barriers to trade and the import vulnerability of us manufacturing industries while it is widely recognized that imports can discipline markets the strength of that disciplinary power surely varies across industries the determinants and extent of this interindustry variation in the disciplinary force for foreign trade flows is however relatively unexplored this article investigates the microeconomic determinants of changing import shares at the industry level for u s manufacturing industries based upon this investigation the authors are able to create an index that measures the relative vulnerability of the various manufacturing industries to foreign competition and test a number of hypotheses concerning the underlying causes of observed variations in import vulnerability copyright 1990 by blackwell publishing ltd

intervention analysis of electoral tax cycle the case of japan this paper analyzed the impact of elections on tax policy in japan using an arima autoregressive integrated moving average intervention analysis from 1953 through 1992 we used discretionary tax revenues which means the changes in tax receipts attributable to changes in the tax code rather than automatic tax revenues due to business cycles in the economy

optimal government policy in a small open economy with rational expectations and uncertain election outcomes many of the major western economies have recently been engaged in monetary disinflation at the expense of considerable short term losses in output and jobs in some of these economies there are opposition parties which promise a greater emphasis on job creation and expansion of public expenditure programs when elected into office the possibility of a more keynesian political party gaining office in the near future might have dra matic consequences for the pre election outcomes of the economy for example if there is a chance that demand will be stimulated in the future the economy will anticipate the possibility of future budget deficits and rising future short term interest rates this implies a rise in current long real rates of interest which combined with the appreciation of the currency can aggravate the recession caused by the monetary disinflation package implemented by the incumbent political party 2 because the election outcome will not be known until all votes have been counted on the morning after the election the economy will jump onto a new trajectory in order to take account of the election news it is clear therefore that future political uncertainty can cause major fluctuations in the current state of the economy however most of the literature on political business cycles e g nordhaus 1975 macrae 1977 van der ploeg 1984b assumes that the private sector is backward looking so that the effects described above do not occur instead this literature assumes that the incumbent political party attempts to secure re election by maximizing the expected number of votes cast in its favour at the forthcoming election and to exploit lags due to adaptive expectations the government can then fool the electorate by judiciously depressing output in the early part of its term in office in order to force down the expected rate of inflation and by engineering a boom without too many adverse inflationary consequences

tricks with hicks the easi demand system we invent implicit marshallian demands which combine desirable features of hicksian and marshallian demands we propose and estimate the exact affine stone index easi implicit marshallian demand system like the almost ideal demand aid system easi budget shares are linear in parameters given real expenditures however unlike the aid easi demands can have any rank and its engel curves can have any shape over real expenditures easi error terms equal random utility parameters to account for unobserved preference heterogeneity easi demand functions can be estimated using gmm or three stage least squares and like aid an approximate easi model can be estimated by linear regression

semiparametric estimation of consumer demand systems in real expenditure microdata concerning consumer demand typically show considerable variation in real expenditures but very little variation in prices we propose a semiparametric strategy for the consumer demand problem in which expenditure share equations are estimated nonparametrically in the real expenditure direction and estimated parametrically with fixed or varying coefficients in price directions in our model engel curves are unrestricted demands may have any rank because the demand model is derived from a cost function it may be restricted to satisfy integrability and used for consumer surplus calculations since real expenditure is unobserved but rather estimated under the model we face a semiparametric model with a nonparametrically generated regressor we show efficient convergence rates for parametric and nonparametric components we illustrate the feasibility of our proposed strategy using canadian expenditure and price data engel curves display curvature which cannot be encompassed by standard parametric models we also find that the rationality restriction of slutsky symmetry is rejected in the fixed coefficients model but not in the varying coefficients model copyright 2009 john wiley sons ltd

disposable income unemployment inflation and state spending in a dynamic political economic model this paper formulates a medium term macroeconomic model of disposable income unemployment inflation and state spending proposes a theory of qualitative choice to explain electoral popularity in terms of these variables and develops three approaches to the formulation of political economic policy the first approach is static sets the tax rate to reconcile the interests of various pressure groups and yields a political trade off between the private and public sector the second approach relies on maximizing the probability of winning the next election and gives rise to a political business cycle unless the electorate votes strategically the implications of crowding out of private investment under alternative monetary rules autonomous behaviour of the state bureaucracy and tax indexation for the political business cycle are also examined the third approach analyzes the objective of maximizing the uninterrupted length in office it yields a short run political cycle superimposed on a longer cycle

the optimal intertemporal choice of inflation and unemployment an analysis of the steady state and transitional dynamics abstract this paper analyzes the optimal intertemporal choice of inflation and unemployment rates in two versions of a simple dynamic macro model in the first of these the real wage remains fixed while in the second the real wage is permitted to adjust endogenously the implications for the long run as well as the transitional dynamic adjustment paths are discussed in detail in the long run the optimal policy will drive the economy to its natural rate of unemployment accompanied by a steady rate of inflation which can be described in terms of a number of parameters characterizing the economy and the preferences of the policy maker the transitional dynamic adjustment path also depends upon these parameters among which the rate of time discount is particularly important

nonparametric welfare analysis for discrete choice we consider empirical measurement of equivalent variation ev and compensating variation cv resulting from price change of a discrete good using individual level data when there is unobserved heterogeneity in preferences we show that for binary and unordered multinomial choice the marginal distributions of ev and cv can be expressed as simple closed form functionals of conditional choice probabilities under essentially unrestricted preference distributions these results hold even when the distribution and dimension of unobserved heterogeneity are neither known nor identified and utilities are neither quasilinear nor parametrically specified the welfare distributions take simple forms that are easy to compute in applications in particular average ev for a price rise equals the change in average marshallian consumer surplus and is smaller than average cv for a normal good these nonparametric point identification results fail for ordered choice if the unit price is identical for all alternatives thereby providing a connection to hausman newey s 2014 partial identification results for the limiting case of continuous choice

estimating consumption economies of scale adult equivalence scales and household bargaining power how much income would a woman living alone require to attain the same standard of living that she would have if she were married what percentage of a married couple s expenditures are controlled by the husband how much money does a couple save on consumption goods by living together versus living apart we propose and estimate a collective model of household behaviour that permits identification and estimation of concepts such as these we model households in terms of the utility functions of its members a bargaining or social welfare function and a consumption technology function we demonstrate generic non parametric identification of the model and hence of a version of adult equivalence scales that we call indifference scales as well as consumption economies of scale the household s resource sharing rule or members bargaining power and other related concepts copyright 2013 oxford university press

individual heterogeneity and average welfare individual heterogeneity is an important source of variation in demand allowing for general heterogeneity is needed for correct welfare comparisons we consider general heterogenous demand where preferences and linear budget sets are statistically independent we find that the dimension of heterogeneity and the individual demand functions are not identified we also find that the exact consumer surplus of a price change averaged across individuals is not identified motivating bounds analysis we use bounds on income effects to derive relatively simple bounds on the average surplus including for discrete continous choice we also sketch an approach to bounding surplus that does not use income effect bounds we apply the results with income effect bounds to gasoline demand we find little sensitivity to the income effect bounds in this application

the political theory of the business cycle two strands of recent empirical work pose a challenge for the macro theorist when brought together one is the rational expectations interpretation of the business cycle the other is the political theory of the business cycle this paper attempts a reconciliation of these two strands in a theory where national political parties have to satisfy the preference of their own supporters as well as the floating voter the implications are that party voters evaluate government performance with respect to expected inflation and output and their variances and that parties will pursue different feedback rules

identifying combinatorial valuations from aggregate demand abstract we study identification of combinatorial valuations from aggregate demand each utility function takes as arguments subsets or alternatively quantities of the multiple goods we exploit mathematical insights from auction theory to generically identify the distribution of utility functions in our setting aggregate demand for each item is observable while demand for bundles is not nevertheless our identification result allows us to recover the latter

demand systems with and without errors revealed preference theory assumes that each consumer has demands that are rational meaning that they arise from the maximization of his or her own utility function in contrast econometric or statistical demand models assume that each consumer s demands equal a rational systematic component derived from a common utility function plus an individual specific additive error term this paper reconciles these differences by providing necessary and sufficient conditions for rationality of statistical demand models given individual consumer rationality

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

foreign trade elasticities and import discipline this paper provides new evidence on the trade as discipline7rsquo hypothesis by considering the determination of price cost margins with a panel of 41 four digit us food manufacturing industries from 1972 to 1987 following the empirical specification suggested by competitive fringe oligopoly models we include estimated domestic demand elasticities and cross price elasticities of import demand as explanatory variables and the empirical results confirm the importance of these variables in assessing the hypothesis

unobserved preference heterogeneity in demand using generalized random coefficients we model unobserved preference heterogeneity in demand systems via random barten scales in utility functions these barten scales appear as random coefficients multiplying prices in demand functions consumer demands are nonlinear in prices and may have unknown functional structure we therefore prove identification of generalized random coefficients models defined as nonparametric regressions where each regressor is multiplied by an unobserved random coefficient having an unknown distribution using canadian data we estimate energy demand functions with and without random coefficient barten scales we find that not accounting for this unobserved preference heterogeneity substantially biases estimated consumer surplus costs of an energy tax jel codes c14 d12 d13 c21 keywords unobserved heterogeneity nonseparable errors random utility parameters random coefficients equivalence scales consumer surplus welfare calculations the authors wish to thank jinyong hahn richard blundell stefan hoderlein rosa matzkin and anonymous referees for helpful discussions and suggestions earlier versions of this paper were circulated under the

inter industry variations in the effect of trade on industry performance this paper develops an empirical model to measure the strength of import discipline across industries allowing it to vary sys tematically with various features of industry market structure the m odel is applied to a panel of data for eighty two belgian three digit industries for the period 1973 78 and the results suggest that the parameters of the structural model are stable over time that the ext ent of discipline is endogenous and that about 70 percent of the ind ustries in the sample experience significant trade induced competitiv e discipline copyright 1988 by blackwell publishing ltd

static and intertemporal household decisions we discuss the most popular static and dynamic models of household behavior our main objective is to explain which aspects of household decisions different models can account for using this insight we describe testable implications identification results and estimation findings obtained in the literature particular attention is given to the ability of different models to answer various types of policy questions

a note on different approaches to index number theory the central question in a recent paper by j peter neary 2004 concerning real incomes and the penn world tables is what exactly do the numbers mean this question is important because these data are widely used in empirical research more generally index number data including indicators of inflation and economic growth are used so extensively in research throughout the profession that it indeed seems helpful to understand what they actually indicate in the literature two approaches to index numbers are distinguished the axiomatic approach and the economic approach in this note we would like to discuss the way in which these two approaches differ and how that affects what the numbers mean in neary s paper the difference is described as one between an approach that does and an approach that does not assume that quantities arise from optimizing behavior this is in line with a tradition in index number theory that can be traced back to ragnar frisch 1936 we will argue that a more accurate description is that the difference lies in whether or not optimizing agents or representative consumers are assumed to optimize the same utility function it is exactly this distinction that sets the differ ent limitations of both approaches for constructing a meaningful indicator of real income those limitations will be described in some detail and being aware of them is helpful for assessing the value of results from both the axiomatic and the economic approach they also suggest ways in which the two approaches may be complementary for constructing meaningful index numbers introducing the geary allen international accounts gaia system neary combines taking the economic approach with judging the resulting indices in view of some axioms we think that this makes his paper a suitable point of departure for the discussion of how the two approaches handle differences in relative prices on the one hand and differences in preferences on the other

aggregation without separability a generalized composite commodity theorem this paper provides general conditions for aggregating commodities without separable utility these conditions impose weaker and more empirically plausible restrictions on price movements than the currently existing alternative to separability the hicks leontief composite commodity theorem the idea is to allow departures from hicks leontief that take the form of well behaved error terms utility functions that permit generalized composite commodity aggregation include the aids model the translog all homothetic utility functions and any utility function when demands are aggregated to two groups of goods implications of empirical nonstationarity of relative prices for aggregation and demand estimation are considered copyright 1996 by american economic association

how revealing is revealed preference this lecture address the following two key criticisms of the empirical application of revealed preference theory when the rp conditions do not reject they do not provide precise predictions and when they do reject they do not help characterize the nature of irrationality or the degree direction of changing tastes recent developments in the application of rp theory are shown to have rendered these criticisms unfounded a powerful test of rationality is available that also provides a natural characterization of changing tastes tight bounds on demand responses and on the welfare costs of relative price and tax changes are also available and are shown to work well in practice

heterogeneity and the non parametric analysis of consumer choice conditions for invertibility this paper considers structural non parametric random utility models for continuous choice variables with unobserved heterogeneity we provide sufficient conditions on random preferences to yield reduced form systems of non parametric stochastic demand functions that allow global invertibility between demands and non separable unobserved heterogeneity invertibility is essential for global identification of structural consumer demand models for the existence of well specified probability models of choice and for the non parametric analysis of revealed stochastic preference we distinguish between new classes of models in which heterogeneity is separable and non separable in the marginal rates of substitution respectively

nonparametric estimation of a nonseparable demand function under the slutsky inequality restriction we present a method for consistent nonparametric estimation of a demand function with nonseparable unobserved taste heterogeneity subject to the shape restriction implied by the slutsky inequality we use the method to estimate gasoline demand in the united states the results reveal differences in behavior between heavy and moderate gasoline users they also reveal variation in the responsiveness of demand to plausible changes in prices across the income distribution we extend our estimation method to permit endogeneity of prices the empirical results illustrate the improvements in finite sample performance of a nonparametric estimator from imposing shape restrictions based on economic theory

the common scaling social cost of living index if preferences or budgets are heterogeneous across people as they clearly are then individual cost of living indexes are also heterogeneous thus any social cost of living index faces an aggregation problem in this article we provide a solution to this problem that we call a common scaling social cost of living index cs scoli in addition we describe nonparametric methods for estimating such social cost of living indexes as an application we consider changes in the social cost of living in the u s between 1988 and 2000

nonparametric engel curves and revealed preference this paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand knowledge of expansion paths is shown to improve the power of nonparametric tests of revealed preference the tightest bounds on indifference surfaces and welfare measures are derived using an algorithm for which revealed preference conditions are shown to guarantee convergence nonparametric engel curves are used to estimate expansion paths and provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory an application is made to a long time series of repeated cross sections from the family expenditure survey for britain the consistency of these data with revealed preference theory is examined for periods of consistency with revealed preference tight bounds are placed on true cost of living indices

critical import supply elasticities and the imports as market discipline hypothesis abstract this paper formally examines the factors underlying how responsive imports must be to domestic prices the import supply elasticity in order to thwart an anticompetitive domestic price increase stemming from a merger an issue that frequently arises in many antitrust reviews domestic firms face a fringe comprised of foreign firms who import their products into the domestic market in the eyes of domestic consumers these imports are viewed as imperfect substitutes in demand to the output produced by the domestic firms the model is solved in terms of the critical import supply elasticity that can then be used evaluate the ability of imports to constrain an anticompetitive price increase post merger numerical simulations are conducted to consider the magnitude of perturbations in the model s exogenous parameters potential empirical extensions of the model are also considered

the discipline of imports the case of sweden in examining the constraints that imports competition imposes on the price cost margins in swedish manufacturing industries the paper addresses two questions whether the free trade agreement between the ec and efta has reinforced the disciplinary effect of imports and whether there are differences between imports of different origins my findings support intensified competition from the free trade agreement even though the disciplinary effect of imports originating from ldcs japan and the asian nics is larger than the effect of imports from other developed countries

potential foreign competition in us manufacturing abstract trade barriers are falling and firms are competing in increasingly open international markets the data reveal considerable heterogeneity across industries in the intertemporal path of import shares against this backdrop we focus on an issue that is increasingly important for competition policy analysis potential foreign competition inadequate attention to this aspect could result in a biased picture of total competition leading to misguided antitrust decisions drawing on the conceptual framework outlined by landes and posner harvard law review 94 1981 937 we measure potential foreign competition by the intertemporal response of industry import share to industry specific and aggregate economic factors and our estimates indicate wide variation across industries in this dimension a particularly striking finding is that highly concentrated industries which are more likely to be subject to antitrust scrutiny have a greater degree of potential foreign competition than industries with low concentration even though the extent of actual foreign competition is similar across these groups of industries

heterogeneity in consumer demands and the income effect evidence from panel data this paper uses unique spanish panel data on household expenditures to test whether unobservable heterogeneity in household demands taste etc is correlated with total expenditures income the main finding is that tastes are indeed correlated with income for about half of the goods considered implying that cross sectional estimates of income elasticities for these goods are biased the goods are the following food eaten outside home alcohol and tobacco transportation and energy the elasticity of alcohol and tobacco is more than halved when taking unobserved heterogeneity into account for transportation the bias is sufficiently large to misclassify the good as a luxury

market structure and price cost margins in a paper that has become a standard reference in the structure conductperformance approach to industrial economics cowling and waterson 1976 developed a theoretical rationale for expecting industry profitability to be positively correlated with the level of concentration their model based on a simple algebraic description of oligopoly behaviour has been interpreted as providing a justification for the common empirical practice of cross industry regression analysis of price cost margins in terms of concentration levels in the present paper we show that on further examination this model implies a joint determination of margins and concentration this provides some interesting comparative static results of relevance to inter industry differences in concentration levels equally however it leads to various cautionary insights concerning the meaning of price cost margin versus concentration regressions

editorial are consumers rational experimental evidence despite some misconceptions consumer rationality is a property of the researcher rather than the consumer consumers become more rational as we are better able to predict their behavior or other important outcomes influenced by their behavior perfect rationality results when we achieve accurate predictions consequently at least for many marketing science articles consumers are becoming more rational as we find better ways to predict however some experimental consumer behavior articles find the opposite the difference between experimental and statistical controls explains the divergence in conclusions experimental controls test rationality based on whether previously absent variables exhibit significant explanatory power holding known explanatory variables constant statistical controls test rationality based on the incremental explanatory power of previously absent variables after accounting for known explanatory variables moreover experimental tests tend to isolate consumer behavior predictions while statistical tests check for sufficient accuracy to choose among different firm strategies both perspectives are correct but ask very different questions

measuring consumer welfare with mean demands the welfare change from a price increase for example the compensating variation cv is often calculated using the expenditure function from an estimated demand if there is unobserved preference heterogeneity then the estimated demand is an average over households with different preferences and the cv from the mean demand does not generally equal the mean cv we give conditions ensuring that the cv from the mean demand equals the mean cv is less than the mean cv and approximates the mean cv better than the change in consumers surplus a necessary condition is that demands become more dispersed as income rises

explaining armington what determines substitutability between home and foreign goods for decades trade economists have modeled imperfect substitution between home and foreign goods in consumption often called the armington assumption with little analysis of what explains the wide variation in these substitution elasticities across sectors using a varying coefficients model the authors estimate armington elasticities between u s domestic and foreign goods across over one hundred industrial sectors from 1980 to 1988 and examine the role of product industry political and home bias factors as determinants they find strong support that the presence of foreign owned affiliates affects armington elasticities in important ways and some support that entry barriers and union presence have an effect

estimating the distribution of welfare effects using quantiles this paper proposes a framework to model empirically welfare effects that are associated with a price change in a population of heterogeneous consumers which is similar to hausman and newey 1995 but allows for more general forms of heterogeneity individual demands are characterized by a general model which is nonparametric in the regressors as well as monotonic in unobserved heterogeneity in this setup we first provide and discuss conditions under which the heterogeneous welfare effects are identified and establish constructive identification we then propose a sample counterpart estimator and analyze its large sample properties for both identification and estimation we distinguish between the cases when regressors are exogenous and when they are endogenous finally we apply all concepts to measuring the heterogeneous effect of a chance of gasoline price using us consumer data and find very substantial differences in individual effects across quantiles

improving revealed preference bounds on demand responses there are three key dimensions by which revealed preference bounds on consumer demand responses can be improved the first relates to the improvements that arise from using expansion paths for given relative prices e bounds the second concerns the addition of new price information thirdly there are improvements due to assuming separability our previous research has examined the first two cases in this article we show how to impose separability assumptions within a fully nonparametric analysis and distinguish between weak and homothetic separability we also apply these ideas to the analysis of demand responses using united kingdom household level data

estimation of heterogeneous preferences with an application to demand for internet services this paper presents a structural econometric framework for discrete and continuous consumer choices in which unobserved intrapersonal and interpersonal preference heterogeneity is modeled explicitly it outlines a simulation assisted estimation methodology applicable in this framework this methodology is illustrated in an application to analyze data from the u c berkeley internet demand experiment

nonparametric welfare and demand analysis with unobserved individual heterogeneity abstract this paper combines revealed preference and nonparametric estimation techniques to obtain nonparametric bounds on the distribution of the money metric utility and demand functions over a population of heterogeneous households our approach is independent of any functional specification on the household utility functions our method applies the weak axiom of revealed preference to a population of heterogeneous households although this does not produce the sharpest bounds we show that it is computationally attractive and provides narrow bounds we demonstrate the usefulness of our results by applying it to the consumer expenditure survey a us cross sectional consumption data set jel codes d12 c14

the influence of increased foreign competition on industrial concentration and profitability abstract this paper uses the chilean manufacturing censuses of 1967 and 1979 to examine the effects of the chilean reforms in the mid 1970s on market structure and performance the reforms substantially increased the concentration in industry and substantially reduced profitability these outcomes are interpreted in the light of hypotheses about the effect of potential entrants on market structure and on the pricing behavior of incumbents next a cross sectoral simultaneous equations model of structure and performance is estimated to isolate the contribution of import and export shares to cross sectoral variations in concentration and profitability and to test for structural change between the two censuses the analysis confirms that the liberalization of trade changed the way import and export shares determined profitability and supports the import discipline hypothesis

additive general error models for production cost and derived demand or share systems many empirical studies of production specify a deterministic model of the firm derive the implied behavioral equations input demand or share system and then embed this system in a stochastic framework by tacking on linear error terms in contrast this paper proposes general error models gems in which the error specification is an integral part of the optimization model these models are the statistical embodiment of stigler s view that apparent observed inefficiencies reflect the investigator s ignorance of the true optimization problem additive gems are proposed and interpreted specification tests indicate that a translog additive gem is superior to the standard translog specification

some results on comparative statics under uncertainty this paper presents results on comparative statics for a class of decision problems under uncertainty necessary and sufficient conditions are derived for parameter changes and stochastically dominant shifts in the return in the two asset portfolio problem these results give conditions for the demand for money to be inversely related to the rate of interest further applications include the qualitive behavior of aggregate savings under uncertainty and the production decision of a firm facing price uncertainty copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

nonresponse in panel data the impact on estimates of a life cycle consumption function if missing observations in a panel data set are not missing at random many widely applied estimators may be inconsistent in this paper we examine empirically several ways to reveal the nature and severity of the selectivity problem due to nonresponse as well as a number of methods to estimate the resulting models using a life cycle consumption function and data from the expenditure index panel from the netherlands we discuss simple procedures that can be used to assess whether observations are missing at random and we consider more complicated estimation procedures that can be used to obtain consistent or efficient estimates in case of selectivity of attrition bias finally some attention is paid to the differences in identification consistency and efficiency between inferences from a single wave of the panel a balanced sub panel and an unbalanced panel

nonparametric estimation of exact consumers surplus and deadweight loss we apply nonparametric regression models to estimation of demand curves of the type most often used in applied research from the demand curve estimators we derive estimates of exact consumers surplus and deadweight loss which are the most widely used welfare and economic efficiency measures in areas of economics such as public finance we also develop tests of the symmetry and downward sloping properties of compensated demand we work out asymptotic normal sampling theory for kernel and series nonparametric estimators as well as for the parametric case the paper includes an application to gasoline demand empirical questions of interest here are the shape of the demand curve and the average magnitude of welfare loss from a tax on gasoline in this application we compare parametric and nonparametric estimates of the demand curve calculate exact and approximate measures of consumers surplus and deadweight loss and give standard error estimates we also analyze the sensitivity of the welfare measures to components of nonparametric regression estimators such as the number of terms in a series approximation

the random utility hypothesis and inference in demand systems in this paper the authors examine the consequences of adopting the random utility hypothesis as an approach for randomizing a system of demand equations random utility models are appealing since they allow the usual assumption of deterministic utility maximizing behavior by each consumer to coexist with the apparent randomness across individuals that is exhibited by data their results show that the use of random utility models implies that the disturbances of the demand equations may not be homoskedastic but must be functions of prices and or income copyright 1989 by the econometric society

economic outcomes and political support for british governments among occupational classes a dynamic analysis the first section of the article establishes the political salience of macroeconomic issues to the british electorate reviews the distributional consequences of macroeconomic outcomes and suggests that unemployment outcomes in particular have strong class related distributional effects the second part presents a dynamic model of how rational voters evaluate the governing party based on the idea that voters evaluate the cumulative performance of the governing party relative to the prior performance of the current opposition since the present relevance of prior outcomes decays over time voters weight current performance more heavily than past performance informing contemporaneous political judgments the empirical analyses in the third section include measures of nominal economic performance inflation and exchange rate movements and real economic performance unemployment and real income fluctuations the regression results indicate that the responses of political support among the occupational classes to macroeconomic changes are sizeable and that the cross class variations are consistent with the distributional consequences reviewed at the beginning of the article the concluding section develops the electoral implications of the empirical results and presents a novel interpretation of trends in class related political support for the parties the evidence shows that the argument that there has been a persistent decline of class based political alignments in britain is erroneous

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase