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    ABSTRACT: We consider an alternating offer bargaining model in which the players may agree to call in an arbitrator in case of disagreement. The main message of our study is that the mere presence of an arbitrator—who can only become active with the consent of both parties—in the background of negotiations may entirely drive their outcome. We compare our results with those obtained in models with outside options. Journal of Economic Literature classification Number: C78.
    Games and Economic Behavior 08/2013; DOI:10.1006/game.2000.0823
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    ABSTRACT: We present an explicit model of firm-regulator negotiations in a market with several firms. We describe how the regulatory surplus is distributed between firms and regulator, and analyse the impact of various parameters on the resulting level of environmental regulation. Our main result is that a ‘toughest firm principle’ holds: the outcome of negotiations is essentially determined by the firm with the most aggressive attitude towards environmental control.
    Journal of Public Economics 08/2013; DOI:10.1016/S0047-2727(02)00137-8
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    ABSTRACT: Discussion paper Despite limited government control over the pre-1914 economy, opposition politicians were enthusiastic in blaming bad economic news on the incumbent. In a study of 458 by-elections between 1857 and 1914, we find that voters typically gave new governments a 'honeymoon' but thereafter held them responsible for high unemployment and high prices. Each 1% rise in the price level, on average, brought about a 0.21% swing against the government of the day, while each one-point rise in the percentage unemployed had double this effect. Attributing shorter- or longer-term memories to voters, as they used the past to determine what constituted unacceptable price and unemployment levels, makes little difference to this result. We also look at grievance asymmetry - the idea that voters give governments more blame for bad outcomes than they give credit for good ones - and find some evidence in its favour.
    Electoral Studies 12/2012; 31(4). DOI:10.1016/j.electstud.2012.07.006
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    ABSTRACT: We study estimation of the date of change in persistence, from [Formula: see text] to [Formula: see text] or vice versa. Contrary to statements in the original papers, our analytical results establish that the ratio-based break point estimators of Kim [Kim, J.Y., 2000. Detection of change in persistence of a linear time series. Journal of Econometrics 95, 97-116], Kim et al. [Kim, J.Y., Belaire-Franch, J., Badillo Amador, R., 2002. Corringendum to "Detection of change in persistence of a linear time series". Journal of Econometrics 109, 389-392] and Busetti and Taylor [Busetti, F., Taylor, A.M.R., 2004. Tests of stationarity against a change in persistence. Journal of Econometrics 123, 33-66] are inconsistent when a mean (or other deterministic component) is estimated for the process. In such cases, the estimators converge to random variables with upper bound given by the true break date when persistence changes from [Formula: see text] to [Formula: see text]. A Monte Carlo study confirms the large sample downward bias and also finds substantial biases in moderate sized samples, partly due to properties at the end points of the search interval.
    Journal of Econometrics 11/2012; 171(1):24-31. DOI:10.1016/j.jeconom.2012.05.024
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    ABSTRACT: AbstractThis paper studies the dynamic implications of the endogenous rate of time preference depending on the stock of capital, in a one-sector growth model. The planner’s problem is presented and the optimal paths are characterized. We prove that there exists a critical value of initial stock, in the vicinity of which, small differences lead to permanent differences in the optimal path. Indeed, we show that a development trap can arise even under a strictly convex technology. In contrast with the early contributions that consider recursive preferences, the critical stock is not an unstable steady state so that if an economy starts at this stock, an indeterminacy will emerge. We also show that even under a convex–concave technology, the optimal path can exhibit global convergence to a unique stationary point. The multipliers system associated with an optimal path is proven to be the supporting price system of a competitive equilibrium under externality and detailed results concerning the properties of optimal (equilibrium) paths are provided. We show that the model exhibits globally monotone capital sequences yielding a richer set of potential dynamics than the classic model with exogenous discounting.
    Journal of Mathematical Economics 03/2011; 47(2-47):170-179. DOI:10.1016/j.jmateco.2010.12.006
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    ABSTRACT: In this paper, it is argued that previous estimates of the expected cost of equity and the expected arithmetic risk premium in the UK show a degree of upward bias. Given the importance of the risk premium in regulatory cost of capital in the UK, this has important policy implications. There are three reasons why previous estimates could be upward biased. The first two arise from the comparison of estimates of the realised returns on government bond (‘gilt’) with those of the realised and expected returns on equities. These estimates are frequently used to infer a risk premium relative to either the current yield on index-linked gilts or an ‘adjusted’ current yield measure. This is incorrect on two counts; first, inconsistent estimates of the risk-free rate are implied on the right-hand side of the capital asset pricing model; second, they compare the realised returns from a bond that carried inflation risk with the realised and expected returns from equities that may be expected to have at least some protection from inflation risk. The third, and most important, source of bias arises from uplifts to expected returns. If markets exhibit ‘excess volatility’, or if part of the historical return arises because of revisions to expected future cash flows, then estimates of variance derived from the historical returns or the price growth must be used with great care when uplifting average expected returns to derive simple discount rates. Adjusting expected returns for the effect of such biases leads to lower expected cost of equity and risk premia than those that are typically quoted. Copyright © 2011 John Wiley & Sons, Ltd.
    01/2010; 3(1):1 - 26. DOI:10.1002/rbf.13
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    ABSTRACT: Employing the modified tests of Harvey, Leybourne and Taylor [Harvey, D.I., Leybourne, S.J. and Taylor, A.M.R., 2006. Modified tests for a change in persistence. Journal of Econometrics 134, 441-469.] for a single change in persistence and repartitioning the sample when a break is found, this paper shows that US and UK inflation changes from I(0) to I(1) in the early 1970s, with a subsequent reversion to I(0) behaviour, compatible with modern macroeconomic theories, in the early 1980s.
    Economics Letters 02/2009; 102(1):30-32. DOI:10.1016/j.econlet.2008.10.008
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    ABSTRACT: This paper proposes simple Hausman-type tests to check for bias in the log-periodogram regression of a time series believed to be long memory. The statistics are asymptotically standard normal on the null hypothesis that no bias is present, and the tests are consistent.
    Economics Letters 02/2009; 102(2):83-86. DOI:10.1016/j.econlet.2008.11.020
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    ABSTRACT: A common feature of multi-jurisdictional systems is equalization programs. The implementation of such programs, that is based on some measurement of sub-national fiscal capacity and effort, is particularly complex. Within a political economy model, this paper analyzes the impact of such systems on accountability, identifying a positive and a negative effect. The positive effect arises because with equalized fiscal resources, a consequence of equalization, citizens attach more importance to any remaining variation in public good supplies and so punish rent-taking more severely. This induces politicians to restrain themselves and so accountability improves. The negative effect arises because the complexity of such programs reduces the informational content of observed public good supplies. This introduces a perverse fiscal incentive that reduces accountability. Thus, the overall impact of equalization programs on accountability depends on the balance of these effects.
    Journal of Public Economics 12/2008; DOI:10.1016/j.jpubeco.2007.12.013
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    ABSTRACT: This paper examines the issue of whether workers learn productive skills from their co-workers, even if those skills are unethical. Specifically, we estimate whether Jose Canseco, a star baseball player in the late 1980's and 1990's, affected the performance of his teammates by introducing them to steroids. Using panel data, we show that a player's performance increases significantly after they played with Jose Canseco. After checking 30 comparable players from the same era, we find that no other baseball player produced a similar effect. Furthermore, the positive effect of Canseco disappears after 2003, the year that drug testing was implemented. These results suggest that workers not only learn productive skills from their co-workers, but sometimes those skills may derive from unethical practices. These findings may be relevant to many workplaces where competitive pressures create incentives to adopt unethical means to boost productivity and profits. Our analysis leads to several potential policy implications designed to reduce the spread of unethical behavior among workers.
    Labour Economics 02/2008; 18(3):338-348. DOI:10.1016/j.labeco.2010.10.004
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