a differential games solution to a model of competition between a thief and the police this paper contains an extension of an optimal control model considered by sethi sethi s p 1979 optimal pilfenng policies for dynamic continuous thieves management sci 25 6 june 535 542 to a differential game situation it is assumed that sethi s concave thief i e a risk averter plays against the police whose objective function incorporates convex costs of law enforcement a one shot utility at the time of arrest and a continuous utility or cost rate after the thief is arrested the probability that the thief is caught by time t is influenced not only by the pilfering rate as is the case in sethi s model but also by the instrumental variable of the police namely its rate of law enforcement our aim is to analyze noncooperative nash solutions of the differential game sketched above due to the special structure of the hamiltonians a system of two nonlinear differential equations for the control variables of both players can be derived the system is solved explicitly under special assumptions it is shown that the optimal rate of law enforcement of police increases monotonically whereas for the nash optimal pilfering rate three cases may be characterized in which increase decrease or constancy occur thus the nash optimal solutions show in each case monotonic behavior i e changes in trend never occur moreover the dependency of the terminal values of control can be described finally an interpretation of the model as market entrance game is sketched

micro data heterogeneity and the evaluation of public policy nobel lecture this paper summarizes the contributions of microeconometrics to economic knowledge four main themes are developed 1 microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the second world war 2 microeconometrics improved on aggregate time series methods by building models that linked economic models for individuals to data on individual behavior 3 an important empirical regularity detected by the field is the diversity and heterogeneity of behavior this heterogeneity has profound consequences for economic theory and for econometric practice 4 microeconometrics has contributed substantially to the scientific evaluation of public policy

the use and abuse of meta analysis in environmental and natural resource economics an assessment motivated by the 2006 report of a work group appointed by the environmental protection agency epa this paper examines the present state of meta analysis in environmental economics and offers recommendations for its future use to this end we summarize and assess 140 meta analyses from 125 published and unpublished studies covering 17 topical categories in environmental and resource economics first we provide several generic meta analysis models as reference points and discuss major estimation issues five econometric issues are identified as part of a complete analysis 1 sample selection criteria 2 basic data summary 3 primary data heterogeneity 4 heteroskedasticity and 5 non independence of multiple observations from primary studies second a tabular summary is presented for the 140 meta analyses with respect to estimation methods third a narrative summary is presented for 19 meta analyses including the three value of statistical life studies examined by the epa work group and one analysis from each of 16 other categories fourth we offer a set of best practice guidelines for future meta analyses in this and other areas of economics last the paper comments on the use of meta analytic methods for benefit transfers of environmental values

the response of exchange rates to permanent and transitory shocks under floating exchange rates abstract using the joint behavior of inflation and real exchange rates we develop an empirical model to uncover the sources of the fluctuations in the real dollar exchange rates of four major industrial countries under the current float this model allows us to construct two time series for each country pair one representing the permanent component of each real exchange rate and the other the purely transitory component over the period as a whole transitory shocks played a relatively small but statistically significant role real dollar exchange rates therefore did not simply evolve in response to permanent shocks instead there are instances in which temporary shocks made a substantial contribution we conclude that the random walk model though an approximate statistical description of real exchange rate behavior is a poor guide to model structure jel f31

can the markov switching model forecast exchange rates abstract a markov swirching model is fit for 18 exchange rates at quarterly frequencies the model fits well in sample for many exchange rates by the mean squared error criterion the markov model does not generate superior forecasts to a random walk or the forward rate there appears to ne some evidence that the forecasts of the markov model are superior at predicting the direction of change of the exchange rate

is there a threat effect of labour market programmes a study of almp in the danish ui system this article focuses on unemployed individuals reaction to compulsory labour market programmes prior to participation in denmark after having received ui benefits for a given period of time continued benefits are made conditional on participation in a labour market programme i estimate individuals reaction to compulsory programmes using legislative changes in the duration of benefits period as identification i find that compulsory programmes do indeed motivate individuals to find employment prior to participation the effect is large and is even comparable in size to the effect of benefits exhaustion found in studies of american ui systems

real exchange rate behavior abstract using random simulations with artificial data with identical sample characteristics to the long sample exchange rate data employed by lothian and taylor lothian j r and taylor m p 1996 the recent float from the perspective of the past two centuries journal of political economy 104 488 509 we show that standard unit root tests have extremely low power over sample sizes corresponding to the recent float the probability of rejecting the null hypothesis when it is false is extremely low with 20 years or even 50 years of data and only reaches an acceptable level over much longer spans

on the predictive power of monetary exchange rate model the case of the malaysian ringgit us dollar rate the predictive power of the monetary model for the malaysian ringgit us dollar rm usd rate is analysed using quarterly data ending in 2006 q3 we find compelling evidence of a long run relationship between exchange rates and the economic fundamental determinant macroeconomic factors systematically affect the long run movement of the rm usd rate additionally the rm usd rate was overvalued by about 10 several quarters before the 1997 crisis after the crisis rates fluctuated close to the equilibrium value the out of sample forecasts demonstrate that the monetary model outperforms the naive random walk model the monetary and purchasing power parity ppp models do well at the four to eight quarters horizon

a re assessment of the relationship between real exchange rates and real interest rates 1974 1990 abstract this paper uses cointegration techniques and error correction models to re examine the link between real exchange rates and real interest rate differentials the results show that real exchange rates and real interest rates are nonstationary however they are not cointegrated with each other on the other hand the dynamic models indicate that there might be a long run relationship between these variables but this cannot be verified the final conclusion is that there is little empirical evidence in support of a systematic relationship and this result is robust across exchange rates time periods and measures of expected inflation

meta analysis of economics research reporting guidelines meta regression analysis mra can provide objective and comprehensive summaries of economics research their use has grown rapidly over the last few decades to improve transparency and to raise the quality of mra the meta analysis of economics research network maer net has created the below reporting guidelines future meta analyses in economics will be expected to follow these guidelines or give valid reasons why a meta analysis must deviate from them

was it real the exchange rate interest differential relation over the modern floating rate period in this paper we explore the relationship between real exchange rates and real interest rate differentials in the united states germany japan and the united kingdom contrary to theories based on the joint hypothesis that domestic prices are sticky and monetary disturbances are predominant we find little evidence of a stable relationship between real interest rates and real exchange rates we consider both in sample and out of sample tests one hypothesis that is consistent with our findings is that real disturbances such as productivity shocks may be a major source of exchange rate volatility this paper investigates the empirical relationship between major currency real exchange rates and real interest rates over the modern post march 1973 flexible rate experience the exchange rates examined here include the dollar mark dollar yen and dollar pound rates our two major findings are as follows first the data do not indicate a strong correspondence between real interest rate differentials short term or long term and real exchange rates this finding appears to conflict with the predictions of most monetary and portfolio balance models of exchange rate determination though the conflict can be substantially reconciled if aggregate disturbances are primarily real in nature i e changes in productivity tastes etc it is true that in many cases the sign of the estimated exchange rate interest rate differential relationship is consistent with the possible predominance of financial market disturbances but the relationship is not stable enough to be statistically significant second although one does find some evidence of a unit root in both real exchange rates and long term but not shortterm real interest differentials these two series do not appear to be linearly cointegrated hence the nonstationarity or near nonstationarity in the two series cannot be attributed to the same factor in section i we briefly describe a class of small scale monetary models of exchange rate determination the importance of this class of models for empirical work derives from its strong predictions about how the exchange rate will move

experimental evidence on the effects of early meetings and activation we analyze the effects of four randomized social experiments involving early and intensive active labour market policy conducted in denmark in 2008 the experiments entailed different combinations of early and intensive treatment in terms of meetings and active labour market programmes we find that frequent meetings between newly unemployed workers and case workers can increase employment rates over the next two years by up to 10 weeks the effects continue to grow over the whole 4 year horizon studied for men we find evidence of a threat effect of having to participate in early active labour market programmes while no such effect is found for women we conduct a cost benefit analysis of each ofthe four experiments and find that meetings yield the largest net benefits

is the threat of reemployment services more effective than the services themselves evidence from random assignment in the ui system we examine the effect of the worker profiling and reemployment services system this program profiles unemployment insurance ui claimants to determine their probability of benefit exhaustion and then provides mandatory employment and training services to claimants with high predicted probabilities using a unique experimental design we estimate that the program reduces mean weeks of ui benefit receipt by about 2 2 weeks reduces mean ui benefits received by about 143 ana increases subsequent earnings by over 1 050 most of the effect results from a sharp increase in early ui exits in the treatment group relative to the control group jel j650

the threat effect of active labor market programs a systematic review this paper is a systematic review of the threat effect of active labor market programs for unemployed individuals the threat effect is the induced change in the hazard rate of leaving unemployment prior to program participation studies included in the review all estimated a threat effect with the participants in all cases being unemployed individuals in receipt of benefit of some kind during their tenure of unemployment eight of these studies have been included in a meta analysis the meta analysis which has been carried out using a random effects model to account for heterogeneity indicated a hazard ratio of 1 25 for the pooled estimate we conclude that active labor market programs constitute a statistically significant threat effect although it is modest

how to help unemployed find jobs quickly experimental evidence from a mandatory activation program abstract this paper investigates how a mandatory activation program in denmark affects the job finding rate of unemployed workers the activation program was introduced in an experimental setting where about half of the workers who became unemployed in the period from november 2005 to march 2006 were randomly assigned to the program while the other half was not it appears that the activation program is very effective the median unemployment duration of the control group is 14 weeks while it is 11 5 weeks for the treatment group the analysis shows that the job finding rate in the treatment group is 30 higher than in the control group this result is mainly driven by the more intensive contacts between the unemployed and the public employment service

consumer activism producer groups and production standards we examine competition between groups of producers when consumers prefer costly ethical production technologies consumers are unable to identify or monitor production technologies producers can freeride on their group s reputation by substituting cheaper unethical technologies when an ethical technology is pareto optimal social pressures within competing producer groups can ensure long run dominance of groups relying most heavily on the ethical technology even if social pressures cannot support the choice of the ethical technology in the long run competition between producer groups can increase the average level of adoption of the ethical technology for an arbitrarily long period of time

changing beliefs and systematic rational forecast errors with evidence from foreign exchange this paper addresses a new interpretation to the appearance in the early 1980s of systematic errors in forecasting the dollar exchange rate following a change in the process of a fundamental variable market participants revise their beliefs about the process using bayes rule since the market does not immediately recognize the change forecast errors are on average wrong during a period when the market is rationally learning for conservative parameter values the learning behavior of the dollar exchange rate in the early 1980s appears consistent with about half of the dollar s underprediction implied by the forward market copyright 1989 by american economic association

stochastic competitive entries and dynamic pricing abstract how should firms price new products when they do not know the timing nor the nature of the next competitive entry to guide managers pricing decisions in such contexts we propose a dynamic pricing model with two types of randomly timed entry i e imitative and innovative the characterization of the equilibrium strategies reveals how optimal prices vary with the manager s knowledge about the timing of future competitive entries we show that price skimming is not always optimal when entry dates are unknown to managers everything else equal we demonstrate that the randomness of competitive entries make forward looking managers to choose constant prices even though the characteristics of the market would have justified skimming the demand in the normal course moreover we show that the constant pricing policy remains optimal even when the incumbent s optimal pricing strategy influences the probability of facing a competitive entry finally we find that uncertainty does not necessarily hurt firms profits

are there pre programme effects of active placement efforts evidence from a social experiment this note estimates pre programme effects of active placement programmes estimation is based on a social experiment conducted in three swedish counties in 2004 i find that placement programmes could substantially increase transitions both to jobs and other exits before programme start

the threat effect of active labour market programmes in this paper we estimate the threat effect of active labour market programmes almps for a sample of unemployed men in denmark threat effects of such programmes capture the impacts of a system of almps prior to actual participation rational economic agents make search decisions based on the expected discounted value of unemployment and the perceived risk of future participation in programmes may affect job search behaviour early in the unemployment spell we find a strong and significant threat effect which is shown to reduce average unemployment duration by two and a half weeks

the exchange rate interest differential relationship in six east asian countries abstract this study shows that the real exchange rate real interest differential relation in six east asian economies changes with the nominal regime positive time varying correlations characterize the relation during pegged regimes correlations are negative during freely falling regimes

dynamic optimal pricing and possibly advertising in the face of various kinds of potential entrants abstract several nonlinear stochastic models are developed for a dynamic profit maximizing firm with respect to its price and possibly advertising decisions under threat of entry the optimal price advertising policies for these models are characterized by the use of the maximum principle while the optimal policy will depend on the assumed functional forms it is shown that under certain plausible assumptions the optimal policy is to increase profit by charging a higher price and decrease the resulting threat of entry by a higher level of advertising

optimal management of fringe entry over time abstract in this paper we investigate the problem of a dominant company facing entry of a competitive fringe smaller competitor or fringe of smaller competitors we seek to identify pricing and advertising or other promotional strategies that maximize long term profits for the dominant firm under possible reactions of the competitive fringe two main situations are considered the firms in the fringe are price takers but they advertise the firms in the fringe are not price takers and advertise the possibility of a passive reaction in the case of a very small fringe is considered as a particular case we assume that the rate of change of fringe sales is dynamically related to the current sales price and advertising efforts of both the dominant firm and the fringe the higher the dominant firm price the faster fringe entry the higher dominant firm advertising effort the slower fringe entry fringe advertising and pricing may counterbalance these effects formulating a dynamic game with the dominant firm as a leader and the fringe as a follower we present a new methodology for providing time invariant feedback stackelberg equilibrium the methodology relies on finding the relationship between the co state variables and the state variable the equilibrium solution is obtained in an implicit form by solving a set of two backward differential equations to show the applicability of our solution to real situations we use data from the u s long distance market and find optimal decision rules for at t facing the entry of mci and sprint during the 1980 1990 period the feedback equilibrium indicates that while at t s price is decreasing when fringe mci and sprint sales increase the fringe price is increasing at t s advertising is increasing with fringe sales while the fringe s advertising increases and then decreases the comparison with actual behavior indicates that at t has adhered closer to the optimal solution in both price and advertising than the fringe

strategic entry before demand takes off in developing industries firms have to decide whether and when to enter the market depending on the state of demand existing firms in the industry and the firm s capabilities this paper investigates a model of increasing demand in which firms decide when to enter the market anticipating the strategic behavior of other potential entrants and the effects of entry on future potential entrants this paper shows that the ability of early entry to deter future competitors entry leads firms to enter the market at a rate faster than demand is expanding if there is the potential for many firms to enter the market firms may be less likely to enter because of future competitor entry to correct any market opportunities if firms enter the market depending on their fixed capabilities rather than depending on the firm s circumstances at each moment in time firms end up entering the market at a faster rate in the early periods

banking on currency forecasts how predictable is change in money abstract the paper examines the predictive performance of four structural exchange rate models using both parametric and nonparametric techniques error correction versions of the models are fit so that plausible long run elasticities can be imposed on the fundamental variables of each model a variety of model evaluation statistics are reported our findings confirm that fundamental exchange rate models forecast no better than a random walk model for short term prediction horizons for longer horizons error correction terms can explain exchange rate movements significantly better than a no change forecast for a subset of the models and currencies we consider

a microeconometric evaluation of the active labour market policy in switzerland in the second part of the 1990 s switzerland conducted an ambitious active labour market policy almp encompassing a wide variety of programmes we evaluate the effects of these programmes on the individual employment probability of potential participants our econometric analysis uses unusually informative data origi nating from administrative unemployment and social security records we apply a matching es timator adapted for the case of multiple programmes we find substantial positive effects for one particular programme that is a unique feature of the swiss almp it consists of a wage subsidy for temporary jobs in the regular labour market that would otherwise not be taken up by the unemployed we also find large negative effects for traditional employment programmes oper ated in sheltered labour markets for training courses the results are mixed doi 10 1111 1468 0297 00072 download internet appendix pdf 2 590 kb

the impact of active labour market programmes on the duration of unemployment in switzerland this article evaluates the effects of swiss active labour market programmes on the job chances of unemployed workers the main innovation is a comparison of two important dynamic evaluation estimators the matching estimator and the timing of events estimator we find that both estimators generate different treatment effects according to the matching estimator temporary subsidised jobs shorten unemployment duration whereas training programmes and employment programmes do not in contrast the timing of events estimator suggests that none of the swiss active labour market programmes shortens unemployment duration the aim of the present article is to study the impact of active labour market policies almps on the duration of unemployment in switzerland the new swiss almps reflect the increasing consensus among policy makers that actively assisting the unemployed in job search is preferable to simply providing them with passive income support the danger is so the argument goes that reliance on passive income support may reduce work incentives and job search activities and therefore increase the risk of long term unemployment almps are seen by many as the key to minimise these risks the question how participation in almp measures affects labour market histories of individuals has been the subject of substantial debate the main problem is that labour market outcomes for participants may be systematically different from non participants

is there a unit root in the inflation rate evidence from sequential break and panel data models summary using sequential trend break and panel data models we investigate the unit root hypothesis for the inflation rates of thirteen oecd countries with individual country tests we find evidence of stationarity in only four of the thirteen countries the results are more striking with the panel data model we can strongly reject the unit root hypothesis both for a panel of all thirteen countries and for a number of smaller panels consisting of as few as three countries the non rejection of the unit root hypothesis for inflation is very fragile to even a small amount of cross section variation 1997 john wiley sons ltd

a re examination of the exchange rate interest differential relationship evidence from germany and japan abstract this paper presents empirical evidence which links the exchange rate interest differential relation over the recent floating rate period using johansen s cointegration test we find a long run relationship between real exchange rates and expected real interest differentials in addition empirical evidence is provided to show that our error correction framework leads to real exchange rate forecasts that are superior to those generated by a random walk forecasting model moreover this superiority in out of sample predictability is supported statistically by the test of diebold and mariano

understanding the empirical literature on purchasing power parity the post bretton woods era abstract this paper argues that the empirical failure of statistical tests of ppp in post bretton woods data is largely due to the low power of the tests employed this result is demonstrated using monte carlo experiments on the size and power of different testing procedures a new procedure based on horvath and watson econometric theory 11 pp 984 1014 1995 has greater power than previous approaches using the horvath watson procedure we find moderate evidence in favor of ppp in the post bretton woods era

convergence of interest rates around the pacific rim this article applies the panel data unit root tests provided by im pesaran and shin discussion paper 1997 to examine the interest rate convergence of small open asian countries with major financial centres with monthly data from 1988 1 to 1997 6 it was found that the nominal interest rates of these countries converge to the us rates rather than to japan s this finding is consistent with the view that the monetary authorities of non japan asian economies pegged their exchange rates overwhelmingly to the dollar rather than the yen before the financial crisis of 1997

the term structure of forward exchange premiums and the forecastability of spot exchange rates correcting the errors we develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and