Theoretical Economics Letters

Published by Scientific Research Publishing
Print ISSN: 2162-2078
Several contributions have already pointed out that initial wealth in- equalities do persist in the long run in the Ramsey model with heteroge- nous agents. We show that this result is not robust to the introduction of endogenous fertility. Our argument builds on the Barro-Becker (1989) seminal model extended to allow for heterogenous agents with dierent capital endowments. Strikingly enough, individual consumption levels, fertility rates and capital stocks are shown to be equalized after only one adjustment period. This property is shown to hold irrespective of the production sector specication.
Four Move Centipede Game
Players' Strategies and Optimal Actions
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement, and the European CVAR Approach to Macroeconometrics” contrasting two different perspectives in Europe and the US that are currently dominating empirical macroeconometric modeling and delves deeper into their methodological/philosophical underpinnings. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
A news-driven business cycle is a positive comovement of consumption, output, labor, and investment from the news about the future. We show that nominal rigidities, especially sticky prices, can cause it in an estimated medium-scale DSGE economy.
In the international health care literature there is a broad discussion on impacts of competition in health care markets. But aspects of standardization in regional health care markets with no price competition received comparatively little attention. We use a typical Hotelling-framework (reference case) to analyze a regional health care market with two health care providers competing in (vertical) quality after the scope of medical treatment is set (horizontal quality). We conclude, that in the reference case both health care provider will use vertical quality to separate from each other. In the next step (standardization case) we introduce one health care provider to be the standard leader in vertical quality. In the standardization case a more homogeneous supply can be expected. But, there is a higher possibility that the standard follower has to leave the regional health care market. --
Moral concepts affect crime supply. This idea is modelled assuming that illegal activities is habit forming. We introduce habits in a intertemporal general equilibrium framework to illegal activities and compare its outcomes with a model without habit formation. The findings are that habit (i) reduces the crime level; (ii) reduces the marginal effect of illegal activities return on crime; (iii) reduces the efficacy of punishment.
This study is motivated by a theoretical deficiency in the research on internal resource allocation and functional differ-entiation of higher education institutions in relation with their prestige maximizing behaviors. Our finding, despite its purely theoretical nature, suggests that a prestige-maximizing college or university achieves the highest potential pres-tige by optimally allocating its limited resources and equalizing the prestige of the closely associated academic depart-ments or disciplines. The result certainly indicates that the interdisciplinary activities and functional differentiation, which represent two major efforts found in the recent higher education community, have indeed counteractive effects on their separate objectives.
The work discusses a basic proposition in the theory of competition in markets with adverse selection (Bester, 1985). By working out the sequence of market transactions, we show that the effectiveness of collateral in avoiding equilibrium rationing depends on an assumption of uncontestability of the loan market. If contestability is restored to its proper place, the separation of borrower by means of sufficient collateral does not impede the emergence of credit rationing, which results from a coordination failure among risk-neutral banks. As a consequence, even in a risk-neutral environment with suitable endowments, the use of collateral in credit contracts could not be a socially efficient screening-device. Our conclusion on rationing does not stand in contrast with the general result of Gale (1996).
Determinacy and indeterminacy regions
Carlstrom and Fuerst (2007) [``Asset prices, nominal rigidities, and monetary policy,'' Review of Economic Dynamics 10, 256--275] find that monetary policy response to share prices is a source of equilibrium indeterminacy because an increase in inflation implies a high real marginal cost and low share prices in a sticky-price economy. We find that if the New Keynesian Phillips curve has a lagged inflation term caused by price indexation, this effect is weakened. Moreover, equilibrium indeterminacy caused by monetary policy response to share prices never arises if all the firms that cannot re-optimize their prices follow price indexation.
This paper establishes general conditions for the validity of mutual fund separation and the equilibrium CAPM. We use partial preference orders that display weak form mean preserving spread (w-MPS) risk aversion in the sense of Ma (2011). We derive this result without imposing any distributional assumptions on asset returns. The results hold even when the market contains an infinite number of securities and a continuum number of traders, and when each investor is permitted to hold some (arbitrary) finite portfolios. A proof of existence of equilibrium CAPM is provided for finite economies by assuming that when preferences constrained on the market subspace spanned by the risk free bond and the market portfolio admit continuous utility representations.
We investigate how the health of a relationship bank impacts upon coordination between it and the firm's other creditors and how this ex post coordination problem influences the ex ante efficiency of the firm's actions. First, we show that as the relationship bank becomes financially distressed, it desires the firm to undertake riskier projects whereas the firm's other creditors require the firm to undertake safer projects. Thus, a coordination problem arises ex post and the inefficient liquidation of the firm's projects occur. Second, the higher ex post inefficiency of the firm also reduces the ex ante efficiency because the higher interest payments made to the relationship bank and the firm's other creditors encourages the firm to select inefficient and riskier projects.
A new explanation for the failure of plea bargaining is provided. It is shown that a retention agent (i.e. median voter) can use convictions at trial as a signal of the quality of a prosecutor. This encourages a public prosecutor to take cases to trial even when both social welfare and her utility (absent the retention motivation) from plea bargaining is higher.
We study the information structure implied by models in which the asset price is always risky and there are no arbitrage opportunities. Using the martingale representation of Harrison and Kreps (1979), a claim takes its value from the stream of discounted expected payments. Equivalently, a pricing-kernel is sufficient to value the payment stream. If a price process is always risky, then either the payment or the discount factor must also be continually risky. This observation substantially complicates the valuation of contingent claims. Many classical option pricing formulas abstract from both risky dividends and risky discount rates. In order to value contingent claims, one of the assumptions must be abandoned.
One impetus for reform of the health care system in the United States is that in the U.S. more is spent on medical care than in other countries, with no noticeable difference in results. It is commonly thought that this is a result of a defect in the organization of medicine in the U.S. which can be repaired by “reform.” However, medicine is a labor intensive good and labor is more expensive in the U.S. We show that in a simple general equilibrium model these conditions will invariably lead to a higher price and a higher percentage of GDP spent on the labor intensive good. While reforms may improve the functioning of the health care sector, they are unlikely to have a major effect on spending levels (unless they artificially reduce usage of medical care).
The decision about how much to save for retirement is likely to be dependent on when an individual plans to be retired, and vice versa. Yet, the established literature on hyperbolic discounting and life-cycle saving behavior has for the most part abstracted from choice over retirement. Two notable exceptions are Diamond and Kőszegi (2003) and an important follow-up study by Holmes (2010), which demonstrates that time-inconsistent retirement timing is impossible when saving behavior is explicitly modeled in a stylized three-period setting. In this paper, we build upon the framework of Diamond and Kőszegi (2003) and Holmes (2010) by generalizing the assumptions about initial income and assets. We show analytically and via simple numerical examples that time-inconsistent retirement can exist in a three-period life-cycle model of consumption and saving.
In Elamin (2010a), I found that the CRA can not credibly fully reveal its information about the quality of the projects it rates when the ratings are unverifiable. In the model with unverifiable ratings an informationally-efficient equilibrium, where the investors are always fully informed about the quality of the project they face, did not exist. This paper analyses the infinitely repeated game with unverifiable ratings and asks: can fear to lose reputation discipline the CRA and induce it to behave truthfully? Reputation here is considered as incomplete information about the type of the CRA. With some probability, the CRA could be a truthful type that always truthfully reveals the information it has about the projects it rates. I analyze the game of Elamin (2010a) between a sequence of short-run investors and short-run firms and a strategic long-run CRA. Nature selects a type for the CRA in the beginning of time and only informs the CRA of it. At every period, the (updated) probability that the CRA is of the truthful type is its reputation. In the model with only two types of projects, if the CRA's reputation is high enough, then there is an informationally-efficient equilibrium. But if there are more than two types of projects, then no matter how high the CRA's patience level or its reputation are, there is no informationally-efficient equilibrium. I also find that in the two types of projects case, if the firms are informed of the type of the CRA then there is no informationally-efficient equilibrium. The many types of projects case is clearly the relevant case to consider, therefore I conclude that the fear to lose reputation is not enough deterrent for the CRA in the structured finance market.
Examples of stable and unstable equilibria for each F(q). 
In this short note, I examine the rationality of money-search equilibrium in a basic second-generation money search model, which is a perfectly divisible goods and indivisible money model. I then show that only an inflationary economy can generate a socially and individually rational stable equilibrium. On the basis of this finding, I demonstrate that there is no loss of generality in an analysis that assumes dictatorial buyers in an inflationary economy, since the properties of a dictatorial buyers model are identical to those of a general inflationary economy model. The result of this paper is especially useful for empirical applications since we are generally incapable of finding data showing bargaining power. This result also alerts us against employing the second-generation model to analyze a deflationary economy and com-modity money.
We modify the standard trade model introducing the possibility of biased technological changes. This model help to explain the falling labor shares as well as the mixed changes in skill premium in developing countries after trade liberalization takes place.
Development of desease (The Economist, 2020).
Total infections ( ) n t with 1 0.5 τ =
Diseases are spread due to the behavior of people. One may have millions of differently behaving people. For simplicity humankind is only considering the average behavior. However, this simplification can lead to results tremendously different from the exact solution in at least some applications when non-linear differential equations are used. In this letter we prove that the mistake is very big for the spread of infections like Covid-19. Ten percent ignoring the rules can almost ruin the extremely careful behavior of the remaining ninety percent. This is totally different to most business situations where considering eighty percent is sufficient (“80-20-rule”). This may explain why the spread of the Covid-19 pandemic and the impact of measures against it are hard to predict for decision makers.
Inputs and outputs used for estimation.
Basic estimation of CD production function.
Restricted estimation of CD production function.
Constrained estimation with dummy variables.
China’s civil aviation industry experienced an average annual growth rate of over 16% for traffic turnover during 1955-2011. It is important to identify the role of capital and labor inputs as well as total factor productivity (TFP) in China’s civil aviation industry during this period of time. First, the inputs of capital stock and labor as well as the output of traffic turnover in China’s air transport industry are measured. Next, the constrained E-G two-stage estimation of the CD production function is used to calculate the capital and labor elasticities and TFP, which provides the necessary basis for the estimation of the growth sources in China’s air transport industry from 1955 to 2011. The results show that the growth of China’s civil aviation industry has depended on the capital factor input and that TFP has played an increasingly important role. Furthermore, the results also indicate that private sources have been crucial for improving the TFP after the 2002 reform.
The objective of this paper was to explain the greater or lesser growth rate of total factor productivity, TFP, in the main East Asian and Latin American economies between 1960 and 2015. We found econometric evidence favorable to this hypothesis: the increase in public consumption expenditures, given the evolution of other factors, reduces the TFP. Other results of the econometric exercise, those that are related to hypothetical positive effects of public investment and imports on TFP were not as robust or as reliable as we would have expected.
55 countries and regions.
Unit root test.
Regression result.
Robust test results.
This article constructed a panel data model to investigate the effect of education human capital on economic growth, using the latest education data of 55 countries and regions from 1960 to 2009. Meantime, by subdividing education human capital into higher education, secondary education and primary education, it also examines the effect of different education level on economic growth. Furthermore, while introducing health human capital into the model, we explored the influence of different economic development level and some important historical events. The result shows that in general, education human capital has a significant positive impact on economic growth. The positive impact of higher education on economic growth is especially significant, however, the primary education and secondary education does not have a significant impact on economic growth; as for human capital, life expectancy and per capita GDP growth also showed a significant positive correlation.
The paper is a critical review of India’s progress of economic reforms (1991- 2016). The relative failures of the past quarter century are considered, and the ways in which the reforms could be strengthened are suggested. Keywords Quarter Century of Economic Reforms, India, Colonial Development, Pre-Reforms Development, Post Reforms Development
Education level by parties in March 30, 2014 local elections 3 .
Correlation between cities general education levels and party votes.
Education level of the participants in the Gezi events.
Erasmus exchange statistics for Turkey I.
Students who go abroad by Turkish ministry of national education's fellowships.
The higher education system in Turkey suffered from capacity problem during the 1980s and the 1990s. After the election in 2002, to solve the problem, the Justice and Development Party governments have invested in higher education through opening new universities, increasing the total capacity in higher education, and sending more students abroad especially for graduate studies. In this paper, noting the conservative structure of the Justice and Development Party, we determine whether a dilemma exists between these liberal practices and the party's conservatism. By constructing a one-period sequential game, we show that heavy investment in higher education by the Justice and Development Party is not contradictory and, in fact, inevitable, as long as it tries to maximize its vote in the short-medium run.
The objective of this article is to evaluate the effects of public economic poli-cies, implemented in response to the economic crisis of 2008, on the flows of foreign direct investment in Brazil. It demonstrates, through the political so-ciology of public action, that the crisis generated a change in the references of Brazilian economic policies: from the policies of the so-called “macroeco-nomic tripod” to policies of the new economic matrix. The implementation of this change is expressed in multiple government actions, including the use of the National Bank for Economic and Social Development, to stimulate the internationalization of Brazilian companies. It seeks to identify the possible effects of public action through data on the evolution of direct foreign in-vestment and the use of the Grubel-Lloyd index.
The largest reduction of K value of 16 countries respectively datum in year 2005 and 2011.
The largest amplification of K value of 16 countries respectively datum in year 2005 and 2011.
Compare fluctuations of K values in groups.
This paper analyzes and compares the purchasing power parity (PPP) and exchange rate worldwide based on the datum of International Comparison Program (ICP) in the year 2005 and 2011. The results indicate that developing countries have been experiencing more substantial currency devaluation, while currency appreciation occurs mainly in high-income countries. After analyzing the relative price levels for 2011 and per capita income, we find that the relative price level is above 1.5 in most countries worldwide, while the relative price level is between 0.5 and 1 in a few high-income countries. When the per capita income is around $3000, the peering relationships of purchasing power parity and exchange rates are the most obvious.
Variables used in previous and present studies.
Descriptive statistics of the variables for testing the hypotheses (January 2011 to December 2018).
Estimation of the interference of factors in the risk-adjusted returns of Brazilian fixed-income funds.
Estimation of the interference of factors in the risk-adjusted returns of Brazilian fixed-income funds: Sortino ratio.
This study analyzes the relationship between portfolio distribution, manage- ment, and composition indicators and the performance of fixed-income funds in Brazil. It provides support to investors when making decisions re- garding their investments. A sample composed of 1039 Brazilian fixed-income funds from January 2011 to December 2019 was analyzed using a panel data analysis methodology and considering robust standard errors. The perfor- mance fee charged by funds was found to be the variable that most helped in- crease the performance of Brazilian fixed-income funds. In addition, portfo- lios characterized by a higher proportion of fixed-income assets, less expe- rienced management, managers concurrently responsible for a large number of funds, and greater net assets contributed substantially to improved fund performance, by generating the best risk-adjusted returns.
Management decisions.
The result of management.
The increasing of accounting value.
The value in Edgeworth's box.
The indexes of Edgeworth's box.
The analysis of economic policy is made through a new methodology using the information provided by businesses to the Bank of Spain. The financial statements are the result of economic and financial transactions in a year and show a behavior that is likely to be measured by applying the Edgeworth's box for analysis. This means that it is possible to measure the response of firms against market disruptions through an accounting interpretation of the information contained in the financial statements. The indicators obtained through this methodology measure a position taken in the Edgeworth's box. Consequently, the observations obtained are random and therefore may explain the evolution of the economy of any country.
The Economic-Landscape 2016. 
The Economic-Landscape 2012. 
Value added, import was induced by a unit increase in final demand.
, the research
Power of dispersion and sensitivity of dispersion indexes of economy.
ABSTRACT National economic structure is defined as the composition and patterns of various components of the national economy such as: production, value added, consumption, gross capital formation, export, import and gross value added. Structural change is conceptualized as the change in relative importance of the aggregate indicators of the economy. It implies that changes of intra-sectoral and inter-sectoral lead to changes in final demand, output, value added and import. This paper seeks to answer some questions: 1) What would be the impact on the power of dispersion and the sensitivity of dispersion by sectors? 2) What would be the impact on value added induced by final demand? and 3) How would the final demand impact the level of import? The main finding in this study is to find a sectoral structure and a factor of the final demand for Vietnam’s development.
Top-cited authors
Masayuki Otaki
  • The University of Tokyo
Canh Phuc Nguyen
  • University of Economics Ho Chi Minh City
Gouher Ahmed
  • Skyline University College
Sheereen Fauzel
  • University of Mauritius
Thanh Su Dinh
  • University of Economics Ho Chi Minh City Vietnam