do the russians really save that much alternate estimates from the russian longitudinal monitoring survey we use a new independent survey of 4000 russian households the russian longitudinal monitoring survey or rlms to study their saving behavior the rlms household saving rate 12 is less than half the official figure 29 despite the massive changes of the transition the russian household saving rate of 1994 cannot be shown to be different from that of 1976 the patterns of russian household saving differ from international experience its paradoxical u shaped saving age relationship may be explained by the dramatic deterioration of life expectancies of middle aged russians

the assessment household saving issues in theory and policy in this assessment we discuss the issues raised by the papers in this issue of the oxford review of economic policy in the context of economic models of household consumption and saving we also provide a discussion of what we consider to be some important areas in the current debate surrounding theories and evidence regarding saving behaviour we highlight the differences that arise from considering partial as opposed to general equilibrium models and in looking at developed as opposed to developing countries we also discuss current policy issues relating both to the adequacy of household saving and to the distribution of saving across households or across asset types as well as the need for more microdata on saving and asset holding

managing a noncooperative supply chain with limited capacity we consider a two stage serial supply chain with capacity limits where each installation is operated by managers attempting to minimize their own costs a multiple period model is necessitated by the multiple stages capacity limits stochastic demand and the explicit consideration of inventories with appropriate salvage value functions a markov equilibrium policy is found intuitive profit dominance allows for existence of a unique equilibrium solution which is shown to be a modified echelon base stock policy this equilibrium policy structure is sustained in the infinite horizon a numerical study compares the behavior of the decentralized system with the first best integrated capacitated system the performance of this decentralized system relative to the integrated system across other parameters can be very good over a broad range of values this implies that an acceptable system performance may be attained without the imposition of a contract or other coordinating mechanism which themselves may encounter difficulties in implementation in the form of negotiation execution or enforcement of these agreements we find instances where tighter capacities may actually enhance channel efficiency we also examine the effect of capacity utilization on the system suboptimality

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

on markov equilibria in dynamic inventory competition we provide a review of the types of equilibria typically found in operations management inventory papers and a discussion on when the commonly used stationary infinite horizon open loop equilibrium may be sufficient for study we focus particularly on order up to and basestock equilibria in the context of inventory duopolies we give conditions under which the stationary infinite horizon equilibrium is also a markov perfect closed loop equilibrium these conditions are then applied to three specific duopolies the first application is one with stockout based substitution where the firms face independent direct demand but some fraction of a firm s lost sales will switch to the other firm the second application is one where shelf space display stimulates primary demand and reduces demand for the other firm s product the final application is one where the state variables represent goodwill rather than inventory these specific problems have been previously studied in both the single period and or stationary infinite horizon open loop settings but not in markov perfect closed loop settings under the markov perfect setting a variety of interesting dynamics may occur including that there may be a so called commitment value to inventory

inventory models with inventory level dependent demand a comprehensive review and unifying theory marketing researchers and practitioners have long recognized the demand of many retail items is proportional to the amount of inventory displayed recently two distinct types of inventory control models reflecting this relationship have appeared in the literature models in which the demand rate of an item is a function of the initial inventory level and those in which it is dependent on the instantaneous inventory level we present a comprehensive overview of this literature and demonstrate the equivalence of the two types of models through the use of a simple periodic review model an alternative approach to sensitivity analysis for inventory models with inventory level dependent demand is also presented

a long run perspective on saving historical estimates of long run gross savings rates are provided for 11 countries which represent about 48 per cent of world product in real terms and close to half of world savings even though savings rates declined over the past decade in nine of the 11 countries present rates are usually well above their prewar levels factors which influence savings rates are also examined

computable markov perfect industry dynamics we provide a general model of dynamic competition in an oligopolistic industry with investment entry andexit toensurethatthereexistsacomputationallytractablemarkov perfectequilibrium we introduce firm heterogeneity in the form of randomly drawn privately known scrap values and setup costs into the model our game of incomplete information always has an equilibrium in cutoff entry exit strategies in contrast the existence of an equilibrium in the ericson and pakes model of industry dynamics requires admissibility of mixed entry exit strategies contrary to the assertion in their article that existing algorithms cannot cope with in addition we provide a condition on the model s primitives that ensures that the equilibrium is in pure investment strategies building on this basic existence result we first show that a symmetric equilibrium exists under appropriate assumptions on the model s primitives second we show that as the distribution of the random scrap values setup costs becomes degenerate equilibria in cutoff entry exit strategies converge to equilibria in mixed entry exit strategies of the game of complete information

inventory management under market size dynamics we investigate the situation where a customer experiencing an inventory stockout at a retailer potentially leaves the firm s market in classical inventory theory a unit stockout penalty cost has been used as a surrogate to mimic the economic effect of such a departure in this study we explicitly represent this aspect of consumer behavior incorporating the diminishing effect of the consumers leaving the market upon the stochastic demand distribution in a time dynamic context the initial model considers a single firm we allow for consumer forgiveness where customers may flow back to the committed purchasing market from a nonpurchasing latent market the per period decisions include a marketing mix to attract latent and new consumers to the committed market and the setting of inventory levels we establish conditions under which the firm optimally operates a base stock inventory policy the subsequent two models consider a duopoly where the potential market for a firm is now the committed market of

saving and growth evidence from micro data abstract this paper examines whether the observed cross country correlation between aggregate saving rates and economic growth can be explained by models in which higher growth increases saving rates rather than the other way around there are two explanations why higher growth might increase saving first life cycle theory implies that higher growth will increase the life time wealth of younger savers relative to older dissavers thereby increasing the aggregate saving rate second models of consumption with habit formation imply that consumption responds slowly to unexpected income growth so unanticipated growth can produce a higher saving rate at least in the short run i assess these explanations using time series of cross sections of household surveys from four countries the us britain taiwan and thailand i find evidence that higher growth will produce only small increases in aggregate saving rates

understanding the mechanisms of economic development in this paper i advocate the investigation testing and modification of mechanisms as a progressive empirical research strategy for the field of economic development and other areas of applied economics i discuss three lines of work that have elucidated mechanisms that are relevant for development 1 connections between saving and growth 2 the determinants of commodity prices which are a key source of income for many developing countries and 3 some unexpected puzzles that arise in considering the linkages between income and food consumption in each case my discussion illustrates the positivist approach to the hypotheticodeductive method in this approach mechanisms are proposed key predictions derived and tested and if falsified the mechanisms are rejected or modified if the predictions of a mechanism are confirmed if they are sufficiently specific and if they are hard to explain in other ways we attach additional credence to the mechanism albeit provisionally since later evidence may undermine it sometimes the falsifications can be repaired by changing supplementary assumptions and sometimes they involve long steps backwards where the model is abandoned and often there is disagreement about which is the correct response but the end result is an accumulation of useful knowledge and understanding

what do we learn from recall consumption data in this paper we use two complementary italian data sources the 1995 istat and bank of italy household surveys to generate householdspecific nondurable expenditure in the bank of italy sample that contains relatively high quality income data we show that food expenditure data are of comparable quality and informational content across the two surveys once we properly account for heaping rounding and time averaging we therefore depart from standard practice and rely on the estimation of an inverse engel curve on istat data to impute nondurable expenditure to bank of italy observations and show how we can use these estimates to analyze consumption age profiles conditional on demographics our key result is that predictions based on a standard set of demographic and socioeconomic indicators are quite different from predictions that also condition on simulated food consumption in the sense that their age profile is less in line with the implications of the standard consumer intertemporal optimization problem

decomposition of new venture growth into firm age survey period and vintage effects firm data are accumulated on a yearly basis in view of the linear relationship of firm age foundation year survey year the fluctuations of firm data classified by age and period cannot be decomposed into age period and cohort foundation year effects three decomposition methods are briefly reviewed and applied to japanese data on new ventures founded since 1995 regarding sales and employment growth the age effect is the largest with a downward trend and the cohort effect is negligible regarding labour productivity the age effect indicates upward movements and the cohort effect is negligible the reason of the negligible cohort effect is discussed

capital budgeting for interrelated projects a real options approach this paper explores the effect of project interrelationships on investment decisions and project values in a real options framework we examine in detail the mutually exclusive case where a firm may invest in the development stage of two projects and then may select only a single project to implement the firm can develop the projects in parallel or in sequence the choice of development policy depends on the relative values of the embedded options for each strategy sequential development is shown to be superior to parallel development when projects have highly correlated values and when they require a large commitment of capital for development are short term in nature and have relatively low volatility we also show that the optimal ordering of sequential projects does not always begin with the most profitable project

multiple bgps in a growth model with habit persistence this paper establishes multiple balanced growth paths in an otherwise standard competitive growth model without externality or distortions and with households preference dependent upon how his her consumption compares to a habit stock formed by his her own past consumption the key feature in our model is that consumption forms habits in combination with existing habits this model establishes multiple equilibria because habit persistence induces an internal intertemporal complementarity effect among consumption flows with current consumption reinforcing future consumption as a result there exist two balanced growth paths with one path exhibiting low consumption and habits and high economic growth and the other path exhibiting high consumption and habits and low growth that is not necessarily a development trap both steady states are saddles but global indeterminacy arises where a high balanced growth path co exists with a low balanced growth path where the two equilibrium paths cannot be pareto ranked and history need not matter for the selection of the equilibrium path

a framework for dynamic oligopoly in concentrated industries in this article we introduce a new computationally tractable framework for ericson and pakes style dynamic oligopoly models that overcomes the computational complexity involved in computing markov perfect equilibrium mpe first we define a new equilibrium concept that we call moment based markov equilibrium mme in which firms keep track of their own state the detailed state of dominant firms and few moments of the distribution of fringe firms states second we provide guidelines to use mme in applied work and illustrate with an application how it can endogenize the market structure in a dynamic industry model even with hundreds of firms third we develop a series of results that provide support for using mme as an approximation we present numerical experiments showing that mme approximates mpe for important classes of models then we introduce novel unilateral deviation error bounds that can be used to test the accuracy of mme as an approximation in large scale settings overall our new framework opens the door to study new issues in industry dynamics

growth and saving among individuals and households the lifecycle theory of saving and consumption predicts that changes in an economy s rate of economic growth will affect its aggregate saving rate by changing the lifetime resources of younger people relative to older people however studies that track the saving behavior of cohorts of household heads over time as they age have yielded estimates of age saving profiles that are too flat for growth to have much effect on the aggregate saving rate one problem with the cohort approach is that multigenerational households are common in many counties and the age saving profiles of households may be quite different from the age saving profiles of individuals that make up households in this paper we propose a method for estimating individual age saving profiles using household data this method is applied to data from taiwan and thailand we find that the individual method yields results that are more favorable to the lifecycle model these results imply that changes in the rate of economic growth may in som

do consumers respond to future income shocks evidence from social security reform in taiwan abstract a prediction of the basic permanent income hypothesis life cycle model is that an unexpected increase in future income produces an immediate increase in current consumption this paper tests that prediction using data from taiwan the 1985 labor standards law granted all employees in covered industries a windfall retirement severance benefit my results indicate that consumption did not increase immediately for those who were granted the windfall relative to those who received no windfall moreover consumption for those receiving a greater windfall did not increase relative to those who were granted less

measuring and understanding behavior welfare and poverty angus deaton delivered his prize lecture on tuesday 8 december 2015 at the aula magna stockholm university these are the lecture slides this abstract was borrowed from another version of this item

the role of obsolescence and inventory costs in providing commitment this paper modifies the cournot and stackelberg models to allow the firms to sell less than they have produced and to store the unsold portion of their output as inventory even if one of the firms can choose its output before the other if it is costless to carry unsold goods forward then the cournot outcome emerges we show however that costs of carrying the inventory forward endow the firms with a limited degree of commitment to sell what they have produced this partially restores the first mover advantage if the firms choose their outputs simultaneously the cournot outcome emerges and has locally consistent conjectures

lumpy capacity investment and disinvestment dynamics capacity addition and withdrawal decisions are among the most important strategic decisions made by firms in oligopolistic industries in this paper we develop and analyze a fully dynamic model of an oligopolistic industry with lumpy capacity and lumpy investment disinvestment we use our model to suggest answers to two questions first what economic factors facilitate preemption races second what economic factors facilitate capacity coordination with a series of examples we show that low product differentiation low investment sunkness and high depreciation tend to promote preemption races the same examples also show that low product differentiation and low investment sunkness tend to promote capacity coordination although depreciation removes capacity it might impede capacity coordination finally our examples show that multiple equilibria arise over at least some range of parameter values the distinct structures of these equilibria suggest that firms expectations play a key role in determining whether or not industry dynamics are characterized by preemption races and capacity coordination taken together our results suggest that preemption races and excess capacity in the short run often go hand in hand with capacity coordination in the long run

irreversible investment real options and competition evidence from real estate development abstract we examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1214 condominium developments in vancouver canada built from 1979 1998 we find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments empirically a one standard deviation increase in the return volatility reduces the probability of investment by 13 percent equivalent to a 9 percent decline in real prices increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development these results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion

technical note a multiperiod model of inventory competition this paper explores when it is important for firms to consider stockout based substitution and competitor s inventory levels in making inventory decisions in the context of a duopoly model to address this question we consider a model where two newsvendors sell substitutable products in a market with aggregate market demand d the two firms get a proportion p and 1 p of this demand where p is random we characterize the equilibrium inventory levels of the two firms in a single period model and show the striking property that under certain reasonable conditions on the cost parameters the two firms ignore their competitor s inventory levels and potential substitution demand i e their inventory decisions are decoupled furthermore we show under slightly more restrictive conditions on the cost parameters that the single period results can be extended to the case where d is random finally we extend the decoupling property to a multiperiod periodic review scenario and show that the resulting nash equilibrium can be characterized simply as the solution to a single product dynamic newsvendor problem that ignores substitution demand

reversal of fortunes the rise and fall of lifetime earnings of iranian men abstractthe islamic revolution of 1979 the 8 year war with iraq 1980 88 and the collapse of oil prices in 1986 dealt huge blows to iran s economy in this article we use a pseudopanel constructed from annual multiple surveys during 1984 2004 to analyze changes in cohort earnings and consumption through these tumultuous times using well known techniques we decompose the changes in median cohort earnings of men into cohort age and year effects our results show that cohorts born before 1950 who were well into their careers at the time of the revolution enjoyed a steady increase in lifetime earnings however those born after the mid 1960s who started their careers during the revolution and the war with iraq experienced losses relative to previous cohorts in contrast to earnings per capita expenditures do not indicate a declining cohort trend for younger cohorts when we restrict the year effects to cyclical variation only the cohort effects show a rising trend we interpret the difference in

age period cohort decomposition of aggregate data an application to us and japanese household saving rates this paper compares two methods of analyzing aggregate data that is classified by period and age because there is a linear relationship among age period and cohort it is not possible to distinguish the separate effects without employing an identifying assumption the first method which is applied in the economics literature assumes that period effects are orthogonal to a linear time trend the second method which is applied in the statistics literature assumes that the effect parameters change gradually simulation results suggest that the performances of both methods are comparable the results of applying the second method to household saving rates suggest that period effects had a negligible influence in the united states but considerable influence in japan copyright 2006 john wiley sons ltd

demographic change and the uk savings rate microeconomic data are used to explore the effects of a changing age structure on the uk s aggregate personal savings rate the findings suggest that changes to the population s age structure have had detectable sustained but relative to the yearly changes observed in the savings rate over the previous century modest effects on aggregate personal sector savings it is estimated that the projected changes to the uk s age structure over the next 40 years are likely to raise the uk s savings rate but by no more than two percentage points no basis is found for the view that the aggregate savings rate will decline as a result of the anticipated ageing of the uk population

multi period inventory games with information update this paper addresses the multi period inventory game of two substitutable products with learning in which the demand distribution form in each period is known but one or more parameters are unknown in advance the retailers update the estimates of the unknown parameters using the historical demand information as the transaction proceeds at each period the retailers check the initial inventories and update the forecasts about their demands first then they place the orders which are delivered immediately finally the demands are realized and satisfied by the available inventories the unsatisfied demand of one retailer switches to another and is satisfied by the other s left inventory unsatisfied demand is lost and the excess inventories incur a holding cost all the information is common knowledge the objectives of the two retailers are to make proper ordering decisions to maximize their total expected discount profits respectively we model the problem as a dynamic bayesian game with multi dimension state space we give the conditions under which the state space can be reduced we prove the existence and uniqueness of nash equilibrium and show that the equilibrium ordering strategy is the base stock policy the computation of the base stock levels can be reduced to a game with one dimension state space moreover for the case with perishable product the computation of the base stock levels can be reduced to the newsboy game

explaining the wealth holdings of different cohorts productivity growth and social security in this paper we explore the reasons why different generations accumulate different amounts of wealth we use basic economic theory to propose two indicators of the economic conditions under which households accumulate wealth the first one represents productivity differences across cohorts the aggregate level of gross national product per capita around the time the head of the household entered the labor market the second measure summarizes the changes in social security during the head of household s working life using panel data from the dutch socio economic panel we show that productivity growth can explain all the cohort effects present in income data while productivity growth and the generosity of social security can explain all the cohort effects present in household net worth we also find a limited offset of social security on wealth holdings

capacity dynamics and endogenous asymmetries in firm size empirical evidence suggests that there are substantial and persistent differences in the sizes of firms in most industries we propose a dynamic model of capacity accumulation that is consistent with the observed facts the model highlights the mode of product market competition and the extent of investment reversibility as key determinants of the size distribution of firms in an industry in particular if firms compete in prices and the rate of depreciation is large then the industry moves toward an outcome with one dominant firm and one small firm industry dynamics in this case resemble a preemption race contrary to the usual intuition this preemption race becomes more brutal as investment becomes more reversible

urban development with lags abstract this paper specifies a model of urban development under uncertainty when there is a lag between the decision to begin a project and its completion these lags have three important effects first the deterrent effect of uncertainty on development is smaller with lags than without them second in some cases development occurs later under uncertainty than with certainty third lags may lead to leapfrog development when distant land is developed prior to nearby land