this paper, we examine network capital usage and migration
patterns in a theoretical model. Networks are modeled as
impacting the migration decision in many ways. When young, larger
networks reduce the time lost moving from one region to another.
In addition networks decrease the time spent searching for a job.
Finally, when old, migrants receive transfer payments through the
network. We show that the number and properties of steady state
equilibria as well as the global dynamics depend crucially on
whether the returns to network capital accumulation exhibit
constant, increasing, or decreasing returns to scales relative to
the level of network capital. With constant returns to scale,
migration flows and network capital levels are characterized by
either a unique steady state equilibria or by a two-period cycle.
The fluctuations in network capital usage exhibited by our model
are consistent with recent empirical data regarding the usage of
networks by Mexican immigrants. In the case of increasing returns
to scale, either there exists a unique, stable steady state
equilibria or multiple equilibria which are characterized as
either sinks or saddles. When the returns to scale are decreasing,
there exists a unique, stable steady state equilibrium. Finally,
we show that increasing barriers to migration will result in an
increase in the flow of immigrants, contrary to the desired
effect, in the constant and increasing returns to scale cases.
JEL: F22 F43 H21
Date: 2004-08-04
URL: http://d.repec.org/n?u=RePEc:umc:wpaper:0410&r=all
141. Spurious regression under broken trend stationarity
Antonio E. Noriega (School of Economics, Universidad de
Guanajuato)
Daniel Ventosa-Santaularia (School of Economics, Universidad
de Guanajuato)
We study the phenomenon of spurious regression between two
random variables, when the generating mechanism of individual
series is assumed to follow a stationary process around a trend
with (possibly) multiple breaks in the level and slope of trend.
We develop the relevant asymptotic theory and show that the
phenomenon of spurious regression occurs independently of the
structure assumed for the errors. In contrast to previous
findings, the presence of a spurious relationship will be less
severe when breaks are present in the generating mechanism of
individual series. This is true whether the regression model
includes a linear trend or not. Simulations confirm our
asymptotic results, and reveal that in finite samples, the
phenomenon of spurious regression is sensitive to the presence of
a linear trend in the regression model, and to the relative
location of breaks within the sample.
Keywords: Stationarity, Structural breaks, Spurious regression
JEL: C22
URL: http://d.repec.org/n?u=RePEc:gua:wpaper:em200501&r=all
142. Turbulence, Inequality, and Cheap Steel
Peter B. Meyer (U.S. Bureau of Labor Statistics)
Iron and steel production grew dramatically in the U.S. when
mass production technologies for steel were adopted in the 1860s.
According to new measures presented in this study, earnings
inequality rose within the iron and steel industries about 1870,
perhaps because technological uncertainty led to gambles and
turbulence. Firms made a variety of technological choices and
began formal research and development. Professional associations
and journals for mechanical engineers and chemists appeared. A
national market replaced local markets for iron and steel. An
industrial union replaced craft unions. As new ore sources and
cheap water transportation were introduced, new plants along the
Great Lakes outcompeted existing plants elsewhere. Because new
iron and steel plants in the 1870s were larger than any U.S.
plants had ever been, cost accounting appeared in the industry
and grew in importance. Uncertainty explains the rise in
inequality better than a skill bias account, according to which
differences among individuals generate greater differences in
wages. Analogous issues of inequality come up with respect to
recent information technology.
Keywords: technological change, Bessemer steel, technological
uncertainty, turbulence, inequality, innovation
JEL: J31 N11 N10 O33
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050010&r=all
143. Occupation-Specific Human Capital and Local Labor Markets
Jeffrey A. Groen (U.S. Bureau of Labor Statistics)
Most skills acquired through on-the-job training may be specific
to an occupation and therefore transferable to some but not all
firms. This paper explores the relationship between the size of
the local market for an occupation-specific skill and job-
training outcomes. The Stevens (1994) model of training predicts
that as market size increases, job turnover increases and
training becomes more general. I test these predictions using
data on blue-collar workers and variation in market size across U.
S. metropolitan areas. The empirical results support the
theoretical predictions and the impacts are most relevant at low
levels of market size.
Keywords: on-the-job training, occupation, human capital, local
labor markets, market size
JEL: J24 J63 J61
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050020&r=all
144. Returning to the Returns to Computer Use
Sabrina Wulff Pabilonia (U.S. Bureau of Labor Statistics)
Cindy Zoghi (U.S. Bureau of Labor Statistics)
This paper re-examines the returns to computer use using a new
matched workplace-employee data from Canada. We control for
potential selection using instrumental variables. Results suggest
that it is not merely the employee having a computer on his desk,
but rather having complementary computer skills, that causes
wages to increase.
Keywords: computers, computer skills, human capital, technology
JEL: J31 O30
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050030&r=all
145. The Geography of Innovation Commercialization in the United
States During the 1990s
Joshua L. Rosenbloom (Department of Finance, The University
of Kansas)
This paper analyzes the location and interrelationship of three
measures of innovation commercialization across the 50 largest
metropolitan areas in the United States and estimates a model of
the factors explaining variations in the location of innovation
commercialization. In general innovation commercialization tends
to be highly geographically concentrated, suggesting the presence
of substantial external economies in these functions. Beyond
these scale effects, however, I find that the university science
and engineering capacity and local patenting activity both help
to account for intercity differences in the level of innovation
commercialization activity.
Date: 2005-01
Date: 2005-01
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200502&r=all
146. ELIMINATION OF ARBITRAGE STATES IN ASYMMETRIC INFORMATION
MODELS
Bernard Cornet (Department of Economics, The University of
Kansas)
Lionel De Boisdeffre (CERMSEM, Maison des Sciences
Economiques, Universite de Paris 1)
In a financial economy with asymmetric information and
incomplete markets, we study how agents, having no model of how
equilibrium prices are determined, may still refine their
information by eliminating sequentially ?°arbitrage state(s)
?±, namely, the state(s) which would grant the agent an
arbitrage, if realizable.
Keywords: Arbitrage, incomplete markets, asymmetric information,
information revealed by prices.
JEL: D52
Date: 2005-02
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200504&r=all
147. EXISTENCE OF EQUILIBRIA FOR ECONOMIES WITH EXTERNALITIES
AND A MEASURE SPACE OF CONSUMERS
Bernard Cornet (Department of Economics, The University of
Kansas)
Mihaela Topuzu (CERMSEM, Universite de Paris I)
This paper considers an exchange economy with a measure space of
agents and consumption externalities, which take into account two
possible external eects in consumers?? preferences: the
dependence upon prices and other agents?? consumptions,
respectively, as in Greenberg et al. [12] and Khan and Vohra [15]
see also Balder [4] for a general discussion). This allows to
cover a general model of reference coalitions externalities, in
which the agents?? preferences are influenced by the global (or
the mean) consumption of the agents in the finitely many
reference coalitions. Our paper provides a general existence
theorem of equilibria that extends previous results by Schmeidler
[21], in the case of fixed reference coalitions and Noguchi [17],
for a more particular concept of reference coalitions.
Keywords: Externalities, Reference coalitions, Measure space of
agents, Equilibrium.
JEL: D62 D51 H23
Date: 2005-02
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200505&r=all
148. EXISTENCE OF FINANCIAL EQUILIBRIA IN A MULTIPERIOD
STOCHASTIC ECONOMY
Laura Angeloni (Dipartimento di Matematica e Informatica,
Universita degli Studi di Perugia)
Bernard Cornet (Department of Economics, The University of
Kansas)
We consider the model of a stochastic financial exchange economy
where time and uncertainty are represented by a finite event-tree
of length T. We provide a general existence result of financial
equilibria, which allows to cover several important cases of
financial structures considered in the literature, such as
nominal and numeraire assets, when consumers may have constraints
on their portfolios.
Date: 2005-02
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200506&r=all
149. Efficiency and Consistency for Locating Multiple Public
Facilities
Biung-Ghi Ju (Department of Economics, The University of
Kansas)
In the problem of locating multiple public facilities studied by
Barbera and Bevia (2002), we offer simple necessary and
sufficient conditions for effciency, decentralizability of
efficient decisions in a game of community division and local
public goods provision, and a constructive algorithm for
efficient and consistent decisions.
Keywords: Efficiency; Consistency; Self-selection consistency;
No-envy; Local stability; Diversity; Strong Nash
equilibrium; Community division; Location
Date: 2005-02
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200507&r=all
150. The commons with capital markets.
Rowat, Colin.
We explore commons problems when agents have access to capital
markets. The commons has a high intrinsic rate of return but its
fruits cannot be secured by individual agents. Resources
transferred to the capital market earn lower returns, but are
secure. In a two period model, we assess the consequences of
market access for the commons' survival and welfare; we compare
strategic and competitive equilibria. Market access generally
speeds extinction, with negative welfare consequences. Against
this, it allows intertemporal smoothing, a positive effect. In
societies in which the former effect dominates, market
liberalisation may be harmful. We reproduce the multiple
equilibria found in other models of competitive agents; when
agents are strategic, extinction dates are unique. Strategic
agents generally earn their surplus by delaying the commons'
extinction; in unusual cases, strategic agents behave as
competitive ones even when their numbers are small.
Keywords: commons, capital markets, Washington Consensus,
property rights
JEL: C73 D91 O17 Q21
Date: 2004-12
URL: http://d.repec.org/n?u=RePEc:bir:birmec:05-01&r=all