time varying smooth transition autoregressive models nonlinear regime switching behavior and structural change are often perceived as competing alternatives to linearity in this article we study the so called time varying smooth transition autoregressive tv star model which can be used both for describing simultaneous nonlinearity and structural change and for distinguishing between these features two modeling strategies for empirical specification of tv star models are developed monte carlo simulations show that neither of the two strategies dominates the other a specific to general to specific procedure is best suited for obtaining a first impression of the importance of nonlinearity and or structural change for a particular time series a specific to general procedure is most useful in careful specification of a model with nonlinear and or time varying properties an empirical application to a large dataset of u s macroeconomic time series illustrates the relative merits of both modeling strategies

rational demand and expenditures patterns under habit formation abstract this paper proposes a model in which habit formation is present in a relatively general but tractable way the consumer s problem is transformed into a sequence of two period fisherian problems by introducing a reduced utility function to ensure full dynamic rationality of the consumer by making preferences dependent on past real expenditure levels rather than past consumption bundles it is possible to characterize the long run behavior of the consumer stability analysis is performed the cases of immediate habit formation and delayed habit formation are discussed

fdi as an outcome of the market for corporate control theory and evidence abstract much foreign direct investment fdi takes the form of mergers and acquisitions m a it is commonplace in finance to view acquisitions as manifestations of the market for corporate control following on that insight we propose a model of fdi in which headquarters bid to control overseas assets we derive an equation for bilateral fdi stocks that resembles the recently developed fixed effects approach to modelling bilateral trade flows we estimate the model and use its parameters to construct benchmarks for evaluating multilateral inward and outward fdi

when should we worry about inflation at what level should inflation be a concern from a growth perspective high and rising levels of inflation as in 2006 2008 raise concerns that inflation if uncontained can undermine growth on the other hand higher levels of inflation can create more space for using monetary policy to reduce nominal and real interest rates during financial crises a nonlinear growth regression for 165 countries over 1960 2007 shows that for developing countries inflation above 10 percent quickly hurts growth for advanced economies there is no specific threshold in the medium term higher inflation hurts growth for any initial level of inflation suggesting that there is a real cost to maintaining higher inflation as a buffer

examining dynamically changing timber market linkages market integration has been widely studied in the past to gain a better understanding of how different markets for the same good interact with one another traditional cointegration tests have been used to perform these analyses however these tests can only reveal the presence of stable or average long term relationships to evaluate market dynamics over time we modify a time varying smooth transition autoregressive tv star model to examine pine stumpage markets in the us south the proposed model incorporates an economic indicator and allows us to evaluate market integration as it changes throughout a specified time period the potential significance of this work is twofold first market integration can be observed as a function of an economic indicator and secondly the proposed model will allow us to draw inference about market integration at specific time points

advertising and food drink and tobacco consumption in the united kingdom a dynamic demand system this paper tests for the influence of advertising on the inter product distribution of consumer demand for non durable goods and services in the uk 1963 1996 the long run demand for seven categories of non durable products is modelled through an advertising augmented version of the almost ideal demand system aids which is incorporated into an error correction model to allow for short run dynamic adjustments to long run equilibrium positions model estimates confirm that the restrictions of price homogeneity and symmetry appear to be consistent with the data yield measures of the various types of demand elasticity that are in general plausible confirm the strong influence of prices on the allocation of consumer expenditure but find little evidence to support the hypothesis that advertising has the power to effect marked changes in the inter product pattern of consumer demand in the uk

prices and quality effects in cross sectional demand analysis a conceptual clarification of the sources and meaning of cross sectional price variability is used to motivate a theoretical and econometric framework for the estimation of cross sectional demand functions quality effects are distinguished from supply related price variability to identify cross sectional demand for disaggregated food commodities an empirical application using data from the 1977 78 nationwide food consumption survey indicates that parameter differences resulting from a failure to adjust cross sectional prices for quality effects are likely to be small for relatively homogenous disaggregated food commodities in demand analysis with cross sectional household budget data it is usually assumed that prices are constant allen and bowley prais and houthakker george and king given this assumption engel functions are estimated where expenditure or quantity is regressed on income or total expenditures family size and other demographic characteristics the assumption that cross sectional price effects are absent or are captured adequately by spatial and temporal dummy variables has not been evaluated empirically whether cross sectional price effects can be treated in this manner has implications for the specification of cross sectional demand functions as well as the estimation of engel functions there is a considerable literature on estimating price elasticities with cross sectional data most of the applications utilize timeseries cross sectional data annual or quarterly household consumption surveys and

quality quantity and spatial variation of price this paper develops and implements a method for estimating price elasticities of demand using cross sectional household survey data geographically clustered households report unit values which when corrected for quality effects and for measurement error indicate the underlying spatial variation in prices and can be matched to variation in demand patterns a simple model of quality choice is proposed while the correction for measurement error exploits the clustered design of such surveys data from a 1979 household survey from the ivory coast are used to estimate price elasticities for beef meat fish cereals and starches copyright 1988 by american economic association

demand systems estimation with microdata a censored regression approach demand systems estimation increasingly makes use of household level microdata mainly to measure the effects of demographic variables data based on these household expenditure surveys present a major estimation problem for any given household many of the goods have zero consumption implying a censored dependent variable techniques which do not take this censored dependent variable into account will yield biased results we utilize a censored regression approach that is computationally simple consistent and asymptotically efficient the results are then presented and compared with those obtained using an uncensored technique

a test of the habit formation hypothesis using household data numerous studies have confirmed the importance of habit formation as represented by a lagged dependent variable in demand analysis although all work to date has been based on aggregate time series data this study uses household level bls interview panel data to test the habit hypothesis an interrelated demand system for seventeen goods is estimated from cross section data and compared with a similar system based on time series data the results show that the habit component is significantly different between the two data sets and much smaller in the cross section data habit effects while not as large in cross section data as time series are still highly significant several explanations are offered concerning why the two sets of estimates differ copyright 1991 by mit press

predicting the effects of sugar sweetened beverage taxes on food and beverage demand in a large demand system a censored exact affine stone index incomplete demand system is estimated for 23 packaged foods and beverages and a numeraire good instrumental variables are used to control for endogenous prices a half cent per ounce increase in sugar sweetened beverage prices is predicted to reduce total calories from the 23 foods and beverages but increase sodium and fat intakes as a result of product substitution the predicted decline in calories is larger for low income households than for high income households although welfare loss is also higher for low income households neglecting price endogeneity or estimating a conditional demand model significantly overestimates the calorie reduction

habit formation in consumption and its implications for monetary policy models this paper explores a monetary policy model with habit formation for consumers in which consumers utility depends in part on current consumption relative to past consumption the empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous condence largely because the habit formation model captures the gradual hump shaped response of real spending to various shocks the paper then embeds the habit consumption specication in a monetary policy model and nds that the responses of both spending and inflation to monetary policy actions are signicantly improved by this modication jel d12 e52 e43

habit formation and demand for sugar sweetened beverages using scanner data we estimated demand for nine nonalcoholic beverages under habit formation we found strong evidence for habit formation although demand for sugar sweetened beverages by low income households is less elastic to own price changes compared with high income households there is evidence that high income households consider beverages to be more substitutable than low income households do a half cent per ounce tax on store purchased sugar sweetened beverages will result in a moderate reduction in consumption of sugar sweetened beverages for both income strata because of habit formation long run national tax revenue from a sugar sweetened beverage tax is about 15 to 20 lower than short run revenue

has the cds market influenced the borrowing cost of european countries during the sovereign crisis this paper assesses the potential influence of the growing cds market on the borrowing cost of sovereign states during the european sovereign crisis we analyze the sovereign debt market to ascertain the pattern of information transmission between the cds and corresponding bond markets our methodological innovation is the use of a non linear specification rather than the linear vecm specification customarily employed using a panel smooth transition model during the 2008 2010 period we find that 1 linearity tests clearly reject the null hypothesis of a linear transmission mechanisms between the bond and the cds markets 2 market distress alters the mutual influence and 3 the higher the distress the more the cds market dominates the information transmission between cds and bond markets

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

fruit and vegetable consumption patterns a segmentation approach in this article we study the heterogeneity of fruit and vegetable consumption patterns in france a finite mixture of aids models is used to describe food demand patterns revealing different preferences over distinct classes we obtained six different clusters which reflect specific socio demographic characteristics and different income and price elasticities this approach is appropriate for targeting specific public nutritional policies our main results show that unlike the other clusters in which the usual price and income policy tools may be used the lowest income cluster with the lowest consumption remains insensitive to economic variables

the demand for cigarettes in japan a two stage budgeting procedure was used to estimate demand elasticities for cigarettes in japan cigarettes were disaggregated into japanese u s and rest of world testing for habit effects was performed at both stages results indicated that habit effects occur for total expenditures on cigarettes but not between types

soft drink prices sales body mass index and diabetes evidence from a panel of low middle and high income countries we take advantage of four different cross country datasets containing data on 78 countries for the period 1999 2014 in order to assess the relationship of carbonated soft drinks sales as well as their prices with body mass index bmi overweight obesity and diabetes using an ecological study design and multivariate regression longitudinal estimation approaches we find that carbonated soft drink sales were significantly positively related to bmi overweight and obesity but only in the low and lower middle income countries this finding was robust to a number of sensitivity and falsification checks in this sub sample an increase in per capita soft drink sales by 1 litre per year was related to an increase of bmi by about 0 009 kg m2 p 0 1 this is a small effect implying that halving annual consumption per capita in this group of countries would result in a drop of bmi by only about 0 03 kg m2 although soft drink prices were negatively related to weight related outcomes in the sample of higher middle income and high income countries this finding was not robust to falsification checks the results thus suggest that sales restrictions to steer consumers away from soft drinks could indeed have a beneficial health effects in poorer countries although the effect magnitude appears to be very small however given potential limitations of using ecological research design results from individual level studies would be required to further ascertain the role of soft drink sales and prices in obesity and diabetes

granular institutional investors and global market interdependence we study the propagation of global investment risk across markets through the granular view of institutional investors applying the conditional value at risk estimation to micro level weekly observations of international mutual funds between 2003 and 2011 we find that idiosyncratic shocks to large institutional investors explain both aggregate market risk and cross market risk interdependence conditional on the us capital markets being in financial distress idiosyncratic shocks to the top 10 largest funds investing in the us explain about 40 of the risk fluctuations in other non us markets the findings are also economically and statistically significant for the top largest funds investing in non us markets with the effects becoming especially large during the global financial crisis of 2007 09 these results are robust after controlling for common risk factors and applying alternative measures of idiosyncratic shocks

zipf s law for cities an explanation zipf s law is a very tight constraint on the class of admissible models of local growth it says that for most countries the size distribution of cities strikingly fits a power law the number of cities with populations greater than s is proportional to 1 s suppose that at least in the upper tail all cities follow some proportional growth process this appears to be verified empirically this automatically leads their distribution to converge to zipf s law

concentration indices and zipf s law abstract the relationships between zipf s law a relevant model for the firms size and the financial investment amounts and the major concentration indices are derived the hirschman herfindahl index is the most sensitive index in contexts where zipf s law applies

potential dietary outcomes of changing relative prices of healthy and less healthy foods the case of ready to eat breakfast cereals abstract many prevalent and costly health disorders in the u s can be attributed in part to poor diets overconsumption of calories and physical inactivity taxing less healthy foods and subsidizing healthy foods as a strategy to improve diet and health has attracted growing interest among policy makers and researchers we test this strategy by using national household purchase data to estimate a censored price and expenditure endogenous demand system for 12 food groups that are commonly consumed at breakfast low and high nutrition ready to eat breakfast cereals eggs breads hot cereals breakfast bars juice whole and reduced fat milk yogurt meats and coffee the estimated demand elasticities are applied to nationally representative food intake data to simulate under the assumption of perfectly price elastic supply the potential dietary improvement from taxing low nutrition and subsidizing high nutrition ready to eat breakfast cereals we find that the demand for both types of cereals is own price inelastic suggesting that consumers are not likely to make large shifts in consumption of cereals if the price changes thus only limited dietary improvement can be expected from taxes and subsidies furthermore when the healthfulness of breakfast foods is evaluated using a comprehensive list of nutrients and food components a price intervention strategy may result in unintended adverse impacts our simulation results suggest that the hypothetical price intervention actually increases the calorie content of foods consumed at breakfast

a latent class approach to investigating demand for genetically modified banana in uganda this study explores consumer acceptance and valuation of a genetically modified gm staple food crop in a developing country prior to its commercialization we focus on the hypothetical introduction of a disease resistant gm banana variety in uganda where bananas are among the most important staple crops a choice experiment is used to investigate consumer preferences for various attributes related to the banana such as bunch size technology producer benefit and price and examine their opinions on gm foodstuff choice data come from 421 banana consuming households randomly selected from three regions of uganda a latent class model is used to investigate the heterogeneity in consumers preferences for selected attributes related to the banana and to profile consumers who are more or less likely to accept gm bananas our results reveal that there is significant heterogeneity in consumer preferences across our sample gm bananas are valued the most by poorer households located in the rural areas of the eastern region these food insecure households would experience the highest benefits i e welfare gains from the commercial release of gm bananas in contrast urban consumers are less accepting of gm bananas and they would experience significant welfare losses if gm banana is released according to our welfare estimates both the total welfare benefits acquired by the gainers and the total welfare losses borne by the losers of this technology are significant and large these results suggest the need for further investigation of the overall welfare effects of the introduction of gm bananas on the ugandan society as a whole

does increasing the beer tax reduce marijuana consumption previous studies suggest that alcohol and marijuana are economic substitutes so recent policies restricting the availability of alcohol have led to an increase in the amount of marijuana consumed using micro level data from the national longitudinal survey of youth nlsy to estimate individual demand equations for alcohol and marijuana this research finds that alcohol and marijuana are economic complements not substitutes further this research finds that increases in the federal tax on beer will generate a larger reduction in the unconditional demand for marijuana than for alcohol in percentage terms

brand inertia in u s household cheese consumption to analyze u s consumers brand choices for cheese purchases we derive a set of discrete choice models from dynamic utility maximization acnielsen homescan survey data on u s households is used to estimate a dynamic probit model for each of the top brands for cheddar shredded and sliced cheese in four u s regions we find that households have strong brand inertia a result robust across alternative specifications predicted probabilities confirm greater inertia in the top brands and consumers are more likely to switch into them brand inertia is relatively larger in cheddar and sliced cheese especially in the central and southeast regions copyright 2008 oxford university press

an economy of scales a selective review of obesity s economic causes consequences and solutions this paper reviews the economic research on obesity covering topics such as the measurement of and trends in obesity the economic causes of obesity e g the monetary price and time cost of food food assistance programs income education macroeconomic conditions and peer effects and the economic consequences of obesity e g lower wages a lower probability of employment and higher medical care costs it also examines the extent to which obesity imposes negative externalities and economic interventions that could potentially internalize such externalities such as food taxes subsidies for school based physical activity programs and financial rewards for weight loss it discusses other economic rationales for government intervention with respect to obesity such as imperfect information time inconsistent preferences and irrational behavior it concludes by proposing a research agenda for the field overall the evidence suggests that there is no single dominant economic cause of obesity a wide variety of factors may contribute a modest amount to the risk there is consistent evidence regarding the economic consequences of obesity which are lower wages and higher medical care costs that impose negative externalities through health insurance studies of economic approaches to preventing obesity such as menu labeling taxes on energy dense foods and financial rewards for weight loss find only modest effects on weight and thus a range of policies may be necessary to have a substantial effect on the prevalence of obesity

the implications of heterogeneous habit in consumer beverage purchases on soda and sin taxes abstract in this article we study the heterogeneity of habit strength in households demand for regular carbonated sweetened beverages csbs and beer in the united states a demand model that nests a smooth transition function is used to describe habit based consumption patterns revealing heterogeneous strengths of habits among households we find that more habitual consumers those with a strong preference for a particular product are not as sensitive to price or expenditure as the aggregate population this finding is further supported by simulations of the potential effects of soda and beer taxes we find the aggregate response to soda and beer taxes is smaller than when the influence of habit is assumed to be homogeneous

auditing and competitive bidding in the public sector abstract this paper investigates the impact of a ministry s budget size on the choice between auditing a niskanen bureau and employing competitive bidding in the provision of a publicly funded good the ministry s marginal expected payoff increases fastest with budget size for auctioning as opposed to auditing however the ministry is shown to switch from a purely public provision to a competitive provision as the budget size increases even if expected fixed costs favor the audit the study contributes to the literature by extending the niskanen framework and by endogenizing the institutional arrangements for the provision of public sector goods

a multi level panel star model for us manufacturing sectors we introduce a multi level smooth transition model for a panel of time series which can be used to examine the presence of common nonlinear business cycle features across many variables the model is positioned in between a fully pooled model which imposes such common features and a fully heterogeneous model which allows for unrestricted nonlinearity we introduce a second stage model linking the parameters that determine the timing of the switches between business cycle regimes to observable explanatory variables thereby allowing for lead lag relationships across panel members we discuss representation estimation by concentrated simulated maximum likelihood and inference we illustrate our model using quarterly industrial production in 19 us manufacturing sectors and document that there are subtle differences across sectors in leads and lags for switches between business cycle recessions and expansions copyright 2005 john wiley sons ltd

the pareto zipf and other power laws abstract many empirical size distributions in economics and elsewhere exhibit power law behaviour in the upper tail this article contains a simple explanation for this it also predicts lower tail power law behaviour which is verified empirically for income and city size data