efficiency and information aggregation in auctions the tension between allocative efficiency and information aggregation is explored in the context of an auction k identical objects of unknown quality are auctioned off to n bidders whose tastes affect their valuation of an object of given quality bidders receive a signal about the quality of the objects the k highest bidders get an object and pay a price equal to the k first highest bid we find conditions under which in the limit objects are allocated efficiently to those with the highest tastes and price converges in probability to the value of an object to the marginal taste type

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

ex ante incentive efficient trading mechanisms without the private valuation restriction abstract the private valuation assumption found in most trading mechanism design papers rules out markets whose valuation structure generates externalities between traders this paper characterizes the set of ex ante incentive efficient trading mechanisms for a large class of markets that do admit such externalities and for bilateral trade markets establishes the impossibility of a first best solution across a class of trading problems employing uniform priors and linear valuation structures this paper also compares levels of market efficiency for varying numbers of traders

tradeoffs and complementarities in the adoption of improved seeds fertilizer and natural resource management technologies in kenya there is widespread consensus that agricultural technology has an important role to play for poverty reduction and sustainable development there is no consensus however about the types of technologies that are best suited for smallholder farmers in africa while some consider natural resource management nrm technologies as most appropriate others propagate input intensification with a stronger role of the private sector in the public debate these two strategies are often perceived as incompatible environmental non governmental organizations in particular consider low external input strategies as the only sustainable form of agriculture a view that has considerable influence on policymakers and the international donor community most existing research studies on smallholder innovation focus on the adoption of individual technologies so that comparisons between different types of technologies in the same context are not easily possible we use representative data from maize producing households in kenya and a multivariate probit model to analyze the adoption of different types of technologies simultaneously results indicate that nrm technologies and strategies that build on external inputs are not incompatible interesting complementarities exist which are not yet sufficiently exploited because many organizations promote either one type of technology or the other but rarely a combination of both

reap what you sow agricultural technology urbanization and structural change abstract this paper studies how productivity enhancing agricultural technology affects urbanization by provoking structural change we investigate these issues using a natural experiment in the united states the results show that technologies which improve crop productivity lead to a less urbanized economy as economic activity relocates from manufacturing and services towards agriculture the effects are highly persistent and are driven by the technology increasing agricultural labor demand our findings highlight the potentially unintended disruptive force of innovative technologies

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

upstairs market for principal and agency trades analysis of adverse information and price effects this paper directly tests the hypothesis that upstairs intermediation lowers adverse selection cost we find upstairs market makers effectively screen out information motivated orders and execute large liquidity motivated orders at a lower cost than the downstairs market upstairs markets do not cannibalize or free ride off the downstairs market in one quarter of the trades the upstairs market offers price improvement over the limit orders available in the consolidated limit order book trades are more likely to be executed upstairs at times when liquidity is lower in the downstairs market

money matters the role of yields and profits in agricultural technology adoption despite the growing attention to technology adoption in the economics literature knowledge gaps remain regarding why some valuable technologies are rapidly adopted while others are not this paper contributes to our understanding of agricultural technology adoption by showing that a focus on yield gains may in some contexts be misguided we study a technology in ethiopia that has no impact on yields but that has nonetheless been widely adopted using three waves of panel data we estimate a correlated random coefficient model and calculate the returns to improved chickpea in terms of yields costs and profits we find that farmers comparative advantage does not play a significant role in their adoption decisions and hypothesize that this is due to the overall high economic returns to adoption despite the limited yield impacts of the technology our results suggest economic measures of returns may be more relevant than increases in yields in explaining technology adoption decisions

channels of interstate risk sharing united states 1963 1990 we develop a framework for quantifying the amount of risk sharing among states in the united states and construct data that allow us to decompose the cross sectional variance in gross state product into several components which we refer to as levels of smoothing we find that 39 percent of shocks to gross state product are smoothed by capital markets 13 percent are smoothed by the federal government and 23 percent are smoothed by credit markets the remaining 25 percent are not smoothed we also decompose the federal government smoothing into subcategories taxes transfers and grants to states

maize of the ancestors and modern varieties the microeconomics of high yielding variety adoption in malawi farmer adoption of seed fertilizer technology can be characterized in terms of several interrelated choices one choice is whether to adopt only seed only fertilizer or both components of the technology adoption another choice relates to the extent of land allocation to modem and to farmers seed varieties extent of adoption a third choice is the level per hectare of either seed or fertilizer or both intensity of adoption 1 in the literature about agricultural innovations in developing countries some theoretical models treat more than one aspect of the adoption decision 2 but most econometric approaches have portrayed only the discrete adoption choice for a single input although farmers often adopt parts or components of recommended technology neither the theoretical nor the econometric models have included the level of fertilizer applied to farmers varieties in the analysis of seed fertilizer adoption 3 two features of the seed fertilizer adoption decision as defined above are particularly evident in malawi first even when farmers adopt hybrid maize they continue to allocate a part of their maize area to their own varieties microeconomic theory provides four explanations for land allocation to both modern and traditional seed variet

business cycle convergence in emu a first look at the second moment we analyse the dynamics of the standard deviation of demand and supply shocks as well as of the demand component of gdp across countries in the european monetary union emu this analysis allows us to evaluate the patterns of cyclical comovement in emu and compare them the cyclical performance of the new members of the eu and other oecd countries we make use of sigma convergence methods to identify synchronization patterns in business cycles the eurozone has converged to a stable lower level of dispersion across business cycles during the end of the 80s and the beginning of the 90s the new eu members have also experienced a strong pattern of convergence from 1998 to 2005 when a strong divergence trend appears an enlargement of the emu to 22 members would not significantly decrease its optimality as a currency area there is evidence for some europe specific characteristics as compared to global comovements in business cycles authors abstract

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

toward a strategic foundation for rational expectations equilibrium a step toward a strategic foundation for rational expectations equilibrium is taken by considering a double auction with n buyers and m sellers with interdependent values and affiliated private information if there are sufficiently many buyers and sellers and their bids are restricted to a sufficiently fine discrete set of prices then generically there is an equilibrium in nondecreasing bidding functions that is arbitrarily close to the unique fully revealing rational expectations equilibrium of the limit market with unrestricted bids and a continuum of agents in particular the large double auction equilibrium is almost efficient and almost fully aggregates the agents information

international risk sharing and european monetary unification abstract we explore income and consumption smoothing patterns among european community ec countries and among oecd countries during the period 1966 90 we find that for oecd as well as for ec countries about 40 percent of shocks to gdp are smoothed at the one year frequency with about half the smoothing achieved through national government budget deficits and half by corporate saving at the three year differencing frequency only 25 percent of shocks to gdp are smoothed mainly via government lending and borrowing in the absence of alternative income and consumption smoothing mechanisms the restrictions on budget deficits imposed by the maastricht treaty should be relaxed to allow governments to run large temporary deficits in response to output shocks

alternating offer bargaining with two sided incomplete information i study alternating offer bargaining games with two sided incomplete information about the players discount rates for both perfect bayesian equilibrium and a rationalizability style notion i characterize the set of expected payoffs which may arise in the game i also construct bounds on agreements that may be made the set of expected payoffs is easy to compute and incorporate into applied models my main result is a full characterization of the set of perfect bayesian equilibrium payoffs for games in which the distribution over the players discount rates is of wide support yet is in a weak sense close to a point mass distribution i prove a lopsided convergence result each player cannot gain from a slight chance that she is a strong type but the player can suffer greatly if there is a slight chance that she is a weak type

business cycle synchronization in the emu this article asks whether the business cycles of the eu countries have become more or less synchronized after the introduction of the euro our findings show that all countries in our eu sample are better synchronized with the emu wide economy in the post emu period than they were before the euro we also show that this increase in synchronization is present in all components of aggregate demand as well as two supply side variables but it is more pronounced in the trade components imports and particularly exports it is also shown that the increase in trade within the emu area is at least partly responsible for the increase in cyclical synchronization

regional non adjustment and fiscal policy asymmetric shocks regional non adjustment and fiscal policy how will countries handle idiosyncratic macroeconomic shocks under the single currency since the regional adjustment patterns currently prevailing within european currency unions are likely to prevail at the national level under the single currency looking at the ways in which european countries react to internally asymmetric shocks today provides a good preview for the answer to that question in this paper we compare the usa with germany italy and the uk and with canada which is closer to europe than the usa in its labour market and fiscal institutions europe s and to some extent canada s model of regional response differs from that of the usa changes in regional real exchange rates are small in all countries outside of the usa however there is more reliance on interregional transfer payments less on labour migration and the pace of regional adjustment appears to be slower if emu aims at the same degree of economic and social cohesion that its constituent nations enjoy today this suggests that its members may find it hard to resist the eventual extension of existing eu mechanisms of income redistribution a transfer union we propose an alternative strategy based on a relaxed stability pact further strictures against central eu borrowing labour market and fiscal reform and the issuance by individual member states of debt indexed to nominal gdp maurice obstfeld and giovanni peri

sequential bargaining with correlated values the paper analyzes an infinite horizon sequential bargaining game with one sided offers between a buyer and a seller when the buyer s valuation depends on the seller s the seller knows the value of the object and the buyer does not the influence of relative discount factors on the solution is studied it is shown for example that an impasse may result if the buyer offeror is too impatient relative to the seller the buyer makes a single take it or leave it offer

emu enlargement stabilization costs and insurance mechanisms this paper considers the determinants of the macroeconomic costs of joining emu for the new eu member sates and compares them with those of the emu members specifically we investigate the business cycle correlation between the candidate s economy and that of the euro area as a whole and the ability of insurance mechanisms and fiscal policies to smooth income fluctuations the results suggest that emu membership would not be costly for some countries cyprus hungary and malta but for other countries it could have relevant costs at least in the short run for some of these countries business cycles are not yet well synchronized with the euro area s business cycle and risk sharing mechanisms do not provide enough insurance against shocks

bargaining with common values this paper examines a bargaining model with asymmetric information in which the private valuations of the two bargaining agents are correlated it shows that equilibria in such models typically exhibit a significant probability of a significant delay to agreement the paper characterizes the unique perfect bayesian equilibrium to the game in which an uninformed buyer makes offers to a privately informed seller it also shows by example that in this framework bargainers may rationally break off negotiations even in the presence of commonly known gains from trade

economic effects of currency unions we develop a new instrumental variable iv approach to estimate the effects of different exchange rate regimes on bilateral outcomes the basic idea is that the characteristics of the exchange rate between two countries are partially related to the independent decisions of these countries to peg explicitly or de facto to a third currency notably that of a main anchor this component of the exchange rate regime can be used as an iv in regressions of bilateral outcomes we apply the methodology to study the economic effects of currency unions the likelihood that two countries independently adopt the currency of the same anchor country is used as an instrument for whether they share a common currency we find that sharing a common currency enhances trade increases price comovements and decreases the comovement of real gross domestic product shocks

heterogeneity of commercialization gains in the rural economy farmers in low income rural economies often fail to switch to cash crops from staple production despite the positive income effects of commercialization expected by policy makers the literature suggests that market failures prevent households from cash crop adoption but remains inconclusive regarding farmers motives and the effects of commercialization this article contributes to the debate by offering an original approach to the analysis of commercialization outcomes and farmers decisions it consists of applying a model with essential heterogeneity and a semiparametric estimation technique to analyzing harvest value returns to cash cropping using malawian data we show considerable heterogeneity in harvest value returns to cash cropping both within and between groups of farmers choosing different crop portfolios importantly the results imply rational choices based on comparative advantage considerations of farming households farmers self select into the activity where they expect higher gains and adopt cash crops when facing weaker market barriers

currency unions and international integration this paper characterizes the integration patterns of international currency unions such as the cfa franc zone we empirically explore different features of currency unions and compare them to countries with sovereign monies by examining the criteria for mundellos concept of an optimum currency area we find that members of currency unions are more integrated than countries with their own currencies for instance we find that currency union members have more trade and less volatile real exchange rates than countries with their own monies business cycles are more highly synchronized across currency union countries than across countries with sovereign monies

the impacts of hybrid maize seed on the welfare of farming households in kenya this paper explores the impacts of hybrid maize adoption on the welfare of farming households in kenya we use a four year panel dataset to estimate the effects of hybrid seed use on four indicators of household welfare namely income assets inequality and poverty results show that use of hybrid seed not only contributes to higher annual income but also to raising the value of assets possibly reflecting longer term welfare effects further we find that use of hybrid seed reduces the depth of poverty and that the amount planted reduces inequality as expected impacts differ between major and minor maize growing areas of the country maize farmers who do not use hybrid seed are clearly disadvantaged this calls for continued public and private investments in the infrastructure and policy process that supports a competitive liberalized seed industry and improved access of smallholder farmers to well adapted affordable hybrids

regional redistribution and stabilization by the center in canada france the uk and the us abstract this paper re examines earlier estimates of regional redistribution and stabilization through the central government budget in the us and produces new estimates of this redistribution and stabilization in the us canada france and the uk the new estimates rest on panel data econometrics and an adherence to certain accounting principles that have occasionally been violated in the past as a result of the accounting the peak estimates for the us and canada in the earlier literature are never attained regional stabilization of personal income through the central government budget emerges as close to 20 in the us france and the uk but only 10 to 14 in canada in case of gross product instead of personal income accounting regional stabilization is closer to 10 in the us as regards france and the uk the use of panel data econometrics proves essential

bargaining with endogenous information two ex ante identically informed agents play a double auction over the division of a trading surplus with endogenous information and common values this paper shows that if information acquisition is not observable three types of inefficiencies can arise if the information cost is in an intermediate range no pure strategy equilibrium with trade exists although the agents maintain symmetric information if the information cost is low any trading equilibrium exhibits costly information acquisition if the agents face asymmetric information cost the akerlof s lemons problem arises as a self fulfilling equilibrium and only partial trade occurs

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small

demand for maize hybrids and hybrid change on smallholder farms in kenya kenya is a globally recognized maize success story as the overall percentage of maize farmers growing hybrids tops 80 and the seed industry matures the slow pace of hybrid replacement on farms and the continued dominance of the seed industry by kenya seed company may dampen productivity our econometric analysis identifies the factors that explain farmer demand for hybrid seed and the age of hybrids they grow considering hybrid seed ownership male headed households with more education more assets and more land plant more hybrid seed scale of seed demand per farm is differentiated by agroecology we find a strong farmer response to the seed to grain price ratio which we interpret as evidence of a commercial orientation even on household farms however despite the dramatic increase in the number of hybrids sold and the breadth of seed suppliers as seed markets liberalize an older hybrid still dominates national demand