design and analysis of simulated consumer choice or allocation experiments an approach based on aggregate data the authors integrate concepts in conjoint analysis and discrete choice theory in econometrics to develop a new approach to the design and analysis of controlled consumer choice or resource allocat

the bond old bond spread abstract i document the profits on a trade that is long the old 30 year treasury bond and short the new 30 year treasury bond and is rolled over every auction cycle from june 1995 to november 1999 despite the systematic convergence of the spread over the auction cycle the average profits are close to zero the difference in repo market financing rates between the two bonds is a significant cost of carry in this trade i show that variation in the bond old bond spread is driven by the treasury supply of 30 year bonds as well as aggregate factors affecting investors preference for liquid assets

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

optimal contracts and supply driven recessions abstract in models with financial frictions state contingent contracts stabilize the business cycle relative to contracts with predetermined repayments we show that this finding depends on whether predetermined repayments are set in real or nominal terms state contingent contracts may amplify supply driven recessions compared to contracts set in nominal terms

determinants of agricultural economics faculty retirement the retirement experiences of faculty who had retired from 1862 land grant universities are described health financial family and professional characteristics of early retirees are contrasted to those of late retirees determinants of faculty retirement are identified in the context of a general retirement model model results indicate that years of service to retirement programs number of children mental health health trends age at initial employment and faculty spouse age differences are positively related to retirement age salary levels net worth and extension appointments are inversely related to retirement age implications of recent changes in the agricultural economics profession on expected retirement behavior are discussed

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

trader leverage and liquidity does trader leverage drive equity market liquidity we use the unique features of the margin trading system in india to identify a causal relationship between traders ability to borrow and a stock s market liquidity to quantify the impact of trader leverage we employ a regression discontinuity design that exploits threshold rules that determine a stock s margin trading eligibility we find that liquidity is higher when stocks become eligible for margin trading and that this liquidity enhancement is driven by margin traders contrarian strategies consistent with downward liquidity spirals due to deleveraging we also find that this effect reverses during crises

inefficient investment waves we show that firms individually optimal liquidity management results in socially inefficient boom and bust patterns financially constrained firms decide on the level of their liquid resources facing cash flow shocks and time varying investment opportunities firms liquidity management decisions generate simultaneous waves in aggregate cash holdings and investment even if technology remains constant these investment waves are not constrained efficient in general because the social and private value of liquidity differs the resulting pecuniary externality affects incentives differentially depending on the state of the economy and often overinvestment occurs during booms and underinvestment occurs during recessions in general policies intended to mitigate underinvestment raise prices during recessions making overinvestment during booms worse however a well designed price support policy will increase welfare in both booms and recessions

collateral constraints in a monetary economy this paper reviews the role of collateral constraints in transforming small monetary shocks into large persistent output fluctuations we do this by introducing money in the heterogeneous agent real economy of kiyotaki and moore 1997 money enters in a cash in advance constraint and money supply is managed via open market operations we find that a monetary shock generates persistent movements in aggregate output the amplitude of which depends upon whether or not debt contracts are indexed if only nominal contracts are traded money shocks can trigger large output fluctuations in this case a money expansion triggers a boom whereas money contractions generate recessions in contrast if contracts are indexed then amplification is not only smaller it can also generate the reverse results when the possibility of default and renegotiation is considered the model can generate asymmetric business cycles with recessions milder than booms finally monetary shocks generate a highly persistent dampening cycle rather than a smoothly declining deviation jel e32 e43 e44 e52

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

the effects of economic status and recent experience on innovative behavior under environmental variability an experimental approach we build and empirically test a model that predicts the display of innovative behavior as a function of environmental change with recent experience and economic status acting as moderators we start with the model developed by slevin 1971 which evolved from the so called innovation boundary this is the threshold beyond which the display of innovative behavior becomes attractive we show how environmental change creates uncertainty about the position of the innovation boundary however this uncertainty is reduced by recent experiences furthermore economic status serves as both an enhancer and an inhibitor of innovation our model was tested and largely confirmed in two experiments one conducted in a laboratory setting and one conducted as a discrete choice experiment currently experiments are rarely conducted in the field of innovation studies by presenting this evidence we also hope to encourage more authors to conduct experiments in their work

capital over the business cycle renting versus ownership we find that capital renting makes up one fifth of u s capital expenditures and it increases during downturns further we present cross country evidence that output losses after financial crises are smaller where renting is more prevalent to understand these findings we build a general equilibrium model with borrowing constraints and with the option to rent or buy capital the countercyclicality of rentals occurs because their supply increases as renting serves as an additional means of savings when credit markets malfunction moreover demand also shifts toward rentals as they become relatively cheaper by absorbing excess savings renting mitigates financial crises

the retirement health nexus a new measure of an old puzzle traditional empirical models of retirement which use a self assessed health measure have often found that the wage rate has a surprisingly small effect on retirement using both a self reported health measure and one not based on self report subsequent mortality experience in a more general reduced form joint demand framework we test the importance of the interaction effects of health and retirement our findings are consistent with a joint determination of health and retirement the wage elasticity using either health measure is about equal to that found in a single equation model when a mortality measure is used but all three elasticities are five times greater than one found using self reported health in a traditional single equation model

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

financial intermediaries and liquidity creation trading losses associated with information asymmetries can be mitigated by designing securities which split the cash flows of underlying assets these securities which can arise endogenously have values that do not depend on the information known only to informed agents bank debt deposits is an example of this type of liquid security which protect relatively uninformed agents and we provide a rationale for deposit insurance in this content high grade corporate debt and government bonds are other examples implying that a money market mutual fund based payments system may be an alternative to one based on insured bank deposits

the elastic provision of liquidity by private agents i study a model of investment by financially constrained firms that are heterogeneous with respect to their exposure to an aggregate liquidity shock a firm that is susceptible to the shock will mitigate its exposure by purchasing claims issued by a firm that is not liabilities of an unaffected firm may earn a liquidity premium due to their fungibility and because they are backed by productive investment their supply is elastic to the demand this segmentation implies that an aggregate liquidity shock has different consequences across sectors of the economy

valuation adverse selection and market collapses we study a market for funding real investment where valuation meaning investors devoting resources to acquiring information about future payoffs creates an adverse selection problem unlike previous models more valuation is associated with lower market prices and so greater returns to valuation this strategic complementarity in the capacity to do valuation generates multiple equilibria with multiple equilibria the equilibrium without valuation is most efficient despite funding some unprofitable investments switches to valuation equilibria valuation runs look like credit crunches a large investor can ensure the efficient equilibrium only if it can precommit to a price and potentially only if subsidized

collateral amplification under complete markets abstract this paper examines the robustness of the kiyotaki moore collateral amplification mechanism to the existence of complete markets for aggregate risk we show that when borrowers can hedge against aggregate shocks at fair prices the volatility of endogenous variables becomes identical to the first best in the absence of credit constraints the collateral amplification mechanism disappears to motivate the limited use of contingent contracts we introduce costs of issuing contingent debt and calibrate them to match the liquidity and safety premia the data we find that realistic costs of state contingent market participation can rationalize the predominant use of uncontingent debt amplification is restored in such an environment

inertia and incentives bridging organizational economics and organizational theory organizational theorists have long acknowledged the importance of the formal and informal incentives facing a firm s employees stressing that the political economy of a firm plays a major role in shaping organizational life and firm behavior yet the detailed study of incentive systems has traditionally been left in the hands of organizational economists with most organizational theorists focusing their attention on critical problems in culture network structure framing and so on in essence the social context in which economics and incentive systems are embedded we argue that this separation of domains is problematic the economics literature for example is unable to explain why organizations should find it difficult to change incentive structures in the face of environmental change while the organizational literature focuses heavily on the role of inertia as sources of organizational rigidity drawing on recent research on incentives in organizational economics and on cognition in organizational theory we build a framework for the analysis of incentives that highlights the ways in which incentives and cognition while being analytically distinct concepts are phenomenologically deeply intertwined we suggest that incentives and cognition coevolve so that organizational competencies or routines are as much about building knowledge of what should be rewarded as they are about what should be done we argue that this recognition has important implications for our understanding of organizational inertia in the face of environmental change and that it opens up important new areas for further research

what calls to arms international evidence on interest rates and the choice of adjustable rate mortgages the form of the interest rate on newly issued mortgages namely whether they are adjustable rate mortgages arms or fixed rate mortgages frms varies considerably both across countries and over time we attempt to uncover the sources of this variation in the arm share of arms issued relative to total mortgage issuance our emphasis is on drawing inferences about how household mortgage choice is affected by households reactions to movements in interest rates we complement newly assembled panel data from nine countries on the arm share and mortgage interest rates with a panel instrumental variables approach in which we test exclusion restrictions that are implied by alternative explanations for variation in the arm share we uncover strong evidence in favour of current cost minimization as the proximate driver of household mortgage choice

public acceptance of energy technologies the effects of labeling time and heterogeneity in a discrete choice experiment public acceptance is crucial for successful implementation of energy technologies in society however studies that use the concept do so in diverse and often inconsistent ways they also often limit themselves to specific technologies and do not account for the effects of labeling time and the heterogeneity of the general public which may lead to a biased and incomplete understanding of public acceptance this study first conceptualizes three forms of public acceptance socio political acceptance market acceptance and community acceptance it then relates the concept of socio political acceptance to preference formation next it uses two discrete choice experiments that were conducted in 2010 and 2012 to investigate these concerns our results show that public preferences for energy technologies are temporally stable even in the face of exogenous shocks such as the fukushima incident using mixed logit models we further show that labeling has a profound influence on stated preferences when technology labels are revealed respondents favor renewable and natural gas technologies when labels remain unobserved nuclear energy and biomass take prominence however latent class models show that there are distinct classes of respondents tied to specific socio demographic characteristics that differ greatly in their sensitivity to labeling and in the temporal stability of their preferences it follows that changes in public acceptance are not population wide but remain limited to specific sub groups we discuss the theoretical and policy implications of our findings and conclude that future studies and policy initiatives may overlook important insights if they disregard the effects of labels time and heterogeneity

firm behaviour and innovative performance an empirical exploration of the selection adaptation debate innovation is a complex trade off between routinisation and change between reliability and accountability of firms and timely adaptation this innovator s dilemma confronts innovation theory with the question how to align routinisation with innovation induced organisational change and consistent performance obviously it is a complex issue dominant innovation theory neglects this subject due to its pro innovation bias while evolutionary organisation and innovation theory give opposite perspectives on this problem the adaptation perspective considers pro active behaviour as the best condition for innovative performance whereas the selection perspective advances inert firm behaviour as the best alternative to achieve successful innovations our research question focuses on the explanatory value of either the selection or the adaptation perspective for the innovative performance of industrial firms our empirical findings confirm the adaptation perspective and reject the selection perspective comparatively firm behaviour involving the highest risks and uncertainties e g high environmental dynamics and high levels of adaptive activity contributes most significant to the explanation of innovative performance inert risk averse behaviour conversely does not improve or even impedes innovative performance compared with other types of firm behaviour

a model of capital and crises we develop a model in which the capital of the intermediary sector plays a critical role in determining asset prices the model is cast within a dynamic general equilibrium economy and the role for intermediation is derived endogenously based on optimal contracting considerations low intermediary capital reduces the risk bearing capacity of the marginal investor we show how this force helps to explain patterns during financial crises the model replicates the observed rise during crises in sharpe ratios conditional volatility correlation in price movements of assets held by the intermediary sector and fall in riskless interest rates

partial retirement as a separate mode of retirement behavior partial retirement is a quantitatively important retirement state that shows significant structural differences from behavioral functions of either full retirement or full time work alternative models of the choice of retirement state are estimated on a sample of white married males from the retirement history survey 1967 1973 findings suggest that while partial retirement appears to take several different forms the critical choice for a large number of older workers appears to be that of labor force participation first with either partial or full time employment determined conditionally among participants the model has good explanatory power and conforms to expectations of the effects of various relevant variables on labor supply decisions

bank loan commitment contracts data theory and tests over 80 per cent of all commercial bank lending to corporations in the u s is done via bank loan commitments yet the authors have little empirical knowledge of loan commitment contracts in this paper they describe the rich contractual structure of bank loan commitments based on data pertaining to over 2 500 contracts the authors then develop a model which demonstrates that the observed complex structure of bank loan commitment contracts which typically include multiple fee structures borrower specific contracting variables and the standard material adverse change clause is important when the bank faces borrower adverse selection and moral hazard problems finally the authors verify the robustness of their model by confronting its additional testable predictions with the data copyright 1997 by ohio state university press

why is there mandatory retirement an empirical reexamination a widely cited explanation of mandatory retirement age provisions is the incentives model developed and tested by lazear the research reported here builds upon lazear s empirical framework by adding testable implications drawn from a specific human capital explanation of mandatory retirement the role of monitoring costs in accounting for mandatory retirement rules is also discussed the evidence presented based on data from the nls mature men sample indicates that in addition to the personal characteristics examined by lazear a comprehensive explanation of mandatory retirement requires the consideration of both specific human capital and monitoring costs

economic determinants of the optimal retirement age an empirical investigation in this paper we examine how the structures of earnings social security and pension benefits affect retirement behavior we use an intertemporal model of labor supply paying special attention to the institutional features of private pensions and social security benefits this theoretical formulation produces comparative dynamic predictions and guides empirical modeling data from a new survey of workers and their income opportunities are used to implement the empirical model on the basis of empirical retirement estimates we conclude that 1 people with higher base wealth retire earlier and 2 those who expect to gain more by postponing retirement retire later

dynamic capabilities what are they this paper focuses on dynamic capabilities and more generally the resource based view of the firm we argue that dynamic capabilities are a set of specific and identifiable processes such as product development strategic decision making and alliancing they are neither vague nor tautological although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence they have significant commonalities across firms popularly termed best practice this suggests that they are more homogeneous fungible equifinal and substitutable than is usually assumed in moderately dynamic markets dynamic capabilities resemble the traditional conception of routines they are detailed analytic stable processes with predictable outcomes in contrast in high velocity markets they are simple highly experiential and fragile processes with unpredictable outcomes finally well known learning mechanisms guide the evolution of dynamic capabilities in moderately dynamic markets the evolutionary emphasis is on variation in high velocity markets it is on selection at the level of rbv we conclude that traditional rbv misidentifies the locus of long term competitive advantage in dynamic markets overemphasizes the strategic logic of leverage and reaches a boundary condition in high velocity markets copyright 2000 john wiley sons ltd

variable risk preferences and adaptive aspirations abstract observations of human decision making indicate that risk preferences depend on the values of possible outcomes relative to levels of aspiration a model of such variable risk preference is specified it suggests that some risk averse behavior may result from a human tendency to focus on targets and from the adaptation of those targets to experience rather than from a fixed trait of risk aversion in addition the model shows how risk preferences varying around adaptive aspirations produce both a greater long run likelihood of survival and a higher average return for survivors than do fixed risk preferences

credit cycles redux theoretical studies have shown that under unorthodox assumptions on preferences and production technologies collateral constraints can act as a powerful amplification and propagation mechanism of exogenous shocks we investigate whether or not this result holds under more standard assumptions we find that collateral constraints typically generate small output amplification large amplification is obtained as a knife edge type of result

a confusion of agricultural economists a professional interest survey and essay a random survey of members of the american agricultural economic association is used to examine basic philosophical issues regarding the discipline of agricultural economics in comparison to other studies of economists much more diversity of response is found among agricultural economists the data suggests important correlates between the pattern of responses and socioeconomic variables some variables which affect responses are agricultural interests age school of graduation area of specialization and employment self interest information differences and empathy are among the possible explanations of the patterns of responses

the intended and unintended consequences of financial market regulations a general equilibrium analysis in a production economy with trade in financial markets motivated by the desire to share labor income risk and to speculate we show that speculation increases volatility of asset returns and investment growth increases the equity risk premium and reduces welfare regulatory measures such as constraints on stock positions borrowing constraints and the tobin tax have similar effects on financial and macroeconomic variables borrowing limits and a financial transaction tax improve welfare because they substantially reduce speculative trading without impairing excessively risk sharing trades

the early retirement decision new empirical evidence on the influence of health many studies have examined the influence of health on retirement but there may be problems with the various health measures used a major criticism of the most frequently used variables is that they may reflect ex post rationalizations of retirement in this paper i examine a variety of health variables focusing directly on the health measurement issue as it relates to retirement research new measures of health are developed with individual self evaluations of health status unlike most previous findings the empirical results suggest that economic variables play a more important role than health in retirement decisions

uncertainty shocks and balance sheet recessions this paper investigates the origin and propagation of balance sheet recessions i first show that in standard models driven by tfp shocks the balance sheet channel disappears when agents can write contracts on the aggregate state of the economy optimal contracts sever the link between leverage and aggregate risk sharing eliminating the concentration of aggregate risk that drives balance sheet recessions i then show that uncertainty shocks can help explain this concentration of aggregate risk and drive balance sheet recessions even with contracts on aggregate shocks the mechanism is quantitatively important and i explore implications for financial regulation

collateral constraints and the amplification mechanism abstract kiyotaki and moore j polit economy 105 1997 211 have offered a theory for how common shocks to credit constrained firms are amplified through changes in collateral values and transmitted as fluctuations in output i clarify and extend their model by showing that their collateral amplification mechanism is not robust to the introduction of markets that allow these firms to hedge against common shocks a theory of incomplete hedging is proposed in which the supply of hedging available in the economy is constrained by the aggregate value of collateral i illustrate how the constraint reinstates amplification effects and discuss empirical implications of this new mechanism

financial innovation macroeconomic stability and systemic crises we present a general equilibrium model of intermediation designed to capture some of the key features of the modernnancial system the model incorporatesnan cial constraints and state contingent contracts and contains a clearly dened pe cuniary externality associated with assetre sales during periods of stress if a sufciently severe shock occurs during a credit expansion this externality is capa ble of generating a systemicnancial crisis that may be self fullling our model suggests thatnancial innovation and greater macroeconomic stability may have madenancial crises in developed countries less likely than in the past but poten tially more severe

endogenous cycles in a stiglitz weiss economy the literature on financial imperfections and business cycles has focused onpropagation mechanisms in this paper we model a purereversion mechanism such that the economy may converge to a two period equilibrium cycle this mechanism confirms that financial imperfections may have a dramatic amplification effect unlike in some related models contracts are complete indexation is not assumed away the welfare properties of a possible stabilizing policy are analyzed the model itself is a dynamic extension of the well known stiglitz weiss model of lending under moral hazard although stylized the model still captures some important features of credit cycles

leverage and asset bubbles averting armageddon with chapter 11 an iconic model with high leverage and overvalued collateral assets is used to illustrate the amplification mechanism driving asset prices to overshoot equilibrium when an asset bubble bursts threatening widespread insolvency and what richard koo calls a balance sheet recession besides interest rates cuts asset purchases and capital restructuring are key to crisis resolution the usual bankruptcy procedures for doing this fail to internalise the price effects of asset fire sales to pay down debts however we discuss how official intervention in the form of super chapter 11 actions can help prevent asset price correction causing widespread economic disruption