banking panics information and rational expectations equilibrium this paper shows that bank runs can be modeled as an equilibrium phenomenon we demonstrate that some aspects of the intuitive story that bank runs start with fears of insolvency of banks can be rigorously modeled if individuals observe long lines at the bank they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run however bank runs occur even when no one has any adverse information extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations banking panics were a recurrent phenomenon in the united states until the 1930s they have re emerged as a source of public concern and much theoretical research recently in this paper we provide an information theoretic rationale for bank runs the traditional story is that contagion is an important aspect of bank runs the idea seems to be that when the general public observes large withdrawals from the banking system fears of insolvency grow resulting in even larger withdrawals of deposits in our model some individuals withdraw because they get information that future returns are likely to be low uninformed individuals observing this also have an incentive to liquidate their investments in addition some individuals need to withdraw deposits for other than informationally based reasons thus if the random realization of such a group of individuals is unusually large then the uninformed individuals will be misled and will precipitate a run on the bank the technology is such that a large volume of withdrawals involves liquidation costs consequently runs on the bank do impose social costs a mechanism that may reduce these costs in our model is to suspend convertibility if withdrawals are high however those individuals who need to withdraw their assets for liquidity reasons are worse off ex post our model provides a rationalization for restrictions in demand deposits that were widespread prior to 1929 friedman and schwartz 7 suggest that restrictions of payments ensured

the demand for beer wine and spirits a survey of the literature the demand for alcohol literature is vast and much conflicting information about the nature of the demand for alcoholic beverages has been published this paper presents a survey of the literature and then uses the technique of meta regression analysis to establish insights into the nature of the demand for beer wine and spirits unlike previous meta studies of the demand for alcoholic beverages this study adjusts for the precision of each elasticity estimate the analysis presented suggests reported elasticity estimates will be influenced by such factors as estimation technique data frequency and time period under consideration with respect to time the findings suggest that the demand for alcoholic beverages has become less inelastic since the mid 1950s and that the income elasticity has been falling since the mid 1960s the analysis also found support for the idea that alcohol as a commodity group is a necessity and that consumers respond to price discounting with inventory behaviour rather than true substitution behaviour little support is found for the idea that the demand for alcoholic beverages varies fundamentally across most countries although wine may be an exception language en

forms of trust and conditions for their stability of the three principal approaches to trust we decided to investigate in greater detail the one in which trust is regarded as a belief that the individuals involved hold about a relationship trust was defined as a delegatory relationship based on anticipation of the delegatee s behaviour we reached four main conclusions first the solution to the problem posed by the indeterminacy of trust lies in the differentiation and hierarchisation of the various forms of trust contractual organisational and tacit on the basis of their degree of irreversibility and stability second contractual trust is unstable because it comes up against the problem of guarantees of individual intentions this leads to the third conclusion rational evaluation by individuals cannot by itself establish trust which is based on collective beliefs practices and rules fourth we identified two conditions for the stability of trust the creation of irreversibilities through adherence to a rule and the creation of a confidence interval within which different interpretations of contradictory individual strategies are tolerated thus the viability of the various forms of trust depends on the ability of institutions and organisations to create rules that are likely when applied to produce an interval in which tolerance of mutual intentions is the norm these analyses of trust hence highlight the role of time and period of time in the notion of trust

dalton improving indirect tax reform a tax reform is dalton improving if it improves social welfare for all possible social welfare functions that conform to hugh dalton s principle of transfers according to this principle there exists a prior social ranking of households and a transfer is approved if it it distributes from high ranking rich to low ranking poor households without altering the ranking itself in this paper the authors develop a procedure for identifying marginal dalton improving reforms in the context of indirect taxation the methodology is illustrated using data on excise taxes in the united kingdom copyright 1995 by american economic association

firm and product life cycles and firm survival on average roughly 5 10 percent of the firms in a given market leave that market over the span of a single year at least so data for a broad range of industries in several economies tell us what is it other than random shocks that determines the probability of survival for a firm in a given market we start by decomposing the forces that affect survival into industry and firm attributes industry attributes we hypothesize encompass variables that exert their influence both over time and across markets the variables that operate over time are defined by the life cycle of the industry life cycles of the industry affect mainly the characteristics of demand and the rate and form of technical change variations across firms we hypothesize arise mainly from learning by doing darwinian survival of the fittest and the obsolescence of initial endowments these variables are linked to the life cycle of the firm how these industry and firm life cycles define patterns of survival is the story

deposit insurance and moral hazard problem the case of turkish banking system we investigate the effect of full deposit insurance introduced in 1994 on the financial performance of turkish commercial banks we construct a model under reasonable assumptions with deposit insurance where banks undertake excessive risk moral hazard risk empirical investigation using experimental design approach supports our moral hazard hypothesis our findings indicate that banks subject to the moral hazard behaviour show significant increases in foreign exchange position risk and deterioration in capital adequacy relative to their benchmark after introduction of full deposit insurance system we relate this excessive risk taking to the moral hazard behaviour by commercial banks the research results indicate that complete deposit insurance system distorts the incentive structure of commercial banks and thus prevents proper functioning of market discipline mechanism and leads to the taking excessive risk taking

is there a link between alcohol consumption and the level of poverty abstractin many developing countries in addition to household income there are a number of other socio economic determinants of poverty one such hidden socio economic factor is alcohol consumption and some studies argue that there is a link between alcohol consumption and poverty the main aim of this study is to measure the effects of alcohol consumption on the level of poverty in a systematic way using sri lanka as a case study this article demonstrates that the consumption of various types of alcoholic beverages particularly the illegal beverages has a significant positive association with the level of poverty the findings of this study suggest that in sri lanka the consumption of illegal alcoholic beverages increases the likelihood of being in a poor household by 2 3 the results of this study also find that households who are characterized as nonpoor but are just above the poverty line behave more like the poor rather than the nonpoor in terms of alcohol consumption some of the conclusio

distinguishing panics and information based bank runs welfare and policy implications in this paper we contrast panics and information based bank runs in an effort to provide a robust and empirically plausible model of how bank runs are triggered the model of information based runs is characterized by two sided asymmetric information the bank cannot observe the true liquidity needs of the depositors while depositors are asymmetrically informed about bank asset quality we also examine the relative degrees of risk sharing provided by bank deposit contracts and traded equity contracts we show that the choice of deposit or equity depends on the attributes of and information about the underlying investment returns

job polarization in europe the structure of employment is always changing and economists are always trying to understand those changes in the 1990s the idea of skill biased technological change sbtc was used to understand the shift in employment toward more educated workers see david h autor and lawrence f katz 1999 for a survey however in recent years it has become appar ent that a more nuanced approach is needed the idea of sbtc might lead one to predict a uni form shift in employment away from low skilled and toward high skilled occupations but studies for the united states autor katz and melissa s kearney 2006 and the united kingdom goos and manning 2007 have shown that there is growth in employment in both the high est skilled professional and managerial and lowest skilled personal services occupations with declining employment in the middle of the distribution manufacturing and routine office jobs this is what goos and manning 2007 term job polarization although see the introduc tion to goos and manning 2007 for antecedents of these ideas there are several hypotheses about the rea sons for job polarization first the routiniza tion hypothesis first put forward by autor frank levy and richard murnane 2003 sug gests that the effect of technological progress is to replace routine labor which tends to be clerical and craft jobs in the middle of the wage distribution second there is the view that globalization in general and offshoring in par ticular is an important source of change in the job structure in the richest countries see for example alan s blinder 2007 third there may be a link between job polarization and

interest rate and exchange rate exposures of banking institutions in pre crisis korea this study empirically investigates interest rate and exchange rate exposures of banking institutions in pre crisis korea using the sensitivity of stock returns as a measure of the exposure it is shown that korean commercial banks and merchant banking corporations had been significantly exposed to both interest rate and exchange rate risks and that the subsequent profitability of commercial banks was significantly associated with the degree of pre crisis exposure the evidence suggests that along with the negative exposure of banking institutions the sharp depreciation of the korean won and high interest rates at the end of 1997 further deteriorated the banking sector s capital adequacy worsening the financial crisis the korean case highlights the importance of upgrading financial supervision and risk management practices as a precondition for successful financial liberalization

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

empirical application of optimal commodity tax theory to taxation of alcoholic beverages this paper concerns the calculation of optimal taxes on commodities which contain a common externality generating component the first best solution is characterized by a form of marginal cost pricing with production costs increased according to the harm content of commodities valued at marginal external cost an application to finnish alcohol consumption data is made to indicate how the tradeoff between control and revenue requirements affects taxes by bootstrapping the estimates taxes are found to be less sensitive than compensated elasticities

three paradigms for the role of capitalization requirements in insured financial institutions standard models for deposit insurance strike analogies to more familiar financial contracts and conceive of risk as exogenous the oldest model of deposit insurance likens it to passively underwriting casualty insurance a more sophisticated but still bilateral model likens deposit insurance to writing a passive put option on the enterprise whose funding is insured delays in acknowledging the wreck of the s l industry and its federal insurer fslic discredit these models as guides to managing a deposit insurance fund deposit insurance is better interpreted as a trilateral performance bond that enhances the credit of an insured institution this interpretation endogenizes risk emphasizes incentive conflict and underscores the need to optimize loss control activity the bonding model clarifies that a subset of the monitoring and disciplinary activities traditionally undertaken by government officials can usefully be privatized

what percentage of innovations are patented empirical estimates for european firms abstract a 1993 survey on the innovative activities of europe s largest industrial firms obtained useable results on patenting activities for 604 respondents the data are used to calculate the sales weighted propensity rates for 19 industries the propensity rates equal the percentage of innovations for which a patent application is made the propensity rates for product innovations average 35 9 varying between 8 1 in textiles and 79 2 in pharmaceuticals the average for process innovations is 24 8 varying from 8 1 in textiles to 46 8 for precision instruments only four sectors have patent propensity rates for both product and process innovations combined that exceed 50 pharmaceuticals chemicals machinery and precision instruments regression results that control for the effect of industry sector show that patent propensity rates increase with firm size and are higher among firms that find patents to be an important method for preventing competitors from copying both product and process innovations the effect of secrecy is not so straightforward firms that find secrecy to be an important protection method for product innovations are less likely to patent as expected but secrecy has little effect on the propensity to patent process innovations the r d intensity of the firm has no effect on patent propensity rates for both product and process innovations the sector of activity has a strong influence on product patent propensities but very little effect on process patent propensities after controlling for the effect of other factors

effects of innovation on employment a dynamic panel analysis abstract this paper estimates the effect of innovation on employment at the firm level our uniquely long innovation panel data set of german manufacturing firms covers more than 20 years and allows us to use various innovation measures we can distinguish between product and process innovations as well as between innovation input and innovation output measures using dynamic panel gmm system estimation we find positive effects of innovation on employment this is true for innovation input as well as for innovation output variables innovations show their positive effect on employment with a time lag and process innovations have higher effects than product innovations

competition in the turkish banking industry this study employs the panzar rosse h statistic to assess the competitive environment of the turkish banking industry over the period 1990 to 2000 the results indicate that for the period under consideration bank revenues behaved as if they were earned under conditions of monopolistic competition therefore the observed high profitability of the turkish banking sector does not seem to be an indication of an increase in monopoly power the liberalization process and deregulation measures appear to have beneficial effects on competition

employment innovation and productivity evidence from italian microdata italian manufacturing firms have been losing ground with respect to many of their european competitors this paper presents some empirical evidence on the effects of innovation on employment growth and therefore on firms productivity with the goal of understanding the roots of such poor performance we use firm level data from the last three surveys on italian manufacturing firms conducted by mediocredito capitalia which cover the period 1995 2003 using a modified version of the model proposed by harrison jaumandreu mairesse and peters 2005 which separates employment growth rates into those associated with old and new products we provide robust evidence that there is no employment displacement effect stemming from process innovation the sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products however the contribution of product innovation is somewhat lower than that for the four comparison european countries considered by harrison et al

exchange rate regimes for emerging markets moral hazard and international overborrowing this paper investigates the role of the exchange rate regime in a simple fisherian model of the overborrowing syndrome where domestic banks are subject to moral hazard the choice of exchange rate regime may have important implications for the macroeconomic stability of the economy banks that enjoy government guarantees have an incentive to increase foreign borrowing and incur foreign exchange risks that are underwritten by the deposit insurance system in the absence of capital controls this increases the magnitude of overborrowing and leaves the economy both more vulnerable to speculative attack and more exposed to the real economic consequences of such an attack while bad exchange rate pegs will tend to exacerbate the problem of overborrowing in emerging markets it is unclear that flexible exchange rate always dominate fixed exchange rates a good fix one that is credible and close to purchasing power parity may reduce the super risk premium in domestic interest rates and thereby narrow the margin of temptation for banks to overborrow internationally contrary to the current consensus regarding the lessons that should be drawn from the asian crisis a good fix may better stabilise the domestic economy while limiting moral hazard in the banking system

inefficient standard adoption inertia and momentum revisited i introduction since the establishment of the theory of network effects economists have been concerned with the question of whether a market with network effects will tend to settle on the socially optimal standard it has been postulated that markets may exhibit excess inertia once a technological standard is in place a new superior standard may not displace it because of installed base effects alternatively markets may exhibit excess momentum consumers may adopt a new standard too quickly ignoring the stranding effect they are having on previous users similar issues arise in the adoption of language and social norms the literature has investigated various conditions under which one of these inefficiencies arises such inefficiencies are of particular concern for open technologies such as the qwerty and dvorak keyboards 1 the situation is somewhat different when individual firms own standards in that case a simple argument seems to indicate that there is no possibility that an inefficient standard will persist if a new standard is superior in any objective sense there are gains to be made from switching to it once the standard has been adopted the firm can appropriate these gains therefore the firm has incentive to lower the initial price enough to induce adoption of the standard the preceding argument is made in liebowitz and margolis 1999 and repeated in spulber 2002 spulber expresses a general skepticism about the likelihood of inefficiencies when property rights are defined and markets exist critics might claim that previous models that imply inefficient standard adoption are unrealistic in some way and that if such models were modified slightly the inefficiency would disappear i reconsider the issue of inefficient standard adoption using a parsimonious yet compelling model assuming only that there are successive generations of finitely lived consumers that preferences are heterogeneous and that there are network effects among users adoption decisions can be inefficient this is true even if consumers can coordinate efficiently within a generation and a firm can act as a coordinating device across generations the model presented here generates some of the same results found in other papers collectively but in a more general setting and with more robust results if there is an established standard and a superior alternative emerges no single generation of consumers will be willing to switch to the new standard if the switching cost the loss of network benefit from breaking with past users is too high it may be that the benefits to future generations of consumers are large enough that from a social standpoint it would be efficient for one generation to adopt the new standard even if it is privately optimal for that generation to retain the old standard on the other hand the current generation considers only its own switching cost and not the cost it imposes on the previous generation leading to potential overadoption of new technology even for proprietary standards it is not clear that the incentive of the firm to induce adoption matches the social incentive in particular if consumer preferences are heterogeneous the firm will not be able to price in such a way to extract all of the additional surplus gained from the new standard on the other hand the firm will be able to appropriate some of the surplus generated by the network effect itself which is present for any standard and thus does not affect the social incentive to change standards it is not possible to address this issue with a two period model as in some of the previous literature see for example choi 1994 choi and thum 1998 katz and shapiro 1986 if a new technology is introduced in the second period but then the game ends the welfare of future generations of consumers is neglected 2 this article also differs from previous infinite horizon models of technology adoption

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

estimates of the value of patent rights in european countries during the post 1950 period this paper examines the distribution of the values of patent rights in the united kingdom france and germany during the post 1950 period these values are inferred from the behavior of patentees with respect to payment of renewal fees on their patents a simple economic model of renewal decisions is combined with data on the proportion of patents renewed at alternative ages and the renewal fee schedules to produce estimates of the distribution and the total value of patent rights in these countries moreover the data indicate that there have been changes in the value distribution and we follow these changes over the period the empirical results of particular interest concern the total value of patent rights and the relationship between changes in it and changes in the quantity of patents the skew in the distribution of patent values and the rate of obsolescence on the returns to patents

employment and technological innovation evidence from u k manufacturing firms this article uses british firm level panel data on actual innovative activity drawn from different statistical sources to identify the effect of technical change on jobs previous work tends to find positive associations of proxies for technical change and employment but such studies suffer from various statistical drawbacks in this study even when one controls for fixed effects dynamics and endogeneity innovations have a positive and significant effect on employment which persists over several years there seems to be little direct role for spillover effects from industry innovations or any role for industry wages or union power

market discipline by thrift depositors this paper tests for the presence of depositor discipline by examining the effect of depository institutions risk on the pricing and growth of uninsured deposits the study analyzes a large panel of thrifts that includes detailed information on interest rate schedules this information allows the authors to develop a time consistent risk profile for thrifts their empirical findings support the presence of market discipline riskier banks are found to pay higher interest rates but attract smaller amounts of uninsured deposits the authors also find that qualitative results are similar for fully insured deposits although statistical significance is substantially lower

does the debt market assess large banks risk time series evidence from money center cds abstract uninsured bank liabilities should offer a promised yield that compensates depositors for their expected default losses however the conjectural guarantees available to large u s banking firms makes it questionable whether large depositors should or do feel themselves exposed to credit risk prior papers have evaluated the determinants of bank risk premia using cross sectional data with relatively inconclusive results this paper investigates the same issue in a methodologically independent fashion using time series data on specific banks daily offering rates during the period may 1982 through july 1988 we find that cd rates paid by large money center banks include significant default risk premia

the greener the better job creation effects of environmentally friendly technological change this article investigates the link between environment related innovation and job creation at firm level employing italian data on 4507 manufacturing firms matched with patent records for the period 2001 2008 we test whether green innovation measured by the number of environment related patents has a positive effect on long run employment growth that is specific with respect to non environmental innovation results show a strong positive impact of green innovation on long run job creation substantially bigger than the effect of other innovations our findings are robust to a number of additional tests including controls for patents quality and cost differential between generic and green innovation and endogeneity

environmental innovation and employment dynamics in different technology fields an analysis based on the german community innovation survey 2009 the employment effects of environmental technologies are in the focus of politicians but studies analyzing these effects for different environmental innovation fields are rare we use the 2009 wave of the community innovation survey cis allowing for such an analysis at the firm level our econometric analysis shows that innovative firms in general are characterized by a significantly more dynamic employment development especially the introduction of cleaner technologies as process innovations leads to a higher employment within the firm the theoretical background of this finding is that cost savings induced by this type of process innovation improve the competitiveness of firms this has positive effects on demand and thus also increases employment especially material and energy savings are positively correlated to employment because they help to increase the profitability and competitiveness of the firm on the other side air and water process innovations that are still dominated by end of pipe technologies have a negative impact on employment

r d innovation and productivity new evidence from italian manufacturing microdata italian manufacturing firms have been losing ground with respect to many of their european competitors this article presents some empirical evidence on the effects of innovation on employment growth and therefore on firms productivity with the goal of understanding the roots of such poor performance we use firm level data from the last three surveys on italian manufacturing firms conducted by mediocredito capitalia which cover the period 1995 2003 using a slightly modified version of the model proposed by harrison jaumandreu mairesse and peters harrison et al 2005 which separates employment growth rates into those associated with old and new products we find no evidence of significant employment displacement effects stemming from process innovation the sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products however the contribution of product innovation to employment growth is somewhat lower than in the four european countries considered in harrison et al 2005 and the contribution of innovation in general to productivity growth is almost nil in italy during this period

moving toward risk based deposit insurance premiums in the european union the case of spain this article provides a scenario based analysis of how the european union proposal for a new funding model for deposit insurance systems diss would affect the spanish banking sector we examine the risk profiles of commercial banks savings banks and credit cooperatives over the period 2007 to 2011 and compare the contributions to the deposit insurance fund dif under the current flat rate regime with those that would have occurred under the new risk sensitive system we find that a risk based scheme could provide an incentive for sound management by reducing the premiums for credit institutions with better risk profiles we also conclude that the proposed reform may help to mitigate the moral hazard associated with larger credit institutions