|
on Microeconomics |
| By: | Burkhard, Schipper (University of California Davis) |
| Abstract: | We develop awareness-dependent subjective expected utility by taking unawareness structures introduced in Heifetz, Meier, and Schipper (2006, 2008, 2009) as primitives in the Anscombe-Aumann approach to subjective expected utility. We observe that a decision maker is unaware of an event if and only if her choices reveal that the event is "null" and the negation of the event is "null". Moreover, we characterize "impersonal" expected utility that is behaviorally indistinguishable from awareness-dependent subject expected utility and assigns probability zero to some subsets of states that are not necessarily events. We discuss in what sense probability zero can model unawareness. |
| JEL: | C70 C72 D80 D81 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:10-22&r=mic |
| By: | Dreger, Christian; Reimers, Hans-Eggert |
| Abstract: | We investigate the long run relationship between private consumption, disposable income and wealth approximated by equity and house price indices for a panel of 15 industrialized countries. Consumption, income and wealth are cointegrated in their common components. The impact of house prices exceeds the effect arising from equity wealth. The long run vector is broadly in line with the life cycle permanent income hypothesis, if house prices are allowed to enter the relationship. At the idiosyncratic level, a long run equilibrium is detected between consumption and income, i.e. the wealth variable can be excluded. The income elasticity in the idiosyncratic relationship is significantly less than unity. Hence, the presence of wealth effects in consumption equations arises from the international integration of asset markets and points to the relevance of risk sharing activities of agents. Without sufficient opportunities, an increase in national saving rates would be expected, leading to a lower path of private consumption expenditures. -- |
| Keywords: | permanent income hypothesis,panel cointegration,wealth effects |
| JEL: | C23 E21 E32 G15 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:euvwdp:295&r=mic |
| By: | Aristotelis Boukouras (Georg-August-University Göttingen); Kostas Koufopoulos (University of Warwick) |
| Abstract: | In this paper we present a political economy approach in order to explain the degree of financial openness for an economy. In the model, entrepreneurs, who may have good or bad projects, vote for policies, which are proposed by selfish politicians. Two political frictions (ideological adherence and a super- majority requirement) impair political competition and lead to equilibria, where politicians receive corruption bribes. Furthermore, the model implies a non-monotonic relationship between financial openness and corruption and a positive relationship between financial openness and government size. Some of the model predictions are consistent with empirical findings while other predictions have not beeen tested yet. |
| Keywords: | corruption; financial openness; ideology; politicians |
| JEL: | G21 G28 H32 P16 P43 |
| Date: | 2011–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:got:gotcrc:059&r=mic |
| By: | Norma B. Coe; Kelly Haverstick |
| Abstract: | The increase in the full retirement age in the Social Security program provides exogenous variation in the generosity in the Social Security Disability Insurance (SSDI) program, based only on birth year. We exploit this variation to estimate how responsive SSDI applications are to the financial incentive to apply. We find that a 1-percentage-point decrease in the retirement-to-disability benefit ratio leads to a 0.25-percentage-point increase in the SSDI application rate for the sample, which represents an 8-percent increase in applications per two years. When weighted to account for sampling design, we estimate that this change in the financial incentive accounted for about 5 percent of the SSDI applications in 2009. However, we do not find a corresponding increase in SSDI receipt based on the financial incentives. In addition, we find little difference in the covariates for individuals who eventually receive SSDI, suggesting that the increase in applications may increase the administrative costs of the SSDI program, but should not have a dramatic impact on the long-term financial solvency of the program. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2010-20&r=mic |
| By: | Estache, Antonio (Université libre de Bruxelles) |
| Abstract: | This study analyzes the main approaches to infrastructure financing in developing countries and their evolution. It places the discussion in the context of the importance of infrastructure investment and maintenance needs to achieve growth and borader social objectives. It summarizes the evidence on the efficiency, equity and fiscal consequences of the main public and private financing options commonly used to achieve these goals in these countries. It shows the limits of the role of the private sector as a source of financing of infrastructure and the wide underestimation of public-sector financing support needed to serve the poorest and ensure that services are offered at prices consistent with their ability to pay. It concludes with forward-looking lessons from roughly 20 years of efforts to diversify the sources of infrastructure finance in developing countries. |
| Keywords: | Infrastructure finance; Poverty; Developing countries |
| JEL: | H54 H81 |
| Date: | 2010–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2010_008&r=mic |
| By: | Brown, Sarah (University of Sheffield); McHardy, Jolian (University of Sheffield); McNabb, Robert (Cardiff University); Taylor, Karl (University of Sheffield) |
| Abstract: | Using matched employer-employee level data drawn from the 2004 UK Workplace and Employee Relations Survey, we explore the determinants of a measure of worker commitment and loyalty (CLI) and whether CLI influences workplace performance. Factors influencing employee commitment and loyalty include age and gender, whilst workplace level characteristics of importance include human resource practices. With respect to the effects of employee commitment and loyalty upon the workplace, higher CLI is associated with enhanced workplace performance. Our findings that workplace human resources influence CLI suggest that employers may be able to exert some influence over the commitment and loyalty of its workforce, which, in turn, may affect workplace performance. |
| Keywords: | commitment, financial performance, labor productivity, loyalty |
| JEL: | J20 J50 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5447&r=mic |
| By: | John Karl Scholz (University of Wisconsin-Madison); Ananth Seshadri (University of Wisconsin-Madison) |
| Abstract: | This paper presents a preliminary model of health investments over the life cycle. Health affects both longevity and provides flow utility. We analyze the interplay between consumption choices and investments in health by solving each household’s dynamic optimization problem to obtain predictions on health investments and consumption choices over the lifecycle. Our preliminary model does a good job of matching the distribution of medical expenses across households in the sample. We illustrate the scope of future model applications by examining the effects of a stylized Medicare program on patterns of wealth and mortality. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp224&r=mic |
| By: | André van Stel; Sierdjan Koster |
| Abstract: | Recent literature suggests that two types of competition may contribute to macro-economic performance: the extent of new-firm entry and the extent of competition among incumbent firms. In the present paper we explain employment growth at the region-sector level using direct indicators for both these types of competition -the start-up rate and the market mobility rate- as main independent variables. While previous studies in this field measured competition among incumbent firms in an indirect way, we use a direct measure called market mobility. The empirical analysis reiterates existing results in that we find the long-term economic effect of start-ups to be bigger than the short-term effect. We also find empirical indications that this long-term effect consist of two significant parts. First, the most successful start-ups grow out to become high-growth firms, and second, the entry of new firms stimulates incumbent firms to perform better. |
| Date: | 2011–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h201104&r=mic |
| By: | Robert A. Baade (Department of Business and Economics, Lake Forest College); Victor A. Matheson (Department of Economics, College of the Holy Cross) |
| Abstract: | This paper examines public financing of professional sports facilities with a focus on both early and recent developments in taxpayer subsidization of spectator sports. The paper explores both the magnitude and the sources of public funding for professional sports facilities. |
| Keywords: | Stadiums, arenas, sports, subsidies |
| JEL: | L83 O18 R53 J23 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:1102&r=mic |
| By: | Joern Meissner (Department of Management Science, Lancaster University Management School); Arne Strauss (Department of Management Science, Lancaster University Management School); Kalyan Talluri (ICREA & Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain) |
| Abstract: | The network choice revenue management problem models customers as choosing from an offerset, and the firm decides the best subset to offer at any given moment to maximize expected revenue. The resulting dynamic program for the firm is intractable and approximated by a deterministic linear program called the CDLP which has an exponential number of columns. However, under the choice-set paradigm when the segment consideration sets overlap, the CDLP is difficult to solve. Column generation has been proposed but finding an entering column has been shown to be NP-hard. In this paper, starting with a concave program formulation based on segment-level consideration sets called SDCP, we add a class of valid inequalities called product cuts, that project onto subsets of intersections. In addition we propose a natural direct tightening of the SDCP called kSDCP, and compare the performance of both methods on the benchmark data sets in the literature. Both the product cuts and the kSDCP method are very simple and easy to implement, work with general discrete choice models and are applicable to the case of overlapping segment consideration sets. In our computational testing SDCP with product cuts achieves the CDLP value at a fraction of the CPU time taken by column generation and hence has the potential to be scalable to industrial-size problems. |
| Keywords: | operations research, marketing, bid prices, yield management, heuristics, discrete-choice, network revenue management |
| JEL: | C61 M11 M31 L93 L83 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:lms:mansci:mrg-0020&r=mic |
| By: | Christian Cordes; Christian Schubert |
| Abstract: | Behavioral (e.g. consumption) patterns of boundedly rational agents can lead these agents into learning dynamics that appear to be “wasteful†in terms of well-being or welfare. Within settings displaying preference endogeneity, it is however still unclear how to conceptualize well-being. This paper contributes to the discussion by suggesting a formal model of preference learning that can inform the construction of alternative notions of dynamic well-being. Based on the assumption that interacting agents are subject to two biases that make them systematically prefer some cultural variants over others, a procedural notion of well-being can be developed, based on the idea that policy should identify and confine conditions that generate dynamic instability in preference trajectories. |
| Keywords: | Social Learning, Preference Change, Welfare, Human Cognition, Consumer Behavior Length 33 pages |
| JEL: | C61 D11 D63 D83 O12 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2010-22&r=mic |
| By: | Suzanne Bianchi (University of California, Los Angeles); Kathleen McGarry (University of California, Los Angeles and NBER); Judith Seltzer (University of California, Los Angeles) |
| Abstract: | Perhaps the largest problem confronting our aging population is the rising cost of health care, particularly the costs borne by Medicare and Medicaid. A chief component of this expense is long-term care. Much of this care for an unmarried (mostly widowed) mother is currently provided by adult children. The provision of family care depends importantly on the geographic dispersion of family members. In this study we provide preliminary evidence on the geographic dispersion of adult children and their older unmarried mother. Coresidence is less likely for married adult children, those who are parents and the highly educated and more likely for those who are not working or only employed part time and for black and Hispanic adult children. Close proximity is more common for married children who are parents but less common for the highly educated. When we look at transitions between one wave of data collection and the next (a 2-year interval), about half of adult children live more than 10 miles away at both points, a little less than one quarter live within 10 miles at both points, and 8 percent are coresident at both points in time. Among the 17 percent who make a transition, about half of the changes result in greater distance between the adult child and mother and half bring them into closer proximity. The needs of both generations are likely reflected in these transitions. In fact, a mother’s health is not strongly related to most transitions and if anything, distance tends to be greater for older mothers relative to those mothers in their early 50s. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp234&r=mic |
| By: | Horii, Ryo (Tohoku University and Yale University); Ikefuji, Masako (Osaka University) |
| Abstract: | Using an endogenous growth model with physical and human capital accumulation, this paper considers the sustainability of economic growth when the use of a polluting input (e.g., fossil fuels) intensi.es the risk of capital destruction through natural disasters. We .nd that growth is sustainable only if the tax rate on the polluting input increases over time. The long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax, and it is maximized by the least aggressive tax policy from among those that asymptotically eliminate the use of polluting inputs. Moreover, welfare is maximized under an even milder environmental tax policy, especially when the pollutants accumulate gradually. |
| JEL: | H23 O41 Q54 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:yaleco:86&r=mic |
| By: | Vincent Bouvatier; Antonia López-Villavicencio; Valérie Mignon |
| Abstract: | This paper investigates the relationship between bank competition and credit procyclicality for 17 OECD countries on the 1986-2009 period. We account for heterogeneity among countries in terms of bank competition through the use of a hierarchical clustering methodology. We then estimate panel VAR models for the identified sub-groups of economies to investigate whether credit procyclicality is more important when the degree of bank competition is high. Our findings show that while credit significantly responds to shocks to GDP, the degree of bank competition is not essential in assessing the procyclicality of credit for OECD countries. |
| Keywords: | Credit cycle, economic cycle, bank competition, financial stability, panel VAR. |
| JEL: | C33 E32 E51 G21 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2011-2&r=mic |
| By: | Elena Sochirca (Faculdade de Economia, Universidade do Porto); Óscar Afonso (CEF.UP, OBEGEF, Faculdade de Economia, Universidade do Porto); Pedro Mazeda Gil (CEFUP, Faculdade de Economia do Porto, Portugal) |
| Abstract: | We develop an extended directed technological change model with R&D driven growth to analyze the growth rate, technological-knowledge bias, skill premium and industrial structure, assuming: (i) complementarities between intermediate goods in production, and (ii) internal costly investment. We find that complementarities directly affect equilibrium technological-knowledge bias, both elements influence equilibrium growth rate and neither affects skill premium and industrial structure. We also find that equilibrium skill premium is independent of relative labour endowments, being determined solely by workers' productivities, suggesting that the persisting increase in wage inequality observed in several developed countries over the last decades may have been due to increases in productivity advantages of skilled workers favoured by technological development. |
| Keywords: | technological-knowledge bias, skill premium, complementarities, costly investment, vertical and horizontal R&D |
| JEL: | J31 O31 O33 O41 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:401&r=mic |
| By: | Gary Koop (University of Strathclyde); Roberto Leon-Gonzalez (National Graduate Institute for Policy Studies); Rodney Strachan (The Australian National University) |
| Abstract: | This paper considers the instrumental variable regression model when there is uncertainty about the set of instruments, exogeneity restrictions, the validity of identifying restrictions and the set of exogenous regressors. This uncertainty can result in a huge number of models. To avoid statistical problems associated with standard model selection procedures, we develop a reversible jump Markov chain Monte Carlo algorithm that allows us to do Bayesian model averaging. The algorithm is very flexible and can be easily adapted to analyze any of the different priors that have been proposed in the Bayesian instrumental variables literature. We show how to calculate the probability of any relevant restriction (e.g. the posterior probability that over-identifying restrictions hold) and discuss diagnostic checking using the posterior distribution of discrepancy vectors. We illustrate our methods in a returns-to-schooling application. |
| Keywords: | Bayesian, endogeneity, simultaneous equations, reversible jump Markov chain Monte Carlo |
| JEL: | C11 C30 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:09_11&r=mic |
| By: | Aristotelis Boukouras (Georg-August-University Göttingen); Kostas Koufopoulos (University of Warwick) |
| Abstract: | In this paper we provide a political game where agents decide whether to become legislators or politicians. Legislators determine the political institutions constraining politicians\' behavior and politicians compete for gaining the power to make decisions about the level of the public good. We derive the following results: i) Political competition is a necessary but not a suffcient condition for the elimination of political rents. ii) Agents utilize the separation of powers in order to endogenously select institutions which restrict the power of politicians. iii) In conjunction with political competition, these institutions implement the Lindahl allocation in the economy as a sub-game perfect Nash equilibrium of the political game. iv) As a consequence of the previous result, political rents are zero in equilibrium, in the sense that the winning politician does not extract part of the social surplus because of his power. To the best of our knowledge, this in the only citizen-candidate model with this equilibrium property. |
| Keywords: | Lindahl allocation; political competition; voting games |
| JEL: | D02 D62 D72 H41 |
| Date: | 2011–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:got:gotcrc:060&r=mic |
| By: | Haigner, Stefan D.; Jenewein, Stefan; Müller, Hans Christian; Wakolbinger, Florian |
| Abstract: | We analyze competitions where the contestants evaluate each other and find the first contestant to be disadvantaged. We suspect that this is due to information diffusion, Bayesian belief updating taking place in course of the contest and initial uncertainty about a contestant's relative quality. -- |
| Keywords: | Serial Position Effects,Ordering Effects |
| JEL: | C12 D81 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:14&r=mic |
| By: | Ph. Barbe (CNRS); W. P. McCormick (UGA) |
| Abstract: | Motivated by applications to insurance mathematics, we prove some heavy-traffic limit theorems for process which encompass the fractionally integrated random walk as well as some FARIMA processes, when the innovations are in the domain of attraction of a nonGaussian stable distribution. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1101.4437&r=mic |
| By: | Christian Kleiber; Achim Zeileis |
| Abstract: | Reproducibility of economic research has attracted considerable attention in recent years. So far, the discussion has focused on reproducibility of empirical analyses. This paper addresses a further aspect of reproducibility, the reproducibility of computational experiments. We examine the current situation in econometrics and derive a set of guidelines from our findings. To illustrate how computational experiments could be conducted and reported we present an example from time series econometrics that explores the finite-sample power of certain structural change tests. |
| Keywords: | computational experiment, reproducibility, simulation, software. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2011-02&r=mic |
| By: | Ian Appel and Caroline Fohlin |
| Abstract: | We find that the bans on covered short sales, implemented in several countries during the financial crisis of 2008-09 improved market liquidity or at least had a neutral impact; a result we argue could be expected in theory, given a simple variation on the Diamond-Verrechia (1987) model. The result holds for daily data over an extended period as well as for intraday data over various time spans. In contrast to other recent studies, we use American Depository Receipts as the controls in a difference-in-difference analysis encompassing all banned non-U.S. shares with corresponding depository receipts listed in the United States. Furthermore, we find that bans on covered short sales generally succeeded in lowering volatility. Banning short selling is not good policy in normal times, but our findings indicate that such bans might prove useful in (temporarily) stemming liquidity loss during crises. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:jhu:papers:574&r=mic |
| By: | Hao Wang; Hao Zhou; Yi Zhou |
| Abstract: | We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables identified in the existing literature. Such a predictability complements that of the leading state variable--leverage ratio--and strengthens significantly with lower firm credit rating, longer credit contract maturity, and model-free implied variance. We provide further evidence that: (1) variance risk premium has a cleaner systematic component and Granger-causes implied and expected variances, (2) the cross-section of firms' variance risk premia seem to price the market variance risk correctly, and (3) a structural model with stochastic volatility can reproduce the predictability pattern of variance risk premia for credit spreads. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2011-02&r=mic |