infrastructure investment the cost of capital and regulation an assessment the paper considers the role of infrastructure in improving economic performance and its compar ative neglect relative to traditional macroeconomic and microeconomic policies it explains why infrastructure matters why britain s infrastructure performance has been poor and summarizes the scale of the challenge for the coming decade privatization liberalization and competition have focused on monopoly market failure and private incentives but they have neglected the time inconsistency problem which confronts investors in networks with high fixed and sunk costs the failure to commit which has characterized british approaches to infrastructure has been partially addressed through the creation of regulated asset bases rabs backed up by the duty on regulators to ensure that functions can be financed the paper considers how the rabs can be developed to provide credible long term contracts over a wide range of activities and how the financial regu latory regime can complement this commitment notably through the split cost of capital and the indexation of the cost of debt approaches the paper concludes by setting out the building blocks of a credible regulatory framework for infrastructure together with the impacts on reducing the cost of capital the role of the state in reinforcing this commitment and the associated institutions are also set out

on the concavity of the consumption function at least since keynes 1935 many economists have had the intuition that the marginal propensity to consume out of wealth declines as wealth increases nonetheless standard perfect certainty and certainty equivalent versions of intertemporal optimizing models of consumption imply a marginal propensity to consume that is unrelated to the level of household wealth we show that adding income uncertainty to the standard optimization problem induces a concave consumption function in which as keynes suggested the marginal propensity to consume out of wealth or transitory income declines with the level of wealth

cointegration tests and spatial price linkages in regional cattle markets this analysis empirically evaluates spatial linkages in regional cattle markets using cointegration tests of regional price series several markets were not cointegrated over the 1980 through 1987 period however significant increases in cointegration of several regional livestock markets are observed through the 1980s the increased cointegration parallels significant structural changes in the livestock industry a formal analysis of market characteristics reveals that distances between markets industry concentration ratios market volumes and market types have significant influences on cointegration relationships between markets

transforming telecommunications technologies policy and regulation the replacement of copper telecommunications networks by fibre based next generation networks ngn capable of providing high speed broadband services requires substantial investment and a regulatory regime designed to encourage it the paper identifies which technologies are capable of supporting ngn and considers what changes to the regulatory regime are required to elicit them in competitive non competitive and non commercial geographical areas in non competitive areas there is likely to be trade off between the timing of investment and nature of concessions offered to constructors governments are also considering investment in ngn either separately from or as part of a recovery package and the paper discusses the justification for such investments

financing investment in the european electricity transmission network consequences on long term sustainability of the tsos financial structure this article focuses on the ability of european tsos to meet the demand for substantial investments in the electricity transmission grid over the next two decades we employ quantitative analysis to assess the impact of the required capital expenditures under a set of alternative financing strategies we consider a best case scenario of full cooperation between the european tsos it appears that under current trends in the evolution of transmission tariffs only half the volumes of investment currently planned could be funded a highly significant increase in transmission tariffs will be required to ensure the whole scale investments can be delivered finally alternative strategies can dampen the impact on tariffs but they can only partially substitute for this increase in charges paid by network users

the sustainable borders of the state economic crises have historically set the stage for the reconfiguration of the economic borders of the state current concerns focus on debt and associated intergenerational issues such as pensions infrastructure and the environment the sustainable state is designed to put in place a framework for integrating these intergenerational issues alongside the traditional focus on macroeconomic policy static market failures and transfers the building blocks include the accounting framework and in particular a national balance sheet setting out assets and liabilities and providing for capital maintenance over time to support these assets and to provide for sufficient investment the sustainable state requires an appropriate level of savings and institutions to translate these savings into investments two components are the deployment of regulatory asset bases to underpin long term sunk and fixed costs given the time inconsistency problem in government s commitments and the development of financial intermediaries such as an infrastructure bank copyright 2011 oxford university press

capacity investment and market power in the economic value of energy firms regulation of energy firms faces the complex problem of balancing private earning a fair rate of return on investment and public assure safe and reliable supply of energy at the lowest possible costs goals tobin s q is a forward looking indicator on investment opportunities and on market power of firms that energy regulators can use for more effective regulation this paper presents the empirical evidence on the determinants of differences in observed values of tobin s q for a sample of large listed energy firms from 10 different countries in the period 2000 2006 we find that adjustment costs represent around sixty percent of the difference between economic and book value of the assets for the representative firm while rents from market power represent the other forty percent therefore across countries there is room for regulatory actions aiming at reducing energy prices but less than what may be inferred from the observed average q values

a simulation model of the u s export enhancement program for wheat nash bargaining game models representing negotiations of export enhancement program eep sales are combined with a quarterly spatial price equilibrium model representing non eep world wheat trade to simulate the eep s impact in late 1985 and early 1986 the benefits of the eep in terms of increased u s export revenues adjusted for subsidy costs are estimated to be less than one percent of total u s revenues for the first quarter of 1986 model simulations also show a lowering of the ccc loan rate to have a much greater potential for increasing u s wheat exports than the eep as operated

survival of the unfittest why the worst infrastructure gets built and what we can do about it the article first describes characteristics of major infrastructure projects second it documents a much neglected topic in economics that ex ante estimates of costs and benefits are often very different from actual ex post costs and benefits for large infrastructure projects the consequences are cost overruns benefit shortfalls and the systematic underestimation of risks third implications for cost benefit analysis are described including that such analysis is not to be trusted for major infrastructure projects fourth the article uncovers the causes of this state of affairs in terms of perverse incentives that encourage promoters to underestimate costs and overestimate benefits in the business cases for their projects but the projects that are made to look best on paper are the projects that amass the highest cost overruns and benefit shortfalls in reality the article depicts this situation as survival of the unfittest fifth the article sets out to explain how the problem may be solved with a view to arriving at more efficient and more democratic projects and avoiding the scandals that often accompany major infrastructure investments finally the article identifies current trends in major infrastructure development it is argued that a rapid increase in stimulus spending combined with more investments in emerging economies combined with more spending on information technology is catapulting infrastructure investment from the frying pan into the fire

optimal portfolio choice for long horizon investors with nontradable labor income this paper examines how risky labor income and retirement affect optimal portfolio choice with idiosyncratic labor income risk the optimal allocation to stocks is unambiguously larger for employed investors than for retired investors consistent with the typical recommendations of investment advisors increasing idiosyncratic labor income risk raises investors willingness to save and reduces their stock portfolio allocation towards the level of retired investors positive correlation between labor income and stock returns has a further negative effect and can actually reduce stockholdings below the level of retired investors financial advisors typically recommend that their customers invest more in stocks than in safe assets when they are working and to shift their investments towards safe assets when they retire jagannathan and kocherlakota 1996 malkiel 1996 by contrast the standard academic models of portfolio choice merton 1969 1971 samuelson 1969 show that retirement is irrelevant for portfolio decisions if investment opportunities are constant and human capital is tradable in this case the fraction of wealth optimally invested in risky assets should be constant over the lifetime of an individual recent research building on the pioneering work by merton 1971 shows that time varying investment opportunities result in portfolio rules with an intertemporal hedging component whose magnitude depends on the investment horizon of the investor kim and omberg 1996 balduzzi and lynch 1997 brennan schwartz and lagnado 1997 brandt 1999 campbell and viceira 1999 2001 barberis 2000 with time variation in investment opportunities retirement and death play an instrumental role as events that exogenously fix the individual s investment horizon more importantly retirement also marks the time at which individuals stop working and thereafter must live off their lifetime savings and possibly transfers from this perspective retirement matters for portfolio choice

the evolution of infrastructure and utility ownership and its implications the paper documents the significant changes of ownership since the infrastructure utilities were privatized and in particular the shifts from the initial focus on dispersed retail share ownership through takeovers to more concentrated ownership and the emergence of private equity and infrastructure funds in the process there has been substantial financial engineering and balance sheets have been geared up towards exhaustion with major implications for financing future investment increased gearing has on the one hand introduced the discipline of debt upon management which had engaged in substantive diversification and on the other provided an arbitrage between the weighted average cost of capital used to calculate the allowed return and the lower marginal cost of debt the paper shows how regulation has determined the allocation of risk and facilitated the observed changes in ownership and financial structures three solutions to the exhausted balance sheets are considered to finance future investment rate of return regulation the split cost of capital and a collapse back into not for dividend mutual or state ownership the default outcome already witnessed in the welsh water and network rail cases is the latter case which is inferior to the second option copyright 2009 oxford university press

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated

political economy of pension plans impact of institutions gender and culture abstract national pension systems are an important part of financial intermediation and worker welfare in most countries but how and why do they differ internationally controlling for important political economic and social institutions we document that international differences in pension progressivity or how pensions reflect lifetime earnings are negatively related to masculinity uncertainty avoidance individualism long term orientation employment rights average pension levels social trust and economic inequality we also find that pension progressivity is positively related to the economic and societal role of women the extent of catholicism as well as political voice and accountability these results provide important insights for both public policy and mnc managers

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

optimal consumption portfolio choices and retirement planning abstract we examine consumption and investment decisions in a life cycle model with habit formation stochastic opportunity set stochastic wages and labor supply flexibility retirement is taken into account by specifying an age at which labor earnings stop but consumption spending continues explicit solutions are obtained for optimal consumption labor supply and the financing portfolio we examine the structure and determinants of the optimal portfolio we also study the effects of the retirement date and of habits on optimal decisions finally we conduct a preliminary analysis to assess the effects of a liquidity constraint on optimal consumption leisure choices

market definition in antitrust analysis a regression based approach alleged violations of either sherman 2 s antimonopoly strictures or clayton 7 s proscriptions against anticompetitive mergers necessarily involve a particular product and must occur in a particular place that is the plaintiff in either a 2 or 7 suit must define a relevant market within which the violation alleged has occurred even in the most mundane antitrust analysis however market definition is rarely readily accomplished and unaccompanied by a series of caveats and the possibility of the opposing parties in an antitrust suit failing to contest each other s proffered definition is virtually nil 2 because economists from

the farm retail price spread in an imperfectly competitive food industry in a previous article in this journal gardner investigated the effects of three distinct forces affecting food system equilibria shifts in retail demand shifts in farm commodity supply and shifts in marketing input supply he derived comparative static predictions about how the quotient of retail and farm prices the retailfarm price ratio would adjust to changes in each of these exogenous effects the investigation was conducted within a framework that

valuation of the quality characteristics of japanese soybean imports the implicit prices of the physical and intrinsic characteristics of soybeans exported by the united states are estimated the results suggest that the us grades and standards assigned to a shipment either do not provide information valued by the market or the existence of us grades and standards has resulted in the definition of a standard of quality that is met by all exporters additionally in japan there are two identifiable soybean markets a premium food bean market and a crushing market the soybeans going into the food market for processing can be identified by their lower oil content lower percentage of split and damaged beans and a lower amount of foreign material as well as smaller shipment sizes

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

on the fluctuations in consumption and market returns in the presence of labor and human capital an equilibrium analysis abstract we examine the effects of human capital on consumption stock market and other fluctuations in a general equilibrium continuous time model a representative consumer worker investor derives utility from consumption and leisure a representative firm demands labor as the sole input to a stochastic production technology driven by general possibly nonmultiplicative shocks for cobb douglas utility and multiplicative shocks labor is nonstochastic and consumption and stock market volatility are equated as under no human capital deviations from this are analyzed for logarithmic utility and constant elasticity of substitution production technology cases are identified where the presence of labor causes consumption to be smoother than the stock market

a unified model of entrepreneurship dynamics we develop an incomplete markets q theoretic model to study entrepreneurship dynamics precautionary motive borrowing constraints and capital illiquidity lead to underinvestment conservative debt use under consumption and less risky portfolio allocation the endogenous liquid wealth illiquid capital ratio w measures time varying financial constraint the option to accumulate wealth before entry is critical for entrepreneurship flexible exit option is important for risk management purposes investment increases and the private marginal value of liquidity decreases as w decreases and exit becomes more likely contrary to predictions of standard financial constraint models we show that the idiosyncratic risk premium is quantitatively significant especially for low w

developing transport infrastructure for the low carbon society for the uk and other advanced economies the transition to a genuinely low carbon society is a major undertaking within transport changes to vehicle and aircraft technology are likely to be the key drivers of this change underpinned by a more consistent and comprehensive approach to carbon pricing infrastructure investment is likely to be needed to cater for travel growth but this should be on the basis that improvements in carbon efficiency outweigh the upward pressure of growth on emissions a radical shift in the power supply for road transport to support electric vehicles could also have significant infrastructure requirements and there will be potentially significant soft investment requirements associated with improved traffic management travel information systems and road pricing road pricing and an extension of carbon pricing particularly to aviation create income flows which may help to fund transport infrastructure development in a world of constrained public finances

retirement spending and biological age abstract we solve a lifecycle model in which the consumer s chronological age does not move in lockstep with calendar time instead biological age increases at a stochastic non linear rate in time like a broken clock that might occasionally move backwards in other words biological age could actually decline our paper is inspired by the growing body of medical literature that has identified biomarkers which indicate how people age at different rates this offers better estimates of expected remaining lifetime and future mortality rates it isn t farfetched to argue that in the not too distant future personal age will be more closely associated with biological vs calendar age thus after introducing our stochastic mortality model we derive optimal consumption rates in a classic yaari 1965 framework adjusted to our proper clock time in addition to the normative implications of having access to biological age our positive objective is to partially explain the cross sectional heterogeneity in retirement spending rates at any given chronological age in sum we argue that neither biological nor chronological age alone is a sufficient statistic for making economic decisions rather both ages are required to behave rationally

lifetime consumption and investment retirement and constrained borrowing retirement flexibility and inability to borrow against future labor income can significantly affect optimal consumption and investment with voluntary retirement there exists an optimal wealth to wage ratio threshold for retirement and human capital correlates negatively with the stock market even when wages have zero or slightly positive market risk exposure consequently investors optimally invest more in the stock market than without retirement flexibility both consumption and portfolio choice jump at the endogenous retirement date the inability to borrow limits hedging and reduces the value of labor income the wealth to wage ratio threshold for retirement and the stock investment

the integration of the market for soybeans and soybean products abstract this article addresses the question of whether soybeans soybean meal and soybean oil produced in the usa and exported were part of a single world geographic market during the decade of the 1980s an answer to this question is sought using an approach to defining a geographic market based on the notion of instantaneous causality the empirical results based on prices for soybeans soybean meal and soybean oil for three spatially diffuse locations suggest that there was but a single identifiable world market for these commodities over the period of study this has implications for the continued presence of soybean production subsidies and discussions on international agreements designed to reduce or eliminate these subsidies

what is product differentiation really empirical research on industrial organization has failed to identify the empirical bases of product differentiation that is each seller facing an individual downward sloping demand curve two sets of conditions are theoretically sufficient one resting on complex attribute structures coupled with fixed costs the other on costs of information to guide buyers choices among brands factor analysis of observable decision variables and market patterns appears to reveal and confirm these underlying causes the estimated factors perform successfully to test hypotheses about the effects of product differentiation on the mutual sensitivity of prices of australian domestic manufactures and competing imports product differentiation is a well defined theoretical concept resting on

investment in electricity infrastructure in a small isolated market the case of ireland climate policy is driving an extensive deployment of wind generation in the irish electricity market this study evaluates the cost of increasing wind generation both to the system as a whole and to consumers for 2020 we consider different scenarios on fuel and carbon dioxide permit prices and the extent of electricity interconnection with great britain for a small and isolated electricity system such as ireland a high penetration of wind is economically sound only with increased interconnection to great britain since wind generation would otherwise be curtailed not surprisingly for low fuel prices the least cost scenario contains low levels of wind generation whereas the opposite is true for high fuel prices the findings highlight the importance of interconnection and its operation and governance copyright 2009 oxford university press

transport infrastructure investment implications for growth and productivity theory and evidence on the effects of public investment on growth and productivity are reviewed it is concluded that on average public capital has positive impacts on output and private investment partly offset by the effects of the taxation needed to finance it a possible future shortfall in public capital in the uk is highlighted the paper also reviews the contribution of transport infrastructure to productivity and considers implications for cost benefit analysis it is suggested that there is a case for greater uk investment in roads but ideally this should be implemented along with an efficient national road pricing scheme

saving and investing for early retirement a theoretical analysis we study optimal consumption and portfolio choice in a framework where investors adjust their labor supply through an irreversible choice of their retirement time we show that investing for early retirement tends to increase savings and reduce an agent s effective relative risk aversion thus increasing her stock market exposure contrary to common intuition an investor might find it optimal to increase the proportion of financial wealth held in stocks as she ages and accumulates assets even when her income and the investment opportunity set are constant the model predicts a decrease in risk aversion following strong market gains like those observed in the nineties

optimal consumption and investment under time varying liquidity constraints we study consumption and investment decisions given realistic time varying constraints on borrowing we first consider the case where borrowing is constrained by a maximum debt to income ratio we then consider collateral borrowing with a maximum loan to value ratio the resulting implications for optimal policies differ considerably from those obtained in the existing literature based on fixed borrowing limits but are consistent with those documented in the empirical literature

valuation optimal asset allocation and retirement incentives of pension plans we provide a framework in which we link the valuation and asset allocation policies of defined benefits plans with the lifetime marginal productivity schedule of the worker and the pension plan formula in turn we examine the retirement policies that are implied by the primitives of the model and the value of pension obligations our model provides an explicit valuation formula for a stylized defined benefits plan the optimal asset allocation policies consist of the replicating portfolio of the pension liabilities and the growth optimum portfolio independent of the pension liabilities we show that the worker will retire when the ratio of pension benefits to current wages reaches a critical value which depends on the parameters of the pension plan and the discount rate using numerical techniques we analyze the feedback effect of retirement policies on the valuation of plans and on the asset allocation decisions article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the extent of the market examines the classical theory of the market in this paper authors consider the role of price market determination price movement in competitive and monopolistic markets extension of commodity markets

how family status and social security claiming options shape optimal life cycle portfolios we show how optimal household decisions regarding work retirement saving portfolio allocations and life insurance are shaped by the complex financial options embedded in u s social security rules and uncertain family transitions our life cycle model predicts sharp consumption drops on retirement an age 62 peak in claiming rates and earlier claiming by wives versus husbands and single women moreover life insurance is mainly purchased on men s lives our model which takes social security rules seriously generates wealth and retirement outcomes that are more consistent with the data in contrast to earlier and less realistic models

unemployment risks and optimal retirement in an incomplete market we develop a new approach for solving the optimal retirement problem for an individual with an unhedgeable income risk the income risk stems from a forced unemployment event which occurs as an exponentially distributed random shock the optimal retirement problem is to determine an individual s optimal consumption and investment behaviors and optimal retirement time simultaneously we introduce a new convex duality approach for reformulating the original retirement problem and provide an iterative numerical method to solve it reasonably calibrated parameters say that our model can give an explanation for lower consumption and risky investment behaviors of individuals and for relatively higher stock holdings of the poor we also analyze the sensitivity of an individual s optimal behavior in changing her wealth level investment opportunity and the magnitude of preference for postretirement leisure finally we find that our model explains a countercyclical pattern of the number of unemployed job leavers

hedging in incomplete markets with hara utility in the context of merton s original problem of optimal consumption and portfolio choice in continuous time this paper solves an extension in which the investor is endowed with a stochastic income that cannot be replicated by trading the available securities the problem is treated by demonstrating using analytic and in particular viscosity solutions techniques that the value function of the stochastic control problem is a smooth solution of the associated hamilton jacobi bellman hjb equation the optimal policy is shown to exist and given in a feedback form from the optimality conditions in the hjb equation at zero wealth a fixed fraction of income is consumed for large wealth the original merton policy is approached we also give a sufficient condition for wealth under the optimal policy to remain strictly positive

the impact of the export enhancement programme on the soybean market in the united states this study endeavours to understand the nature and extent of the market interrelationships between the price of soybeans the price of soybean meal and oil and the crushing margin in order to assess how processors benefit relative to farmers with regard to the export enhancement programme as it applies to soybean oil the results suggest that while both farmers and processors do benefit from the programme processors benefit porportionately more than farmers receiving nearly three times the relative return of farmers from the effects of the programme this observed outcome is a function of the joint nature of the products being produced soybean meal and oil by processors and the relative less importance afforded to soybean oil in the production process in an absolute sense however the returns to soybean farmers are substantially greater than those to processors being a function of the magnitude of the price of soybeans relative to the crushing margin

intergenerational risk sharing and endogenous labour supply within funded pension schemes funded defined benefit pensions add to welfare on account of providing intergenerational risk sharing but lower it on account of inducing labour supply distortions we show that a properly designed funded defined benefit pension scheme involves a welfare improvement even if contributions are distortionary and even if individuals face potentially correlated wage and equity risks numerical calculations indicate that diversification gains from risk sharing are large compared to the losses related to labour supply distortions this result withstands a number of extensions like the introduction of a short sale constraint for individuals or the inclusion of a labour income tax

labor supply flexibility and portfolio choice in a life cycle model abstract this paper examines the effect of the labor leisure choice on portfolio and consumption decisions over an individual s life cycle the model incorporates the fact that individuals may have considerable flexibility in varying their work effort including their choice of when to retire given this flexibility the individual simultaneously determines optimal levels of current consumption labor effort and an optimal financial investment strategy at each point in his life cycle we show that labor and investment choices are intimately related the ability to vary labor supply ex post induces the individual to assume greater risks in his investment portfolio ex ante

portfolio choice in retirement health risk and the demand for annuities housing and risky assets in a life cycle model a retiree faces stochastic health depreciation and chooses consumption health expenditure and the allocation of wealth between bonds stocks and housing the model explains key facts about asset allocation and health expenditure across health status and age the portfolio share in stocks is low overall and is positively related to health especially for younger retirees the portfolio share in housing is negatively related to health for younger retirees and falls significantly in age finally out of pocket health expenditure as a share of income is negatively related to health and rises in age

optimal retirement with unemployment risks abstract this paper investigates the optimal retirement of an individual in the presence of involuntary unemployment risks and borrowing constraints in a complete market with frictions we use an intensity model and loading factors to illustrate the involuntary unemployment risks and frictions in unemployment insurance markets using reasonably calibrated parameters we observe that high involuntary unemployment intensity and loading factors could be important explanations for the empirical findings emphasized in recent studies we also find that an individual with high leisure demand after retirement reduces consumption during retirement and increases stockholdings as retirement time approaches

when can life cycle investors benefit from time varying bond risk premia we study the importance of time varying bond risk premia in a consumption and portfolio choice problem for a life cycle investor facing short sales and borrowing constraints tilts in the optimal asset allocation in response to changes in bond risk premia exhibit pronounced life cycle patterns we find that the investor is willing to pay an annual fee up to 1 to implement a strategy that optimally conditions on prevailing bond risk premia in addition to her age and wealth to solve our model we extend recently developed simulation based techniques to life cycle problems featuring multiple state variables and multiple risky assets

exchange rate uncertainty and the demand for u s soybeans this study examines the effects of exchange rate uncertainty on bilateral soybean trade flows and finds that imports for japan france and spain are sensitive to short term variations in nominal bilateral exchange rates this research extends previous work by focusing on bilateral trade for a single commodity using a longer sample period and testing over a variety of model specifications the results suggest that the effects vary across countries depending on access to forward markets the availability of alternative soybean suppliers the degree of market concentration in the domestic soybean processing sector and the degree of currency risk importers are willing to assume the decline in u s agricultural exports during the 1980s has been explained by numerous factors including stagnant world income increased foreign competition the existence of trade barriers and the level of the exchange rate an additional factor exchange rate volatility has received less attention in agricultural trade models since the adoption of the flexible exchange rate system in the early 1970s variability in exchange rates has had a potentially destabilizing impact on trade disruptions in trade can occur because exchange rate variations change the actual price paid or received for traded goods causing adjustments in quantities traded domestic prices or in the timing of sales in order to avoid the effects of variability on profits other longer term effects may occur if exchange rate uncertainty persists to the extent that goods are substitutable such adjustments can be manifested as a sustained preference for domestic suppliers over foreign suppliers or alternative sources of foreign supply may be explored the magnitude of the effect of exchange rate uncertainty on quantity imported is dependent upon inter alia the respective exchange rate elasticities and the importer s response to variability for some goods this magnitude can be substantial the objective of this study is to determine

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

household portfolio choice and retirement this study examines household portfolio choice through the retirement transition i show that couples significantly decrease their stock allocations after retirement whereas singles allocations remain relatively unchanged reallocations are concentrated among couples in which the wife is more risk averse than her husband husbands and wives respective retirement events are followed by opposite signed changes in stock allocations these findings are consistent with a model of collective household decision making in which spouses have heterogeneous risk preferences and suggest that dynamics in the distribution of intrahousehold bargaining power generate time varying household risk aversion

longevity risk retirement savings and financial innovation abstract over the last couple of decades unprecedented increases in life expectancy have raised important concerns for retirement savings we solve a life cycle model with longevity risk which can be hedged through endogenous saving and retirement decisions we investigate the benefits of financial assets designed to hedge the shocks to survival probabilities when longevity risk is calibrated to match forward looking projections those benefits are substantial this lends support to the idea that such hedging should be pursued by defined benefit pension plans on behalf of their beneficiaries finally we draw implications for optimal security design

roads a utility in need of a strategy british roads are under supplied and irrationally priced estimates of the rate of economic return to investment are high there is no mechanism for consumer protection and current attempts to record and publish the level of service are inadequate this will persist until there is fundamental reform of the governance and possibly ownership of the major road network the paper argues that the uk regulated utility model offers valuable insights other candidates are discussed for reform of corporate governance accountability charging and funding a reformed charging regime designed to deal with road congestion and other externalities would also help with the carbon emission problem the paper discusses the division between central government new bodies to own and regulate the assets and local authorities even in the absence of direct user charging in the short term there is a case for change to enhance the accountability of the national roads infrastructure provider to its customers language en

financing the uk power sector is the money available abstract the uk power generation sector faces a major new round of investment the coincidence of asset retiring and ambitious goals for decarbonisation is not unique but is particularly acute in the uk the uk government has put in place a raft of new policies that seek to promote new low carbon investment and ensure security of supply the traditional channel for financing the sector has been through large utility companies but this now looks challenging for various reasons the uk therefore offers an interesting case study on several counts the scale of the challenge effectiveness of new policies and the availability of alternative finance we find that the link between the finance sector and the electricity sector is not broken but the flow of money to the sector is threatened by the current weakness of the utilities business model this paper compares estimates of the scale of investment required in the uk with historical investment rates it summarises contemporary finance industry views of conditions and trends and potential policy interventions that might be needed to bridge the investment gap the potential for channelling institutional investor funds directly into energy assets is reviewed

a generalization of yaari s result on annuitization with optimal retirement abstract in this paper we generalize the following result of yaari 1965 on annuitization with an agent s optimal retirement it is optimal for individuals to annuitize all of their wealth in the absence of bequest motive we have other results that refine or extend the result of yaari 1965 full annuitization can be viewed as an american type option that allows an economic agent to exchange the value of labor income with the extra leisure that is brought about by annuitizing all of her wealth when the agent s wealth is above a certain wealth threshold annuitization is triggered otherwise it is not accordingly wealth plays a key role in controlling the distance to full annuitization

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance

is there a retirement savings puzzle in this paper we ask whether households are saving enough for their retirement we use data on income expenditure and expenditure components to analyse patterns of behaviour at and around the time of retirement for successive date of birth cohorts we compare periods of unemployment to periods of retirement and separate expenditures into categories reflecting work related expenditures basic necessities and other goods we find that income typically falls by more at unemployment than retirement but the reverse is true for expenditure we observe falls in expenditure at retirement for all expenditure categories using a stochastic life cycle model including mortality rates we assess the anticipated impact of retirement on consumption against that of unemployment the inter relationship between goods and leisure explains a large part of the persistent fall in expenditure at retirement we argue that the only way in which the life cycle hypothesis could be reconciled with the remaining unanticipated dip in consumption would be with the systematic arrival of unexpected adverse information at the time of retirement