bluuebunny/crossref_metadata_2025 huggingface dataset:
Crossover Designs in the Presence of Carry-Over Effects from Two Factors
Authors: Lewis S. M. , Russell K. G.
Published: March 2003

Experiments, used in the telecommunications industry and elsewhere, are considered that involve the simultaneous application of levels of two unrelated factors, treatments and stimuli, to each of several subjects in a succession of time periods. The existence is suspected of carry-over effects of treatments and stimuli, in the period immediately following the period of their application. Methods are given for the construction of separate sequences of treatments and of stimuli; these methods are based on the Latin squares of Williams and of Russell. In the resulting designs, the treatments and stimuli are either orthogonal or nearly orthogonal, and the coincidence of the direct and carry-over effects of each factor is either balanced or nearly balanced. The efficiencies of the designs are assessed by comparing the average variances of elementary contrasts in the levels of each factor with appropriate lower bounds.
Sample Selection in Radiocarbon Dating
Authors: Christen J. Andrés , Buck Caitlin E.
Published: March 2003

Archaeologists working on the island of O’ahu, Hawai’i, use radiocarbon dating of samples of organic matter found trapped in fish-pond sediments to help them to learn about the chronology of the construction and use of the aquicultural systems created by the Polynesians. At one particular site, Loko Kuwili, 25 organic samples were obtained and funds were available to date an initial nine. However, on calibration to the calendar scale, the radiocarbon determinations provided date estimates that had very large variances. As a result, major issues of chronology remained unresolved and the archaeologists were faced with the prospect of another expensive programme of radiocarbon dating. This paper presents results of research that tackles the problems associated with selecting samples from those which are still available. Building on considerable recent research that utilizes Markov chain Monte Carlo methods to aid archaeologists in their radiocarbon calibration and interpretation, we adopt the standard Bayesian framework of risk functions, which allows us to assess the optimal samples to be sent for dating. Although rather computer intensive, our algorithms are simple to implement within the Bayesian radiocarbon framework that is already in place and produce results that are capable of direct interpretation by the archaeologists. By dating just three more samples from Loko Kuwili the expected variance on the date of greatest interest could be substantially reduced.
Empirical Bayes Estimation for Archaeological Stratigraphy
Authors: Allum G. T. , Aykroyd R. G. , Haigh J. G. B.
Published: March 2003

Models and algorithms are presented for the stratigraphic analysis of earth core samples collected at archaeological sites. The aim is to separate the occupation of the site into distinct periods, by dividing the earth core into well-defined blocks of uniform magnetic susceptibility. The models describe the response of detector equipment by using both a spread function and an error process, and they incorporate prior beliefs regarding the nature of the true susceptibility values. The prior parameters are estimated by using pseudolikelihood and the susceptibilities by maximum a posteriori methods via the one-step-late algorithm. These procedures are illustrated with data from synthetic and real core specimens. The new procedures prove to be far superior to other approaches, producing reconstructions which clearly show distinct periods of uniform magnetic susceptibility separated by sharp discontinuities.
ESTIMATION OF THE COEFFICIENTS OF A MULTIVARIATE LINEAR FILTER USING THE INNOVATIONS ALGORITHM
Authors: Mitchell Heather , Brockwell Peter
Published: March 2003

It is shown under mild conditions that the estimators of the coefficient matrices obtained by applying the innovations algorithm to the sample covariances of observations of the multivariate linear time series Xt = ∑∞j=0ψiZt, t = 0, ±1, ±2, . . ., are consistent. The asymptotic distribution of the estimators is found to have a very simple form which generalizes the corresponding univariate result of Brockwell and Davis (Simple consistent estimation of the coefficients of a linear filter. In Stochastic Processes and Their Applications. Amsterdam: North‐ Holland, pp. 47‐‐59). The asymptotic distribution of the corresponding estimator of the spectral density matrix is also derived. Some simulation results are presented to illustrate the small‐sample behaviour of the estimators.
On the spectral density of a class of chaotic time series
Authors: Lopes Artur , Lopes Selvia , Souza Rafael R.
Published: March 2003

The purpose of this paper is to show explicitly the spectral density function of the stationary stochastic process determined by a certain class of two‐dimensional maps Fα defined below (α is a parameter in (0, 1)), the random variable φ(x, y) = x and the invariant probability described below.

We first define the transformation Tα: [0, 1]←[0, 1] given by

T
α(x) = {x/α if 0 ≤x < α and (α(x−α)/1 −α) if α≤x≤ 1

where α∈ (0, 1) is a constant. The map Tα describes a model for a particle (or the probability of a certain kind of element in a given population) that moves around, in discrete time, in the interval [0, 1].

The results presented here can be stated either for Tα or for Fα but we prefer the latter. The results for Tα can be obtained from the more general setting described by Fα.

The map Fα is defined from K = ([0, 1]× (0, α)) ∨ ([0, α]×[α, 1]) ⊂;R;2 to itself and is given by Fα(x, y) = (Tα(x), Gα(x, y)) for (x, y) ∈K, where

G
α(x, y) = {αy if 0 ≤x < α and α + ((1 −α)/α)y if α≤x < 1.

The spectral density function of the stationary process with probability ν (invariant for Fα and absolutely continuous with respect to the Lebesgue measure) Zt = Xt + ξt = φ{Ftα(X0, Y0)} + ξt for t∈Z

where (X0, Y0) ∈R2 and ξt}t∈Z is a white noise process, is given explicitly (Theorem 1) by

f

Z
(λ) = fX(λ) + (σ2ξ/2π) = (1/2πvar(Xt))[γ{exp(iλ)}−C(0)] + (σ2/2π) for all λ∈[0, 2π), where var(Xt) = (α2−α + 1)(α2− 5α + 5){12(2 −α)2}−1, γ is given by Equation (2.10) of Proposition 5 and C(0) = (1 + α2−α3){3(2 −α)}−1. We also estimate the parameter α based on a time series.
A Test of Linearity for Functional Autoregressive Models
Authors: Poggi Jean‐Michel , Portier Bruno
Published: March 2003

We propose a new test for linearity in time series. We consider an asymptotically stationary functional AR(p) model on ℜd of the form

X

n
= f(Xn−1, ..., Xn−p) + ξn (n∈ N).

The testing procedure is based on a suitably normalized sum of quadratic deviations between two different estimates of the function f evaluated at q distinct points of ℜdp. The estimators are f^n, a recursive version of the non‐parametric kernel estimator of f, and Ân, a least squares estimator well suited to the linear case. The main result states that the test statistic has a χ2 limit distribution under the null hypothesis. A similar result is derived under the alternative hypothesis for the test statistic corrupted by a non‐linear term. Our simulations indicate that our asymptotic results hold for moderate sample sizes when the testing procedure is used carefully
A Difference Estimator for Testing Equality of Variances for Paired Time Series
Authors: Cooil Bruce , Froeb Luke
Published: March 2003

A difference estimator of the standard error for the difference in variances of paired time series is proposed. The difference estimator uses the independence of periodogram ordinates to remove nuisance parameters. The difference estimator is easier to compute than one centered on the smoothed periodogram, but shares the same small sample shortcomings for non‐normal series
Dickey–Fuller, Lagrange Multiplier and Combined Tests for a Unit Root in Autoregressive Time Series
Authors: Oya Kosuke , Toda Hiro
Published: March 2003

In this paper we investigate (augmented) Dickey–Fuller (DF) and Lagrange multiplier (LM) type unit root tests for autoregressive time series through comprehensive Monte Carlo simulations. We consider two sorts of null and alternative hypotheses: a unit root without drift versus level stationarity and a unit root with drift versus trend stationarity. The DF‐type coef ficient tests are found to show the best overall performance in both cases, at least if the sample size is sufficiently large. How ever, it is also found that the DF and LM tests are roughly complementary with regard to their finite‐sample power. We therefore consider combining these two types of unit root tests to obtain (ad hoc‘but’) ‘robust’ test procedures. Critical values for the proposed tests are provided
Book Review
Authors: Laycock Patric
Published: March 2003

Reiss, R. D. and Thomas, M., Statistical Analysis of Extreme Values
Linear Trend with Fractionally Integrated Errors
Authors: Deo Rohit S. , Hurvich Clifford M.
Published: March 2003

We consider the estimation of linear trend for a time series in the presence of additive long‐memory noise with memory parameter d∈[0, 1.5). Although no parametric model is assumed for the noise, our assumptions include as special cases the random walk with drift as well as linear trend with stationary invertible autoregressive moving‐average errors. Moreover, our assumptions include a wide variety of trend‐stationary and difference‐stationary situations. We consider three different trend estimators: the ordinary least squares estimator based on the original series, the sample mean of the first differences and a class of weighted (tapered) means of the first differences. We present expressions for the asymptotic variances of these estimators in the form of one‐dimensional integrals. We also establish the asymptotic normality of the tapered means for d∈[0, 1.5) −{0.5} and of the ordinary least squares estimator for d∈ (0.5, 1.5). We point out connections with existing theory and present applications of the methodology.
An Improvement of Akaike's FPE Criterion to Reduce its Variability
Authors: De Luna Xavier
Published: March 2003

The selection of the number of past observations to be included in a linear predictor (the order of the predictor) should be done with minimum variability, since it is not taken into account in the inference stage. For finite time series, there is a trade‐off between variability and optimality (in the sense of mean squared prediction error). The widely used Akaike criteria, FPE and AIC, lead to highly variable estimated orders, whereas consistent criteria are downward biased when the optimal order increases with the sample size. In this paper we propose the use of a sequence of tests to analyse the order selected with FPE. The result is a new identification criterion. In a simulation study, this criterion is shown to reach a compromise with respect to the above‐mentioned trade‐off. Some asymptotic properties are also derived.
Some Inference Results for Causal Autoregressive Processes on a Plane
Authors: Guo Jiin‐Huarng , Billard L.
Published: March 2003

We investigate the causal autoregressive process on a plane pioneered by Whittle (On stationary processes on the plane. Biometrika 41 (1954), 434–49) and further studied by Besag (Spatial interaction and statistical analysis of lattice systems. J. R. Stat. Soc. Ser. B 36 (1974), 192–236). We develop test statistics to test composite hypotheses about the parameters and to test if the process is separable. Also, when some data points are missing, we develop a computational procedure obtained by combining the EM algorithm and bootstrap procedures to find estimates of the parameters and hence the distribution of these estimates.
Some Results on Specification Search and Pre‐testing in an ARMA(1,1) Process
Authors: Oke Thimothy
Published: March 2003

In this study we consider simple autoregressive moving‐average (ARMA) models of order at most 1. Pre‐testing, on the moving‐average coefficient θ, is used to choose between an ARMA(1,1) and an AR(1) in a Monte Carlo design. We find that the pre‐test estimator is not always dominated by the others, and that the bias and the mean square error of the estimate of the autoregressive coefficient φ very often depend on the sign of the autoregressive and moving‐average parameters of the ARMA(1,1) model in the data‐generating process. Further, we note that the degrees of size and power distortion of the t test on φ, after pre‐testing for θ, are generally associated with model misspecification.
The Limiting Distribution of the Residual Processes in Nonstationary Autoregressive Processes
Authors: Shin Dong Wan
Published: March 2003

The weak limit of the partial sums of the normalized residuals in an AR(1) process yt = ρyt−1 + et is shown to be a standard Brownian motion W(x) when |ρ| ≠ 1. However, when |ρ| = 1, the weak limit is W(x) plus an extra term due to estimation of ρ. Asymptotic behaviour of the partial sums is investigated with ρ = exp(c)/n) in the vicinity of unity, yielding a c‐dependent weak limit as n←∞, whose limit is again W(x) as |c| ←∞. An extension is made to nonstationary AR(p) processes with multiple characteristic roots on the unit circle. The weak limit of the partial sums has close resemblance to that for the polynomial regression.
A New Test of Linearity of Time Series Based on the Bispectrum
Authors: Terdik Gy. , Math J.
Published: March 2003

The linearity of a time series is tested by use of the bispectrum. We define the time series to be linear if the best predictor is linear. The bispectrum is estimated by stretching the data and smoothing by the Subba Rao–Gabr optimal window. The null hypothesis tested here is that the best predictor is linear against the alternative that the best predictor is quadratic. It turns out that the test statistic is asymptotically χ2‐distributed under the hypothesis that the time series is linear. The results are demonstrated using simulated and real data.
Properties of the Autocorrelation Function of Squared Observations for Second‐order Garch Processes Under Two Sets of Parameter Constraints
Authors: He Changli , Terasvirta Timo
Published: March 2003

Non‐negativity constraints on the parameters of the GARCH(p, q) process may be relaxed without giving up the requirement that the conditional variance remains non‐negative with probability 1. In this paper we look into the consequences of adopting these less severe constraints in the GARCH(2, 2) case and its two second‐order special cases, GARCH(2, 1) and GARCH(1, 2). This is done by comparing the autocorrelation function of squared observations under these two sets of constraints. The less severe constraints allow more flexibility in the shape of the autocorrelation function than the constraints restricting the parameters to be non‐negative.
Residual Autocorrelation Distribution in the Validation Data Set
Authors: Fasso Alessandro
Published: March 2003

Testing model performance on a data set other than the data set used for estimation is common practice in econometrics, technological stochastic modelling and environmetrics. In this paper, using an ARMAX model, the asymptotic distribution of the residual autocorrelations in the validation data set is given and a χ2 test for overall residual incorrelation is considered.
On Kay's Frequency Estimator
Authors: Quinn B. G.
Published: March 2003

Kay has proposed a technique for estimating the frequency of a complex sinusoid in additive noise, the real and imaginary parts of which are independent and normally distributed with means zero and the same variance. For fixed sample size the estimator achieves the Cramer–Rao lower bound for unbiased estimators of the frequency in the limit as the signal to noise ratio approaches infinity. It has been noted by Lovell and Williamson, however, that the estimator is biased. It is shown in this paper that under Kay's assumptions the estimator is not consistent (for fixed signal to noise ratio the estimator converges almost surely, as the sample size N increases, to a number that is not the true frequency, no matter how large the signal to noise ratio). A class of distributions for the additive noise is proposed under which the technique is strongly consistent and has the correct order of asymptotic variance, namely N−3, for the case where there is some a priori knowledge concerning the range of the frequency. For this class a normal central limit theorem is developed.
The Effect of Linear Time Trends on the KPSS Test for Cointegration
Authors: Hassler Uwe
Published: March 2003

The so‐called KPSS test for the null hypothesis of cointegration builds on residuals from single equation regressions. Critical values have been provided for regressions with and without detrending. Here it is shown that the latter are not appropriate if the series display linear trends, although this does not mean that detrending is required. In this paper adequate percentiles are suggested for series that follow linear time trends, and tests are based on regressions without detrending. These percentiles are readily available from the literature.
Estimation in the Mixture Transition Distribution Model
Authors: Berchtold Andre
Published: March 2003

This paper introduces a new iterative algorithm for the estimation of the mixture transition distribution (MTD) model, which does not require the use of any specific external optimization procedure and can therefore be programmed in any computing language. Comparisons with previously published results show that this new algorithm performs at least as well as or better than other methods. The choice of initial values is also discussed.

The MTD model was designed for the modeling of high‐order Markov chains and has already proved to be a useful tool for the analysis of different types of time series such as wind speeds and social relationships. In this paper, we also propose to use it for the modeling of one‐dimensional spatial data. An application using a DNA sequence shows that this approach can lead to better results than the classical Potts model.
Estimation of GARCH Models from the Autocorrelations of the Squares of a Process
Authors: Baillie Richard T. , Chung Huimin
Published: March 2003

This paper shows how the parameters of a stable GARCH(1, 1) model can be estimated from the autocorrelations of the squared process. Specifically, the method applies a minimum distance estimator (MDE) to the sample autocorrelations of the squared realization. The asymptotic efficiency of the estimator is calculated from using the first g autocorrelations. The estimator can be surprisingly efficient for quite small numbers of autocorrelations and, in some cases, can be more efficient than the quasi maximum likelihood estimator (QMLE). Also, the estimated process can better fit the pattern of observed autocorrelations of squared returns than those from models estimated by maximum likelihood estimation (MLE). The estimator is applied to a series of hourly exchange rate returns, which are extremely non Gaussian.
State‐space Models with Finite Dimensional Dependence
Authors: Gourieroux Christian , Jasiak Joann
Published: March 2003

We consider nonlinear state‐space models, where the state variable (ζt) is Markov, stationary and features finite dimensional dependence (FDD), i.e. admits a transition function of the type: π(ζt|ζt−1) =π(ζt)a′(ζt)b(ζt−1), where π(ζt) denotes the marginal distribution of ζt, with a finite number of cross‐effects between the present and past values. We discuss various characterizations of the FDD condition in terms of the predictor space and nonlinear canonical decomposition. The FDD models are shown to admit explicit recursive formulas for filtering and smoothing of the observable process, that arise as an extension of the Kitagawa approach. The filtering and smoothing algorithms are given in the paper.

JEL. C4.
On Prediction Intervals for Conditionally Heteroscedastic Processes
Authors: Kabaila Paul , He Zhisong
Published: March 2003

Kabaila (1999) argues that the standard 1−α prediction intervals for a broad class of conditionally heteroscedastic processes are justified by their possession of what he calls the ‘relevance property’. He considers both the case that the parameters of the process are known and that these parameters are unknown. We consider the former case and ask whether these prediction intervals can, alternatively, be deduced from the requirements of both (a) unconditional coverage probability 1−α and (b) minimum unconditional expected length. We show that the answer to this question is no, by presenting a counterexample. This counterexample concerns the standard 95% one‐step‐ahead prediction interval in the context of a simple Markovian bilinear process.
Nonlinear modelling of periodic threshold autoregressions using Tsmars
Authors: LEWIS PETER A. W. , RAY BONNIE K.
Published: March 2003

We present new methods for modelling nonlinear threshold‐type autoregressive behaviour in periodically correlated time series. The methods are illustrated using a series of average monthly flows of the Fraser River in British Columbia. Commonly used nonlinearity tests of the river flow data in each month indicate nonlinear behaviour in certain months. The periodic nonlinear correlation structure is modelled nonparametrically using TSMARS, a time series version of Friedman's extended multivariate adaptive regression splines (MARS) algorithm, which allows for categorical predictor variables. We discuss two methods of using the computational algorithm in TSMARS for modelling and fitting periodically correlated data. The first method applies the algorithm to data from each period separately. The second method models data from all periods simultaneously by incorporating an additional predictor variable to distinguish different behaviour in different periods, and allows for coalescing of data from periods with similar behaviour. The models obtained using TSMARS provide better short‐term forecasts for the Fraser River data than a corresponding linear periodic AR model.
A State space approach to bootstrapping conditional forecasts in arma models
Authors: WALL KENT D. , STOFFER DAVID S.
Published: March 2003

A bootstrap approach to evaluating conditional forecast errors in ARMA models is presented. The key to this method is the derivation of a reverse‐time state space model for generating conditional data sets that capture the salient stochastic properties of the observed data series. We demonstrate the utility of the method using several simulation experiments for the MA(q) and ARMA(p, q) models. Using the state space form, we are able to investigate conditional forecast errors in these models quite easily whereas the existing literature has only addressed conditional forecast error assessment in the pure AR(p) form. Our experiments use short data sets and non‐Gaussian, as well as Gaussian, disturbances. The bootstrap is found to provide useful information on error distributions in all cases and serves as a broadly applicable alternative to the asymptotic Gaussian theory.
The Role of Survey Data in Microsimulation Models for Social Policy Analysis
Authors: Martini Alberto , Trivellato Ugo
Published: March 2003

Questions about the impact of social policies cannot be answered solely on the basis of official statistics made available in tabular format. The access to microdata allows policy analysts to answer these questions with a larger set of analytical tools, in particular microsimulation models. This paper examines the interface between survey data and microsimulation models. We review different types of microsimulation models (static and dynamic) and their data requirements. We then restrict the attention to survey‐based microdata, and examine issues in survey design, questionnaire content, data quality, and dissemination policy that are important from the perspective of microsimulation.
The Macroeconomics of Employment and Wages in Mexico
Authors: López Julio G.
Published: March 2003

The main objective of this article is to study some aspects of the labor market in Mexico, on the basis of an econometric model. Starting with an unrestricted VAR, the author finds two cointegration vectors, one with employment and output, and one with nominal wages, minimum wages, the price index, and labor productivity. A congruent model with the growth rates of the variables, and including the cointegration vectors, is finally estimated. On the basis of this model the author carries out an analysis of the effects of macroeconomic variables upon employment and nominal wages.
Is Wage Leadership an Instrument to Coordinate Unions’ Wage Policy?The Case of Imperfect Product Markets
Authors: Grandner Thomas
Published: March 2003

Given an oligopolistic product market, trade unions organized at firm level want to coordinate their bargaining activities. If for some exogenous reasons centralization is not possible, unions could try to coordinate wage setting by wage leadership. The outcome of such wage leadership is compared with that of an uncoordinated bargaining and is characterized by higher utilities for all unions. But wages and employment levels are not symmetrical either for unions or for firms. The leader firm employment decreases and the follower firm employment rises compared with uncoordinated bargaining. This may cause problems with the implementation of wage leadership.
Wage Differentials between Ethnic Groups in Switzerland
Authors: De Coulon Augustin
Published: March 2003

This paper analyses the average wage differentials between various groups of immigrants and the Swiss workers. Classical Oaxaca‐Blinder decompositions are applied to a sample of 7,494 males (whose 1,070 immigrants) interviewed for the 1995 Swiss Labour Force Survey. Education and experience before and after migration are separately considered in two different ways. We control for sample selection in the wage and salary sector. We also investigate earnings differentials between natives and immigrants who arrived in the country before the age of 6. Our main results are that the part of differentials due to difference in coefficient varies strongly with different ethnic groups considered, that education is a strong determinant of the difference in observed characteristics and that second generation immigrants are fairly well assimilated in the Swiss labour market.
National Culture and Industrial Relations and Pay Structures
Authors: Black Boyd
Published: March 2003

The paper develops an explanatory model of comparative industrial relations and labour market structures based on national culture. The four cultural variables derived by Hofstede (Culture’s Consequences, Beverly Hills: Sage, 1984) are used to investigate the relationship between national culture and various dimensions of industrial relations and pay structures. The paper finds national culture to be associated with the centralization of bargaining, the extent of corporatism, the degree of co‐ordination in bargaining, the coverage of collective bargaining, trade union density, the extent of worker participation in decision making, and most dimensions of the pay structure. Hofstede’s MAS variable, measuring cultural values representing gender social structuring, is associated with both industrial relations institutions and the pay structure. The results provide support for our cultural model.
Youth Unemployment and Opportunities in the Labour Market – The Myth of Lifelong Hysteresis
Authors: Holm Anders , Groes Nils , Honoré Olsen Tina
Published: March 2003

This paper examines whether the level of risk of unemployment for recently trained youths in the labour market has lasting effects upon their employment opportunities: will a cohort that enters the labour market during a period of high unemployment have a permanently higher rate of unemployment than one that joins the labour market during a period of low unemployment? The connection between occupational choice and employment status after graduation is also examined The analysis encompasses teachers, engineers and unskilled workers. The conclusion is that troughs and highs in the labour market have a significant but not necessarily permanent effect upon unemployment and placement in different industries.
Infrequent Large Shocks to Unemployment: New Evidence on Alternative Persistence Perspectives
Authors: Everaert Gerdie
Published: March 2003

This paper tests whether the observed high persistence of unemployment rates in most OECD countries is due to (full) hysteresis against the alternative that it is caused by adjustment towards an increased natural rate. The analysis relies on standard univariate unit root tests. Usually such tests cannot reject the presence of a unit root in the unemployment rate, pointing to full hysteresis. This paper shows that the unit root hypothesis can clearly be rejected once infrequent level‐shifts are allowed for.
Efficiency‐wage Unemployment and Economic Welfare in a Model of Endogenous Growth
Authors: Meckl Jürgen
Published: March 2003

This paper examines positive and normative implications of efficiency‐wage‐induced unemployment within a model of endogenous growth. Sector‐specific impacts of the wage rate on labour efficiency establish a correlation between the growth rate and the rate of unemployment. The sign of this correlation is determined by the intersectoral wage differential. Despite the existence of unemployment, decisive positive properties of the full‐employment model are preserved. However, welfare implications of the full‐employment model may be reversed. The optimal policy can be to reduce growth, while at the same time raising unemployment.
Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?
Authors: Pekkala Sari , Kangasharju Aki
Published: March 2003

This paper analyses regional labour market adjustment in the Finnish provinces during 1971–96. It investigates the interrelations of employment, unemployment and labour force participation to examine how a change in labour demand is adjusted to. The study questions the usual assumption that positive and negative shocks evoke similar adjustment processes. Instead, we test for the possibility that the effects of positive and negative shocks are asymmetric. The analysis reveals that there is little asymmetry in the adjustment to region‐specific labour demand shocks, but adjustment to total (region‐specific plus common component) shocks displays more asymmetry. The region‐specific component of a labour demand shock has short‐lived effects on unemployment and participation, and its effect on employment is very small but permanent [persistent?]. Initially, most of the fall in employment is absorbed by the unemployment and participation rate, but after a few years migration plays a larger role in the adjustment process.
‘Investment’ in Union Membership: A Managerial Approach
Authors: Sjögren Tomas
Published: March 2003

This paper concerns wage formation in a unionized economy when union membership is endogenous and determined by employment. A union is run by a leadership which has as an objective to strengthen the union’s position in the labour market. This is achieved by building up membership. Among the results, it is found that since membership is determined by employment, the inclusion of the leadership’s preferences into a union’s objective function produces lower real wages than a static version would predict. It is also shown that an increase in the union’s rate of time preference increases the natural rate of unemployment, while an increase in the speed at which workers enter/leave a union has an opposite effect.
On the Asymmetric Volatility of Employment Outflows
Authors: Leeves Gareth
Published: March 2003

Recent research into job flow dynamics highlights the asymmetry in aggregate employment adjustment. This has implications for patterns of worker flow adjustment. This paper draws upon modelling strategies developed in the applied finance literature to characterize the asymmetry of aggregate employment outflow volatility. It is found that higher employment outflow volatility is associated with negative shocks, when the outflow is lower than expected. This, it is suggested, could be associated with the dynamic processes linking the hiring and turnover of workers.
The Israeli Model for Managing The National List of Health Services in an Era of Limited Resources
Authors: Shani Segev , Yahalom Zohar
Published: March 2003

In order to attain financial stability, equality, and quality of care, Israel placed its basic health insurance system under strict government regulation in the National Health Insurance Act (NHIA) of 1994. The act creates the National List of Health Services (NLHS), which outlines the minimal health services (including drugs and medical devices) that the four pre–exiting Sick Funds must supply to their members free of charge or for a relatively small defined co–payment

This article analyzes the mechanisms that update the NLHS to ensure the quality of health services provided to all citizens with respect to the constant developments in health technologies both for medical procedures and diagnosis, and for drugs.

The article’s main conclusion is that Israel offers a unique model for explicit rationing. The process of updating the list of services leads to clear decision making at a national level, one which offers new technologies to all citizens by public funding each year within the limits of an allocated and defined budget. However, the Israeli model is far from perfect, especially as the act does not establish a defined mechanism for allocating an annual budget for updating the list. Therefore, the act cannot assure a health care system with the stability and certainty it requires.
Negotiation, Power in Conciliation, and Review of Compensation Claims
Authors: Guthrie Robert
Published: March 2003

Workers Compensation claims are not interpersonal disputes. Almost always they are disputes between individuals and corporations. Compensation insurers are “repeat players” in the system. Workers are often “one–shotters” who have little or infrequent contact with the system. Power inequality between the worker, employer, insurer, and those who are required to facilitate negotiations and resolve and settle disputes under compensation legislation are matters of considerable importance. This paper examines the effects of the implementation, in 1993, of informal dispute resolution processes in the Western Australian workers compensation system under the Workers Compensation and Rehabilitation Act 1981(WA), which excluded lawyers from the process. It argues that preexisting power imbalances have been aggravated by these procedural changes, and in particular, by the exclusion of legal practitioners from the dispute resolution process. The issues raised herein have general application to most workers compensation systems.
The Geometry of Life Annuities
Authors: Kingston Geoffrey , Piggott John
Published: March 2003

Straightforward geometry can be used to explain the role for life annuities in smoothing individual consumption during retirement. In the aggregate, there is a surprising analogy with a standard diagram from trade theory. That diagram takes careful account of the government revenues forgone when there is a move from tariffs to free trade. Here we find a similar geometric interpretation of the proceeds from deceased estates which need to be accounted for when comparing a no‐annuities economy with its annuitized counterpart. By the same token, there are considerable gains from opening up a market for life annuities, even after deceased estates are taken into account.
Retirement Incomes: Private Savings versus Social Transfers
Authors: Creedy John , De Ven Justin Van
Published: March 2003

It has long been known, from the work of Samuelson and Aaron, that if (approximately) the sum of the population and real earnings growth rates exceeds the real interest rate, all individuals can be made better off by using a pay‐as‐you‐go pension scheme. The basic overlapping generations model that is typically used to examine such intergenerational transfers makes no allowance for labour supply responses to taxes and transfers, and so cannot be used to examine optimal tax and pension levels. The present paper allows for labour supply effects, whereby a tax imposed to finance current pensions introduces distortions to labour supply and a reduction in the tax base. The optimal proportional tax rate, and therefore the optimal combination of private savings and social transfers, is derived in terms of the time preference rate, the taste for leisure, real interest and productivity and population growth rates. It is found that the condition under which the optimal tax is positive is the same as the Samuelson–Aaron condition. A crucial ingredient in obtaining this result is an assumption that pension levels are adjusted in line with the growth of wage rates rather than, for example, being held constant in real terms. This in turn is found to imply that earnings grow at the same rate as the wage, so long as preferences are such that leisure can be expressed as a proportion of full income.
Risk, Self‐Employment and Differential Income Taxation
Authors: Parker Simon C.
Published: March 2003

Previous research has identified non‐diversifiable risk and a preference for ‘being one’s own boss’ as key determinants of participation in self‐employment. Using a simple model of occupational choice, I show how both factors can cause efficiency losses in a free market economy, and how linear differential occupational taxation can improve on the market outcome. A simulation exercise calibrated with UK data advocates a tax premium on employment incomes and a tax cut for the self‐employed, in order to generate an efficiency gain of around a third of one per cent of GDP.
Firms’ Organization and Efficient Communications Networks
Authors: Creti Anna
Published: March 2003

This paper presents a very simple characterization of the technological choices underlying M‐form and U‐form organizations. We first show that the externalities within a function favour the M‐form, which gives higher profit, higher output level and lower prices than the U‐form. The major innovation of the paper consists in the analysis of communication flows that constitute a positive externality on demand schedules. When these information flows are introduced, we find conditions under which the U‐form gives output and communication flows higher than the M‐form.
Contracted Workdays and Absence
Authors: Barmby Tim , Nolan Michael , Winkelmann Rainer
Published: March 2003

We present results of a negative binomial model on the determinants of the number of days of absence in a given year for a sample of 2049 workers drawn from three factories. We find evidence of the terms of the remuneration contract being important and we offer an interpretation of the differential effect of the company sickpay scheme on the behaviour of workers contracted to work four or five days a week.
Actuarially Unfair Insurance and Downward‐Sloping Demand Curves for Giffen Goods
Authors: Weber Christian E.
Published: March 2003

Barzel and Suen (Economic Journal, Vol. 102 (1992), No. 413, pp. 896–905) have shown that, if households can purchase actuarially fair insurance against higher prices, then goods which would have upward‐sloping demand curves in the absence of the price insurance will have downward‐sloping demand curves when the insurance is available. This note builds on their analysis by showing that, if the utility function is additively separable, then goods which would be Giffen in the absence of the insurance still have downward‐sloping demand curves even when the price insurance exhibits certain types of actuarial unfairness.
Coalitions and Networks in Industrial Organization
Authors: Bloch Francis
Published: March 2003

This paper provides a selective survey of recent approaches to coalition and network formation in industrial organization, and offers a unified framework in which the different approaches can be compared. We focus on two extreme forms of cooperation—collusive agreements and cost‐reducing alliances. We show that bilateral negotiations yield higher levels of cooperation than multilateral agreements, that the formation of a cartel depends on the sequentiality of the procedure of coalition formation, and that the size of alliances depends on the membership rule.
The Welfare and Political Economy Dimensions of Private versus State Enterprise
Authors: Cook Paul , Fabella Raul V.
Published: March 2003

We revisit the theoretical debate concerning the merits of privatization by decomposing the welfare effect of transferring an enterprise from public to private ownership. A range of effects is considered including overproduction, subsidy valuation, redistribution, ownership and regulatory effects. The potential gains/losses from privatization are examined by considering the initial conditions facing enterprises under public ownership (whether technically and/or economically efficient) and a range of post‐privatization market structures (whether monopoly, oligopoly or Walrasian).
Jevons’s Debt to Bentham: Mathematical Economy, Morals and Psychology
Authors: Sigot Nathalie
Published: March 2003

The aim of this paper is to show that Jevons’s utilitarianism is to be related to his attempt to build a mathematical theory of economics: the ‘felicific calculus’ provides the instrument for transforming sensations into quantities. The first section shows that Jevons referred to Bentham’s calculus but made it much simpler to enable the mathematical instrument to be introduced. The second section is devoted to his rejection of Mill’s attempt to make utilitarianism a morally reasonable philosophy by introducing qualities of feelings. But I endeavour to show that avoiding Mill’s interpretation did not mean that Jevons gave up on moral matters.
Inflation and Price Level Targeting in a New Keynesian Model
Authors: Chadha Jagjit S. , Nolan Charles
Published: March 2003

In a New Keynesian macroeconomic model under credible commitment, price level targeting dominates inflation targeting. But with sufficient inflation aversion the inflation–targeting central bank can produce quantitatively similar results to one targeting the price level. The current degree of inflation aversion demonstrated by the Bank of England may be sufficient to reap the benefits of price level targeting.
Selecting From Amongst Non–Nested Conditional Variance Models: Information Criteria and Portfolio Determination
Authors: Brooks Chris , Burke Simon P.
Published: March 2003

We consider the finite sample properties of model selection by information criteria in conditionally heteroscedastic models. Recent theoretical results show that certain popular criteria are consistent in that they will select the true model asymptotically with probability 1. To examine the empirical relevance of this property, Monte Carlo simulations are conducted for a set of non–nested data generating processes (DGPs) with the set of candidate models consisting of all types of model used as DGPs. In addition, not only is the best model considered but also those with similar values of the information criterion, called close competitors, thus forming a portfolio of eligible models. To supplement the simulations, the criteria are applied to a set of economic and financial series. In the simulations, the criteria are largely ineffective at identifying the correct model, either as best or a close competitor, the parsimonious GARCH(1, 1) model being preferred for most DGPs. In contrast, asymmetric models are generally selected to represent actual data. This leads to the conjecture that the properties of parameterizations of processes commonly used to model heteroscedastic data are more similar than may be imagined and that more attention needs to be paid to the behaviour of the standardized disturbances of such models, both in simulation exercises and in empirical modelling.
Non‐Convexities, Asymmetries and Aggregate Investment Activity: Evidence for the UK
Authors: Holt Richard W. P.
Published: March 2003

This paper documents cyclical asymmetries in the aggregate investment activity of UK industrial and commercial companies. The ability of a model of aggregate activity based on heterogeneous actions under non‐convex adjustment at the individual level to account for this feature is then investigated. Aggregate activity is found to be consistent with non‐convex adjustment at the individual level. Asymmetric features of microeconomic adjustment technology do not appear crucial for understanding aggregate non‐linearities.
Principal Component Value at Risk
Authors: BRUMMELHUIS R. , CÓRDOBA A. , QUINTANILLA M. , SECO L.
Published: March 2003

Value at risk (VaR) is an industrial standard for monitoring financial risk in an investment portfolio. It measures potential losses within a given confidence interval. The implementation, calculation, and interpretation of VaR contains a wealth of mathematical issues that are not fully understood. In this paper we present a methodology for an approximation to value at risk that is based on the principal components of a sensitivity‐adjusted covariance matrix. The result is an explicit expression in terms of portfolio deltas, gammas, and the variance/covariance matrix. It can be viewed as a nonlinear extension of the linear model given by the delta‐normal VaR or RiskMetrics (J.P. Morgan, 1996).
Efficient Computation of Hedging Portfolios for Options with Discontinuous Payoffs
Authors: Cvitanić Jakša , Ma Jin , Zhang Jianfeng
Published: March 2003

We consider the problem of computing hedging portfolios for options that may have discontinuous payoffs, in the framework of diffusion models in which the number of factors may be larger than the number of Brownian motions driving the model. Extending the work of Fournié et al. (1999), as well as Ma and Zhang (2000), using integration by parts of Malliavin calculus, we find two representations of the hedging portfolio in terms of expected values of random variables that do not involve differentiating the payoff function. Once this has been accomplished, the hedging portfolio can be computed by simple Monte Carlo. We find the theoretical bound for the error of the two methods. We also perform numerical experiments in order to compare these methods to two existing methods, and find that no method is clearly superior to others.
Analysis of Error with Malliavin Calculus: Application to Hedging
Authors: Temam E.
Published: March 2003

The aim of this paper is to compute the quadratic error of a discrete time‐hedging strategy in a complete multidimensional model. This result extends that of Gobet and Temam (2001) and Zhang (1999). More precisely, our basic assumption is that the asset prices satisfy the d‐dimensional stochastic differential equation dXit=Xit(bi(Xt)dt+σi,j(Xt)dWjt). We precisely describe the risk of this strategy with respect to n, the number of rebalancing times. The rates of convergence obtained are for any options with Lipschitz payoff and 1/n1/4 for options with irregular payoff.
Interest Rate Dynamics and Consistent Forward Rate Curves
Authors: Björk Tomas , Christensen Bent Jesper
Published: March 2003

We consider as given an arbitrage‐free interest rate model M, and a parametrized family of forward rate curves G. We study the question as to when the given family G is consistent with the dynamics of the interest rate model M, in the sense that M actually will produce forward rate curves belonging to G. We allow the interest rate model to be driven by a multidimensional Wiener process, as well as by a marked point process, and we give necessary and sufficient conditions for consistency. As test cases, we study some popular models, obtaining both positive and negative results about consistency. We also introduce a natural exponential‐polynomial family of forward rate curves, and for this family we give necessary and sufficient conditions for the existence of consistent interest rate models with deterministic volatility functions.