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on Microeconomics |
| By: | Pivato, Marcus |
| Abstract: | We develop a model of social choice over lotteries, where people's psychological characteristics are mutable, their preferences may be incomplete, and approximate interpersonal comparisons of well-being are possible. Formally, we suppose individual preferences are described by a von~Neumann-Morgenstern (vNM) preference order on a space of lotteries over psychophysical states; the social planner must construct a vNM preference order on lotteries over social states. First we consider a model when the individual vNM preference order is incomplete (so not all interpersonal comparisons are possible). Then we consider a model where the individual vNM preference order is complete, but unknown to the planner, and thus modeled by a random variable. In both cases, we obtain characterizations of a utilitarian social welfare function. |
| Keywords: | interpersonal comparisons; social welfare; social choice; utility; utilitarian; von Neumann-Morgenstern; risk |
| JEL: | D70 D63 D81 |
| Date: | 2010–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25222&r=mic |
| By: | Koumparoulis, Dimitrios |
| Abstract: | Modern growth theory, which built on the Harrod-Domar model, was born in 1956 with Robert Solow's famous papers and will turn 50 this year. Even the "new" growth theory, born with Paul Romer's papers, is now in its 20s. Why is it that with aptness, if poetic ineptness, many economists feel they could replace "words" with "growth research" in T. S. Eliot's refrain above about his "middle way?" This article is a brief retrospective and prospective on growth research in three parts: growth theory (old and new), empirical growth research (short and long), and the way forward. The theme that runs through all three parts is the tension between the logics of academic interest and the needs of the policy practitioner. The typical policymaker or advisor—whether politico or technocrat—wants to know the likely consequences of concrete public sector actions (not necessarily limited to policies) over their relevant time horizon. If growth research is a quest to satisfy this need, the journey is far from over. |
| Keywords: | growth theory; empirical growth research |
| JEL: | O40 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25165&r=mic |
| By: | Muller, L.; Ruffieux, B. |
| Abstract: | The paper considers the external validity of the growing set of literature that uses laboratory auctions to reveal consumers' willingness to pay for consumer goods, when the concerned goods are sold in retailing shops through posted prices procedures. Here, the quality of the parallel between the field and the lab crucially depends on whether being informed of the actual field price influences a consumer's willingness to pay for a good or not. We show that the elasticity of the WTP revision, according to the field price estimation error, is significant, positive and can be roughly approximate to one quarter of the error. We then discuss the normative implications of these results for future experiments aimed at eliciting private valuations through auctions. |
| Keywords: | EXPERIMENTAL ECONOMICS;WILLINGNESS TO PAY;AUCTION;POSTED PRICE;VALUE ELICITATION;CONSUMER BEHAVIOR |
| JEL: | C91 D44 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:201003&r=mic |
| By: | Waśniewski, Krzysztof |
| Abstract: | The present paper introduces a model of corporate strategies, based on institutional theories of the firm and formalized with the concepts of the theory of games. Corporate strategies are balanced outcomes of four social games: capital market, corporate governance, product market and social responsibility. Two empirical applications of the model are then introduced: a qualitative one, consisting in comparative study of strategies deployed by Royal Dutch Shell and Israel Corporation, then a quantitative one, presenting a study of capital accumulation and operational efficiency in 79 companies listed in the Warsaw Stock Exchange. |
| Keywords: | institutional economics; strategy; corporation |
| JEL: | D53 L2 D81 D2 G12 D02 G3 D01 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25190&r=mic |
| By: | Malik, Sadia Mariam; Janjua, Yasin |
| Abstract: | This paper examines the role of long standing institutions – identified through geography, disease ecology, colonial legacy, and some direct measures of political and economic governance – on human development and its non income components across countries. The study employs a novel econometric technique called the Bayesian Model Averaging that allows us to select the relevant predictors by experimenting with a host of competing sets of variables. It constructs estimates as weighted average of OLS estimates for every possible combination of included variables. This is particularly useful in situations when there is model uncertainty and theory provides only a weak guidance on the selection of appropriate predictors. Of the 25 variables that we tried, three stand out in terms of their degree of importance and their robustness across various specifications. These include malaria ecology, KKZ index of good governance and fertility rate. Our finding on the dominant and robust role of malaria ecology in explaining differences in human development across countries, even in the presence of variables that directly and indirectly measure the quality of institutions, is extremely fascinating. It shows that malaria ecology has a direct negative impact on human development and this effect appears to be over and above its effect via institutions. Some of the other measures of climate and geography as well as those of colonial legacy are important as long as we do not control for some direct measures of the performance of political and economic institutions such as the KKZ index of good governance and democracy score. Once we control for these and other conditioning variables such as public spending on health and education; fertility rates; and measures of health infrastructure, the importance of geography and colonial legacy disappears. |
| Keywords: | Human development; geography; institutions; Bayesian Model Averaging |
| JEL: | C52 O43 I18 O15 |
| Date: | 2010–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24612&r=mic |
| By: | Berg, Nathan; Biele, Guido; Gigerenzer, Gerd |
| Abstract: | Subjective beliefs and behavior regarding the Prostate Specific Antigen (PSA) test for prostate cancer were surveyed among attendees of the 2006 meeting of the American Economic Association. Logical inconsistency was measured in percentage deviations from a restriction imposed by Bayes’ Rule on pairs of conditional beliefs. Economists with inconsistent beliefs tended to be more accurate than average, and consistent Bayesians were substantially less accurate. Within a loss function framework, we look for and cannot find evidence that inconsistent beliefs cause economic losses. Subjective beliefs about cancer risks do not predict PSA testing decisions, but social influences do. |
| Keywords: | logical consistency; predictive accuracy; elicitation; non-Bayesian; ecological rationality |
| JEL: | D6 D8 |
| Date: | 2010–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24976&r=mic |
| By: | Koumparoulis, Dimitrios |
| Abstract: | At the Bank of Greece econometric modeling started in 1975 when the Bank’s first model of the Greek economy was developed under the leadership of the outgoing Governor of the Bank C. Garganas. The model was extensively used for many years in forecasting as well as in policy analysis and proved to be an indispensable tool for the policy decisions of the Bank over a broad spectrum of issues. Model of Greece is an ongoing activity fuelled by the changes in the economy as well as by modeling theoretical advances. This paper describes and documents the use of the current version of the Bank of Greece model. |
| Keywords: | econometric modeling; cointegration techniques |
| JEL: | C50 E17 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25040&r=mic |
| By: | Loukas Dalafoutas; Martin G. Kocher; Louis Putterman; Matthias Sutter |
| Abstract: | We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjects’ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations. |
| Keywords: | equality; efficiency; voluntary contribution mechanism; incentives; experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2010-13&r=mic |
| By: | Marco Casari; Jingjing Zhang; Christine Jackson |
| Abstract: | In a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to group learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement within a group, what prevailed was not the best proposal but the one of the majority. Groups underperformed with respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation. We draw general lessons about when to employ groups instead of individuals in intellectual tasks. |
| Keywords: | Winner’s curse, takeover game, group decision making, communication, experiments |
| JEL: | C91 C92 D81 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:504&r=mic |
| By: | Christoph Braun |
| Abstract: | This paper studies a Ramsey optimal taxation model with human capital in an infi nite-horizon setting. Contrary to Jones, Manuelli, and Rossi (1997), the human capital production function does not include the current stock of human capital as a production factor. As a result, the return to human capital, namely labor income, does not vanish in equilibrium. In a stationary state, the household underinvests in human capital relative to the fi rst best, i.e., education is distorted. Human capital is eff ectively taxed. The optimal tax scheme prescribes making the cost of education not fully tax-deductible. |
| Keywords: | Optimal taxation; human capital; Ramsey approach |
| JEL: | H21 I28 J24 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0202&r=mic |
| By: | Moraga-Gonzalez, Jose L. (IESE Business School); Sandor, Zsolt (University of Groningen); Wildenbees, Matthijs R. (Kelly School of Business) |
| Abstract: | We generalize the model of Burdett and Judd (1983) to the case where an arbitrary finite number of firms sells a homogeneous good to buyers who have heterogeneous search costs. We show that a price dispersed symmetric Nash equilibrium always exists. Numerical results show that the behavior of prices with respect to the number of firms hinges upon the shape of the search cost distribution: when search costs are relatively concentrated (dispersed), entry of firms leads to higher (lower) average prices. |
| Keywords: | nonsequential search; oligopoly; arbitrary search cost distributions; |
| JEL: | C72 D43 |
| Date: | 2010–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0869&r=mic |
| By: | Volker Nannen |
| Abstract: | We consider a heterogeneous agent-based economic model where economic agents have strictly bounded rationality and where income allocation strategies evolve through selective imitation. Income is calculated by a Cobb-Douglas type production function, and selection of strategies for imitation depends on the income growth rate they generate. We show that under these conditions, when an agent adopts a new strategy, the effect on its income growth rate is immediately visible to other agents, which allows a group of imitating agents to quickly adapt their strategies when needed. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1009.2721&r=mic |
| By: | Peter C. B. Phillips (Cowles Foundation, Yale University) |
| Abstract: | Trends are ubiquitous in economic discourse, play a role in much economic theory, and have been intensively studied in econometrics over the last three decades. Yet the empirical economist, forecaster, and policy maker have little guidance from theory about the source and nature of trend behavior, even less guidance about practical formulations, and are heavily reliant on a limited class of stochastic trend, deterministic drift, and structural break models to use in applications. A vast econometric literature has emerged but the nature of trend remains elusive. In spite of being the dominant characteristic in much economic data, having a role in policy assessment that is often vital, and attracting intense academic and popular interest that extends well beyond the subject of economics, trends are little understood. This essay discusses some implications of these limitations, mentions some research opportunities, and briefly illustrates the extent of the difficulties in learning about trend phenomena even when the time series are far longer than those that are available in economics. |
| Keywords: | Climate change, Etymology of trend, Paleoclimatology, Policy, Stochastic trend |
| JEL: | C22 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1771&r=mic |
| By: | Arthur Lewbel (Boston College); Oliver Linton (London School of Economics) |
| Abstract: | We consider nonparametric identification and estimation of consumption based asset pricing Euler equations. This entails estimation of pricing kernels or equivalently marginal utility functions up to scale. The standard way of writing these Euler pricing equations yields Fredholm integral equations of the first kind, resulting in the ill posed inverse problem. We show that these equations can be written in a form that equals, (or with habits, resembles) Fredholm integral equations of the second kind, having well posed rather than ill posed inverses. We allow durables, habits, or both to affect utility. We show how to extend the usual method of solving Fredholm integral equations of the second kind to allow for the presence of habits. Using these results, we show with few low level assumptions that marginal utility functions and pricing kernels are locally nonparametrically identified, and we give conditions for finite set and point identification of these functions. Unlike the case of ill posed inverse problems, the limiting distribution theory for our nonparametric estimators should be relatively standard. |
| JEL: | C14 |
| Date: | 2010–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:757&r=mic |
| By: | Trillas, Francesc (IESE Business School) |
| Abstract: | The economics of federalism is a broad discipline with more than five decades of experience. It may shed light on how regulatory jurisdiction is allocated in EU electricity and telecommunications markets. Specifically, this paper assesses the evolution of reform up to and including the third EU packages, which continue the liberalization and integration process in these markets. Liberalization has been accompanied by gradual harmonization of national markets to overcome resistance to competitive forces. Less steps than necessary have been undertaken to promote market integration; yet, positive and normative reasons remain for the participation of national or even regional/local powers. Vertical institutional cooperation will remain a necessary condition for a sound regulatory framework, but cooperation may sometimes be inhibited by distributive considerations. |
| Keywords: | federalism; regulation; electricity; telecommunications; |
| JEL: | H77 K23 L50 L94 L96 L97 |
| Date: | 2010–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0861&r=mic |
| By: | Ecker, Olivier; Qaim, Matin |
| Abstract: | Widespread malnutrition in developing countries calls for appropriate strategies, presupposing good knowledge about nutritional impacts of policies. Little previous work has been carried out in this direction, especially with respect to micronutrients. We use representative household data from Malawi and develop a demand systems approach to estimate income and price elasticities of food demand and nutrient consumption. These estimates are applied for policy simulations. Given multiple nutritional deficiencies, income-related policies are better suited than price policies to improve nutrition. Although consumer price subsidies for maize improve calorie and mineral consumption, they can worsen vitamin consumption in urban areas. |
| Keywords: | income and price elasticities, micronutrient deficiency, nutrient consumption, quadratic almost ideal demand system, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1017&r=mic |
| By: | Hall, Bronwyn (University of California at Berkeley, UNU-MERIT, and Maastricht University); Helmers, Christian (CEP, London School of Economics and Political Science, and CSAE, University of Oxford) |
| Abstract: | Global climate change mitigation will require the development and diffusion of a large number and variety of new technologies. How will patent protection affect this process? In this paper we first review the evidence on the role of patents for innovation and international technology transfer in general. The literature suggests that patent protection in a host country encourages technology transfer to that country but that its impact on innovation and development is much more ambiguous. We then discuss the implications of these findings and other technology-specific evidence for the diffusion of climate change-related technologies. We conclude that the "gdouble externality" problem, that is the presence of both environmental and knowledge externalities, implies that IP may not be the ideal and cannot be the only policy instrument to encourage innovation in this area and that the range and variety of green technologies as well as the need for local adaptation of technologies means that patent protection may be neither available nor useful in some settings. |
| Keywords: | climate change, intellectual property, innovation, technology transfer |
| JEL: | O19 O33 O34 Q54 Q55 Q58 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2010046&r=mic |
| By: | Seelos, Christian (IESE Business School); Mair, Johanna (IESE Business School); Battilana, Julie (Harvard Business School); Dacin, M. Tina (Queen's School of Business) |
| Abstract: | Social enterprise organizations (SEOs) arise from entrepreneurial activities with the aim of achieving social goals. SEOs have been seen as alternative and/or complementary to the actions of governments and international organizations to address poverty and poverty-related social needs. Using a number of illustrative cases, we explore how variations in local institutional mechanisms shape the local "face of poverty" in different communities and how this relates to variations in the emergence and strategic orientations of SEOs. We develop a model of the productive opportunity space for SEOs as a basis of, and an inspiration for, further scholarly inquiry. |
| Keywords: | social entrepreneurship; Social mechanisms; poverty; opportunity; institutions; |
| Date: | 2010–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0858&r=mic |
| By: | Di Kuang (Aon, 8 Devonshire Square, London EC2M 4PL, U.K.); Bent Nielsen (Nuffield College, Oxford OX1 1NF, U.K.); Jens Perch Nielsen (Cass Business School, City University London, 106 Bunhill Row, London EC1Y 8TZ, U.K.) |
| Abstract: | Reserving in general insurance is often done using chain-ladder-type methods. We propose a method aimed at situations where there is a sudden change in the economic environment affecting the policies for all accident years in the reserving triangle. It is shown that methods for forecasting non-stationary time series are helpful. We illustrate the method using data published in Barnett and Zehnwirth (2000). These data illustrate features we also found in data from the general insurer RSA during the recent credit crunch. |
| Keywords: | Calendar effect, canonical parameter, extended chain-ladder, identification problem, forecasting. |
| Date: | 2010–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:1005&r=mic |
| By: | Schumacher, Heiner; Hadnes, Myriam |
| Abstract: | We propose a theory that explains why rational agents start to believe in a causal relationship between unrelated events. Agents send and collect messages through a communication network. If they are convinced of a relationship between two events, they send messages confirming their belief with higher probability than messages contradicting it. The network aggregates this communication bias over individuals. Therefore, agents may find a strong relationship between unrelated events even if the communication bias is very small. We apply this model to an informal economy where the fear of punishment by supernatural forces prevents agents from cheating others. -- |
| Keywords: | Informal Contract Enforcement,Communication,Learning,Networks |
| JEL: | C72 L14 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec10:11&r=mic |
| By: | Cooper, David J.; Saral, Krista Jabs |
| Abstract: | Entrepreneurs are surprisingly unlikely to have partners. In spite of the obvious advantages to forming partnerships, only a small minority of entrepreneurs (less than 10%, excluding family businesses) have partners. A number of possible explanations exist for this puzzling phenomenon, including an inability to locate suitable partners, fear of free-riding by partners, and a preference for not working in groups. Utilizing a diverse subject population with a high proportion of active entrepreneurs, we use a team production experiment to study whether entrepreneurs prefer to work alone or in a team. The data indicate that entrepreneurs, while no more likely to free-ride on their teammates, are substantially less interested in joining teams. This suggests that efforts to encourage partnership among entrepreneurs may run contrary to the preferences of this group. |
| Keywords: | Entrepreneurship; Teams; Artefactual Field Experiment |
| JEL: | L26 C93 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25144&r=mic |