the solution to the tullock rent seeking game when r 2 mixed strategy equilibria and mean dissipation rates in tullock s rent seeking model the probability a player wins the game depends on expenditures raised to the power r we show that a symmetric mixed strategy nash equilibrium exists when r 2 and that overdissipation of rents does not arise in any nash equilibrium we derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete and show that full rent dissipation occurs when the strategy space is continuous our results are shown to be consistent with recent experimental evidence on the dissipation of rents

consumption of durable goods and tests of the permanent income hypothesis evidence from korean macro data quarterly aggregate data from korean urban households is used to test the restrictions on the vector autoregressive var representation of the permanent income hypothesis pih in testing these restrictions an alternative consumption measure is proposed which takes account of the flow of services from durable goods for comparison two commonly used measures total consumption expenditures and expenditures on non durables and services are also employed in the empirical analysis and the results show that the choice of consumption measures could have a significant effect on the results of the tests leading to a false conclusion with the improper consumption variables

agriculture production versus biodiversity protection the impact of north south unconditional transfers the purpose of this paper is to explore whether international income transfers can improve or worsen the global level of biodiversity and global social welfare by changing the relative contributions to biodiversity protection and to agricultural production because of the public good nature of biodiversity warr s neutrality theorem suggests that such transfers may have no effects at all warr 1983 a model is developed based on the simplifying assumption that northern countries have little biodiversity whereas southern countries are endowed with natural capital in the form of generally unspoilt biodiversity rich land southern countries allocate optimally land and capital to two competing productive activities agriculture and eco tourism when transfers are organized from the north to the south we show that warr s neutrality theorem collapses transfers can either reduce or increase the natural capital in the south depending on some empirically verifiable hypotheses concerning the characteristics of the eco tourism and agricultural production functions in addition we demonstrate that welfare improvements can be obtained even with reductions in the level of biodiversity research highlights could international income transfers improve the levels of biodiversity and welfare a model is developed with a biodiversity poor north and an ecosystem rich south we show that north south transfers can either reduce or increase the natural capital and that welfare improvements can be obtained even with reductions in biodiversity

rent seeking and rent dissipation a neutrality result abstract we consider rent seeking contests between at least two agents who might value the prize differently we capture a wide range of institutional aspects of contests by analyzing a class of contest success functions fulfilling several properties the main properties are anonymity and a condition on the elasticity of a rent seeker s win probability with respect to her effort we show the existence of a mixed strategy equilibrium and establish equilibrium payoffs in this equilibrium complete rent dissipation holds our results imply a partial robustness result for the all pay auction

comparative statics by adaptive dynamics and the correspondence principle the intuition behind comparative statics results is usually dynamic in nature the economic explanation for why differences in endogenous variables result from variations in exogenous variables often takes the form of some sequential adjustment process for example consider the account by milgrom qian and roberts 1991 of technological and organizational changes in modern manufacturing the falling costs of high speed data communication data processing and flexible multitask equipment lead to increases in the directly affected activities which through a web of complementarities then lead to increases in a set of related activities as well despite the prevalence of dynamic economic explanations the formal analysis is static in games of strategic complementarities gsc topkis 1979 vives 1990 parameterized by a variable that is complementary to the choice variables the existing results on monotone comparative statics of equilibria are summarized by a theorem of milgrom and roberts 1990 mr hereafter the largest and smallest equilibria in a parameterized gsc

election goals and the allocation of campaign resources this paper compares the equilibrium behavior and outcomes in a model of two party competition for legislative seats under two different assumptions about the parties goals 1 parties maximize the expected number of seats won and 2 parties maximize the probability of winning a majority of the seats the two goals may lead to qualitatively different behavior and studying the differences yields insights into the relationship between the goals and the role of assymetries between the parties

the estimation of surprise models and the surprise consumption function in the first part of the paper we outline a method for estimating a class of models in which news or surprises appear and expectations are formed rationally the method is an extension of the errors in variables method of mccallum and wickens as a by product some of pagan s results on the circumstances under which the commonly used two step method of estimating surprise models is efficient are shown to be a consequence of well known theorems on the efficiency of sub system estimation when a subset of equations are exactly identified in the second part of the paper the method is applied to hall s random walk model of consumption which is extended to allow for stochastic interest rates and for leisure and government spending to be substitutes for private spending the extended formulation is a great deal more successful at capturing the salient features of the data we also derive approximate restrictions across the parameters of the model due to the rational expectations hypothesis but find that they are marginally rejected by the data finally we evaluate the ability of the life cycle with rational expectations model to encompass alternative models

habit formation in consumer preferences evidence from panel data this paper tests for the presence of habit formation using household data a simple model of habit formation implies a condition relating the strength of habits to the evolution of consumption over time when the condition is estimated with food consumption data from the panel study on income dynamics the results yield no evidence of habit formation at the annual frequency this finding is robust to a number of changes in the specification it also holds for several proxies for nondurables and services consumption created by combining psid variables with weights estimated from consumer expenditure survey data

the optimal prize structure of symmetric tullock contests we show that the optimal prize structure of symmetric n player tullock tournaments assigns the entire prize pool to the winner provided that a symmetric pure strategy equilibrium exists if such an equilibrium fails to exist under the winner take all structure we construct the optimal prize structure which improves existence conditions by dampening efforts if no such optimal equilibrium exists no symmetric pure strategy equilibrium induces positive efforts

contests with small noise and the robustness of the all pay auction this paper considers all pay contests in which the relationship between bids and allocations reflects a small amount of noise prior work had focused on one particular equilibrium however there may be other equilibria to address this issue we introduce a new and intuitive measure for the proximity to the all pay auction this allows in particular to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all pay auction the results are shown to have powerful implications for monopoly licensing political lobbying electoral competition optimally biased contests the empirical analysis of rent seeking and dynamic contests

how to split the pie optimal rewards in dynamic multi battle competitions abstract multi battle competitions are ubiquitous in real life in this paper we examine the effort maximizing reward design in sequentially played multi battle competitions between two players the organizer has a fixed prize budget and rewards players contingent on the number of battles they win in a three battle contest a full spectrum of contest technologies in the tullock family is accommodated we find that the optimal design varies with the discriminatory power of the contest technology in particular when it is in the low range winner take all is optimal for the intermediate range as discriminatory power increases the optimal prize structure evolves continuously from winner take all to the proportional division rule due to the need to mitigate the growing momentum discouragement effect for the high range a wide span of prize structures extracts full surplus and is thus optimal several robustness checks confirm that mitigating the momentum discouragement effect is essential for effort maximizing prize design in dynamic multi battle contests

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

dyke maintenance and other stories some neglected types of public goods the orthodox summation model of a pure nonexcludable public good assumes that each individual consumes a quantity of public good defined as the sum of all individuals contributions to that good recently hirshleifer 1983 1985 has analyzed models that do not fall within this class at one extreme is the weakestlink in which the total quantity available to each consumer equals the smallest individual contribution at the other is the best shot in which the total quantity available equals the largest individual contribution hirshleifer s example of the weakest link case concerns a circular region of which each citizen owns a pie shaped slice the perimeter is marked by a dyke floods may penetrate the weakest point of the dyke and cause damage equally throughout the region each citizen decides the height and state of repair of that section of the dyke adjoining his piece of land its maintenance constituting his contribution to the public good thus the level of protection enjoyed by all is determined by the least well maintained section of the dyke an example of the best shot case concerns a number of antimissile batteries ringing a city firing at an incoming icbm all that matters is the accuracy of the best shot bliss and nalebuff 1984 discuss dragon slaying as another example of a best shot situation section ii of this paper introduces a class of functions of which the summation weakest link and best shot are examples section iii analyzes the properties of equilibrium when consumers have identical tastes and incomes section iv analyzes the implications of income redistribution in the summation case the equilibrium is unaffected by the initial redistribution over a range and outside that range transfers help the recipient and hurt the donor within the broader class of models however the invariance property does not generally hold and there may be opportunities for paretoimproving income redistribution i give an example similar to the weakest link case in which a pareto improving redistribution is

creating balance in dynamic competitions abstract we consider incentives for organizing competitions in multiple rounds focusing on situations where there is heterogeneity among the contestants ex ante which discourages effort in a single contest heterogeneity evolves across rounds depending upon the outcomes of previous rounds we present conditions under which balance in such a competition can be created by determining the number of rounds and dividing the prize fund carefully across them so that full rent dissipation entails in the model each round is an all pay auction where contestants differ in their abilities to gain a momentum from winning we also discuss the case when negative prizes are feasible demonstrating that this strengthens the full dissipation result and we consider a case where the size of the winner s momentum is related to the size of the prize attained showing that the stronger this linkage the less of the prize is awarded early on

primaries and the new hampshire effect candidates for u s presidential elections are determined through sequential elections in single states the primaries we develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning the equilibrium replicates several stylized facts very well campaigning is very intensive in the first district the outcome of the first election then creates an asymmetry in the candidates incentives to campaign in the next district which endogenously increases the equilibrium probability that the first winner wins in further districts on the normative side our model oers a possible explanation for the sequential organization it leads in expectation to a lower level of advertising expenditures than simultaneous elections moreover if one of the candidates is the more eective campaigner sequential elections also perform better with regard to the selection of the best candidate

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

uniqueness of equilibrium in two player asymmetric tullock contests with intermediate discriminatory power abstract this paper provides a different approach to establish the uniqueness of equilibrium in tullock contests between two players with asymmetric valuations when the discriminatory power r is between 1 and 2 our result complements that of ewerhart 2017 in filling up the remaining gap in the literature on the uniqueness of equilibrium in two player asymmetric tullock contests

split award contracts with investment abstract this paper studies procurement contracts where a buyer can either divide full production among multiple suppliers or award the entire production to a single supplier we examine the effect of using multiple suppliers on investment incentives in a framework of generalized second price auctions with pre auction investment we show that the optimality of split award depends on the socially efficient number of firms at the investment stage when that number is greater than one sole sourcing is buyer optimal when that number is one split award lowers the buyer procurement cost

a sequential game model of sports championship series theory and estimation these large percentages may indicate that teams that fall behind 3 0 tend to give up in the fourth game reaching the state 3 0 is an endogenous outcome that depends on the relative ability of the teams uncontrolled differences in the strengths of the teams induce positive serial correlation across the outcomes of games within a series this serial correlation could be mistaken for dependence of outcomes on the state of the series however estimates of the structural model do not support the notion that strategic incentives matter in the championship series of any of the three sports nor are the estimates of unobserved heterogeneity in relative team ability significant in any of the sports the estimated strategic effect is largest in hockey but both it and unobserved heterogeneity are still small in magnitude compared to home field advantage in short cliches such as a team played with its back against the wall or is better than it appears on paper are not evident in the data our analysis relates to some research on patterns in sports statistics concerning momentum much of this work such as tversky and gilovich s 1989 well known analysis of shooting streaks in basketball studies individual offensive performance it is difficult to relate momentum of this type to strategic interactions in a symmetric situation since defensive performance may have a momentum of its own that it is harder to measure jackson and mosurski 1997 and magnus and klaasen 1996 analyze outcomes of tennis tournaments which like championship series are symmetric contests jackson and mosurski find the outcomes of sets within a match to be correlated which is consistent with the incentive effects present in our model magnus and klaasen analyze individual points at wimbledon and they find complicated correlations between the state of the match and the outcomes of points for example they conclude that seeded players play important or critical points better than non seeded players which is consistent with our framework of ability differences combined with variable effort levels that depend upon the state of the larger competition the model adapts and extends the tournament models of lazear and rosen 1981 and rosen 1986 to a sequential environment ehrenberg and bognanno 1990 craig and hall 1994 and taylor and trogdon 1999 analyze sports data in the spirit of the tournament model ehrenberg and bognanno study whether performance of professional golfers is related to the prize structure of the tournament and craig and hall interpret outcomes of pre season nfl football games as a tournament among teammates for positions on their respective teams our focus is on aggregate team performance at the last stage of the season when the primary objective would not appear to be competition for positions using a random effects logit taylor and trodgon

multicointegration in us consumption data the present study tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the usa in doing so the study exploits the fact that the flows of disposable income and consumption expenditure on the one hand and the stock of consumers wealth which can be considered as cumulative past discrepancies between the flows of income and expenditure on the other hand can be thought of as a stock flow model in which multicointegration is likely to occur recently developed i 2 techniques are applied for testing for multicointegrating relations and find supporting evidence for the existence of multicointegration in us consumption data

team contests with multiple pairwise battles abstract we consider a multi battle team contest in which players from two rival teams form pairwise matches to fight in distinct component battles which are carried out sequentially or partially

the contributions of angus deaton angus deaton was awarded the 2015 sveriges riksbank prize in economic sciences in memory of alfred nobel for his analysis of consumption poverty and welfare this article reviews his contributions to economics

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

why is consumption so smooth for thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income this paper considers the evidence for the contrary position that permanent income is in fact less smooth than measured income so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory the paper argues that in postwar u s quarterly data consumption is smooth because it responds with a lag to changes in income

best of three contest experiments strategic versus psychological momentum abstract we conduct an experimental analysis of a best of three tullock contest intermediate prizes lead to higher efforts while increasing the role of luck as opposed to effort leads to lower efforts both intermediate prizes and luck reduce the probability of the contest ending in two rounds the patterns of players efforts and the probability that a contest ends in two rounds are consistent with strategic momentum i e a momentum generated due to strategic incentives inherent in the contest we do not find evidence for psychological momentum i e a momentum which emerges when winning affects players confidence similar to the previous studies of contests we find significantly higher efforts than predicted and strong heterogeneity in effort between the subjects

entry into winner take all and proportional prize contests an experimental study this experiment compares the performance of two contest designs a standard winner take all tournament with a single fixed prize and a novel proportional payment design in which that same prize is divided among contestants by their share of total achievement we find that proportional prizes elicit more entry and more total achievement than the winner take all tournament the proportional prize contest performs better by limiting the degree to which heterogeneity among contestants discourages weaker entrants without altering the performance of stronger entrants these findings could inform the design of contests for technological and other improvements which are widely used by governments and philanthropic donors to elicit more effort on targeted economic and technological development activities

multi battle contests abstract we study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests players may win a prize for winning each component contest as well as a prize for winning the overall race each component contest is an all pay auction with complete information we characterize the unique subgame perfect equilibrium analytically and demonstrate that it exhibits endogenous uncertainty even a large lead by one player does not fully discourage the other player and each feasible state is reached with positive probability in equilibrium pervasiveness expected effort in the component contests may be non monotonic in the closeness of the race and realized individual effort may exceed the value of the prize by a factor that is proportional to the maximum number of stage victories required

a tug of war team contest this paper analyzes a tug of war contest between two teams in each round of the tug of war a pair of agents from the opposing teams competes in a private value all pay auction with asymmetric value distributions and effort effectiveness whichever team arrives first at a given lead in terms of battle victories over the opponent wins the tug of war there exists a unique markov perfect equilibrium in bidding strategies which depend on the respective player s valuation and the current state of the tug of war we derive rich comparative statics for this equilibrium by using the fact that the state of the tug of war evolves according to a time homogeneous absorbing markov chain

coordination in split award auctions we analyze split award procurement auctions in which a buyer divides full production between two suppliers or awards all production to a single supplier and suppliers have private cost information an intriguing feature of split awards is that the equilibrium bids are implicitly coordinated because a split award price is the sum of offered split prices each supplier can unilaterally veto a split award by bidding very high for the split the need to coordinate is reflected in a split price that does not vary with private information we also explore conditions under which split award auctions may be preferred to winner take all auctions

financial market and housing wealth effects on consumption a permanent income approach the objective of this study is to examine the financial market and housing wealth effects on consumption housing has the dual functions as both a commodity yielding a flow of housing services and an investment asset yielding a flow of capital income with the construction of an empirical framework based on the vector autoregression approach the findings from this study suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption while the positive wealth effect is caused by an increase in capital income the negative price effect is caused by an increase in the cost of housing services in addition the housing market wealth effect increases at the expense of the price effect with the level of housing market leverage these findings imply that the government policy of land supply aiming to stimulate the economy should strike a balance between the possible wealth and price effects of the housing market

revenue ranking of optimally biased contests the case of two players it is shown that the equilibrium in the asymmetric two player tullock contest is unique for parameter values r 2 this allows proving a revenue ranking result saying that a revenue maximizing designer capable of biasing the contest always prefers a technology with higher r

impure public goods and transfers in a three agent model abstract this paper extends previous models of non cooperative private funding of pure public goods by allowing for impure public goods the analysis is developed in the context of international public goods under certain conditions the consequences of transfers on utility are paradoxical if the preferences are divergent a country may gain by giving a transfer the receiver may lose and these two phenomena may appear at the same time

orchestrating rent seeking contests contests have different sometimes quite complex organisational structures in particular while most of the existing literature focusses on simultaneous contests multistage contests are also quite frequently encountered this paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure which is made by an organiser of a contest interested in maximising the efforts expended by the contenders

further evidence of excess sensitivity of consumption nonseparability among goods and heterogeneity across households the standard theoretical framework for analysing households intertemporal decisions is the life cycle permanent income model among its implications testing the model allows to analyse the response of consumption to fiscal policy however the empirical literature with microdata has yielded mixed results this article examines the sensitivity of the results to the assumption of separability among goods and of homogeneity across households for that purpose we test a rational expectations permanent income model with household data drawn from the spanish family expenditure survey this survey contains detailed information on total expenditure and the income presents large exogenous quarterly changes due to an institutional feature the article shows that assuming separability among commodities biases the test against the model when separability is not imposed we show that the rejection of the model depends on heterogeneity across households in terms of their members being unemployed or not for those

contests with stochastic abilities we consider the properties of perfectly discriminating contests in which players abilities are stochastic but become common knowledge before efforts are expended players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in the contest which may explain why they participate we also show that an increase in the dispersion of a player s own ability generally benefits this player it may benefit or harm his rival but cannot benefit the rival more than it benefits himself we also explore the role of stochastic ability for sequential contests with the same opponent multibattle contests and with varying opponents elimination tournaments and show that it reduces the strong discouragement effects and holdup problems that may otherwise emerge in such games high own ability dispersion selects such players into the contest and favors them in elimination contests jel d72 d74 i introduction manytournamentsarecharacterizedbymultiple rounds with or without the elimination of some candidates in earlier stages of the process of determining a final winner in the political context electionprocessesthatdetermineparty leadersorpoliticalleadersmoregenerallyconsist ofmultipleconteststages intheracefortheu s presidency severalcompetitionstagesgradually narrowdownthenumberofcompetitors 1 inter

from custer to thermopylae last stand behavior in multi stage contests abstract in a multi stage contest known as a two player race players display two fundamental behaviors 1 the laggard will make a last stand in order to avoid the cost of losing and 2 the player who is ahead will defend his lead if it is threatened last stand behavior in particular contrasts with previous research where the underdog simply gives up the distinctive results are achieved by introducing losing penalties and discounting into the racing environment this framework permits the momentum effect typically ascribed to the winner of early stages to be more thoroughly examined i study the likelihood that the underdog will catch up i find that neck and neck races are common when the losing penalty is large relative to the winning prize while landslide victories occur when the prize is relatively large closed form solutions are given for the case where players have a common winning prize and losing penalty

consumption and portfolio choice under internal multiplicative habit formation this paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit we obtain closed form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint this enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock bond investments we also show that in a setting that combines habit formation with epstein zin utility consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease

the excess smoothness of consumption identification and interpretation deaton s observation that consumption appears to be too smooth is easily reconciled with the notion that consumption exhibits excess sensitivity to current income the reconciliation invokes the plausible assumption that households forecast on the basis of a larger information set than the econometrician the empirical case for excess smoothness is strengthened by showing that the innovations in permanent income can be inferred from an autoregression of income and saving not only under the permanent income hypothesis but also under the excess sensitivity model empirically parameter restrictions imposed on the bivariate autoregression by the excess sensitivity model are not rejected

best of three all pay auctions abstract we study a best of three all pay auction it is shown that with values of winning and without values of losing this auction is less productive the players total expected effort is smaller than the one stage all pay auction however with different values of losing over the contest s stages it may be more productive than the one stage all pay auction

three object two bidder simultaneous auctions chopsticks and tetrahedra symmetric equilibria are constructed for a class of symmetric auction games the games all have two identical bidders bidding in three simultaneous first price sealed bid auctions for identical objects information is complete and the bidders marginal valuations increase for the second object and then decrease for the third in all cases the support of the mixture that generates the equilibrium is two dimensional and it surrounds a three dimensional set of best responses this appears to be a previously unknown structure

blanchard s model of consumption an empirical study this article derives several empirically testable implications for blanchard s consumption model which has been widely used in analytical macroeconomic research cointegration methods are applied the parameter that measures the life horizon of households is estimated and the consumption model is tested quarterly canadian data are used there is no empirical evidence against the assumption that households behave as if they live forever within blanchard s framework blanchard s model of consumption is strongly rejected by the data however

international evidence on the persistence of economic fluctuations abstract this paper presents new evidence on the persistence of fluctuations in real gnp we estimate two measures of persistence nonparametrically using post war quarterly data from canada france germany italy japan the united kingdom and the united states we compare these estimates with monte carlo results from various ar 2 processes for six out of seven countries the point estimates indicate that a 1 shock to output should change the long run unvariate forecast of output by well over 1 low order arma models yield similar conclusions finally we examine the persistence in relative outputs of different countries

incentives versus competitive balance abstract when players compete repeatedly prizes won in earlier contests may improve the players abilities in later contests this paper determines the allocation of prizes within and across contests that maximizes the weighted sum of aggregate efforts

rent seeking with asymmetric valuations this paper analyzes tullock s rent seeking game with asymmetric valuations for a variable range of the returns to scale parameter a necessary and sufficient condition for a unique pure strategy nash equilibrium is established equilibrium effort and expected profits are determined and subjected to comparative statics analysis increasing the underdog s valuation induces both players to increase their efforts increasing the favorite s valuation increases his effort but decreases the effort of the underdog expected profits increase with a player s valuation but decreases with the valuation of the competitor the impact of the returns to scale parameter is also analyzed

the deaton paradox in a long memory context with structural breaks this article contributes to the permanent income hypothesis pih and excess consumption smoothness debate in the context of fractional integration we show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work in fact the i 1 hypothesis is rejected for the income process with monthly data in favour of a fractional integration order lower than 1 moreover if a structural break is taken into account we observe a substantial reduction in the degree of consumption smoothness especially after the break found in 1975

in praise of inequality public good provision and income distribution abstract it is shown that if all individuals contribute towards the provision of a public good their utilities are equalised even if the income distribution is unequal it may seem that there is then no role for redistributive policy but it is proved that social welfare can be raised by creating sufficient income inequality that only the rich provide public goods