endogenous lifetime and economic growth abstract endogenous mortality is introduced in a two period overlapping generations model probability of surviving from the first period to the next depends upon health capital that is augmented through public investment high mortality societies do not grow fast since shorter lifespans discourage savings development traps are possible productivity differences across nations result in persistent differences in capital output ratios and relatively larger gaps in income and mortality high mortality also reduces returns on education where risks are undiversifiable when human capital drives economic growth countries differing in health capital do not converge to similar living standards threshold effects may also result

fiscal implications of aids in south africa abstract the number of people living with hiv is alarmingly large in addition to the incomprehensible human suffering of those directly affected aids also has large negative economic effects in this paper i study the fiscal implications of the hiv aids epidemic in south africa in a standard neo classical growth model i find that an antiretroviral program is to a large extent self financing improvement in dependency ratios and health care cost savings would pay for rand 144 billion of a full epidemiological intervention the indirect effect through the changing demographic structure will be more important than the direct health care cost saving effect i also explore different taxation policies the households would be willing to sacrifice an amount equal to 12 of gdp in the first period to be subject to an optimal ramsey fiscal policy rather than an alternative fixed debt to gdp policy the optimal policy implies an increase in government debt during the peak of the epidemic

from malthusian stagnation to modern growth this paper investigates the historical evolution of the relationship among population growth technological change and standard of living the analysis focuses on two most important differences among the malthusian regime post malthusian regime and modern growth regime these were the behavior of income per capita and the relationship between the level of income per capita and the population growth rate the modern growth regime is characterized by steady growth in both income per capita and the level of technology in the malthusian regime technological progress and population growth was glacial by modern standards and income per capita was fairly constant in contrast to the modern growth regime the relationship between per capita income and population growth in the malthusian regime was positive post malthusian regime shared one characteristic with each of the two regimes in addition this paper developed and described an endogenous growth model consistent with the above mentioned transition process

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

growth and enduring epidemic diseases abstract this paper analyzes the interplay of human capital formation and economic growth when there is premature adult mortality failing adequate insurance arrangements a long wave of such mortality can so undermine human capital formation as to induce an economic collapse in nuclear family structures random matching of partners is superior to assortative mating only if the shock is not too big and initial levels of human capital are not too low full pooling of mortality risks with equal treatment of all children in extended families may fend off a general collapse depending on the initial conditions and the size and duration of the shock to avoid undesirable effects on expectations awareness campaigns should be complemented by policies that credibly promise to reduce future mortality if mortality depends on the general level of human capital indeterminacy can arise in the form of more than one rational expectations path

on the distributional consequences of epidemics we develop a tractable general theory for the study of the economic and demographic impact of epidemics notably its distributional consequences to this end we build up a three period overlapping generations model where altruistic parents choose optimal health expenditures for their children and themselves the survival probability of adults and children depends on such investments agents can be skilled or unskilled in this paper epidemics are modeled as one period exogenous shocks to the adults survival rates we first show that such epidemics have permanent effects on the size of population and on the level of output however the income distribution is shown to be unaltered in the long run second we show that this distribution may be significantly altered in the medium term in particular the proportion of the unskilled will necessarily increase at that term if orphans are too penalized in the access to education c 2009 elsevier b v all rights reserved

a systematic analysis of the links amongst the marshallian hicksian and frischian demand functions a note three types of demand functions are central to contemporary consumer theory the marshallian the hicksian and the frischian demand functions this paper presents a systematic definition of the analytical relationships amongst these demand functions under the maintained hypothesis that the decision maker is a profit maximizer

the disposition effect and investor experience we examine whether investing experience can dampen the disposition effect that is the fact that investors seem to hold on to their losing stocks to a greater extent than they hold on to their winning stocks to do so we devise a computer program that simulates the stock market we use the program in an experiment with two groups of subjects namely experienced investors and undergraduate students the inexperienced investors as a control procedure we consider random trade decisions made by robot subjects we find that though both human subjects show the disposition effect the more experienced investors are less affected

the long run economic costs of aids a model with an application to south africa primarily a disease of young adults acquired immuno deficiency syndrome aids imposes economic costs that could be devastatingly high in the long run by undermining the transmission of human capital the main driver of long run economic growth across generations aids makes it harder for victims children to obtain an education and deprives them of the love nurturing and life skills that parents provide these children will in turn find it difficult to educate their children and so on an overlapping generations model is used to show that an otherwise growing economy could decline to a low level subsistence equilibrium if hit with an aids type increase in premature adult mortality calibrating the model for south africa where the hiv prevalence rate is over 20 percent simulations reveal that the economy could shrink to half its current size in about four generations in the absence of intervention programs to combat the disease and to support needy families could avert such a collapse but they imply a fiscal burden of about 4 percent of gross domestic product gdp

the macroeconomics of targeting the case of an enduring epidemic what is the right balance among policy interventions in order to ensure economic growth over the long run when an epidemic causes heavy mortality among young adults we argue that in general policies to combat the disease and promote education must be concentrated in certain ways at first on some subgroups of society this concentration involves what we term the macroeconomics of targeting the central comparison is then between programs under which supported families enjoy the benefits of spending on health and education simultaneously dt and those under which the benefits in these two domains are sequenced st when levels of human capital are uniformly low at the outbreak dt is superior to st if the mortality rate exceeds some threshold value outside aid makes dt more attractive but dt restricts support to fewer families initially and so increases inequality a summary account of the empirical evidence is followed by an application of the framework to south africa

on the empirical exploitation of consumers profit functions in static analyses abstract this paper proposes the empirical exploitation of the consumer s profit function in representing preferences and specifying estimable yet general demand systems an empirical application demonstrates the value of this generalisation and the feasibility of the proposed method

the gift of the dying the tragedy of aids and the welfare of future african generations this paper simulates the impact of the aids epidemic on future living standards in south africa i emphasize two competing effects on the one hand the epidemic is likely to have a detrimental impact on the human capital accumulation of orphaned children on the other hand widespread community infection lowers fertility both directly through a reduction in the willingness to engage in unprotected sexual activity and indirectly by increasing the scarcity of labor and the value of a woman s time i find that even with the most pessimistic assumptions concerning reductions in educational attainment the fertility effect dominates the aids epidemic on net enhances the future per capita consumption possibilities of the south african economy

aids crisis and growth abstract we investigate an olg economy where an aids epidemic influences human capital accumulation and growth through the creation of large numbers of orphans we study how intra family allocations regarding school and work time of children are adjusted in the face of aids within a family and how in turn these adjustments influence accumulation of physical and human capital we compute the aggregate effects of an aids epidemic on human and physical capital accumulation and growth we find that growth effects of an aids epidemic are large some policies such as subsidization of aids medication have relatively small effects

a simple nonadditive preference structure for models of household behavior over time intertemporal separability is an almost universal assumption in empirical work on household behavior but a good deal of recent work on consumption and labor supply suggests that it may not be tenable the traditional weakening of this assumption is to allow for habit formation i propose an alternative structure for intertemporal preferences that nests intertemporal additivity in a simple way and yields closed form solutions for demand functions this structure includes the neoclassical durables model as a special case i derive a demand system that nests the almost ideal system as its time separable counterpart this model is estimated on u k aggregate time series data for seven goods time separability is decisively rejected moreover i find that ignoring temporal dependencies leads to considerable bias in the estimates of elasticities of the seven goods durables display the strongest nonseparable effect the estimated reactions are consistent with the neoclassical durables model

price formation in double auction markets abstract this paper reports 14 laboratory experiments that examine existing theories of the price formation process in the continuous double auction the experiments feature random values and costs and therefore a new price formation observation each period we find that efficiency is high and rises with experience in this environment we also find that trades with greater exchange surplus tend to occur earlier in the period that increased trader experience reduces an anomalous intertemporal arbitrage opportunity observed previously and that only when traders are very experienced does exchange surplus accrue disproportionately to the side of the market with a smaller number of traders

a system of demand equations satisfying effectively global regularity conditions a parametric specification of an indirect utility function in terms oaf expenditure and two unit cost functions is proposed specification of these unit cost functions in terms of regular functions leads to the notion of an effectively globally regular system of demand equations that is a system of demand equations that is regular over a cone in expenditure price space and for which the regular region includes all points in any given sample and all values of nominal expenditure and prices generating higher values of real expenditure than the sample minimum this general model nests a number of popular demand systems such as the linear expenditure system as special cases an empirical application illustrates some of these ideas copyright 1996 by mit press

on the exploitation of additional duality relationships in consumer demand analysis abstract this paper advocates more extensive use of the frisch profit function in static consumer demand studies and intorduces its inverse the price of utility function paralleling the well known relationships between indirect utility and expenditure functions an examination of the relationship between these four functions suggests i a fourth system complementing marshallian hicksian and frisch demand systems and ii a fourth theorem complementing roy s identity shephard s theorem and hoteling s lemma

nonspeculative bubbles in experimental asset markets lack of common knowledge of rationality vs actual irrationality we report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets in a setting in which speculation is not possible bubbles and crashes are observed the results suggest that the departures from fundamental values are not caused by the lack of common knowledge of rationality leading to speculation but rather by behavior that itself exhibits elements of irrationality much of the trading activity that accompanies bubble formation in markets where speculation is possible is due to the fact that there is no other activity available for participants in the experiment

from malthus to modern growth can epidemics explain the three regimes we model demographic and economic long run development in a setting where mortality is endogenous and subject to epidemic shocks the model replicates the full transition from malthusian stagnation to modern growth consistent with the historical facts the economy also passes an intermediate post malthusian phase where growth rates of both population and per capita income increase simultaneously as mortality rates fall and become less volatile the escape from the malthusian trap is the result of a series of mild epidemic shocks making it inevitable at some stage but its timing random calibrations show that it can differ by thousands of generations absent differences in exogenous parameters

don t let your robots grow up to be traders artificial intelligence human intelligence and asset market bubbles abstract researchers who have examined markets populated by robot traders have claimed that the high level of allocative efficiency observed in experimental markets is driven largely by the intelligence implicit in the rules of the market furthermore they view the ability of agents artificial or human to process information and make rational decisions as unnecessary for the efficient operation of markets this paper presents a new series of market experiments that show that markets populated with standard robot traders are no longer efficient if time is a meaningful element as it is in all asset markets while simple two season markets with human subjects reliably converge to an efficient equilibrium markets with minimally intelligent robot traders fail to attain this equilibrium instead these markets overshoot the equilibrium and then crash below it in addition to firmly establishing the role of trader intelligence in asset market equilibrium these experiments also provide insights into why bubbles and crashes are consistently observed in many asset market laboratory experiments using human subjects

momentum and overreaction in experimental asset markets abstract price volatility and investor overreactions are commonplace in experimental asset markets understanding the price dynamics in these markets is crucial for designing successful new trading institutions we report on a series of experiments to test the predictions of a new momentum model using a dynamical systems approach this model is then pitted against several standard models to predict prices as well as against expert human forecasters the comparative results suggest that each model has its advantages and regions of best performance overall the best predictive methods are the momentum model and expert human forecasters

avoidable cost ride a double auction roller coaster the double auction trading institution has been highly efficient across diverse marginal cost market structures whether human subjects or zero intelligence robots populated those markets accordingly many researchers suspect that double auction performance transcends market structure and agent strategy but the authors show that large avoidable costs undermine the efficiency and stability of human subject double auctions and these low human efficiencies are simultaneously well above zero intelligence efficiencies their results dramatically illustrate the potential havoc wrought by highly competitive institutions when they must cope with nonconvex technologies copyright 1996 by american economic association

allocative efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality we report market experiments in which human traders are replaced by zero intelligence programs that submit random bids and offers imposing a budget constraint i e not permitting traders to sell below their costs or buy above their values is sufficient to raise the allocative efficiency of these auctions close to 100 percent allocative efficiency of a double auction derives largely from its structure independent of traders motivation intelligence or learning adam smith s invisible hand may be more powerful than some may have thought it can generate aggregate rationality not only from individual rationality but also from individual irrationality

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

the long run economic costs of aids primarily a disease of young adults aids imposes economic costs that could be devastatingly high in the long run by undermining the transmission of human capital the main driver of long run economic growth across generations aids makes it harder for victims children to obtain an education and deprives them of the love nurturing and life skills that parents provide these children will in turn find it difficult to educate their children and so on an overlapping generations model is used to show that an otherwise growing economy could decline to a low level subsistence equilibrium if hit with an aids type increase in premature adult mortality calibrating the model for south africa where the hiv prevalence rate is over 20 percent simulations reveal that the economy could shrink to half its current size in about four generations in the absence of intervention programs to combat the disease and to support needy families could avert such a collapse but they imply a fiscal burden of about 4 percent o