a spatial mean variance mip model for energy market risk analysis the paper presents a short term market risk model based on the markowitz mean variance method for spatial electricity markets the spatial nature is captured using the correlation of geographically separated markets and the consideration of wheeling administration the model also includes transaction costs and other practical constraints resulting in a mixed integer programming mip model the incorporation of those practical constraints makes the model more attractive than the traditional markowitz portfolio model with continuity a case study is used to illustrate the practical application of the model the results show that the mip portfolio efficient frontier is neither smooth nor concave the paper also considers the possible extension of the model to other energy markets including natural gas and oil markets

competition increases x efficiency a limited liability mechanism the main result of this study is that a financial constraint may serve as a disciplining device on the internal efficiency of a firm and the tougher the product market competition the higher the disciplining power this limited liability mechanism may in part account for the alleged disciplining power of product market competition on firm efficiency however even if policies that promote competition enhance x efficiency the gain may be outweighed by a less efficient allocation of risk moreover this adverse risk effect has repercussions implying that the effect of reduced entry barriers on competition and consumer s welfare is small

total factor carbon emission performance of the chinese transportation industry a bootstrapped non radial malmquist index analysis this paper proposes a non radial malmquist co2 emission performance index nmcpi for measuring dynamic changes in total factor co2 emission performance over time this index enables the consideration of non radial slacks in the conventional malmquist co2 emission index mcpi the nmcpi is calculated based on a non radial directional distance function derived by several data envelopment analysis dea models furthermore nmcpi could be decomposed into an efficiency change ec index and technological change tc index a bootstrapping approach is conducted to introduce statistical inferences into the nmcpi and its decompositions based on the proposed indices the dynamic co2 emission performance change and its decompositions of the chinese regional transportation industry from 2002 to 2010 are investigated the empirical results demonstrate that the total factor carbon emission performance of the transportation industry as a whole decreased by 32 8 over the period and this reduction was primarily caused by technological decline

falling behind the joneses relative consumption and the growth savings paradox abstract concern for individual consumption relative to per capita consumption can induce a fear of falling behind which increases precautionary savings this fear intensifies as societal income growth increases allowing for a positive effect of growth on savings rates

production function regressions returns to scale and externalities a number of recent papers have used simple linear regressions in an attempt to identify market structure the extent of returns to scale and possible external effects in u s manufacturing industries the results obtained from these regressions have important implications for several branches of modern macroeconomics as a result the macro literature frequently cites specific numerical evidence from caballero and lyons 1992 and hall 1990 which suggests that there are quantitatively significant increasing returns to scale or external effects in u s manufacturing in contrast it is the argument of this paper that this evidence is not convincing the most robust evidence suggests that the typical u s manufacturing industry displays constant returns with no external effects on the other hand there is significant heterogeneity across industries

growth habit formation and catching up with the joneses when habits are introduced multiplicatively in a capital accumulation model the consumers objective function might fail to be concave in this paper we provide conditions aimed at guaranteeing the existence of interior solutions to the consumers problem we also characterize the equilibrium path of two growth models with multiplicative habits the internal habit formation model where individual habits coincide with own past consumption and the external habit formation or catching up with the joneses model where habits arise from the average past consumption in the economy we show that the introduction of external habits makes the equilibrium path inefficient during the transition towards the balanced growth path we characterize in this context the optimal tax policy

who does not respond in the household expenditure survey a nonparametric multiple regression method based on the extended gini that depends on one parameter v is investigated the parameter v enables production of infinite alternative linear approximations to the regression curve which differ in the weighting schemes applied to the slopes of the curve the method allows the investigator to stress different sections of one independent variable while keeping the treatment of the other independent variables intact as an application we investigate nonresponse patterns in a survey of household expenditures to learn about the relationship between nonresponse and income the empirical results show that the higher the income the higher the response rate and the larger the household the higher the response rate the arab population tends to respond more than the jewish one whereas the ultrareligious group tends to respond less than the rest of the population the implications on the bias in the estimates are discussed

marshall and complexity a necessary balance between process and order according to alfred marshall economics is a complex science which deals with a very compound matter the concept of equilibrium is very widely referred to in his writings not only as a tool to be used in the analytical apparatus as is usually stressed but also and more important as an element that characterises the evolutionary framework of his analysis in the marshallian investigation of economic and social matters the term equilibrium indicates an indispensable degree of order whereas evolution denotes a vital continuous process that characterises every economic and social body the particular relation between equilibrium and evolution which characterises marshall s approach allows us to better understand the balanced interplay between order and process two categories that in marshall pervade every aspect of society considered as a highly complex body

productivity growth and biased technological change in hydroelectric dams abstract this paper analyses productivity growth and the nature of technical change in a sample of portuguese hydroelectric generating plants over the period 2001 to 2008 in a first step we employ the luenberger productivity indicator to estimate and decompose productivity change a malmquist productivity index is also used for a comparative purpose the results paint a picture of mixed productivity performance in the portuguese energy sector the first decomposition underlines that in average the productivity variation is explained by the technological change then in a second step we analyse the nature of this technical change by using the recent concept of parallel neutrality briec et al 2006 we observe a global shift in the best practice frontier as well as in the evidence of input bias in technical change

tax policy and aggregate demand management under catching up with the joneses this paper examines the role for tax policies in productivity shock driven economies with catching up with the joneses utility functions the optimal tax policy is shown to affect the economy countercyclically via procyclical taxes i e cooling down the economy with higher taxes when it is overheating in booms and stimulating the economy with lower taxes in recessions to keep consumption up thus models with catching up with the joneses utility functions call for traditional keynesian demand management policies but for rather unorthodox reasons

seasonality and habit persistence in a life cycle model of consumption summary the allocation of non durable consumers expenditure over the four quarters of the year reflects choices made by consumers implying a utility function exhibiting seasonality incorporating such a function the life cycle model fails to explain fully the observed dynamics in uk seasonally unadjusted data seasonal habit persistence effects are introduced and found to be significant although this generalized model stands up well to testing in a univariate context it fails to exclude a predictive role for lagged income changes seasonality is inherent in many economic time series but it is rarely considered to be an issue of interest in econometric model building rather than explicitly investigating the economics underlying seasonal variation modellers typically try to remove its effects either by using seasonally adjusted data or by including seasonal intercept dummies in their equations the former practice is criticized by wallis 1974 who shows that it may distort the relationship between variab le the latter assumes that the function simply shifts up or down with the season however except for degrees of freedom considerations there seems to be no a priori reason why the same parameters or functional form should apply at different times of the year indeed gersovitz and mackinnon 1978 argue that realistic utility cost or production functions result in models in which seasonal influences cannot be separated out in a simple fashion in the present study seasonality is treated as one of the features to be explained within the economic model thus in the particular application to non durable consumers expenditure it is argued that the allocation of expenditure over the year reflects seasonal tastes and hence seasonality in the underlying utility function the implications of this are explicitly investigated the framework for our analysis is the influential paper by hall 1978 who derives a randomwalk model for real non durable consumers expenditure when rational expectations are combined with a life cycle theory of consumption hall does not investigate seasonality at all and employs seasonally adjusted values in his empirical analysis although subsequent us authors have examined many aspects of this theory the type of data used has rarely been

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

keeping up with the ageing joneses in this paper we consider the implications of relative consumption externalities in the blanchard yaari overlapping generations framework unlike most of the macroeconomic literature that studies this question the differences between agents and thus in their relative position persist in equilibrium we show in our fixed employment model that consumption externalities lower consumption and the capital stock in long run equilibrium a result in sharp contrast to the recent findings of liu and turnovsky 2005 in addition we solve for the intertemporal path of the economy to investigate its response to demographic shocks specifically to permanent changes in the birth and death rates

remittances and inequality in this paper the authors propose a framework and develop techniques for analyzing the impact of migrant remittances on the distribution of rural income by size and subsequently its impact on rural welfare household data are used to assign numerical coefficients to the impact of net remittances from both internal and international migrants on income inequality in 2 mexican villages the impact of migrant remittances on the distribution of rural income by size depends critically on the degree to which migration opportunities become diffused through the village population on the returns to human capital embodied in remittances and on the distribution of potentially remittance enhancing skills and education across village households our empirical findings demonstrate that in a village where many households contain internal migrants but few have experience migrating to the u s remittances from mexico to us migrants have an unequalizing impact on village incomes while remittances from internal migrants have a favorable effect on the village income distribution by contrast in a village with a long historyh of sending migrants to the us and hence a more ready access to us labor markets us to mexico remittances have an equalizing impact on incomes remittances from internal migrants in this village however embody a large human capital component and are highly correlated with household income hence internal migrant remittances account for a comparatively large share of inequalities in the 2nd village the overall effect of remittances on income inequality is favorable in both villages migration type migration stage and interaction terms all appear to play a role in this context the effects of small changes in remittances upon income inequality and rural welfare in the 2 villages are explored and some implications for migration and rural development policy are considered authors modified

almost stochastic dominance and stocks for the long run abstract the geometric mean argument and the recently developed almost stochastic dominance criterion have been employed to make the case for stocks for the long run we show that almost stochastic dominance and the geometric mean argument do not necessarily support long run investment in equities in fact for standard preferences bonds may be preferred to stocks for the long run while stocks are preferred for shorter horizons

economics and the self organisation approach alfred marshall revisited the economics of alfred marshall is reassessed in the light of new developments in the natural sciences whereby a nonequilibrium thermodynamic approach is adopted to analyze self organization in dissipative structures it is argued that there is a clear correspondence between marshall s treatment of time irreversibility and this modern approach particularly when the latter is set in an informational context thus his principles is viewed as a very useful starting point in adapting the self organization approach for application in economics the main features of such a post marshallian approach to economics are discussed and compared with the mechanical approach of neoclassicism copyright 1993 by royal economic society

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

the use of risk and return models for multiattribute decisions with decomposable utilities normatively oriented approaches to decision making under uncertainty occupy a major portion of the literature of decision analysis among the proposed approaches the von neumann morgenstern expected utility eu theory has been the most prominent model of rational choice despite some controversies that surround this model with respect to its descriptive ability as well as the plausibility of utility assessment in actual decision situations 6 10 although most applications of the eu model have been concerned with decisions involving monetary outcomes its scope is not limited to any particular class of conse quences the basic appeal of the model is attributable partly to its generality in this regard and more importantly to the apparent reasonableness of its preferentialaxioms in the context of decisions with monetary outcomes several alternatives to the eu model have been proposed including the mean variance and mean semivariance models that have found popularity in the economies and finance litera ture see 4 8 and 9 in contrast to the eu theory where a decision maker s preferences among uncertain prospects are assumed given preferences in these models are formulated in terms of two attributes that are presumed to character ize all available choices in the mean semivariance model for example uncer tain prospects are viewed entirely in terms of their means and below target semivariances a generalization of this model was examined by fishburn 2 who showed that the general mean risk model exhibits a certain degree of compatibility with the eu model more recently holthausen 5 showed that this compatibility is significantly enhanced when mean is replaced by a return measure de fined as a probability weighted function of above target deviations specifically holthausen proved that this model yields the same preferences as the eu model whenever the expected utility function has the form

optimal emissions tax rates under habit formation and social comparisons abstract the existing climate models ignore the behavioral anomalies of households and conclude that the optimal environmental tax rate should comove with business cycles however this assumption has received extensive criticism recently to this end this paper studies the optimal emissions tax rate when households are bounded rational in particular we calculate the optimal climate policy in a dynamic stochastic general equilibrium dsge model that features households with habit formation internal habits and social comparisons external habits compared to the benchmark model without consumption externality the social comparisons model amplifies consumption volatility but produces a similar response of pollutant emissions in the presence of the three types of economic shocks considered in contrast the habit formation model decreases the volatility of both consumption and pollutant emissions in contrast to the previous result that the optimal emissions tax rate should be procyclical we find that the social comparisons model largely mitigates the procyclicality of optimal emissions tax rates and the optimal emissions tax rates under the habit formation model remain constant in response to all the economic shocks considered

jealousy and underconsumption in a one sector model with wealth preference abstract the present paper examines the effects of consumption externalities on economic performance in a one sector model with wealth preference the presence of the wealth preference generates a wealth effect in consumption growth which plays a crucial role for consumption externalities to have impacts on the economy our main findings are i regardless of the assumption of inelastic labor supply the distortionary effect of consumption externalities stays in the long run ii the income tax as well as the consumption tax can modify the efficiency and iii the numerical simulations supplement theoretical findings

external effects in u s procyclical productivity abstract in this paper we highlight a new dimension of the aggregate procyclical productivity phenomenon we show that estimates of the degree of returns to scale are larger for manufacturing as a whole than for two digit industries since this difference must be due to factors that are only internalized at the most aggregate level we term it an external effect this result rules out explanations based on own input variation such as true increasing returns and unmeasured factor utilization tied to own activity as the sole explanations for aggregate procyclical productivity we explore several potential explanations of this external effect

habit formation in consumption and its implications for monetary policy models this paper explores a monetary policy model with habit formation for consumers in which consumers utility depends in part on current consumption relative to past consumption the empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous condence largely because the habit formation model captures the gradual hump shaped response of real spending to various shocks the paper then embeds the habit consumption specication in a monetary policy model and nds that the responses of both spending and inflation to monetary policy actions are signicantly improved by this modication jel d12 e52 e43

stochastic dominance vs mean variance portfolio analysis an empirical evaluation most of the work in portfolio theory in the past decade has been based on the principle of utility maximization where either the investor s utility function is assumed to be a second degree polynomial with a positive first derivative and a negative second derivative or the probability functions are assumed to be normal if at least one of these conditions holds it can be shown that choosing among risky assets on the basis of their mean and variance only is consistent with the von neumann morgenstern utility maximization model thus given the above assumptions the incorporation of higher moments of a distribution and the adoption of alternative approaches to portfolio selection have largely been ignored in favor of the more familiar mean variance approaches

scale congestion and growth this paper explores the relationship between aggregate and relative congestion returns to scale and economic growth aggregate congestion reduces the effective productivity of capital relative congestion reduces the effective productivity of labour both forms of congestion adversely affect the equilibrium growth rate although their relative effects depend upon aggre gate returns to scale the two forms of congestion have contrasting effects on the transitional dynamics relative congestion retards the rate of adjustment aggregate congestion accelerates it the externalities generated by congestion and non optimal expenditure can be fully cor rected both during the transition and in steady state by a time invariant income tax the role of public expenditure as an instrument of economic growth has been a major policy issue as governments throughout the world design stimulus packages as in japan and face difficult choices to meet the emu criteria in europe empirical research investigating the impact of public investment on the productivity of private capital and output was stimulated by aschauer 1989a b who found the effects to be strongly positive the nature of public investment is however diverse in general public goods vary extensively in terms of the nature of their services spanning the range between the polar cases of pure private and pure public goods but the treatment of public expenditures in formal growth models is limited barro 1990 and futagami et al 1993 treat government expenditure as a pure pub lic good and in so doing they fail to take account of the congestion typically associated with public goods however as barro and sala i martin 1992 have argued almost all public services are characterized by some degree of congestion so that the pure public good should be viewed as only a bench mark these considerations suggest that congestion is an important consider ation in assessing the effect of public expenditures on economic growth attempts to analyse the effects of congestion on economic growth have been limited in various dimensions drawing on the public goods literature edwards 1990 proposes a number of specifications of congestion two notions particularly relevant in a growth context are relative congestion and aggregate absolute congestion the former specifies the level of services derived by an individual from the provision of a public good in terms of the usage of his individual capital stock relative to the aggregate capital stock aggregate congestion sometimes called crowding indicates how aggregate usage of the service alone influences the services received by an individual 2 existing applications of congestion to growth theory introduce it into ak models see barro and sala i martin 1992 1995 glomm and ravikumar 1994 1997 and turnovsky 1996 1997 however the ak model features two limitations that restrict its flexibility to examine the relationship between congestion and growth first as solow 1994 pointed out sustained ongoing

sectoral change catching up and slowing down oecd post war economic growth revisited abstract regression analysis of gdp growth since 1950 on pooled oecd cross sections indicates uniform technological catch up in all sectors but lower marginal labour productivity in agriculture the decline in opportunities to reallocate labour explains some of the post 1973 productivity slowdown

returns to scale in canadian manufacturing an interprovincial comparison this paper measures the degree of returns to scale at the two digit standard industrial classification sic in canadian manufacturing employing both gross output and value added data using a model developed by r j caballero and r k lyons the study distinguishes between internal and external returns to scale the caballero and lyons model is extended by disaggregation to the provincial level in order to measure the returns to scale of geographic provincial concentration the empirical results suggest that in canada there are increasing returns that are primarily national rather than internal to the province or the industry

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

estate taxes consumption externalities and altruism we study how the introduction of consumption externalities affects the efficiency of the dynamic equilibrium in an economy displaying dynastic altruism when the bequest motive is inoperative consumption externalities affect the intertemporal margin between young and old consumption and thus modify the intertemporal path of consumption and capital the optimal tax policy that solves this intertemporal inefficiency consists of a tax on capital income and a pay as yougo social security system the later solves the overaccumulation of capital due to the inoperativeness of the bequest motive and the former solves the inefficient allocation of consumption due to consumption externalities when the bequest motive is operative consumption externalities only cause an intratemporal inefficiency that affects the allocation of consumption between the generations living in the same period but do not affect the optimality of the capital stock level this suboptimal allocation of consumption implies in turn that the path of bequest is also suboptimal the optimal tax policy in this case consists of an estate tax and a capital income tax the estate tax corrects the intratemporal inefficiency but generates an intertemporal inefficiency which is corrected by means of an appropriate capital income tax

dynamic effects in inefficiency evidence from the colombian banking sector firms face a continuous process of technological and environmental changes that requires them to make managerial decisions in a dynamic context however costs and constraints prevent firms from making instant adjustments towards optimal conditions and may cause inefficiency to persist in time we propose a dynamic inefficiency specification that captures differences in the adjustment costs among firms and non persistent effects of inefficiency heterogeneity the model is fitted to a ten year sample of colombian banks the new specification improves model fit and have effects on efficiency estimations overall colombian banks present high inefficiency persistence but important differences between institutions are found in particular merged banks present low adjustment costs that allow them to recover rapidly efficiency losses derived from merging processes

the robustness of risk return nonlinearities to the normality assumption in a recent study tinic and west 1986 empirically reexamine the risk return relationship posited by the traditional mean variance capm they find a positive nonlinear relationship between risk and return except during january when the market rewards bearing nonsystematic risk this study examines the hypothesis that nonnormality of re turn distributions may account for some of these anomalous results we compare shalit and yitzhaki s 1984 mean extended gini capm an equilibrium asset pricing relation that is independent of the form of the underlying asset distribution with the traditional capm our results indicate that the nonlinear risk return relationship and the size and january effects are robust to nonnormality of return distributions

mean gini analysis of stochastic externalities the case of groundwater contamination the mean gini approach is used to analyze stochastic externalities generated by agricultural production the model addresses the problem of groundwater pollution caused by excessive fertilizer application inherent in the mean gini approach to expected utility maximization is a two fold value the simplicity of the two parameter mean variance model and satisfaction of necessary and sufficient conditions for stochastic dominance price and quantity policy recommendations to control externalities are formulated based upon the relative assessment of uncertainty by the regulatory authority and the farmers using the gini as a measure of risk allows for the quantification of control policy measures under differentiated risk aversion and multiple sources of pollution the model shows that when producers underestimate uncertainty quota policies restricting fertilizer are more efficient than tax policies in reducing groundwater contamination

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

on relative wealth effects and the optimality of growth abstract we present a model of endogenous growth in which a desire for social status lead individuals to care about their relative wealth the growth rate of the economy is socially optimal if the status motive is sufficiently important but the presence of status seeking may also lead to excessive growth

forecasting the performance of hedge fund styles this article predicts the relative performance of hedge fund investment styles using time varying conditional stochastic dominance tests these tests allow for the construction of dynamic trading strategies based on nonparametric density forecasts of hedge fund returns during the recent financial turmoil our tests predict a superior performance for the global macro investment style compared with the other strategies of directional traders the dedicated short bias investment style is stochastically dominated by the other directional styles these results are confirmed by simple nonparametric tests constructed from realized excess returns further by utilizing a cross validation method for optimal bandwidth parameter selection we discover the factors that have predictive power regarding the density of hedge fund returns we observe that different factors have forecasting power for different regions of the returns distribution and more importantly that the fung and hsieh factors have power not only for describing the risk premium but also if appropriately exploited for density forecasting

empirical tests for stochastic dominance efficiency we derive empirical tests for the stochastic dominance efficiency of a given portfolio with respect to all possible portfolios constructed from a set of assets the tests can be computed using straightforward linear programming bootstrapping techniques and asymptotic distribution theory can approximate the sampling properties of the test results and allow for statistical inference our results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation using our tests the fama and french market portfolio is significantly inefficient relative to benchmark portfolios formed on market capitalization and book to market equity ratio

regulatory reforms and productivity an empirical analysis of the japanese electricity industry the japanese electricity industry has experienced regulatory reforms since the mid 1990s this article measures productivity in japan s steam power generation sector and examines the effect of reforms on the productivity of this industry over the period 1978 2003 we estimate the luenberger productivity indicator which is a generalization of the commonly used malmquist productivity index using a data envelopment analysis approach factors associated with productivity change are investigated through dynamic generalized method of moments gmm estimation of panel data our empirical analysis shows that the regulatory reforms have contributed to productivity growth in the steam power generation sector in japan

regulatory reform in european banking abstract a stylized model of the role of banks in a context of imperfect financial markets where the potential for market failure exists is proposed the specificity of banking is analyzed and the need of regulation explained the study of regulatory responses highlights the importance of their associated side effects particular attention is devoted to the interaction of regulation and competition in a strategic context the effects of deregulation and european integration of financial markets on banking competition are dealt with in the proposed framework

mean gini portfolio theory and the pricing of risky assets this paper presents the mean gini mg approach to analyze risky prospects and construct optimum portfolios the proposed method has the simplicity of a mean variance model and the main features of stochastic dominance efficiency since mean gini is consistent with investor behavior under uncertainty for a wide class of probability distributions gini s mean difference is shown to be more adequate than the variance for evaluating the variability of a prospect the mg approach is then applied to capital markets and the security valuation theorem is derived as a general relationship between average return and risk this is further extended to include a degree of risk aversion that can be estimated from capital market data the analysis is concluded with the concentration ratio to allow for the classification of different securities with respect to their relative riskiness

deregulation and competition in spanish banking the spanish financial system has undergone a strong liberalization process in the last fifteen years which has accelerated recently starting from a situation of tight regulation and protection from competition the deregulation process has been reinforced by the projected integration of european financial markets and has accompanied major developments in financial markets and banking deregulation has many effects in this short note we concentrate mainly on competition in banking after reviewing the evolution of regulation section 2 and the present state of the financial system section 3 we analyze the effects of liberalization on competition section 4 and conclude with some comments on other effects and open questions

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

exploring efficiency differences over time in the spanish banking industry abstract over the last 15 years the competitive conditions under which spanish banking firms operate have become much tighter deregulation has affected both banks and savings banks allowing them to expand geographically and to choose less regulation conditioned output mixes this paper analyzes how in these circumstances banking efficiency has been affected considering two specifications of output and analyzing the dynamics of the entire distribution not only mean and standard deviation results differ depending on the output definition but they show that in general efficiency scores exhibit dynamic patterns that only two moments of the distribution hardly capture in particular regardless of the output definition considered efficiency scores were more dispersed in 1985 and more concentrated in 1995 and there were substantial changes in firms efficiency relative positions as measured by transition probability matrices in addition the multi modality of the distributions has almost disappeared at the end of the period

technical scale and allocative efficiencies in u s banking an empirical investigation a nonparametric frontier approach is used to calculate the overall technical pure technical allocative and scale efficiencies for a sample of 322 independent banks the sample was drawn from the federal deposit insurance corporation tapes on the reports of condition and reports of income call reports for the year 1986 the results indicated a low level of overall efficiency the main source of inefficiency was technical in nature rather than allocative separate efficiency frontiers were constructed to test the effect of branching however the distributions of efficiency measures for branching and non branching banks were not found to be different

jealousy and equilibrium overconsumption the idea that the happiness of an individual depends upon the consumption of others is widely viewed as an important feature of our shared social existence recent research in finance has used this idea through consumption externalities to explore asset pricing anomalies consumption externalities potentially break the link between pareto optimality and competitive equilibria and open the door for beneficial government intervention e g lars ljungqvist and harald uhlig 2000 in this paper we delineate two effects that a consumption externality may have an increase in aggregate consumption may a raise the marginal utility of individual consumption relative to leisure and or b lower an individual s utility level we refer to a as keeping up with the joneses henceforth kuj following jordi gali 1994 and we refer to b as jealousy jealousy is a distinct concept from kuj under kuj an individual derives greater utility from additional own consumption relative to leisure when others consume more at the same time higher per capita consumption holding fixed individual consumption can trigger either jealousy so that individual utility falls or admiration so that individual utility rises in section i of this paper we show that jealousy implies that the laissez faire equilibrium consumption level is greater than the optimal level whether preferences exhibit kuj is not necessary for this main result intuitively in the presence of jealousy consumption is similar to pollution overpollution exists because individuals do not take into account the cost of polluting on others not because an increase in economywide pollution makes the return to individual polluting higher similarly overconsumption exists because individuals do not take into account the negative effect of own consumption on jealous others things go in the opposite direction when individuals are admiring in section ii we consider a functional form that encompasses several existing models we show that jealousy determines the optimal tax to correct overconsumption and that kuj is mainly important for asset pricing

we are what we eat obesity income and social comparisons abstract the empirical evidence of a non monotone relation between income and obesity is not well explained we build a theoretical model combining income inequality and social comparisons to explain the link between income and obesity and study tax policy implications for fighting obesity we assume that differences in food consumption patterns between poor and wealthy households partly reflect positionality which is the concern for social status our key assumption is that positionality for low calorie food consumption is positively related to a country s wealth in this framework body weight outcomes reflect competing income and positionality effects yielding the following results we explain the link between average obesity rates and standards of living and suggest the existence of a kuznets curve for obesity in accordance with empirical evidence for cross sections of the population we explain the observed correlation between income and obesity which is positive in poor countries and negative in rich countries we find that increasing the relative cost of high calorie food is less effective at decreasing the relative weight of poor individuals in rich countries than in poor countries

some recent developments in futures hedging the use of futures contracts as a hedging instrument has been the focus of much research at the theoretical level an optimal hedge strategy is traditionally based on the expected utility maximization paradigm a simplification of this paradigm leads to the minimum variance criterion although this paradigm is quite well accepted alternative approaches have been sought at the empirical level research on futures hedging has benefited from the recent developments in the econometrics literature much research has been done on improving the estimation of the optimal hedge ratio as more is known about the statistical properties of financial time series more sophisticated estimation methods are proposed in this survey we review some recent developments in futures hedging we delineate the theoretical underpinning of various methods and discuss the econometric implementation of the methods

risk management strategies via minimax portfolio optimization recent extreme economic developments nearing a worst case scenario motivate further examination of minimax linear programming approaches for portfolio optimization risk measured as the worst case return is employed and a portfolio from maximizing returns subject to a risk threshold is constructed minimax model properties are developed and parametric analysis of the risk threshold connects this model to expected value along a continuum revealing an efficient frontier segmenting investors by risk preference divergence of minimax model results from expected value is quantified and a set of possible prior distributions expressing a degree of knightian uncertainty corresponding to risk preference determined the minimax model will maximize return with respect to one of these prior distributions providing valuable insight regarding an investor s risk attitude and decision behavior linear programming models for financial firms to assist individual investors to hedge against losses by buying insurance and a model for designing variable annuities are proposed

the relative income hypothesis abstract despite its theoretical dominance the empirical case in favor of the permanent income hypothesis is weak contrary to one of its basic implications a growing body of evidence suggests that rich households save a higher proportion of their permanent income than poor households we propose an overlapping generations economy where households care about relative consumption as a result an individual s consumption is driven by the comparison of his lifetime income and the lifetime income of his reference group a permanent income version of duesenberry s 1949 relative income hypothesis across households the savings rate increases with income while aggregate savings are independent of the income distribution

optimal taxes and the structure of preferences if optimal tax theory is to be the basis for calculating tax rates a close understanding is required of the relationship between the structure of preferences and the configuration of optimal tax rates otherwise hypotheses chosen by the econometrician for practical convenience may completely determine the results independently of measurement this paper explores the relationship between various types of separability particularly weak and implicit separability and optimal tax rates in the various models discussed in the literature the use of distance functions and the antonelli matrix provides a significant unification of previously disparate results in the final analysis optimal tax theory should be the basis for actual calculation of tax rates although recently there have been great advances in theoretical results and in our understanding of their meaning we are still some way from a working knowledge of whether uniform commodity taxes are in practice optimal or if not which commodities should be discriminated against present theoretical formulae do not yield clear cut results except in special cases and it has recently become clear that optimal rates depend crucially on the detailed structure of consumer preferences for example atkinson and stiglitz 3 show that with an optimal nonlinear income tax discriminatory commodity taxes are only necessary to the extent that individual commodities are not weakly separable from leisure more recently deaton 6 has shown that a similar result holds for what is perhaps the most interesting of the standard models that where there are many consumers and only a linear income tax and proportional commodity taxes are allowed in this case separability between goods and leisure together with linear engel curves for goods removes the need for differential commodity taxation in consequence nothing can be learned about commodity taxes from consumer demand studies in which commodity demands are explained conditionally on total expenditure and commodity prices and which assume linear engel curves all such studies require separability from leisure as a maintained hypothesis and so are consistent with uniform commodity taxation these results suggest that the prospects for meaningful empirical calculations of tax rates are bleak econometricians estimating commodity demand and labor supply equations make generous use of separability assumptions to enable estimation at all in consequence it is likely that empirically calculated tax rates based on econometric estimates of parameters will be determined in structure not by the measurements actually made but by arbitrary untested and even unconscious hypotheses chosen by the econometrician for practical convenience to remedy this situation and as a prelude to fruitful empirical work it is necessary to have a more explicit understanding of how preference structure affects optimal tax rates such is the object of this paper three different

optimal hedging with a subjective view an empirical bayesian approach the standard optimal hedging model has been the preferred theoretical model of normative hedging behavior in empirical applications the model is often implemented with the parameter certainty equivalent pce procedure however the pce procedure completely ignores parameter estimation risk and subjective views we develop an empirical bayesian optimal hedging model that not only effectively accommodates parameter estimation risk but also provides hedgers with a theoretically intuitive yet quantitatively rigorous framework to blend their subjective views and a marketwide or firmwide consensus in determining optimal hedging positions ratios

migration growth distribution and welfare abstract in this note we argue that the inverted u curve of inequality is a technical derivative of the attributes of the conventional indices of inequality that these indices are inadequate measures of the change in welfare associated with the typical distributional consequences of rural to urban migration and that an explicit welfare judgment with respect to this process should and can be made

evaluating the cost efficiency of the italian banking system what can be learned from the joint application of parametric and non parametric techniques abstract research on bank efficiency has developed in two separate streams econometric studies and data envelopment analysis a linear programming technique these two branches of literature have developed quickly but separately in this paper these two approaches have been tested on a common panel of 270 italian banks and this has suggested the following i econometric and linear programming results do not differ dramatically when based on the same data and conceptual framework ii when differences arise they can be explained by going back to the intrinsic features of the models moreover some findings on italian banks may be of interest also to the international reader i efficiency scores show a high variance ii the banking system is split in two between northern and southern banks iii there is a direct rather than inverse relationship between productive efficiency and asset quality iv the efficiency of italian banks did not increase over the period 1988 1992

diversification consistent data envelopment analysis with general deviation measures abstract we propose new efficiency tests which are based on traditional dea models and take into account portfolio diversification the goal is to identify the investment opportunities that perform well without specifying our attitude to risk we use general deviation measures as the inputs and return measures as the outputs we discuss the choice of the set of investment opportunities including portfolios with limited number of assets we compare the optimal values efficiency scores of all proposed tests leading to the relations between the sets of efficient opportunities strength of the tests is then discussed we test the efficiency of 25 world financial indices using new dea models with cvar deviation measures

technical progress inefficiency and productivity change in u s banking 1984 1993 studies often find that on average u s commercial banks are quite inefficient and the authors find that banks became more technically inefficient between 1984 and 1993 from a new decomposition of the malmquist productivity index into changes in pure technical and scale efficiency as well as both pure technical changes and changes in scale of technology they find that much of the inefficiency increase can be attributed to the general failure of banks to adopt technological improvements made by a few banks that advanced the efficient frontier small banks experienced especially large decreases in both efficiency and productivity

malmquist productivity indexes and fisher ideal indexes comment fare and grosskopf i992 henceforth abbreviated as fg showed that under some conditions the productivity index defined as the geometric mean of two input based malmquist productivity indexes is equal to the quotient of the fisher input quantity index and the fisher output quantity index both fisher indices can be computed from observed prices and quantities these conditions appear to be so strong that they will almost certainly never be fulfilled in practice this is shown by a careful inspection of fg s proof however under slightly milder but more plausible conditions it can be shown that the quotient of the fisher input index and the fisher output index is a reasonable approximation of the productivity index consider a firm at two time periods t o i with different technologies which are modelled by the input correspondences lt y x x can produce y x c rn yce rm it is assumed that the sets lt y are closed and convex and that inputs are strongly disposable the vectors x yt wt pt t o i denote observed inputs observed outputs observed input prices and observed output prices respectively the productivity index is defined as

transitional dynamics and economic growth in the neoclassical model neoclassical transitional dynamics are a central element of standard macroeconomic theory quantitative experiments with the fixed savings rate models of the 1960s showed lengthy transitions thus potentially rationalizing sustained differences in growth rates across countries the authors investigate quantitative transitional dynamics in various neoclassical models with intertemporally optimizing households lengthy transitions occur only with very low intertemporal substitution generally when one tries to explain sustained economic growth with transitional dynamics there are extremely counterfactual implications these result from the fact that implied marginal products are extraordinarily high in the early stages of development copyright 1993 by american economic association

the gini coefficient structure and its application for the evaluation of regional balance development in china abstract the evaluation of balanced regional development should consider not only the economic and ecological benefits but also regional differences a nongrouped gini index is constructed based on a continuous distribution function to evaluate the regionally balanced development of the economy and the environment and the applicability of the method is analyzed given the data characteristics combining the difference in the regional economic base and ecological carrying capacity a multigroup overall gini index mgo gini with regional spatial heterogeneity is further developed along with its decomposition structure this work evaluates and analyses the regional balance in china s development with regard to regional industrial output energy consumption and pollution emissions from 2000 to 2015 using both the nongrouped and the mgo gini the results show that the gini index constructed in this paper can be well adapted to fat tailed data which is a typical feature of china s regional economic and ecological benefits data the regionally balanced development of china does not obviously promote industrial output whereas the regional balance of energy consumption shows the same upward trend when evaluated with both the nongrouped and the mgo gini from 2000 to 2015 in recent years after a period of improvement the regional balance of pollution emissions has experienced a downward trend there is disparity in cleaner production efficiency between regions of china as well as an upward trend in this disparity in recent years china s interregional balance has been enhanced in terms of energy consumption and pollution emissions considering regional spatial heterogeneity whereas the balance of economic output has been further reduced the balance in regional energy consumption plays a supporting role in balanced development among regions the imbalance within developed areas is the main source of regional economic output and energy consumption imbalances and the imbalance in developing areas is the main source of the regional pollution imbalance in china

profit margin hedging some extension economists and others recommend profit margin hedging as a way to choose the timing of crop sales however the theory behind this strategy recommendation is not well developed this article determines the producer s utility function and price processes where profit margin hedging is optimal profit margin hedging is shown to be an optimal strategy under a highly restricted target utility function even in an efficient market profit margin hedging is profitable if prices are mean reverting copyright 2010 oxford university press

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

optimal tax policy in the presence of productive consumption and leisure externalities abstract this paper presents the optimal tax policy in an economy featuring consumption production and leisure externalities this extends prior models that only consider consumption and production externalities the immediate consequence is labor income should be taxed subsidized if the leisure externality is positive negative in addition numerical simulations show that in the presence of positive production externalities and irrespective of the sign of consumption externalities an increase in the importance of the leisure externality reduces the distortion generated by consumption and production externalities this effect is reversed if production externalities are negative

consumption externalities production externalities and efficient capital accumulation under time non separable preferences the effects of consumption and production externalities on economic performance under time non separable preferences are examined both theoretically and numerically we show that a consumption externality alone has long run distortionary effects if and only if labor is supplied elastically with fixed labor supply it has only transitional distortionary effects production externalities always generate long run distortions irrespective of labor supply the optimal tax structure to correct for the distortions is characterized we compare the implications of this model with those obtained when the consumption externality is contemporaneous while some of the long run effects are robust there are also important qualitative and quantitative differences particularly along transitional paths

incomplete information income redistribution and risk averse median voter behavior this paper extends the median voter model to include risk aversion an expected utility maximizing median voter with an aversion to risk may behave differently than a median voter who is certain a referendum on income redistribution from the top of the distribution to the bottom which fails when the median voter is certain may pass in the extended median voter model economic inefficiencies and the net losses accompanying redistribution are shown to play a pivotal role in determining the behavior of the risk averse median voter the model is illustrated using a one percent demogrant redistribution

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

marginal conditional stochastic dominance this paper introduces the concept of marginal conditional stochastic dominance mcsd which states the conditions under which all risk averse individuals when presented with a given portfolio prefer to increase the share of one risky asset over that of another mcsd rules also answer the question of whether all risk averse individuals include a new asset in their portfolio when assets returns are correlated mcsd criteria are expressed in terms of the probability distributions of the assets and of the underlying portfolio an empirical application of mcsd is provided using stocks traded on the new york stock exchange mcsd rules are used to show that in the long run one cannot assert that the market portfolio is inefficient

a non parametric analysis of productivity the case of u s and japanese manufacturing a nonparametric analysis of technology technical change and productivity is presented in the context of cost minimizing behavior a number of nonparametric tests concerning the existence and nature of technical change are applied to u s and japanese manufacturing data nonparametric measures of technical change are presented copyright 1990 by american economic association

efficiency and technical progress sources of convergence in the spanish regions the paper analyses the contribution of efficiency as a mechanism of labour productivity convergence taking as the unit of analysis the spanish regions in the period 1964 1993 using the stochastic frontier approach a translogarithmic production function is estimated for the different sectors of the spanish regional economy demonstrating on this basis the existence of substantial differences in efficiency between sectors as well as between regions with regard to convergence the results obtained indicate that at aggregate level the convergence observed in labour productivity is explained by the faster growth of the capital labour ratio of the initially poorer regions and the contribution of technical change and the efficiency hence by the convergence of tfp however the information by sectors shows different results thus on the one hand the importance of the convergence in production per employee is seen in all sectors except agriculture and on the other it is observed that technical change is a

sources of productivity growth using the fare primont decomposition an empirical application to the irish beef sector several competing methodologies for tfp estimation have been developed in the past decades a popular approach in the literature is index number computation the most widely implemented tfp indices

optimal tax debt and expenditure policies in a growing economy abstract this paper employs an endogenous growth model to analyze the role of a consumption tax in enhancing growth and welfare provided government expenditure impacts directly on the decisions of private agents two fiscal instruments are necessary to replicate the first best optimum the tradeoff between consumption and income taxes to achieve this outcome is discussed and shown to depend upon the degree of congestion associated with the public good and the level of government expenditure relative to its social optimum in general the analysis suggests a potentially important role for a consumption tax as part of an overall optimal fiscal package

the evolution and main determinants of productivity in brazilian electricity distribution 1998 2005 an empirical analysis abstract this paper estimates changes in the productivity of the brazilian electricity distribution sector using data envelopment analysis dea on a panel of 18 firms from 1998 to 2005 the study decomposes the productivity change of these distribution firms in terms of technical efficiency scale efficiency and technical progress this exercise aims to help the understanding of the main determinants of the evolution of productivity focusing its relationship with the restructuring process implemented in the 1990s tfp index records a yearly positive growth rate of 1 3 in the whole period under analysis for all firms technical change was the main component behind this evolution with an average growth of 2 1 per year while technical efficiency presented a yearly negative performance of 0 8 the results prove that in general terms the incentives generated in the reform process do not seem to have led the firms to behave in a more efficient manner

mean risk analysis with enhanced behavioral content abstract we study a mean risk model derived from a behavioral theory of disappointment with multiple reference points one distinguishing feature of the risk measure is that it is based on mutual deviations of outcomes not deviations from a specific target we prove necessary and sufficient conditions for strict first and second order stochastic dominance and show that the model is in addition a convex risk measure the model allows for richer and behaviorally more plausible risk preference patterns than competing models with equal degrees of freedom including expected utility eu mean variance m v mean gini m g and models based on non additive probability weighting such as dual theory dt in asset allocation the model allows a decision maker to abstain from diversifying in a positive expected value risky asset if its performance does not meet a certain threshold and gradually invest beyond this threshold which appears more acceptable than the extreme solutions provided by either eu and m v always diversify or dt and m g always plunge in asset trading the model provides no trade intervals like dt and m g in some but not all situations an illustrative application to portfolio selection is presented the model can provide an improved criterion for mean risk analysis by injecting a new level of behavioral realism and flexibility while maintaining key normative properties