the who and why of lottery empirical highlights from the seminal economic literature lotteries operate today in many countries around the world this type of gambling is usually run by governments and is sometimes described as regressive lottery is an unfair bet so explaining the purchase of lottery tickets by risk averse consumers has been a challenge for economic theory lotteries can be analysed from either of two economic perspectives as a source of public revenue or as a consumer commodity in this paper the state of economic research on lotteries is reviewed focusing on its main empirical findings

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

honey the currency union effect on trade hasn t blown up as the value of real bilateral trade between countries i and j at time t cu is a dummy variable which is unity if i and j sharethe same currency at time t z is a vector of controls given by an augmentedgravity model c are the associate nuisance coefficients and is a hopefully well behaved residual my chief finding was that was large and robust mypoint estimate was 1 2 implying that currency union is associated with atripling since exp 1 2 3 of trade in his paper in this issue volker nitsch provides three pieces of value added first he finds and corrects a number of data errors in my original data set second he shows that adding extra controls to my empirical setup disaggregating bycurrency unions and adjusting for missing data affects the results he concludesthat the effect of currency union on trade is smaller than my original estimates has not been reliably estimated and may be zero

buying a dream alternative models of demand for lotto existing lotto demand models utilize effective price computed as the face value of a ticket minus the expected value of prize money per ticket as their primary explanatory variable by contrast this article proposes a key role for consumption benefit or fun in the demand for gambling in general and lotto demand in particular it develops an alternative model of lotto demand that focuses on the maximum possible prize when this is tested against the traditional model using data from the u k national lottery we find that jackpot considerations exert an influence over and above that of variations in effective price

economic shocks and lottery sales an examination of maine state lottery sales most u s states earn significant amount of revenues from lottery sales however they are also criticized for promoting the lotteries because they have been seen as taking advantage of poor popula

testing for efficiency in lotto markets state sponsored lotto games because they are pari mutuel and because jackpots with no winner are rolled over into the next drawing present an excellent opportunity to test for market efficiency using data from massachusetts kentucky and ohio we investigate bettors responses and test for weak form efficiency lotto bets do not have positive net expected returns thus weak form efficiency exists to evaluate strong form efficiency we utilize the concept of a rational expectations equilibrium we find that in general lotto bettors decisions to play generate a level of sales that conform to their original forecasts of expected value

currency unions and trade the effect is large the impact of a common currency on trade can be grossly mismeasured if countries that belong to currency unions are systematically different from those that do not and if the relationship between trade and its observable determinants is complex i argue that such complications are plausible and likely to distort the empirical results of a recent economic policy paper by andrew rose issue 30 2000 pp 7 45 using techniques designed to be robust in this situation i find that the effects of common currency on international trade are considerably less dramatic and much less precisely estimated copyright cepr ces msh 2001

on the optimal design of lotteries is globally concave since thearguments against the plausibility of a convex utility function advanced in the previous sectionin relation to eu theory apply with equal force to the rdeu model by contrast as is shownbelow these arguments do not apply to risk seeking behavior associated with the possibility that

the peculiar scale economies of lotto the best selling lottery game in the united states is lotto a parimutuel game of long odds and large jackpots unlike in the other popular lottery games numbers and instant there is a strong tendency for per capita lotto sales to increase with the size of the population base the fact that the jackpot also tends to increase with population size is not a complete explanation since the probability of winning tends to be inversely proportional to state population our explanation for why the games are more successful in large states is that players tend to judge the likelihood of winning based on the frequency with which someone wins then a larger state can offer a game at longer odds but the same perceived probability of winning as a smaller state this abstract was borrowed from another version of this item

on the relationships between co2 emissions energy consumption and income the importance of time variation abstract the environment that governs the relationships between energy consumption carbon dioxide co2 emissions and gross domestic product gdp in the g7 countries changes over time due to variations in economic growth regulatory policy and technology using a novel approach that may detect causalities when the time constant hypothesis is rejected we find significant time varying granger causalities among the variables under consideration there is bidirectional causality between gdp and energy consumption for japan unidirectional causality running from gdp to energy consumption for italy and unidirectional causality running from energy consumption to gdp for the resource country canada moreover the results also show a bidirectional time varying causality between energy consumption and co2 emissions for the united states and causality from energy consumption to co2 emissions for france finally while we find significant time varying causalities running from gdp to co2 emissions for italy and japan the finding of inverted n shaped curves italy and japan lends no support to the traditional environmental kuznets curve ekc hypothesis for these countries it implies that environmental policy and economic growth should go hand in hand other policy implications of the empirical results have been proposed

understanding carbon lock in abstract this paper narrative argues that industrial economies have been locked into fossil fuel based energy systems through a process of technological and institutional co evolution driven by path dependent increasing returns to scale it is asserted that this condition termed carbon lock in creates persistent market and policy failures that can inhibit the diffusion of carbon saving technologies despite their apparent environmental and economic advantages the notion of a techno institutional complex is introduced to capture the idea that lock in occurs through combined interactions among technological systems and governing institutions while carbon lock in provides a conceptual basis for understanding macro level barriers to the diffusion of carbon saving technologies it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration the question of escaping carbon lock in is left for a future paper

some remarks on quiggin s anticipated utility abstract this remark proves that quiggin s anticipated utility function may solve the allais paradox and the common ratio effect for some generalizations of these it is needed to assume that the decision weight function is concave

what is the optimal design for lottery linked savings programmes in this article we determine the optimal design of lottery linked savings lls programmes lls vehicles such as lottery bonds are financial instruments that preserve depositors principal but provide randomized variable returns to these depositors through periodic lottery drawings in lieu of the regular coupon payments traditionally received by bondholders this type of asset is very popular in europe we note that the framing of lls instruments is linked to their popularity and we attempt to elucidate that link and thereby determine the optimal structure of payments for lls programmes our goal is to frame lls programmes in a manner that both maximizes their investors satisfaction and preserves their ability to serve as inexpensive sources of capital for their issuers we demonstrate that the optimal pay off structure is characterized by a high level of skewness as investors are willing to accept a decrease in the small and medium prizes of the lottery in exchange for an increase in the grand pri

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

on lottery sales jackpot sizes and irrationality a cautionary note jackpot size has a greater impact than expected price as a determinant of lottery sales suggesting that agents exhibit irrational lotto mania we demonstrate why this conclusion is problematical by considering the reduced form obtained if agents are described by cumulative prospect theory

the environmental kuznets curve ekc theory part a concept causes and the co2 emissions case abstract the main purpose of this study is to capture the main features of the environmental kuznets curve ekc concept according to the ekc theory the process of economic growth is expected eventually to limit the environmental degradation created in the early stages of development the ekc concept leads many researchers from the early 1990s to assume that each economy should focus on its growth and any environmental problems will be eventually eliminated by the process of economic growth several studies attempt to test empirically the ekc hypothesis using data on many countries and examining various types of environmental degradation while other studies examine the underlying factors that may drive such a relationship this article reviews the evolution of the ekc concept and the possible causes of an ekc pattern like the distribution of income the international trade pollution haven hypothesis structural changes technical progress and improvements in energy efficiency institutions and governance and consumer preferences as co2 emissions are a pollutant with global effects several studies deal with the possible ekc pattern for co2 emissions and these studies are discussed separately the various critiques on the ekc concept are reviewed in the second article of this work

should european gamblers play lotto in the usa abstract any jackpot building game is designed to have a negative expected return for the gambler but it can be profitable under certain circumstances previous studies have shown that the purchase of a single ticket of us american state lotteries is sometimes a gamble with a positive expected value lottery winnings are not taxed in europe which suggests that the profitability of european games may be even higher we present an exact formula for the calculation of the expected value of a single lotto ticket and find european lottery drawings to be far less profitable for the gambler compared to the us american lotto market those us lotteries that generate profitable drawings are not characterized by higher redistribution rates or by their specific rules but by the purchasing behavior of the gamblers these gamblers buy far fewer tickets per capita and they barely react to increasing jackpots even though the jackpots are large enough to cause positive expected winnings

swedish co2 emissions 1900 2010 an exploratory note abstract this paper projects swedish co 2 emissions during the period 2000 2010 based on data covering 1900 1999 swedish climate policy is currently based on the assumption that carbon emissions will increase ceteris paribus by 5 15 relative to the 1990 level this forecast has motivated a number of policy measures including carbon taxes subsidies and an information package we find however that co 2 emissions may well be lower in the future this outcome is broadly consistent with the literature on the environmental kuznets curve which portrays the relationship between emissions and gdp the key contribution of this paper is that our analysis is based on a long time series current literature is invariably based on short panel data sets while we study a single country through several phases of development our analysis also sheds some light on the key importance played by nuclear power for carbon emission projections

detrending stylized facts and the business cycle the stylized facts of macroeconomic time series can be presented by fitting structural time series models within this framework we analyse the consequences of the widely used detrending technique popularised by hodrick and prescott 1980 it is shown that mechanical detrending based on the hodrick prescott filter can lead investigators to report spurious cyclical behaviour and this point is illustrated with empirical examples structural time series models also allow investigators to deal explicitly with seasonal and irregular movements that may distort estimated cyclical components finally the structural framework provides a basis for exposing the limitations of arima methodology and models based on a deterministic trend with a single break

information and preference reversals in lotteries several approaches have been proposed for evaluating information in expected utility theory among the most popular approaches are the expected utility increase the selling price and the buying price while the expected utility increase and the selling price always agree in ranking information alternatives hazen and sounderpandian 11 have demonstrated that the buying price may not always agree with the other two that is in some cases where the expected utility increase would value information a more highly than information b the buying price may reverse these preferences in this paper we discuss the conditions under which all these approaches agree in a generic decision environment where the decision maker may choose to acquire arbitrary information bundles

efficiency and profitability in exotic bets the efficiency and profitability of exotic racetrack bets such as exactas and daily doubles are examined efficiency is understood to mean that above average returns cannot be made in the long run once risk is appropriately controlled for the markets in question are found not to be efficient the inefficiencies however are insufficient to permit simple strategies to show a consistent profit some evidence of smart money exists in that holders of inside information may bet on exactas rather than equivalent standard bets in order to avoid signaling their actions to the betting public copyright 1987 by the review of economic studies limited

fiscal foresight and information flows news or foresight about future economic fundamentals can create rational expectations equilibria with non fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react using tax policies as a leading example of foresight simple theory makes transparent the economic behavior and information structures that generate non fundamental equilibria econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes biases are quantitatively important when two canonical theoretical models are taken as data generating processes both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non uniqueness problem endemic to moving average representations

lotto fever do lottery players act rationally around large jackpots abstract lotto fever occurs when an increase in ticket sales reduces the expected value of a lottery ticket despite a higher jackpot an examination of 17 538 lotto drawings in the united states finds that examples of lotto fever are exceedingly rare

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

the environmental kuznets curve ekc theory part b critical issues according to the environmental kuznets curve ekc theory the process of economic growth is expected to limit the environmental degradation created in the early stages of development the first article of this study reviews the empirical studies examining various factors other than income that may lead to an ekc pattern the current article reviews in the first part the major critiques on the ekc speculation which relate to the following issues the normal distribution of world income the feedback from environmental degradation to economic growth the characteristics of the pollutant in question various econometric issues the evolution of consumption when income rises and the assumption about a common developmental pattern in all countries the second part discusses additional matters reported indirectly in the literature and or must be further examined there are doubts whether the gdp series captures the transition of production to the three productive sectors in empirical estimations and whether services are less polluting compared to industry activities finally the original kuznets theory which laid the groundwork for the ekc concept does not seem to solve income inequality problems

institutions in international relations understanding the effects of the gatt and the wto on world trade the general agreement on tariffs and trade gatt and the world trade organization wto have been touted as premier examples of international institutions but few studies have offered empirical proof this article comprehensively evaluates the effects of the gatt wto and other trade agreements since world war ii our analysis is organized around two factors institutional standing and institutional embeddedness we show that many countries had rights and obligations or institutional standing in the gatt wto even though they were not formal members of the agreement we also expand the analysis to include a range of other commercial agreements that were embedded with the gatt wto using data on dyadic trade since 1946 we demonstrate that the gatt wto substantially increased trade for countries with institutional standing and that other embedded agreements had similarly positive effects moreover our evidence suggests that international trade agreements have complemented rather than undercut each other an earlier version of this article was presented at the 99th annual meeting of the american political science association philadelphia august 28 31 2003 we thank tim buthe joanne gowa miles kahler andrew rose arthur stein richard steinberg and seminar participants at stanford university the university of chicago pipes the university of california los angeles the university of california san diego and the university of virginia for many helpful comments we especially thank claire adida ashley conner moonhawk kim erin krampetz james morrison mike nardis natan sachs rachel rubinfeld and jessica weeks for excellent research assistance we are grateful for financial support from the national science foundation career grant ses 0548285 to tomz the stanford center for international development and the vice provost for undergraduate education at stanford

optimal lottery design for public financing this article develops a model of optimal lottery design for public financing on the assumption that economic agents view buying lottery tickets as a form of entertainment given that lotteries are optimally designed it offers two findings 1 the fundraising potential of a lottery is independent of its type specifically of whether it is a fixed prize type or a pari mutuel and 2 the ratio of the optimal winning prize amount in each prize class to total lottery sales is equalised to the elasticity of demand for lottery ticket purchases with respect to the winning prize in each prize class

risk aversion in the theory of expected utility with rank dependent probabilities expected utility with rank dependent probability theory is a model of decision making under risk where the preference relations on the set of probability distributions is represented by the mathematical expectation of a utility function with respect to a transformation of the probability distributions on the set of outcomes this paper defines based on g teaux differentiability measures of risk aversion for such preferences which characterize the relation more risk averse and applies these measures to the analysis of unconditional and conditional portfolio choice problems

the impact of the economic crisis and policy actions on ghg emissions from road transport in spain abstract road traffic is the greatest contributor to the carbon footprint of the transport sector and reducing it has become one of the main targets of sustainable transport policies an analysis of the main factors influencing greenhouse gas ghg emissions is essential for designing new energy and environmentally efficient strategies for the road transport this paper addresses this need by i identifying factors which influence the carbon footprint including traffic activity fuel economy and socioeconomic development and ii proposing a methodological framework which uses modified laspeyres index decomposition to analyze the effect of important drivers on the changes in emissions of road transport in spain during the period from 1990 to 2010 the results demonstrate that the country s economic growth has been closely linked to the rise in ghg emissions the innovative contribution of this paper is the special analysis of the changes in mobility patterns and ghg emissions during the economic crisis when for the first time spanish road traffic emissions decreased the reduction of road transport and improved energy efficiency has been powerful contributors to this decrease demonstrating the effectiveness of energy saving measures on the basis of this analysis several tailored policy recommendations have been suggested for future implementation

impact of the economic recession on the european power sector s co2 emissions abstract this paper investigates the impact of the economic recession on co 2 emissions in the european power sector during the years 2008 and 2009 three main determinants of the power sector s emissions are identified the demand for electricity the co 2 price and fuel prices a counterfactual scenario has been set up for each of these i e what these parameters would have been if not affected by the recession a simulation model of the european power sector is then employed comparing a historical reference simulation taking the parameters as actually occurred with the counterfactual scenarios the lower electricity demand due to the recession is shown to have by far the largest impact accounting for an emission reduction of about 175 mton the lower co 2 price due to the recession resulted in an increase in emissions by about 30 mton the impact of fuel prices is more difficult to retrieve an indicative reduction of about 17 mton is obtained mainly as a consequence of the low gas prices in 2009 the simulated combined impact of the parameters results in an emission reduction of about 150 mton in the european power sector over the years 2008 and 2009 as a consequence of the recession

the long run decoupling of emissions and output evidence from the largest emitters abstract for the world s 20 largest emitters we use a simple trend cycle decomposition to provide evidence of decoupling between greenhouse gas emissions and output in richer nations particularly in european countries but not yet in emerging markets if consumption based emissions measures that account for countries net emissions embodied in cross border trade are used the evidence for decoupling in the richer economies gets weaker countries with underlying policy frameworks more supportive of renewable energy and climate change mitigation efforts tend to show greater decoupling between trend emissions and trend gdp and for both production and consumption based emissions the relationship between trend emissions and trend gdp has also become much weaker in the last two decades than in preceding decades

are labour markets in the new member states sufficiently flexible for emu abstract new member states nms coming from central planning are often advised against early euro adoption because of their rigid labour markets but are labour markets so rigid in these countries we argue in this paper that this is not the case labour market institutions are no more rigid than among current emu members whilst wage bargaining institutions are actually better equipped for microeconomic wage flexibility than in the eu 15 nms also achieved substantial reallocation of jobs and workers in the transition to markets display relatively large job turnover rates and are reducing their regional mismatch the view that nms have rigid labour markets is fuelled by the low job content of growth in the region but there is evidence that the latter is related to productivity enhancing job destruction in the aftermath of prolonged labour hoarding reduced form employment equations estimated in this paper also suggest that tight fiscal policies rather than being harmful to job creation may actually improve the employment performance of the region our interpretation of this result is that loose fiscal policies weaken the confidence of investors and crowd out private employment growth through generous pay rises to civil servants

optimism and pessimism in games this paper considers the impact of ambiguity in strategic situations it extends the earlier literature by allowing for optimistic responses to ambiguity ambiguity is modelled by ceu preferences we propose a new solution concept for players who may express ambiguitypreference then we study comparative statics of changes in ambiguity attitude in games with strategic complements this gives a precise statement of the impact of ambiguity on economic behaviour

crises and emissions new empirical evidence from a large sample abstract in this paper we empirically assess by means of the local projection method the impact of different types of financial crises on a variety of pollutant emissions categories for a sample of 86 countries between 1980 and 2012 we find that financial crises in general lead to a fall in co2 and methane emissions when hit by a debt crisis a country experiences a rise in emissions stemming from either energy related activities or industrial processes during periods of slack financial crises in general had a positive impact on both methane and nitrous oxide emissions if a financial crisis hit an economy when it was engaging in contractionary fiscal policies this led to a negative response of co2 and production based emissions