transparency of information and coordination in economies with investment complementarities how do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities and what is the optimal transparency in the information conveyed for example by economic statistics policy announcements or news in the media we first consider an environment where the complementarities are weak so that the equilibrium is unique no matter the structure of information an increase in the precision of public information may have the perverse effect of increasing aggregate volatility nevertheless as long as there is no value to lotteries welfare unambiguously increases with an increase in either the relative or the absolute precision of public information hence full transparency is optimal this is because more transparency facilitates more effective coordination which is valuable from a social perspective on the other hand when complementarities are strong enough that multiple equilibria are possible more transparency permits the market to coordinate more effectively on either the bad or the good equilibrium in this case constructive ambiguity becomes optimal if there is a high risk that more transparency will lead to coordination failures this abstract was borrowed from another version of this item

information acquisition in global games of regime change abstract we study costly information acquisition in global games of regime change that is coordination games where payoffs are discontinuous in the unobserved state and in the agents average action we show that only symmetric equilibria exist and provide sufficient conditions for uniqueness we then characterize the value of information in these games and link it to the underlying parameters of the model we investigate equilibrium efficiency complementarities in information choices and the trade offs between public and private information we show that information acquisition can be inefficient and that strategic complementarities in actions do not always translate into strategic complementarities in information acquisition finally we find that public and private information can be complements these results contrast findings in linear quadratic models where payoffs depend continuously on both the unobserved state and the agents average action

information use and acquisition in price setting oligopolies asymmetric price setting multi product suppliers have access to multiple sources of information about demand conditions where the publicity of each source corresponds to the cross industry correlation of signals received from it a signal s influence on suppliers prices is increasing in its publicity as well as in its precision the emphasis on relatively public information is stronger for smaller suppliers who control narrower product portfolios when information is endogenously acquired suppliers listen to only a subset of information sources this subset is smaller when products are less differentiated and when the industry is less concentrated smaller suppliers focus attention on fewer information sources the inefficiencies arising from information acquisition and use are identified the associated externalities depend upon the extent of product differentiation the concentration of the industry and the degree of decreasing returns to scale

the colour of money earnings differentials among ethnic groups in canada the literature on ethnically based earnings differentials in canada has focused on differences either between whites and visible minorities or between particular ethnic groups in this paper the authors examine both earnings differentials between whites and visible minorities and earnings differentials within the white and visible minority groupings among both men and women they find substantial earnings differentials both between and within the white and visible minority groupings differentials between whites and visible minorities suggest that the visible minority category is a useful indicator of economic discrimination differentials within these groupings however suggest that it is only a rough indicator

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

optimal degree of public information dissemination financial markets and macroeconomic environments are often characterised by positive external ities in these environments transparency may reduce expected welfare public announcements serve as focal points for higher order beliefs and affect agentsbehaviour more than justified by their informational contents some scholars conclude that reducing public signalsprecision or entirely withholding information may improve welfare this article shows that public information should always be provided with maximum precision but under certain conditions not to all agents restricting the degree of publicity is a better suited instrument for preventing the negative welfare effects of public announcements than restrictions on their precision are there is a general presumption that higher central bank transparency in terms of information disclosure to a wider audience improves the effectiveness of monetary policy and is beneficial to markets as it reduces information asymmetries helps to assess risk better and arrive at more informed decisions thus enhancing market efficiency while practitioners in central banks and international institutions agree on the desirability of informative announcements and promote higher transparency on the ground that any information is valuable to markets recent academic literature distin guishes private and public information and argues that public announcements may destabilise markets and reduce efficiency by their effects on higher order beliefs if markets are characterised by positive externalities morris and shin 2002 henceforth m s have shown that noisy public announcements may be detrimental to welfare from an ex ante point of view they conclude that a commitment to withholding relevant information or deliberately reducing its precision may be welfare enhancing in this article we challenge this conclusion by distinguishing two components of transparency precision ofinformationanddegreeofpublicity the degreeof publicity is the proportion of agents who receive a signal using a stylised coordination game introduced by m s we show that information should always be provided to the market

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

information markets and the comovement of asset prices traditional asset pricing models predict that covariance between prices of difierent assets should be lower than what we observe in the data this model generates high covariance within a rational expectations framework by introducing markets for information about asset payofis when information is costly rational investors will not buy information about all assets they will learn about a subset because information production has high flxed costs competitive producers charge more for low demand information than for high demand information a price that declines in quantity makes investors want to purchase a common subset of information if investors price many assets using a common subset of information then a shock to one signal is passed on as a common shock to many asset prices these common shocks to asset prices generate excess covariance the cross sectional and time series properties of asset price covariance are consistent with this explanation

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

learning about others actions and the investment accelerator a general equilibrium model of investment is constructed in which the pay offs of firms depend on each other s actions it is shown that when these actions are unobservable but aggregate output is in the information set of the agents it acts as a signal the implication is that output will lead investment over the business cycle this gives a theory of the rational expectations investment accelerator learning also changes the cyclical behaviour of the endogenous variables and leads to a loss of output and efficiency the inefficiency depends on the amount of noise in the system thus reducing fluctuations can have first order welfare effects it is also shown that the introduction of a stock market will not alter the qualitative conclusion of the paper the intuition of this paper for the investment accelerator also suggests that an employer accelerator might exist an economic investigation of the us and uk data gives support to these accelerators also the model predicts investment is less responsive to output when its conditional variance is higher

optimal policy intervention constrained obfuscation and the social value of public information we study the welfare implications of public information precision in a beauty contest framework allowing for optimal stabilization policies and information obfuscation when policy makers ability to obfuscate information is constrained increasing public information precision can be welfare improving

do better property rights improve local income evidence from first nations treaties abstract this paper examines the effect of an improvement in property rights on a local economy using the case of first nations modern treaties these treaties are an important institutional reform that clarifies ownership of land and natural resources near aboriginal communities using confidential micro data i find evidence of a positive impact of modern treaties on real income the effect is driven by employment income and spreads across workers in industries not directly affected by the reform i also find an increase in real wages and housing costs the effects are similar in neighboring communities outside indian reserves these results are consistent with property right reforms creating a positive demand shock that affects the whole local economy this is a yet understudied mechanism through which better property rights can generate positive local spillovers

property rights for the poor effects of land titling secure property rights are considered a key determinant of economic development the evaluation of the causal effects of property rights however is a difficult task as their allocation is typically endogenous to overcome this identification problem we exploit a natural experiment in the allocation of land titles in 1981 squatters occupied a piece of land in a poor suburban area of buenos aires in 1984 a law was passed expropriating the former owners land to entitle the occupants some original owners accepted the government compensation while others disputed the compensation payment in the slow argentine courts these different decisions by the former owners generated an exogenous allocation of property rights across squatters using data from two surveys performed in 2003 and 2007 we find that entitled families substantially increased housing investment reduced household size and enhanced the education of their children relative to the control group these effects however did not take place through improvements in access to credit our results suggest that land titling can be an important tool for poverty reduction albeit not through the shortcut of credit access but through the slow channel of increased physical and human capital investment which should help to reduce poverty in future generations

cournot competition and the social value of information in a differentiated product cournot model each supplier receives informative signals about demand the cross industry correlations of the signals differ more public signals have higher correlation coefficients in equilibrium information is used inefficiently from the industry s perspective information is over used and too much emphasis is placed on relatively public signals from the consumer s perspective information is under used and too much emphasis is placed on relatively private signals welfare is enhanced by increasing the use of information as desired by consumers but re balancing that use away from public signals as desired by the industry if information is costly and endogenously acquired then suppliers acquire too much new information but they use it too little

property rights on first nations reserve land this paper examines the economic effects of existing private property rights on first nations reserves we focus on three regimes of land tenure lawful possession designated land and permits these land regimes have been used to create individual landholdings and grant secure and transferable rights of use of reserve land using confidential census microdata and rich administrative data we find evidence of a positive relationship between the use of these tenure regimes and homeownership rates housing conditions and band s public spending we also observe a positive relationship with average income however this last result is driven by the inflow of a non indigenous population not by improvements in indigenous households income or on reserve employment our findings thus suggest that while reforms to individual property rights on reserve have some positive effects their scope remains limited and they are unlikely to constitute a transformative tool to alleviate poverty on reserve droits de propriete sur les terres de reserve des premieres nations cet article examine les effets economiques des droits prives de propriete existants sur les reserves des premieres nations nous nous attardons sur trois modes de possession des terres la possession legitime les terres designees et les permis ces regimes ont ete utilises a la fois pour creer des proprietes foncieres individuelles sur des terres de reserve mais egalement pour garantir les droits d utilisation proteges et transmissibles y afferant a l aide de micro donnees de recensement confidentielles et d abondantes ressources administratives nous avons decouvert une relation positive entre l utilisation de ces regimes fonciers et les taux d accession a la propriete les conditions de logement et les depenses publiques des premieres nations nous avons egalement observe un rapport positif avec le salaire moyen cependant cette derniere observation resulte davantage d un afflux d une population non autochtone plutot que d une reelle amelioration des revenus des autochtones ou de l emploi dans les reserves ainsi et bien que les reformes pour l acces a la propriete privee dans les reserves ont eu quelques effets positifs nos resultats suggerent que leur portee reste limitee et qu elles ne constituent pas de reels outils de transformation pour reduire la pauvrete dans les reserves

school choice through relocation evidence from the washington d c area abstract in this paper i show how the monetary value parents place on school quality may be inferred from their residential location choice the method identifies parental valuation of school quality from the differential effect of school quality on residential choices of households with and without children i implement the method with 1990 census data for washington d c for whites households with children are willing to pay 1800 more per year for schools generating a 100 sat point advantage while some evidence indicates african american choices are negatively associated with school quality additional evidence suggests african american households may be constrained in available choices

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

optimal bank transparency increasing transparency is recurrently offered as a centerpiece of bank regulation we study a competitive banking sector whose illiquid assets are funded by short term debt that must be refinanced we show that welfare is a nonmonotonic function of the level of transparency increasing transparency fosters efficient liquidation but has an adverse effect on rollover risk given the level of risk banks may compensate this adverse effect by taking more risk these offsetting effects render an intermediate level of transparency optimal moreover the existence of negative social externalities of bank failures calls for making banks more opaque rather than more transparent

property rights and investment in urban slums this paper examines the effect of changes in tenure security on residential investment in urban squatter neighborhoods to address the endogeneity of property rights i make use of variation in ownership status induced by a nationwide titling program in peru in a difference in difference analysis i compare the change in housing investment before and after the program among participating households to the change in investment among two samples of nonparticipants my results indicate that strengthening property rights in urban slums has a significant effect on residential investment the rate of housing renovation rises by more than two thirds of the baseline level the bulk of the increase is financed without the use of credit indicating that changes over time reflect an increase in investment incentives related to lower threat of eviction jel o12 o18 p25 p26

the size and structure of native white wage differentials in canada the labor market behavior of aboriginal canadians has been little studied by economists this paper establishes some basic empirical regularities concerning the wages of natives in canada applying techniques drawn from the earnings function literature to the statistics canada 1986 census public use sample tape the raw wage gap between aboriginal and white canadians is relatively small compared with that of other disadvantaged groups in north america and it is smaller for women than for males differences in observable characteristics such as education language and region account for as much as 50 percent of the overall white native wage gap

social value of public information comment morris and shin 2002 is actually pro transparency not con the main result of morris and shin 2002 restated in papers by amato morris and shin 2002 and amato and shin 2003 and commented upon by the economist 2004 has been presented and interpreted as an anti transparency result more public information can be bad however some scrutiny of the result shows that it is actually pro transparency except in very special circumstances more public information is good furthermore for a conservative benchmark of equal precision in public and privateinformation social welfare is higher than in as ituation without public information

information acquisition and learning from prices over the business cycle abstract we study firms incentives to acquire costly information in booms and recessions to investigate the role of endogenous information in accounting for business cycles our model predicts that for a wide range of parameter values firms have a stronger incentive to acquire information when the economy has been in a recession and a pessimistic belief about the state of the economy prevails than after a boom when firms share an optimistic belief the equilibrium price system which features endogenous information transmission dampens aggregate fluctuations by discouraging information acquisition our welfare analysis reveals that information acquisition in the decentralized economy is not efficient this is due to inefficient employment dispersion arising from information heterogeneity in equilibrium time series data for the u s economy support the model s prediction of wages being more informative about total factor productivity after recessions than following booms

the social value of public information with costly information acquisition abstract in a beauty contest framework public authorities decide the accuracy of public information evaluating how it affects individual actions and private information acquisition more precise public information increases welfare whenever its marginal cost does not exceed that of private information

endogenous information acquisition in coordination games in the context of a beauty contest coordination game in which payoffs 1 depend on the quadratic distance of actions from an unobserved state variable and 2 from the average action players choose how much costly attention to pay to vari 3 ous informative signals each signal has an underlying accuracy how precisely it 4 identifies the state and a clarity how easy it is to understand the unique linear 5 equilibrium has interesting properties the signals which receive attention are the 6 clearest available even if they have poor underlying accuracy the number of sig 7 nals observed falls as the complementarity of players actions rises and if actions 8 are more complementary the information endogenously acquired in equilibrium 9 is more public in nature the consequences of rational inattention constraints on 10