nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2015‒09‒18
seven papers chosen by
Matthew Baker
City University of New York

  1. "Roots of Autocracy" By Oded Galor; Marc Klemp
  2. Growing incomes, growing people in nineteenth-century Tasmania By Kris Inwood; Hamish Maxwell-Stewart; Deb Oxley
  3. An Experimental Study of Intergenerational Altruism with Parent-Child Pairs By Hideo Akabayashi; Akiko Kamesaka; Ryosuke Nakamura; Masao Ogaki; Teruyuki Tamura
  4. Why do wealthy parents have wealthy children? By Andreas Fagereng; Magne Mogstad; Marte Rønning
  5. Side effects of nonlinear profit taxes in an evolutionary market entry model: abrupt changes, coexisting attractors and hysteresis problems By Schmitt, Noemi; Tuinstra, Jan; Westerhoff, Frank
  6. Evolutionary competition and profit taxes: market stability versus tax burden By Schmitt, Noemi; Westerhoff, Frank
  7. Empirical Calibration of Adaptive Learning By Michele Berardi; Jaqueson K. Galimberti

  1. By: Oded Galor; Marc Klemp
    Abstract: This research explores the origins of the variation in the prevalence and nature of political institutions across globe. It advances the hypothesis and establishes empirically that variation in the inherent diversity across human societies, as determined in the course of the exodus of Homo sapiens from Africa tens of thousands of years ago, shaped the nature of political institutions across regions and societies. The study establishes that, while human diversity has amplified the beneficial e?ects of institutions, mitigating the adverse e?ects of non-cohesiveness, its simultaneous contribution to heterogeneity in cognitive and physical traits has fostered the scope for domination, leading to the formation and persistence of autocratic institutions. A larger degree of human diversity within societies diminished cohesiveness and therefore stimulated the emergence of institutions that have mitigated the adverse e?ects of non-cohesiveness on productivity. However, the dual impact of human diversity on the emergence of inequality and class stratification have diverted the nature of the emerging institutions towards extractive, autocratic ones. Developing a novel geo-referenced dataset of genetic diversity and ethnographic characteristics among ethnic groups across the globe, the analysis establishes that genetic diversity contributed to the emergence of autocratic pre-colonial institutions. Moreover, the findings suggest that the contribution of diversity to these pre-colonial autocratic institutions has plausibly operated through its dual e?ect on the formation of institutions and class stratification. Furthermore, reflecting the persistence of institutional, cultural, and genetic characteristics, the spatial distribution of genetic diversity across the globe has contributed to the contemporary variation in the degree of autocracy across countries.
    Keywords: Autocracy, Economic Growth, Genetic Diversity, Institutions, Out-of-Africa Hypothesis of Comparative Development
    Date: 2015
  2. By: Kris Inwood; Hamish Maxwell-Stewart; Deb Oxley
    Abstract: The earliest measures of well-being for Europeans born in the Pacific region are heights and wages in Tasmania. Evidence of rising stature survives multiple checks for measurement, compositional and selection bias. The challenges to health and stature seen in other nineteenth-century settler societies (the ‘antebellum paradox’) are not visible here. There was a strong correlation in Tasmania between stature and per capita GDP. We sketch an interpretation highlighting the role of relatively slow population growth and urbanization, a decline in food cost per family member available from a worker’s wage, and early recognition of the importance of public health.
    Date: 2015–04
  3. By: Hideo Akabayashi (Faculty of Economics, Keio University); Akiko Kamesaka (School of Business Administration, Aoyama Gakuin University); Ryosuke Nakamura (Graduate School of Economics, Hitotsubashi University); Masao Ogaki (Faculty of Economics, Keio University); Teruyuki Tamura (Graduate School of Economics, Sophia University)
    Abstract: In the standard intergenerational altruism model in which the child's utility level is an argument in the parent's utility function, there are no conflicts of interests between the parent and the child if they need to reach an agreement about the amount and the timing of a present that child receives from a third party. On the other hand, in the intergenerational altruism models of cultural transmission of preferences, this may not be true. This difference in two classes of the models can be used to distinguish between them in experiments. We conducted a time preference experiment to compare individual and joint decision makings with parent-child pairs in which (1)the child alone, (2) the parent alone, and (3) the parent-child pair as a group make decisions about the amount and the timing of the payment to the child. The experimental results are not consistent with the standard intergenerational altruism model but consistent with models of cultural transmission of preferences.
    Keywords: intergenerational altruism, model of cultural transmission of preferences, time preference experiment, individual and joint decisions
    JEL: C93 D14 E2
    Date: 2014–08
  4. By: Andreas Fagereng; Magne Mogstad; Marte Rønning (Statistics Norway)
    Abstract: Strong intergenerational correlations in wealth have fueled a long-standing debate over why children of wealthy parents tend to be well off themselves. We investigate the role of family background in determining children's wealth accumulation and investor behavior as adults. Our research design allows us to credibly control for genetic differences in abilities and preferences and to identify the effects of exogenous changes in specific dimensions of family background. The analysis is made possible by linking Korean-born children who were adopted at infancy by Norwegian parents to a population panel data set with detailed information on disaggregated wealth portfolios and socioeconomic characteristics. The mechanism by which these Korean-Norwegian adoptees were assigned to adoptive families is known and effectively random. We use the quasi-random assignment to estimate the causal effects from an adoptee being raised in one type of family versus another. Our findings show that family background matters significantly for children's accumulation of wealth and investor behavior as adults, even when removing the genetic connection between children and the parents raising them. In particular, adoptees raised by wealthy parents are more likely to be well off themselves, whereas adoptees' stock market participation and portfolio risk are increasing in the financial risk taking of their adoptive parents. These intergenerational causal links are not driven primarily by inter vivos transfers or bequests. The detailed nature of our data allows us to explore other mechanisms, assess the generalizability of the lessons from adoptees, and compare our findings to results from behavioral genetics decompositions.
    Keywords: : Intergenerational transmission; wealth; financial risk taking; family background
    JEL: D31 J62
    Date: 2015–06
  5. By: Schmitt, Noemi; Tuinstra, Jan; Westerhoff, Frank
    Abstract: In order to demonstrate that nonlinear tax systems may have surprising and potentially undesirable side effects, we develop an evolutionary market entry model in which firms decide on the basis of past profit opportunities whether or not to enter a competitive market. Our main focus is on the case of a proportional tax on positive profits. Such a piecewise-linear tax scheme induces a kink in the profit functions of firms' strategies, and may lead to abrupt changes in a market's dynamics, coexisting attractors and hysteresis problems. Since these phenomena can also be observed in more general models, a proper understanding of their basic mechanism may be helpful to explain the intricate behavior of many economic systems.
    Keywords: market entry model,replicator dynamics,evolutionary fitness,nonlinear profit taxes,stability analysis,policy implications
    JEL: D84 E30 H20
    Date: 2015
  6. By: Schmitt, Noemi; Westerhoff, Frank
    Abstract: The seminal cobweb model by Brock and Hommes reveals that fixed-point dynamics may turn into increasingly complex dynamics as firms switch more quickly between competing expectation rules. While policy-makers may be able to manage such rational routes to randomness by imposing a proportional profit tax, the stability-ensuring tax rate may cause a very high tax burden for firms. Using a mix of analytical and numerical tools, we show that a rather small profit-dependent lump-sum tax may even be sufficient to take away the competitive edge of cheap destabilizing expectation rules, thereby contributing to market stability.
    Keywords: cobweb models,discrete choice approach,intensity of choice,profit taxes,tax burden,stability analysis
    JEL: D84 E30 Q11
    Date: 2015
  7. By: Michele Berardi (University of Manchester); Jaqueson K. Galimberti (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: Adaptive learning introduces persistence in the evolution of agents’ beliefs over time. For applied purposes this is a convenient feature to help explain why economies present sluggish adjustments towards equilibrium. The pace of learning is directly determined by the gain parameter, which regulates how quickly new information is incorporated into agents’ beliefs. We document renewed empirical calibrations of plausible gain values for adaptive learning applications to macroeconomic data. We cover a broad range of model specifications of applied interest. Our analysis also includes innovative approaches to the endogenous determination of time-varying gains in real-time, and a thorough discussion of the different theoretical interpretations of the learning gain. We also evaluate the merits of different approaches to the gain calibration according to their performance in forecasting macroeconomic variables and in matching survey forecasts. Our results indicate a great degree of heterogeneity in the gain calibrations according to the variable forecasted and the lag length of the model specifications. Calibrations to match survey forecasts are found to be lower than those derived according to the forecasting performance, suggesting some degree of bounded rationality in the speed with which agents update their beliefs.
    Keywords: expectations, forecasting, bounded rationality, real-time, recursive estimation
    JEL: D83 E37
    Date: 2015–08

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