On a Uniform Turnpike of the Third Kind in the Robinson-Solow-Srinivasan Model

On using McKenzie's taxonomy of optimal accumulation in the long-run, we report a ``uniform turnpike' theorem of the third kind in a model original to Robinson, Solow and Srinivasan (RSS), and further studied by Stiglitz. Our results are presented in the undiscounted, discrete-time setting emphasized in the recent work of Khan-Mitra, and they rely on the importance of either a strictly concave felicity function, or on the value of a ``marginal rate of transformation', ξσ, from one period to the next not being unity. We argue that our results, when viewed through the lens of turnpike theory, have a broader relevance to intertemporal optimization theory, as developed in economics by Ramsey, von Neumann and their followers.      

About optimal harvesting policies for a multiple species forest without discounting

We study the optimal harvesting of a mixed forest composed of multiple species, each one having a different maturity age, where only mature trees can be harvested. We prove the existence of an optimal program and the equivalence of maximal, optimal and minimal value-loss programs. We characterize the unique golden rule stock and prove that it is sustainable, i.e., it is invariant along the optimal program. Furthermore, we also prove that along any good program from any initial condition there is convergence of the forest’s state to this sustainable state. Finally, we define a value function in the set of forest states and define a pre-order that provides an alternative way of characterizing the golden rule stock and may potentially have independent interest.     

OPTIMAL TRANSITION DYNAMICS IN THE LEONTIEF TWO‐SECTOR GROWTH MODEL WITH DURABLE CAPITAL: THE CASE OF CAPITAL INTENSIVE CONSUMPTION GOODS*

We present results on undiscounted optimal policies in the Leontief two‐sector growth model with durable capital. Unlike the results with a labour intensive consumption goods sector, we show that a monotonic optimal programme is only one special case out of many richer possibilities of transition dynamics. Depending on the initial capital stock, and a key parameter ζ that could be interpreted as a marginal rate of transformation of capital between today and tomorrow, an optimal programme may converge to a period‐two cycle; and even when it converges to the golden rule stock, it can do so (damped) cyclically or with a “jump”.     

On the Mitra–Wan forestry model: A unified analysis

We present a substantive and far-reaching generalization of the principal results in the economics of forestry, as formalized by Mitra and Wan (1986). Rather than a polarized dichotomy of linear and strictly concave, differentiable benefit (felicity) functions, we develop the theory in the context of functions that are supported at the golden-rule consumption and are not necessarily concave. Through a non-interiority condition on the set of zeroes of a resulting “discrepancy function,” we show the equivalence of finitely-maximal, maximal, minimal value-loss and optimal programs, and thereby answer questions left open by Brock and Mitra. Our synthesizing criterion is new to the capital theory literature, and in the concave setting, proves to be necessary and sufficient for the asymptotic convergence of good programs.     

Economic evaluation of ramipril in the treatment of patients at high risk for cardiovascular events

SUMMARY

Cardiovascular disease (CVD) is a primary cause of death and morbidity in the United Kingdom (UK). Recently, the Heart Outcomes Prevention Evaluation (HOPE) trial demonstrated significant survival and morbidity benefits associated with ramipril use in the treatment of patients at high risk for cardiovascular events. The purpose of this paper is to assess whether and to what extent, these clinical benefits might translate into economic benefits from the perspective of the UK NHS. Using trial data and a decision-analytic model, our base case estimate of cost-effectiveness is £4,406 per life-year saved (undiscounted) and £5,544 per life-year saved (discounted). The extreme values of our sensitivity analyses ranged from a best case of £2,814 per life-year saved (undiscounted) to a worst case of £10,291 per life-year saved (undiscounted). Our base case estimate of cost-effectiveness suggests that treating patients at high risk for CVD events with ramipril is likely to be a good investment of NHS resources.     

Designing the optimal public pension system

This paper uses a two‐period overlapping generations model in order to provide a theoretical design for the optimal public pension system based on a partial equilibrium analysis. Household preferences depend on two periods' consumption and leisure and are positively homogeneous of degree m with respect to consumption in the working and retired periods. We present characteristic features of the optimal public pension system in this paper. First, differences in the population growth rate do not affect the large/small relation between the optimal net lifetime burden rates of generations. Second, we present the optimal public pension system explicitly if m < 1 and m ≠ 0. Third, the difference between the market time‐preference rate and the social time‐preference rate provides a crucial insight into the optimal burden rate of each generation.     

An economic evaluation of ramipril in the treatment of patients at high risk for cardiovascular events due to diabetes mellitus

SUMMARY

Cardiovascular disease (CVD) is a major cause of death and morbidity in the United Kingdom (UK) and carries with it a significant financial cost through health care resource use. More than one in three people die from CVD events, and the cost to the UK National Health Service (NHS) was £1.6 billion in 1996¹. The recently published MICRO-HOPE study evaluated the treatment of 3,577 patients at high risk for cardiovascular events from diabetes mellitus and demonstrated significant survival and morbidity benefits associated with ramipril.

The purpose of this paper is to assess whether the significant clinical benefits offered by ramipril can be translated into economic benefits, and to what extent it can reduce the economic burden of CVD to the UK NHS.

Applying the same analytical framework used in a previous economic analysis of the HOPE study, our base case estimate of cost-effectiveness for ramipril in the MICRO HOPE study is £2,396 per life-year saved (undiscounted) and £2,971 per life-year saved (discounted). A sensitivity analysis was performed which ranged from a best case of £1,954 per life-year saved (undiscounted) to a worst case of £2,964 per life-year saved (undiscounted). Our base case estimate of cost-effectiveness suggests that treating patients at high risk for CVD events with ramipril is likely to be a good investment of NHS resources.     

A never-decisive and anonymous criterion for optimal growth models

We address in this paper the question of the existence of a Social Welfare Function that would be sustainable and would allow us to obtain solutions to optimal growth models. We define sustainability by two new axioms called Never-decisiveness of the present and Never-decisiveness of the future. We first show that a SWF which has Never-decisiveness properties cannot be defined on a ball of $l_{\infty }^{+}$ . We must (i) restrict to the set of utility streams for which the value of the SWF is finite and (ii) introduce additional assumptions in order to obtain the Never-decisiveness properties. Our main result in this paper is therefore to show that the undiscounted utilitarian criterion is an anonymous and never-decisive criterion for optimal growth models. We consider the set of utilities of consumptions which are generated by a specific technology, namely a technology with decreasing returns for high levels of capital, and restrict ourselves to good programs, i.e., any program for which intertemporal utility is well defined.     

Communication equilibrium payoffs in repeated games with imperfect monitoring

We characterize the set of communication equilibrium payoffs of any undiscounted repeated matrix-game with imperfect monitoring and complete information. For two-player games, a characterization is provided by Mertens, Sorin, and Zamir (Repeated games, Part A (1994) CORE DP 9420), mainly using Lehrer's (Math. Operations Res. (1992) 175) result for correlated equilibria. The main result of this paper is to extend this characterization to the n-player case. The proof of the characterization relies on an analogy with an auxiliary 2-player repeated game with incomplete information and imperfect monitoring. We use Kohlberg's (Int. J. Game Theory (1975) 7) result to construct explicitly a canonical communication device for each communication equilibrium payoff.     

Approximation by finite horizons of the undiscounted one-sector growth model

Summary. In this paper I give a method for finding long-run-average policies in the undiscounted economic growth problem using approximations by finite horizons. Required hypothesis is the strong interiority of T-horizon solutions. Received: March 25, 1996; revised version: July 29, 1997     

Reducing Inefficiency in Public Good Provision Through Linking

We characterize the optimal mechanism for the provision of n public goods in an economy with m agents, binary valuations. The mechanism “links” the n problems together because decisions and transfers are based on the whole vector of valuations of the agents. In particular, the decision on whether or not to provide a public good depends not only on the valuations of the agents for that good but, in some cases, also on the valuations for the other goods reported by the low‐valuation agents. For the two‐agent case, we show that the mechanism is asymptotically efficient and we provide an example that compares its relative efficiency with optimal separate provision and with another asymptotically efficient mechanism in the literature.     

On the faustmann solution to the forest management problem

This paper is concerned with optimal solutions to the forest management problem when future utilities are undiscounted. By examining asymptotic properties of such solutions, we find that (i) if the utility function is linear, then the Faustmann periodic solution is optimal; (ii) if the utility function is increasing and strictly concave, an optimal solution converges to the maximum sustained yield solution, which we characterize as a golden rule. These results may be viewed as a possible resolution to the debate in forestry economics about what constitutes an optimal policy in forest management.     

The cost implications of the use of telmisartan or ramipril in patients at high risk for vascular events: the ONTARGET study

Abstract

Background:

The recently published ONTARGET trial found that telmisartan was non-inferior to ramipril in reducing CV death, MI, stroke, or heart failure in patients with vascular disease or high-risk diabetes. The cost implications of ramipril and telmisartan monotherapy use based on the ONTARGET study are reported here.

Methods and Results:

Only healthcare system costs were considered. Healthcare resource utilization was collected for each patient during the trial. The authors obtained country-specific unit costs to the different healthcare care resources consumed (i.e., hospitalizations events, procedures, non-study, and study drugs) for all enrolled patients. Purchasing power parities were used to convert country-specific costs into US dollars (US$ 2008). The total undiscounted costs of the study for the telmisartan group was $12,762 per patient and is higher than the ramipril group at $12,007 per patient, an un-discounted difference of $755 (95% confidence interval [CI], $218–$1292); The discounted costs for the telmisartan group was $11,722 compared with $11,019 for the ramipril group; a difference of $703 (95% CI, $209–$1197). The difference in costs is exclusively related to the acquisition cost of telmisartan over generic ramipril.

Limitations:

This analysis only considered direct healthcare system costs. Costs accrued outside the hospital were not collected. Combination therapy was excluded since it would likely be more expensive than ramipril alone, with no additional benefit and a risk of some harm.

Conclusions:

Based on these results, it is suggested that for the ONTARGET patients, the use of telmisartan instead of ramipril increases costs by 6.3%. These findings suggest that the choice to put patients on telmisartan should be justified based on the patient’s susceptibility to specific adverse events to minimize the cost implications.     

Controlling Illegal Immigration: On the Scope for Cooperation with a Transit Country

We consider the implications of cooperation with respect to immigration control between a final‐destination country (D) and its poorer neighbor (T). Assuming that the latter serves as a transit country for undocumented immigrants, a key question is how much aid should D provide to T for the purpose of strengthening its immigration controls. The problem for T is to determine what proportion of aid to use strictly for immigration control rather than trying to meet other border‐security objectives. We examine the Nash equilibrium values of the policy instruments of both countries and compare them with those which are optimal when international cooperation on immigration control extends to maximization of joint welfare. We also consider a two‐stage game in which D first decides on how much aid to transfer to T, with the latter subsequently choosing how to use it.     

On the Effect of Skewness and Kurtosis Misspecification on the Hedging Error

Using a result in Angelini and Herzel (2009a) , we measure, in terms of variance, the cost of hedging a contingent claim when the hedging portfolio is re‐balanced at a discrete set of dates. We analyse the dependence of the variance of the hedging error on the skewness and kurtosis as modeled by a Normal Inverse Gaussian model. We consider two types of strategies, the standard Black–Scholes Delta strategy and the locally variance‐optimal strategy, and we perform some robustness tests. In particular, we investigate the effect of different types of model misspecification on the performance of the hedging, like that of hedging without taking skewness into account. Computations are performed using a Fast Fourier Transform approach.     

Moment Estimation of the Probit Model with an Endogenous Continuous Regressor

We propose a generalized method of moments (GMM) estimator with optimal instruments for a probit model that includes a continuous endogenous regressor. This GMM estimator incorporates the probit error and the heteroscedasticity of the error term in the first‐stage equation in order to construct the optimal instruments. The estimator estimates the structural equation and the first‐stage equation jointly and, based on this joint moment condition, is efficient within the class of GMM estimators. To estimate the heteroscedasticity of the error term of the first‐stage equation, we use the k‐nearest neighbour (k‐nn) non‐parametric estimation procedure. Our Monte Carlo simulation shows that in the presence of heteroscedasticity and endogeneity, our GMM estimator outperforms the two‐stage conditional maximum likelihood estimator. Our results suggest that in the presence of heteroscedasticity in the first‐stage equation, the proposed GMM estimator with optimal instruments is a useful option for researchers.     

Cost effectiveness of palivizumab for RSV prevention in high-risk children in the Netherlands

Abstract

Background: Respiratory syncytial virus (RSV) is a common pathogen that is the leading cause of lower respiratory tract infections in young children. High-risk children are at risk of severe infection, which may require hospitalisation. RSV is also associated with a high risk for respiratory morbidity and mortality, which may have long-term clinical and economic consequences.

Objective: To assess the cost effectiveness of palivizumab, a humanised monoclonal antibody, used as prevention against severe respiratory syncytial virus (RSV) infection requiring hospitalisation, in the indication of preterm infants and infants with preterm/bronchopulmonary dysplasia and in the second indication of children with congenital heart disease in the Dutch healthcare setting.

Methods: A decision-tree model was used to estimate the cost effectiveness of palivizumab, used as a preventative treatment against severe respiratory syncytial virus (RSV) infection, in high-risk groups of children in the Netherlands. The analysis was based on a lifetime follow-up period in order to capture the impact of palivizumab on long-term morbidity and mortality resulting from an RSV infection. Data sources included published literature, the palivizumab pivotal trials, official price/tariff lists and national population statistics. The study was conducted from the perspective of society in the Netherlands.

Results: The use of palivizumab results in undiscounted incremental cost-effectiveness ratios of €12,728/QALY and €4,256/QALY in the in preterm/bronchopulmonary dysplasia and congenital heart disease indications, respectively. Inclusion of indirect costs leads to even more favourable cost-effectiveness outcomes. The study is limited by a number of conservative assumptions. It was assumed that palivizumab only affects the occurrence of RSV hospitalisation and does not influence the severity of the RSV infection. Another assumption was that international clinical trial data and data on utilities could be applied to the Dutch healthcare setting.

Conclusion: Palivizumab provides cost-effective prophylaxis against RSV in high-risk infants. The use of palivizumab in these children results in positive short- and long-term health-economic benefits.     

The optimal harvesting problem with a land market: a characterization of the asymptotic convergence

We study the asymptotic behavior of the optimal harvesting policies for a multiple species forest with a land market, i.e., any fraction of the land can be traded at any time stage. We prove the existence of sustainable states and we discuss the conditions under which any optimal trajectory converges in the long run towards one of these states or towards the set of optimal periodic cycles. We also discuss briefly a more general problem that includes costs of converting land between the different species.      

Endogenous market structures and the optimal financial structure

Abstract We characterize the optimal financial structure as a strategic device to optimize the value of a firm competing in a market where entry is endogenous. Debt financing is always optimal under quantity competition, and, contrary to the Brander‐Lewis‐Showalter results based on duopolies, we show the optimality of moderate debt financing also under price competition with cost uncertainty (but not with demand uncertainty). We derive the formulas for the optimal financial structure, which does not affect the strategies of the other firms but reduces their number.     

Commodity Taxation and the Effects of Entry: A Case of Variety Preferences

We study the relationship between commodity taxation and the effect of entry with imperfect competition. We develop a simple general equilibrium model with imperfect competition in which consumers have variety preferences. As a result, we see that introducing specific taxes increases social welfare. Furthermore, we show that the optimal tax rule is contrary to the inverse elasticity rule.Acknowledgement We wish to thank two anonymous referees for their helpful comments.