UPDATED:
9 February, 2012
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All of the Department Discussion Papers are submitted to RePEc. The EconPapers or IDEAS sites allow you to search by author, title, keyword, JEL category and abstract contents.
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Papers from 1998 onwards are available on-line as .PDF files.
Revealed Preference in a Discrete Consumption Space
(file size: 274.73KB, last updated: 02/2012)
We show that an agent maximizing some utility function on a discrete (as opposed to continuous) consumption space will obey the generalized axiom of revealed preference (GARP) so long as the agent obeys cost efficiency. Cost efficiency will hold if there is some good, outside the set of goods being studied by the modeler, that can be consumed by the agent in continuous quantities. An application of Afriat's Theorem then guarantees that there is a strictly increasing utility function on the discrete consumption space that rationalizes price and demand observations in that space.
A Nonlinear Panel Data Model of Cross-Sectional Dependence
(file size: 391.35KB, last updated: 01/2012)
This paper proposes a nonlinear panel data model which can generate endogenously both `weak' and `strong' cross-sectional dependence. The model's distinguishing characteristic is that a given agent's behaviour is influenced by an aggregation of the views or actions of those around them. The model allows for considerable exibility in terms of the genesis of this herding or clustering type behaviour. At an econometric level, the model is shown to nest various extant dynamic panel data models. These include panel AR models, spatial models, which accommodate weak dependence only, and panel models where cross-sectional averages or factors exogenously generate strong, but not weak, cross sectional dependence. An important implication is that the appropriate model for the aggregate series becomes intrinsically nonlinear, due to the clustering behaviour, and thus requires the disaggregates to be simultaneously considered with the aggregate. We provide the associated asymptotic theory for estimation and inference. This is supplemented with Monte Carlo studies and two empirical applications which indicate the utility of our proposed model as both a structural and reduced form vehicle to model
di erent types of cross-sectional dependence, including evolving clusters.
Replicator Dynamics and Evolutionary Stable Strategies in Heterogeneous Games
(file size: 359.22KB, last updated: 12/2011)
We generalise and extend the work of Inarra and Laruelle (2011) by studying two person symmetric evolutionary games with two strategies, a heterogeneous population with two possible types of individuals and incomplete information. Comparing such games with their classic homogeneous version with complete information found in the literature, we show that for the class of anti-coordination games the only evolutionarily stable strategy vanishes. Instead, we find infinite neutrally stable strategies. We also model the evolutionary process using two different replicator dynamics setups, each with a different inheritance rule, and we show that both lead to the same results with respect to stability.
Efficient Aggregation of Panel
Qualitative Survey Data
(file size: 344.78KB, last updated: 12/2011)
Qualitative business survey data are used widely to provide indicators of economic activity ahead of the publication of official data. Traditional indicators exploit only aggregate survey information, namely the proportions of respondents who report "up” and “down”. This paper examines disaggregate or firm-level survey responses. It considers how the responses of the individual firms should be quantified and combined if the aim is to produce an early indication of official output data. Having linked firms’ categorical responses to official data using ordered discretechoice models, the paper proposes a statistically efficient means of combining the disparate estimates of aggregate output growth which can be constructed from the responses of individual firms. An application to firm-level survey data from the Confederation of British Industry shows that the proposed indicator can provide early estimates of output growth more accurately than traditional indicators.
Automatic Grade Promotion and Student Performance: Evidence from Brazil
(file size: 417.74KB, last updated: 11/2011)
This paper examines the effect of the introduction of automatic grade promotion on student performance in 1,993 public primary schools in the Brazilian state of Minas Gerais. A difference-in-difference approach that exploits variation over time in the adoption of the policy allows the identification of the treatment effect of automatic promotion. I find a negative and significant effect of about 6% of a standard deviation. Under plausible identifying assumptions the estimates can be interpreted as the disincentive effect on student effort associated with the introduction of automatic promotion.
24/7
(file size: 425.96KB, last updated: 11/2011)
This paper studies entry in a market where firms compete in shopping hours and prices. I show that an incumbent firm is able to choose its opening hours strategically to deter entry of a new firm. The potential effects of entry deterrence on social welfare depends on the degree of product differentiation. Entry deterrence increases social welfare when product differentiation is low, while it reduces social welfare when product differentiation is high. In terms of policy, the result of this model suggests that shopping hours deregulation is not always welfare enhancing.
11/50 - Jesse Matheson A study of adult smoking in Canadian Aboriginal communities to examine the role played by social interactions in the effectiveness of tobacco tax policy
(file size: 284.86KB, last updated: 11/2011)
I provide the first estimates of tobacco price elasticity for adults in Canada's Aboriginal communities. I distinguish between two price effects: the direct effect, reflecting individual reaction to a price change, and the indirect effect, whereby price influences the individual by changing community smoking behavior. Estimates suggest a 10 percent increase in price decreases daily smoking by 0.75 percentage points and occasional smoking by 1.39 percentage points. Further, the indirect effect roughly doubles the response to a change in tobacco prices over the direct effect alone.
11/49 - Maria José Gil-Moltó and Dimitrios VarvarigosEmission Taxes and the Adoption of Cleaner Technologies: The Case of Environmentally Conscious Consumers
(file size: 627.35KB, last updated: 11/2011)
We model a market with environmentally conscious consumers and a duopoly in which firms consider the adoption of a clean technology. We show that as pollution increases, consumers shift more resources to the environmental activities, thereby affecting negatively the demand faced by the duopoly. This effect generates incentives for firms to adopt the clean technology even in the absence of emissions taxes. When such taxes are considered, our results indicate that the benefit of adopting the clean technology is initially increasing and then decreasing in the emission tax. The range of values for which the emission tax increases this benefit becomes narrower when the consumers' environmental awareness is stronger.
11/48 - Svetlana AndrianovaPublic Banks and the Productivity of Capital
(file size: 140.56KB, last updated: 10/2011)
Weak institutions are shown to create scope for public banks to play a growth-promoting role, even if such banks are less efficient than private banks.
11/47 - Javier Rivas and
Miguel Flores Cash Incentives and
Unhealthy Food Consumption
(file size: 267.23KB, last updated: 01/2012)
The costs associated with unhealthy food consumption are not only paid by those suffering from overweight but by all members of society in terms of higher costs for social security systems. With this in mind, we study the effectiveness of a tax, a subsidy and cash incentives in reducing unhealthy food consumption. Using an inter-temporal rational choice model with habit, we calibrate and simulate the effect of those policies to US and UK data. Our findings suggest that cash incentives may be the most effective policy in reducing unhealthy food consumption yet it can be the most costly one. Taxes are relatively ineffective in reducing unhealthy food consumption. Subsidies have the best balance between effectiveness and monetary benefits to the society.
11/46 - Dimitrios Varvarigos and Intan Zanariah ZakariaGrowth and Demographic Change: Do Environmental Factors Matter?
(file size: 280.03KB, last updated: 09/2011)
We incorporate health-damaging pollution into a three period overlapping generations model in which life expectancy, fertility and economic growth are all endogenous. We show that environmental factors can cause significant changes to the economy’s demographics. In particular, the entrepreneurial choice of less polluting production processes, induced by environmental policy, can account for such demographic changes as higher longevity and lower fertility rates.