testing for market efficiency in gambling markets when the errors are non normal and heteroskedastic an application of the wild bootstrap abstract by employing the wild bootstrap we calculate the correct size of the relevant test statistics for the test of the null hypothesis of efficiency in betting markets our findings are that the overall conclusion of the rejection of the null hypothesis is still valid

wheat from chaff meta analysis as quantitative literature review abstract this paper presents and develops a quantitative method of literature reviewing and evaluating empirical research meta regression analysis or mra economics is theory driven yet we must learn empirically if economics is to advance mra offers a more objective statistical method to summarize our empirical knowledge and to explain the wide study to study variation in economic research mra is used to assess the evidence for ricardian equivalence and its findings are contrasted to those of conventional narrative review furthermore mra establishes a platform from which to distinguish genuine empirical effect from the exploitable specification error that infests applied econometrics

aggregation and pairwise aggregation of demand when the distribution of income is fixed abstract this paper derives necessary and sufficient conditions for pairwise aggregation of the demand functions of a group of consumers conditions under which the mean demand for each pair of consumers satisfies the slutsky restrictions when the distribution of income is fixed the sufficient conditions imply existence of a representative competitive consumer whose demand is the mean demand of the group the necessary conditions imply that such a representative consumer exists for every fixed income distribution only if the consumers have homothetic preferences or alternatively if for each price vector all the consumers income expansion paths lie in the same plane

consumer demand and the life cycle allocation of household expenditures the purpose of this paper is to estimate the parameters of household preferences that determine the allocation of goods within the period and over the life cycle using micro data in doing so the authors are able to identify important effects of demographics labor market status and other household characteristics on the intertemporal allocation of expenditure they test the validity of the life cycle model using excess sensitivity tests and find that controlling for demographics and labor market status variables can largely explain the excess sensitivity of consumption to anticipated changes in income

the use and abuse of meta analysis in environmental and natural resource economics an assessment motivated by the 2006 report of a work group appointed by the environmental protection agency epa this paper examines the present state of meta analysis in environmental economics and offers recommendations for its future use to this end we summarize and assess 140 meta analyses from 125 published and unpublished studies covering 17 topical categories in environmental and resource economics first we provide several generic meta analysis models as reference points and discuss major estimation issues five econometric issues are identified as part of a complete analysis 1 sample selection criteria 2 basic data summary 3 primary data heterogeneity 4 heteroskedasticity and 5 non independence of multiple observations from primary studies second a tabular summary is presented for the 140 meta analyses with respect to estimation methods third a narrative summary is presented for 19 meta analyses including the three value of statistical life studies examined by the epa work group and one analysis from each of 16 other categories fourth we offer a set of best practice guidelines for future meta analyses in this and other areas of economics last the paper comments on the use of meta analytic methods for benefit transfers of environmental values

industrial structure and capital flows this paper provides a new theory of international capital flows in a framework that integrates factor proportions based trade and financial capital flows a novel force emerges capital tends to flow toward countries that become more specialized in capital intensive industries this composition effect competes with the standard force that channels capital toward the location where it is scarcer if the composition effect dominates capital flows away from the country hit by a positive labor force productivity shock a flow reversal extended to a quantitative framework the model generates sizable current account imbalances between developing and developed countries broadly consistent with the data

the role of financial analysts in the strategy formation process of business firms increasingly financial analysts are influencing the strategy formation process of corporations but so far little attention has been paid to the complex processes of interaction and the corresponding strategic outcomes this article discusses these influences through different theoretical lenses strategic management finance and accounting theory and economic sociology institutional and systems theory based on case study evidence from three companies we describe how the interactions between financial analysts and business firms take place and formulate several propositions on the relationship between financial analysts and business firms as well as on its influence on the strategic outcome of business firms the results suggest that the influence of financial analysts is indeed significant but depends on a number of contextual factors such as the financial situation of the company or the need for capital practicing managers can learn how to handle a turbulent environment such as the financial analyst community and how they can change their planning processes to absorb as much information as possible

testing for purchasing power parity correcting for non normality using the wild bootstrap we test for purchasing power parity ppp in the g7 area for the post bretton woods period unlike previous studies we correct the critical values of the standard unit root test using a wild bootstrap technique our findings reject ppp thus enhancing the contribution of the recent non linear ppp literature

bubbles and capital flow volatility causes and risk management emerging market economies are fertile ground for the development of real estate and other financial bubbles despite these economies significant growth potential their corporate and government sectors do not generate the financial instruments to provide residents with adequate stores of value capital often flows out of these economies seeking these stores of value in the developed world bubbles are beneficial because they provide domestic stores of value and thereby reduce capital outflows while increasing investment but they come at a cost as they expose the country to bubble crashes and capital flow reversals we show that domestic financial underdevelopment not only facilitates the emergence of bubbles but also leads agents to undervalue the aggregate risk embodied in financial bubbles in this context even rational bubbles can be welfare reducing we study a set of aggregate risk management policies to alleviate the bubble risk we show that prudential banking regulation sterilization of capital inflows and structural policies aimed at developing public debt markets and property rights all have a high payoff in this environment

public debt under limited private credit there is a conventional wisdom in economics that public debt can serve as a substitute for private credit if private borrowing is limited the purpose of this paper is to show that while a government could in principle use such a policy to fully relax borrowing limits this is not generally optimal in our economy agents invest in a short term asset a long term asset and government bonds agents are subject to idiosyncratic liquidity shocks prior to the maturity of the long term asset we show that a high public debt policy fully relaxes private borrowing limits and is suboptimal this is because agents expecting such a policy respond by investing less than is socially optimal in the short asset which can protect them in the event of a liquidity shock the optimal policy is more constrained and it induces a wedge between the technological rate of return on the long asset and the rate of return on bonds in such a regime agents subject to liquidity shocks are also borrowing constrained and this expectation of being borrowing constrained induces them to invest the optimal level in the short asset jel h63 e62 g20

uniqueness and stability of equilibrium in economies with two goods abstract we offer new sufficient conditions ensuring demand is downward sloping local to equilibrium it follows that equilibrium is unique and stable in the sense that rising supply implies falling prices in our setting there are two goods which we interpret as consumption in different time periods and many impatience types agents have the same bernoulli utility function but the types differ arbitrarily in time preference our main result is that if endowments are identical and utility displays nonincreasing absolute risk aversion then market demand is strictly downward sloping local to equilibrium we discuss implications for the literature surrounding diamond and dybvig 1983

cross country heterogeneity in intertemporal substitution abstract we collect 2735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods the estimates vary substantially from country to country even after controlling for 30 aspects of study design our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns micro level studies that focus on sub samples of rich households or asset holders also find systematically larger values of the elasticity

are all economic facts greatly exaggerated theory competition and selectivity there is growing concern and mounting evidence of selectivity in empirical economics most empirical economic literatures have a truncated distribution of results the aim of this paper is to explore the link between publication selectivity and theory contests this link is confirmed through the analysis of 87 distinct empirical economics literatures involving more than three and a half thousand separate empirical studies using objective measures of both selectivity and contests our meta meta analysis shows that publication selection is widespread but not universal it distorts scientific inference with potentially adverse effects on policy making but competition and debate between rival theories reduces this selectivity and thereby improves economic inference

information quality and long run risk asset pricing implications i study the asset pricing implications of the quality of public information about persistent productivity shocks in a general equilibrium model with kreps porteus preferences low information quality is associated with a high equity premium a low volatility of consumption growth and a low volatility of the risk free interest rate the relationship between information quality and the equity premium differs from that in endowment economies my calibration improves substantially upon the bansal yaron model in terms of the moments of the wealth consumption ratio and the return on aggregate wealth in this paper i introduce learning into a production based long run risk model learning improves the asset pricing implications of the model along three dimensions it increases the equilibrium equity premium reduces the volatility of consumption growth and reduces the volatility of the risk free interest rate i show that because of the production economy setting the relationship between information quality and the equity premium differs from that found in pure exchange economies see e g veronesi 2000 quantitatively my model improves substantially upon the bansal and yaron 2004 model in terms of its predictions about the volatility of the return on aggregate wealth and the wealth consumption ratio compared to bansal and yaron 2004 i use a lower relative risk aversion rra parameter two and a higher intertemporal elasticity of substitution ies parameter two my model generates a lower risk premium on the market portfolio 5 06 per year but does roughly as well as the bansal and yaron 2004 model according to other measures commonly used to assess the performance of consumption based asset pricing models such as the key moments of the risk free interest rate and the consumption growth rate more specifically i consider a general equilibrium model with a linear production technology and kreps porteus preferences kreps and porteus 1978 hengjie ai is at the fuqua school of business duke university this paper is based on chap

financial globalization inequality and the rising public debt abstract during the last three decades government debt has increased in most developed countries during the same period we have also observed a significant liberalization of international financial markets we propose a multicountry model with incomplete markets and show that governments may choose higher levels of debt when financial markets become internationally integrated we also show that public debt increases with the volatility of uninsurable income idiosyncratic risk to the extent that the increase in income inequality observed in some industrialized countries has been associated with higher idiosyncratic risk the paper suggests another potential mechanism for the rise in public debt jel d31 e62 f65 h63

the optimal public and private provision of safe assets abstract we develop a theory of optimal government debt in which publicly issued and privately issued safe assets are substitutes while government bonds are backed by future tax revenues privately issued safe assets are backed by the future repayment of pools of defaultable private loans we find that a higher supply of public debt crowds out privately issued safe assets less than one for one and reduces the interest spread between borrowing and deposit rates our main result is that the optimal level of public debt does not fully crowd out private lending and maintains a positive interest spread moreover the optimal level of public debt is higher the more severe are financial frictions

approximate aggregation under uncertainty abstract for a collection of agents with von neumann morgenstern preferences a price independent income distribution and identical probability beliefs there exists a von neumann morgenstern approximate aggregator the risk tolerance of the approximate aggregator is equal to the sum of the individual agent risk tolerances at prices which yield constant risk free contingent consumption the application of the approximate aggregator to standard asset pricing models in finance is discussed briefly

wealth varying intertemporal elasticities of substitution evidence from panel and aggregate data abstract this paper constructs and estimates a model of consumer preferences in which the intertemporal elasticity of substitution ies of consumption expenditure rises with the level of wealth the purpose of this paper is to measure the effect that systematic variation in the ies of poor and rich consumers has on the ies of aggregate consumption expenditure we find economically significant differences in the ies of poor and rich consumers in indian panel data on the consumption of individual households we also find economically significant differences in the ies measured in aggregate time series data for the u s and india

long run purchasing power parity is it for real in this paper we re examine the purchasing power parity concept using data from the recent experience with floating exchange rates in particular we utilise the recently developed multivariate cointegration methodology to test for a long run relationship between exchange rates and relative prices and also to test for the proportionality of the exchange rate with respect to relative prices in contrast to much other research we demonstrate that there is a long run relationship between a number of bilateral u s dollar exchange rates and their corresponding relative prices the proportionality of the exchange rate to relative prices does not however receive support from the data this finding may be attributable to the use of measured price series rather than the true series

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

a note on optimal fiscal policy in an economy with private borrowing limits abstract we consider the implications for optimal fiscal policy when taxes are non distortionary and households are heterogeneous and borrowing constrained the main result is that optimal policy keeps some households borrowing constrained in order to reduce interest rates on government debt

consumption smoothing in island economies can public insurance reduce welfare abstract in this paper we study the effects of certain types of public compulsory insurance arrangements for aggregate shocks on private allocations in environments with limited commitment we show that this type of insurance can improve the wellbeing of private situations but it can also deteriorate it we also describe how different characteristics of the environment affect the role of public insurance using data on the mexican progresa program we document the impact that some government programs have in crowding out private transfers

non linearity versus non normality in real exchange rate dynamics we distinguish non normality from non linearity in g7 real exchange rate dynamics by correcting the critical values of the kapetanios et al kapetanios g shin y snell a 2003 testing for a unit root in the non linear star framework journal of econometrics 112 359 379 test for non normality using the wild bootstrap our findings validate non linear purchasing power parity net of non normality effects

dynamic optimal taxation with private information we study dynamic optimal taxation in a class of economies with private information optimal allocations in these environments are complicated and history dependent yet we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax systems the market structure in these economies is similar to that in bewley 1986 agents supply labour and trade risk free claims to future consumption subject to a budget constraint and a debt limit optimal taxes are conditioned only on two observable characteristics an agent s accumulated stock of claims or wealth and her current labour income we show that optimal taxes are generally non linear and non separable in these variables and relate the structure of marginal wealth and income taxation to the properties of agent preferences this paper studies optimal taxation in a class of dynamic economies with private information we consider an environment in which agents preferences are defined over consumption and labour and each agent receives a privately observed sequence of i i d preference shocks incentivecompatibility constraints stemming from private information imply that socially optimal or constrained efficient allocations in this environment are complicated and history dependent yet we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax systems the market structure in these economies is identical to that in bewley 1986 huggett 1993 or aiyagari 1994 agents can trade current consumption for claims to future consumption subject to a budget constraint and a borrowing limit these claims have a non contingent pre tax return crucially taxes are conditioned upon only two observable characteristics of an agent current wealth given by the agent s accumulated stock of claims and current labour income they do not depend on any other aspect of an agent s past history most models of dynamic optimal taxation follow the ramsey approach in which the set of fiscal instruments available to the government is exogenously specified 1 linear labour and capital income taxes are typically included in this set while lump sum taxes are ruled out the exclusion of the latter is justified by appealing to incentive or administrative constraints but these are not explicitly modelled these exogenous restrictions on fiscal instruments represent frictions that the government seeks to ameliorate through its optimal choice of tax rates the approach we adopt in this paper builds on the optimal taxation literature initiated by mirrlees 1971 mirrlees assumes that agents receive privately observed shocks to their

public debt in economies with heterogeneous agents abstract we study public debt in competitive equilibria in which a government chooses transfers and taxes optimally and in addition decides how thoroughly to enforce debt contracts if the government enforces perfectly asset inequality is determined in an optimum competitive equilibrium but the level of government debt is not welfare increases if private debt contracts are not enforced borrowing frictions let the government gather monopoly rents that come from issuing public debt without facing competing private borrowers regardless of whether the government chooses to enforce private debt contracts the level of initial government debt does not affect an optimal allocation

determinants of horizontal spillovers from fdi evidence from a large meta analysis summary the voluminous empirical research on horizontal productivity spillovers from foreign investors to domestic firms has yielded mixed results in this paper we collect 1 205 estimates of spillovers and examine which factors influence spillover magnitude our results suggest that horizontal spillovers are on average zero but that their sign and magnitude depend systematically on the characteristics of the domestic economy and foreign investors foreign investors who form joint ventures with domestic firms and who come from countries with a modest technology edge create the largest benefits for the domestic economy

public versus private provision of liquidity is there a trade off abstract to what extent is public debt private liquidity much policy advice given in the aftermath of the financial crisis rests on the assumption that increasing public debt relaxes borrowing constraints of private households this is the case for ad hoc debt limits which are exogenous to public policy instead if debt limits are fully endogenous as e g in the case of the natural borrowing limit public debt has no impact we assume that borrowing limits arise because of limited contract enforceability and are therefore determined as equilibrium outcomes using an incomplete markets economy in which households are subject to uninsurable earnings shocks we show that public debt provides some liquidity but less so than it would if constraints were imposed ad hoc we show that generating borrowing constraints as an equilibrium outcome substantially alters the answers to other important questions such as for the welfare effects of government debt or its impact on real economic activity

central bank intervention exchange rate regime and the purchasing power parity motivated by the argument that central bank intervention leads to non linear exchange rate adjustment processes we examine purchase power parity ppp by applying quantile unit root tests to the exchange rates of the new taiwan dollar ntd vis a vis seven asian currencies we show that exchange rate regime matters in determining whether ppp holds while ppp holds overwhelmingly during the period when the ntd is under the fixed exchange rate regime it is present only for some exchange rates during the managed floating rate regime for exchange rates exhibiting mean reversion the reversion occurs mainly when the shocks are large in contrast to conclusion in the literature our test results show little evidence of asymmetric mean reversion between positive and negative shocks

is trust the missing root of institutions education and development we report evidence that trust is the missing root relating education institutions and economic development we observe that more trust both increases education and improves legal and bureaucratic institutions which in turn spurs economic development we substantiate this intuition with a series of regressions that provide evidence that trust determines both education and the quality of institutions and that education and institutions in turn affect gdp per capita

financial deregulation and consumption in the united kingdom the last decade has seen widespread deregulation of domestic financial markets in the united kingdom this paper uses regional data to investigate the connection between consumption and financial deregulation it is concluded that deregulation has led to a significant increase in the forward looking nature of aggregate consumption copyright 1993 by mit press

the chandlerian corporation and the theory of innovative enterprise through the synthesis of business history into a coherent and powerful analytical framework alfred chandler made an enduring intellectual contribution to the social sciences this essay outlines the implications of chandler s perspective for the theory of innovative enterprise embeds that theory in the social conditions of innovative enterprise analytical framework demonstrates the illogic of the neoclassical monopoly model and contends that the analysis of the dynamics and performance of industrial capitalism requires a methodology that integrates theory and history

finance capital in chandlerian capitalism alfred chandler wrote a great deal on finance capital in the development of big business in making bold and provocative statements he provided scholars with a variety of stimulating ideas to a large extent however we still do not know whether chandler s assertions were correct ultimately the value of revisiting chandler s research on finance capital in the rise of us big business is to understand how much research needs to be done and the questions it needs to address copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press