learning by doing vs learning from others in a principal agent model abstract we introduce learning in a principal agent model of output sharing under moral hazard we use social evolutionary learning to represent social learning and reinforcement experience weighted attraction ewa and individual evolutionary learning iel to represent individual learning learning in the principal agent model is difficult due to the stochastic environment the discontinuity in payoffs at the optimal contract and the incorrect evaluation of foregone payoffs for iel and ewa social learning is much more successful in adapting to the optimal contract than standard individual learning algorithms a modified iel using realized payoffs evaluation performs better but still falls short of social learning

pensions and labour market participation in the united kingdom unlike most other european countries the united kingdom s pension system is not well described by an analysis of the social security element for 30 years or more around half the workforce has been covered by private occupational pensions something like half of the income of pensioners comes from non socialsecurity sources and this proportion is growing of the workforce in the mid 1990 s 75 percent are contracted out of the secondtier state earnings related pension scheme serps into private occupational or personal pensions partly as a result of these facts the united kingdom also differs from many other countries in one other important respect its state pension system is solvent tax rates necessary to pay for it are not predicted to rise despite the fact that the number of people over state retirement age is predicted to rise from 15 7 percent of the whole population to over 24 percent in 2050 2 in this paper we begin by describing the labor market behavior of individuals around pension age we also consider the coverage of the various parts of the social security system we go on to explain the structure of state pensions in the united kingdom and compute the incentives for retirement that the structure creates focusing on early retirement and the role of disability benefits which are especially relevant for lower skilled workers we compare these incentives with those facing workers with private occupational schemes who now make up the mnajority of older workers close to retirement the structure of incentives is found to match well with the observed patterns of labor market participation in the data l the labor market behavior of older persons in the united kingdom the labor market behavior of older persons in the united kingdom has been characterized by a severe fall in the participation of men the rate of participation among recent cohorts falls sharply below 80 percent after the age of 50 and declines rapidly thereafter in contrast the secular rise in the participation of women has resulted in a small upward trend in participation among women in the 55 60 age bracket with participation rates approaching those for men

grandmothers and granddaughters this article evaluates the impact of a large cash transfer program in south africa on children s nutritional status and investigates whether the gender of the recipient affects that impact in the early 1990s the benefits and coverage of the south african social pension program were expanded for the black population in 1993 the benefits were about twice the median per capita income in rural areas more than a quarter of black south african children under age five live with a pension recipient estimates suggest that pensions received by women had a large impact on the anthropometric status weight for height and height for age of girls but little effect on that of boys no similar effect is found for pensions received by men this suggests that the efficiency of public transfer programs may depend on the gender of the recipient

adaptive learning with a unit root an application to the current account abstract this paper develops a simple two country two good model of international trade and borrowing that suppresses all previous sources of current account dynamics under rational expectations international debt follows a random walk under adaptive learning however the model s unit root is eliminated and international debt is either a stationary or an explosive process depending on agents specific learning algorithm some stationary learning algorithms result in debt following an ar 1 process with an autoregressive coefficient less than 0 8 because unit roots are a common and problematic feature of many international business cycle models our results offer a new approach for generating stationarity

an alternative approach to market structure and the markup ratio hall s studies of market power emphasize that the markup ratio of price over marginal cost is an important indicator for assessing the role of market structure in resource allocation without using concentration ratios and is also a good measure of allocative efficiency the basic idea was that price is equal to marginal cost if there is perfect competition and constant markup ratio a statistrical model was developed to estimate the markup ratio if the markup ratio estimated for an industry is unitary then the null hypothesis of competition is not rejected if however it is greater than one the alternative hypothesis of non competition is not rejected the theory mandates that monopoly power is dynamically constant despite a nonconstant productivity residual hall assumes in etimation that technical progress or solow residual has a randomness this assumption implies that the procyclicity of technical progress is not a true phenomenon the spurious procyclicity is revealed in the estimated mark

spatial price discrimination in agricultural product procurement markets a computational economics approach significant transport costs and spatially distributed supply and processing create oligopsony power in agricultural markets price discrimination expressed in the form of partial or complete absorption of freight charges by processors is often observed in these environments but we understand little about how these pricing decisions are made analytical approaches are often intractable as an alternative we propose a computational economics approach to analyze a general spatial competition model and study firms choices of spatial pricing policy instead of the commonly presumed free on board pricing we find that buyers choose price discrimination either through uniform delivered pricing or through partial freight absorption

benefit generosity and the income effect on labour supply quasi experimental evidence this study uses an unanticipated exogenous doubling of the legal minimum pension in ukraine as a unique quasi experiment to evaluate the income effect on various aspects of labour supply among the elderly in contrast to previous studies the unusually simple pension eligibility rule allows estimating a pure causal income effect applying reduced form difference in differences and regression discontinuity as well as instrumental variable methods on two nationally representative data sets yields a retirement semi elasticity of 0 1 0 2 men and women respond at different margins of labour supply but with similar overall effect

trends in market power and productivity growth rates in us and japanese manufacturing abstract trends were estimated for market power measured by the price marginal cost ratio and the total factor productivity growth rate for us and japanese manufacturing both trends are negative in both countries but japan s are significant and much steeper

financial incentives and retirement evidence from federal civil service workers we examine the retirement behavior of federal civil service workers employed by the department of defense these workers provide an interesting population for studying retirement because they face relatively simple financial incentives high quality administrative data are available and they are not covered by the social security system we find that these workers respond to their financial incentives in a similar manner to what others have found when analyzing much different retirement systems we also find no evidence of excess retirement at key ages of the social security system which does not support the existence of societal wide norms regarding retirement

the intertemporal stability of the concentration margins relationship using a longitudinal data base we find that there has been a substantial narrowing of the spread between the price cost margins of concentrated and unconcentrated industries including measures of macroeconomic fluctuations into standard price cost margin regressions we find significant differences in cyclical behavior across market structure we also explore a possible explanation unionization for differences in cyclical behavior finally we investigate the degree to which our results are affected by the potential simultaneity of concentration advertising and the price cost margin

the behavior of the exchange rate in the genetic algorithm and experimental economies this paper studies the behavior of the exchange rate in the kareken wallace overlapping generations economy with two currencies in which decision rules are updated using the genetic algorithm the analysis shows that a stationary monetary equilibrium of the kareken wallace model is not stable under the genetic algorithm dynamics the fluctuations in the genetic algorithm exchange rate are driven by fluctuations in the portfolio fractions which change over time in response to the inequality between the rates of return on two currencies further both the genetic algorithm simulations and the experiments with human subjects were characterized by continuing fluctuations of the exchange rate with first period consumption values close to a stationary value

learning to bid the design of auctions under uncertainty and adaptation we examine auction design in a context where symmetrically informed adaptive agents with common valuations learn to bid for a good despite the absence of private valuations asymmetric information or risk aversion bidder strategies do not converge to the bertrand nash equilibrium strategies even in the long run deviations from equilibrium strategies depend on uncertainty regarding the value of the good auction structure the agents learning model and the number of bidders although individual agents learn nash bidding strategies in isolation the learning of each agent by flattening the best reply correspondence of other agents blocks common learning these negative externalities are more severe in second price auctions auctions with many bidders and auctions where the good has an uncertain value ex post

retirement and the evolution of pension structure defined benefit pension plans have become considerably less common since the early 1980s while defined contribution plans have spread previous research showed that defined benefit plans with sharp incentives encouraging retirement after a certain point contributed to the striking decline in american retirement ages in this paper we find that the absence of agerelated incentives in defined contribution plans leads workers to retire almost two years later on average compared to workers with defined benefit plans thus the evolution of pension structure can help explain recent increases in the typical retirement age after decades of decline

work health and income among the elderly contents include introduction and summary public policy implications of declining old age mortality aging the ability to work policy issues and recent trends occupational effects on the health and work capacity of older men involuntary early retirement and consumption life cycle labor supply and social security a time series analysis life insurance of the elderly its adequacy and determinant

learning information processing and order submission in limit order markets by introducing a genetic algorithm learning with a classifier system into a limit order market this paper provides a unified framework of microstructure and agent based models of limit order markets that allows traders to determine their order submission endogenously according to market conditions it examines how traders process and learn from market information and how the learning affects limit order markets it is found that measured by the average usage of different group of market information trading rules under the learning become stationary in the long run also informed traders pay more attention to the last transaction sign while uninformed traders pay more attention to technical rules learning of uninformed traders improves market information efficiency but not necessarily when informed traders learn opposite to the learning of informed traders learning makes uninformed traders submit less aggressive limit orders and more market orders furthermore private values can have significant impact in the short run but not in the long run one implication is that the probability of informed trading pin is positively related to the volatility and the bid ask spread

the convergence of profits in the long run inter firm and inter industry comparisons this paper considers the extent to which the short run dynamic behavior and long run equilibrium levels of profitability differ among firms within the same industry movements in profits are modeled in terms of firm specific deviations from average industry profits and industry specific deviations from economy wide average returns applied to a sample of 217 large u k firms 1951 77 the results suggest that considerable heterogeneities exist within most industries that is most firms profitability experience differs considerably from those of their closest rivals copyright 1987 by blackwell publishing ltd

causes of increased competition in the u s economy 1939 1980 examines the sources of increased competition in the united states u s between 1939 to 1980 in this paper authors consider the review of related literature trends and patterns of competitive structure in the u s economy influence of antirust actions on competition

did soviet elderly employment respond to financial incentives evidence from pension reforms abstract this study answers the open question of whether workers respond to financial incentives in a command economy to do this i evaluate pension reforms in soviet russia in 1964 and 1969 that allowed pensioners to receive a greater share of their pensions if they worked resulting in a progressive elimination of benefit reduction rates variation in group eligibility and variation in benefit reduction rates in eastern and western regions allow for the use of several difference in differences frameworks i collect and digitize novel data from the soviet archives on pensioner employment constructing the first database of the soviet old age labor market i find that soviet pensioners are responsive to financial incentives by 1969 after the benefit reduction rate fell from an average of 47 8 to 24 1 pensioner employment rates rose by 5 7 percentage points representing a 47 increase finally i provide illustrative estimates of the employment elasticity with respect to the average net of tax rate that range from 0 6 to 1 4

market structure and cyclical fluctuations in u s manufacturing the relevance of imperfect competition for models of economic fluctuations has received increased attention from researchers in both macroeconomics and industrial organization the authors outline a new methodology for estimating industry markups of price over marginal cost and the influence of market structure on cyclical movements in total factor productivity measures of industry concentration import competition and unionization are important for explaining markups in some industry groups much of the estimated markup of price over marginal cost is accounted for by noncapital fixed costs finally the authors show that their estimated margins fluctuate substantially over the cycle in particular markups are countercyclical especially in concentrated durable goods industries copyright 1988 by mit press

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

the effect of social security on labor supply a cohort analysis of the notch generation this article uses aggregate birth year calendar year level data derived from the current population survey cps to estimate the effect of social security wealth on the labor supply of older men in the 1970s and 1980s the analysis focuses on measuring the impact of the 1977 amendments to the social security act which created a substantial unanticipated reduction in social security wealth for individuals born after 1916 this differential in benefits has become known as the benefit notch results indicate that labor supply continued to decline for the notch babies who received lower social security benefits than earlier cohorts

old age benefits and retirement decisions of rural elderly in brazil abstract i estimate the impact of social security benefits on retirement decisions of rural workers by studying changes in the rules governing old age benefits for rural workers in brazil i focus on a reform implemented in 1991 which reduced the minimum eligibility age increased benefits and extended the program to non heads of households because those benefits come with no strings attached they are not means or retirement tested any behavioral response is a pure income effect the main finding of the paper is that access to old age benefits is a strong determinant of retirement of rural workers in brazil receiving old age benefits increases the probability of not working by about thirty eight percentage points and reduces total hours per week by 22 h

labor supply responses to marginal social security benefits evidence from discontinuities abstract a key question for social security reform is whether workers respond to the link on the margin between the social security taxes they pay and the social security benefits they will receive we estimate the effects of the marginal social security benefits that accrue with additional earnings on three measures of labor supply retirement age hours and labor earnings we develop a new approach to identifying these incentive effects by exploiting five provisions in the social security benefit rules that generate discontinuities in marginal benefits or non linearities in marginal benefits that converge to discontinuities as uncertainty about the future is resolved we find that individuals approaching retirement age 52 and older respond to the social security tax benefit link on the extensive margin of their labor supply decisions we estimate that a 10 increase in the net of tax share reduces the two year retirement hazard by a statistically significant 2 0 percentage points from a base rate of 15 the evidence with regard to labor supply responses on the intensive margin is more mixed we estimate that the elasticity of hours with respect to the net of tax share is 0 42 and statistically significant but we do not find a statistically significant earnings elasticity though we lack statistical power to estimate results within subsamples precisely the retirement response is driven mostly by the female subsample while the hours response comes from the male subsample

fringe benefits and labor mobility interindustry factor mobility is a crucial determinant of the income distribution effects of exogenous changes in relative commodity prices this examination of interindustry variation in wages and profits using data from manufacturing industries from

can social security explain trends in labor force participation of older men in the united states after a long decline the labor force participation rate lfpr of older men in the united states leveled off in the 1980s and began to increase in the late 1990s we examine how changes in social security rules affected these trends we attribute only a small portion of the decline from the 1960s 80s to the increasing generosity of social security over this period increases in the full retirement age and the delayed retirement credit explain one quarter to one half of the recent increase in the lfpr increasing educational attainment and increasing lfpr of married women also contributed to the recent rise

social security and elderly living arrangements evidence from the social security notch previous studies of the effect of social security on elderly living arrangements generally have relied on data from the distant past or differences in benefits across families or cohorts that potentially were correlated with other determinants of living arrangements using data from the 1980 99 current population surveys we attempt to isolate the causal effect of social security on living arrangements with an instrumental variable approach that relies on the large shifts in benefits for cohorts born from 1910 21 the socalled social security notch over all elderly households the estimated elasticity of living with others with respect to social security income is 0 4 with elasticities of 1 3 and 1 4 for the widowed and divorced respectively most of the effects on living arrangements appear to be concentrated among the lesser educated as well our estimated elasticities are substantially larger than those from previous studies and suggest that reductions in current benefits would alter living arrangements significantly

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

some evolutionary foundations for price level rigidity this paper shows that price rigidity evolves in an economy populated by imperfectly rational agents who experiment with alternative rules of thumb in the model firms must set their prices in face of aggregate demand shocks their payoff depends on the level of aggregate demand as well as on their own price and their neighbor s price the latter assumption captures local interactions despite the fact that the rational expectations equilibrium ree is characterized by a simple pricing rule that firms can easily adopt the economy does not converge to the ree for all parameter values when the volatility of monetary innovations is low and interactions among firms are high the aggregate price level exhibits rigidity in that it does not fully react to contemporaneous aggregate demand shocks we discuss the role of the nature of experimentation and of path dependence driven by interactions in explaining these results

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

rearranging the family income support and elderly living arrangements in a low income country this study examines the link between income and living arrangements our identification comes from exploiting a discontinuity in age in the benefit formula for the social pension in south africa in contrast to previous literature we find no association between pension income and elderly independence we do find that potential beneficiaries alter their household structure when they become pension eligible prime working age women depart and the presence of children younger than five and young women of childbearing age increase these shifts in coresidence patterns are consistent with a setting where prime age women have comparative advantage in work away from extended family relative to younger women the additional income from old age support may induce a change in living arrangements to exploit this advantage

public policy and extended families evidence from pensions in south africa how are resources allocated within extended families in developing economies this question is investigated using a unique social experiment the south african pension program under that program the elderly receive a cash transfer equal to roughly twice the per capita income of africans in south africa the study examines how this transfer affects the labor supply of prime age individuals living with these elderly in extended families it finds a sharp drop in the working hours of prime age individuals in these households when women turn 60 years old or men turn 65 the ages at which they become eligible for pensions it also finds that the drop in labor supply is much larger when the pensioner is a woman suggesting an imperfect pooling of resources the allocation of resources among prime age individuals depends strongly on their absolute age and gender as well as on their relative age the oldest son in the household reduces his working hours more than any other prime age household member

pension incentives and the pattern of early retirement this mix of state and private pension provision in the united kingdom provides a rare degree of variation in pension incentives for retirement using a sample of individuals from the uk retirement survey the paper models the probability of retirement in terms of the incentives underlying the individual s pension plan as well as other socio economic factors it follows an option value approach and allows a separate role for pension wealth for spouse s economic characteristics and for demographic characteristics it distinguishes between serps and private schemes and models eligibility to disability the results point to significant retirement incentive effects from the pension system

learning with misspecification in an artificial currency market abstract agents evolve their forecast rules over time via a modified genetic algorithm in a simple artificial currency market these forecast rules can be nonlinearly misspecified when the misspecification is suppressed learning tends to be complete when it is not suppressed learning can generate persistent exchange rate dynamics

social learning and monetary policy rules we analyse the effects of social learning in a monetary policy context social learning might be viewed as more descriptive of actual learning behaviour in complex market economies in our model taylor principle governs uniqueness and expectational stability of rational expectations equilibrium ree under homogeneous recursive algorithms we find that the taylor principle is not necessary for convergence to ree minimum state variable msv equilibrium under social learning sunspot equilibria exist in the indeterminate region our agents cannot co ordinate on a sunspot equilibrium in general form specification however they can co ordinate on common factor specification we contribute to the use of genetic algorithm learning in stochastic environments

labor supply effects of the recent social security benefit cuts empirical estimates using cohort discontinuities abstract in response to a crisis in social security financing two decades ago congress implemented an increase in the normal retirement age nra of 2 months per year for cohorts born in 1938 and after these cohorts began reaching retirement age in 2000 this paper studies the effects of these benefit cuts on recent retirement behavior the evidence suggests that the mean retirement age of the affected cohorts has increased by about half as much as the increase in the nra if older workers continue to increase their labor supply in the same way there might be important implications for the estimates of social security trust fund exhaustion that have played such a major role in recent discussions of social security reform

corporate financing an artificial agent based analysis we examine corporate security choice by simulating an economy populated by adaptive agents who learn about the structure of security returns and prices through experience through a process of evolutionary selection each agent gravitates toward strategies that generate the highest payoffs despite the fact that markets are perfect and agents maximize value a financing hierarchy emerges in which straight debt dominates other financing choices equity and convertible debt display significant underpricing in general the smaller the probability of loss to outside investors the more likely the firm is to issue the security and the smaller the security s underpricing

pensions and retirement evidence from union army veterans i investigate the factors that fostered rising retirement rates prior to social security and most private sector pensions by estimating the income effect of the first major pension program in the united sates that covering union army veterans the elasticity of nonparticipation with respect to union army pension income was 0 73 the findings suggest that secularly rising income explains a substantial part of increased retirement rates comparisons with elasticities of nonparticipation with respect to social security income suggest that the elasticity of labor force nonparticipation may have decreased with time perhaps because of the increasing attractiveness of leisure

genetic algorithms and inflationary economies abstract this paper studies overlapping generations economies in which agents use genetic algorithms to learn correct decision rules the results of computer simulations show that a genetic algorithm converges to the unique monetary steady state in case of a constant money supply policy and to the low inflation stationary equilibrium in case of a constant real deficit financed through seignorage features of the genetic algorithm adaptation are compared to the performance of other learning algorithms and to the behavior observed in experiments with human subjects in the same olg environments

are sunspots learnable an experimental investigation in a simple macroeconomic model abstract we conduct experiments with human subjects in a model with a positive production externality in which productivity is a nondecreasing function of the average level of employment of other firms the model has three steady states and a sunspot equilibrium that fluctuates between the high and low steady states steady states are payoff ranked low values give lower profits than higher values we investigate whether subjects can learn a sunspot equilibrium we observe coordination on the extrinsic announcements in our experimental economies cases of apparent convergence to the low and high steady states are also observed

universal pensions for developing countries summary the governments of new zealand mauritius namibia botswana bolivia nepal samoa brunei kosovo and mexico city provide a basic pension to the elderly with no test other than citizenship residence and age these universal non means tested pensions automatically protect an entire population in a way that contributory earnings related pensions never can the author examines the value of this scheme for low income countries and argues that an income test if desired is best done ex post through the tax system rather than ex ante even though there are few examples of ex post recovery systems operating in the world today

unraveling the productivity growth slowdown in the u s canada and japan the effects of subequilibrium scale economies and markup measures of productivity growth typically include in the productivity residual the impacts of fixity of factors subequilibrium costs of adjustment returns to scale and markups this paper proposes a general framework for adjusting the residual to accommodate these impacts by first correcting and then decomposing traditional measures use of the framework is illustrated empirically for the united states japanese and canadian manufacturing sectors using an econometric model that allows explicit incorporation and measurement of these factors the adjusted measures show that a significant amount of cyclical and secular change in measured productivity growth can be attributed to production characteristics other than technical change particularly scale effects copyright 1992 by mit press

social security unanticipated benefit increases and the timing of retirement between 1969 and 1972 real u s social security retirement benefits rose by 20 the rise was unanticipated and followed over 15 years of relatively constant real benefits this paper proposes a model of retirement behaviour in which workers respond differently although in a theoretically consistent manner to the anticipated and unanticipated components of the social security benefit they can receive upon retirement the retirement age decision in the presence of unanticipated benefit changes is shown to be a special case of utility maximization under a nonlinear budget constraint the model is estimated using the longitudinal retirement history survey between 1969 and 1973 real social security benefits for u s workers with fixed earnings histories were raised by more than 20 these increases were the first significant increases in social security since the early 1950 s at the same time that retirement benefits were rising the trend toward early retirement among older american men accelerated in the period from 1965 to 1970 the labour force participation rate of men aged 55 to 64 fell 1 6 percentage points from 84x6 to 83 0 but in the five years after 1970 the rate fell an additional 7 4 points to 75 6 the participation rate of men over 65 fell by 1 1 points in the five years after 1965 but by 5 2 points during the mid 1970 s 1 not surprisingly a large share of this labour force decline has been attributed to the effects of the social security increases enacted in 1969 and 1972 the purpose of this paper is to determine the precise effect of the unanticipated benefit increases on the timing of retirement the effect of social security on the age at retirement has been the subject of lively debate in recent years the literature has been reviewed in two recent papers by mitchell and fields 1982 and hurd 1983 who reach nearly opposite conclusions about the lessons that can be drawn from past empirical research mitchell and fields find that no definite judgment can be reached about the effects of social security on retirement while hurd argues that more careful studies have all found a significant and meaningful effect of social security on early retirement certainly the earlier studies by boskin 1977 and boskin and hurd 1978 found very large social security effects with boskin concluding that the social security system has been the major factor in the explosion in earlier retirement boskin 1977 p 1 very recent studies by burkhauser and quinn 1983 burtless and moffitt 1984 diamond and hausman 1984 fields and mitchell 1984 and hausman and wise 1985 have found smaller social security effects however none of them dealt explicitly with the rapid rise in real benefits during the early 1970 s the approach taken in this paper differs significantly from that in the earlier research just cited the proposed econometric model takes full account of the nonlinear relationship between goods consumption and the age at retirement introduced by social security