A double-hurdle approach to modelling tobacco consumption in Italy

This article analyzes the determinants of tobacco expenditures for a sample of Italian households. A Box–Cox double-hurdle model adjusted for heteroscedasticity is estimated to account for separate individual decisions concerning smoking participation and tobacco consumption and to correct for nonnormality in the bivariate distribution of the error terms. Nested univariate and bivariate models are found to be excessively restrictive, supporting the adequacy of a generalized specification. Estimation results show that consumption decisions are significantly affected by income and demographic characteristics. In particular, income positively impacts tobacco expenditure, while participation probability substantially declines as age increases. The existence of significant gender differences in both smoking participation and tobacco consumption patterns is found, while high education and white-collar occupation reduces the likelihood to smoke and tobacco expenditure levels. Single adult households have a lower probability of smoking initiation even if, conditional on smoking, they consume more. Finally, complementarity between tobacco and alcohol beverages suggests the necessity of joint public health strategies.     

What to show on the wine labels: a hedonic analysis of price drivers of Sicilian wines

Unlike previous literature, we construct a hedonic model of wine price that incorporates all the main categories of variables simultaneously to enable a better evaluation of their importance on wine price formation. A comprehensive model has the advantage of providing more reliable estimates of the attributes' implicit prices thereby facilitating firms' pricing and improving effectiveness of wine production and marketing decisions. We utilize two different datasets of Sicilian wines collecting data from influential wine guides. Our results suggest that wine price strongly depends on objective features such as vintage, alcoholic content, geographical origin, grape variety, producer size and cellaring potential. In addition, use of containers like tonneaux and barrique positively affects prices, whereas use of concrete containers has a negative influence. No univocal indications emerge with regard to the effect of the type of company, type of viticulture and firm age. As for sensorial characteristics, our analysis provides novel evidence of the importance of olfactory variables such as aroma intensity and the presence of particular smells in the wine. Finally, current guides’ grades and firm reputation play a crucial role in determining wine prices as well.     

Expert opinion and cuisine reputation in the market for restaurant meals

As food is an experience good, the market for restaurant meals is a market where the cost of acquiring information regarding quality is relatively high. In such markets consumers often turn to reputation measures to guide purchase decisions. As Australia does not have a longstanding cuisine style of its own, and given Australia has been open to substantial immigration inflows since federation, it represents an especially appropriate market to study regarding the impact of individual restaurant reputation and collective cuisine reputation on meal prices. The following study uses the hedonic price approach to investigate the implicit price of individual reputation indicators, cuisine type reputation indicators and other objective indicators in the market for restaurant meals. The empirical findings presented suggest that both individual restaurant reputation and cuisine type reputation are important. Other important factors are shown to include the quality of the restaurant wine list, the availability of private dining rooms, and whether or not there is an outdoor dining option.     

Conspicuous consumption and generation replacement in a model of perpetual youth

This paper investigates household decisions in an overlapping generations model in which individual utility depends on a weighted average of consumption of one's peers. In contrast to representative agent economies, the consumption externality generally affects savings and growth rates. The effects critically depend on the rate at which labor productivity changes with age. For a high (low) rate, the externality lowers (raises) the steady state propensity to consume out of total wealth. The optimal allocation can be decentralized by a (reverse) unfunded social security system if the rate of labor productivity decline is high (low). In contrast to discrete time OLG models, the optimal steady state capital income tax is zero, in spite of the externality.     

经济转轨与城镇化进程中的居民消费行为特征——对1396户城镇家庭的实证分析

基于中国9个省1396户城镇家庭的面板数据,运用系统广义矩估计法对一个包括习惯形成和不确定性的欧拉方程进行估计以考察家庭消费是否跨时演进,研究结果表明,偏好的设定偏误是传统的生命周期——持久收入模型不能很好地诠释中国城镇家庭消费决策的一个原因,在解释消费决策的影响因素时假定偏好的跨时可分性会得出错误的结论,城镇居民消费偏好的跨时不可分性以及由收入和支出不确定性引发的预防性储蓄动机是导致居民消费倾向持续偏低的重要原因。     

Life cycle and housing decisions: a comparison by age cohorts

The use of decomposition methodologies when the involved variable is continuous is not common in the literature. This article uses this methodology, together with other decomposition methodologies, to explain how age can influence on housing decisions. In particular, we use Spanish data to study whether the age of the householder plays a significant role in influencing household decisions with respect to housing tenure and demand. From the comparison of housing decisions between different groups of households classified by the age of the householders, we conclude that age plays the primary role in explaining the gap between households regarding tenure choice, while it shares its importance with other covariates of the model in the housing demand decision.     

Is the median voter decisive? Evidence from referenda voting patterns

This paper examines whether the voter with the median income is decisive in local spending decisions. Previous tests have relied on cross-sectional data while we make use of a pair of California referenda to estimate a first difference specification. The referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50% and 67 to 55%, respectively. We find that voters rationally consider future public service decisions when deciding how to vote on voting rules. However, the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules, especially in communities that have a large share of high-income voters with attributes that suggest low demand for public services. Based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending, we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group. This two type model implies that our low demand types (individuals over age 45 with no children) have demands that are 45% lower than other voters. Collectively, these findings are consistent with high-income voters with weak preferences for public educational services voting with the poor against increases in public spending on education.     

House Money Effects in Public Good Experiments

Are decisions in economics experiments distorted because the money subjects risk comes from the experimenter rather than their own pockets? There is some evidence that people receiving small, one time “windfall gains” have a higher marginal propensity to consume them, and when doing so, exhibit greater risk-seeking behaviour. This has been found in individual decision making experiments when anticipated wealth effects have been controlled, and labelled the “house money effect.” In public good experiments, house money effects could be driving the high levels of voluntary contributions commonly observed. This possibility is tested by comparing VCM contribution rates when subjects supply their own endowments with those when endowments are provided, while holding constant the distribution of promised earnings. No evidence of house money effects is found, suggesting that use of “free” initial money endowments does not distort subsequent contributions in VCM environments.     

Decreasing fertility,economic growth and the intergenerational wage gap

Persistent low fertility rates lead to lower population growth rates and eventually also to decreasing population sizes in most industrialized countries. There are fears that this demographic development is associated with declines in per capita GDP and possibly also increasing inequality of the wage distribution. We investigate whether this is true in the context of neoclassical growth models, augmented with endogenous fertility decisions and endogenous educational decisions. Furthermore we allow for imperfect substitutability across workers of different age in the production process and learning by doing effects as well as human capital depreciation. In particular, we assess the intergenerational wage redistribution effects which follow after a demographic change to persistent low fertility rates.     

Ownership of individual retirement accounts – an empirical analysis based on SHARE

This paper examines the household retirement saving decisions in what concerns to the ownership of Individual Retirement Accounts (IRAs) in eight European Union (EU) countries. IRAs are more and more seen as an alternative to public pension benefits, which are decreasing. Therefore, understanding the enrolment in IRAs, both the socio-economic factors and over time, is most important. Detailed empirical analysis of the factors that might influence the ownership of IRAs is presented based on Survey of Health Ageing and Retirement in Europe (SHARE), using data from Wave 2 (2006–2007) and Wave 4 (2010–2011). Further, to analyse the impact of legal retirement age in the ownership of IRAs, two subsamples are considered: people aged between 50 and 64 years old (50–64 years) and people aged 65 or over (≥ 65 years). The results suggest that age, years of education, income and ownership of dwelling influence positively and significantly household saving, while number of children, marital status and risk aversion have a negative effect. Marital status and income are not statistically significant for retired people. Policy implications are derived.     

The Evolutionary Theory of Time Preferences and Intergenerational Transfers

At each age an organism produces energy by foraging and allocates this energy among reproduction, survival, growth, and intergenerational transfers. We characterize the optimal set of allocation decisions that maximizes fitness. Time preference (the discount rate) is derived from the marginal rate of substitution between energy obtained at two different times or ages, holding fitness constant. Time preference varies with age in different ways depending on whether an individual is immature or mature, and during the transition between these stages. We conclude that time preference and discount rates are likely to be U-shaped across age.     

Non-Keynesian effects of fiscal policy in OECD economies: an empirical study

This article explores the hypothesis that the propensity to consume out of income varies in a nonlinear fashion with fiscal variables, and in particular with government debt per capita. Using panel data from 18 Organization for Economic Cooperation and Development (OECD) countries, we examine whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian behaviour as government debt reaches high levels and as uncertainty about future taxes increases. Our results provide support for this hypothesis, and also suggest that private and government consumption are complements in the household utility function.     

Public–private mix of health expenditure: A political economy and quantitative analysis

This paper constructs a simple model to examine decisions on public and private health spending under majority voting. In the model, agents with heterogeneous incomes choose how much to consume and spend on health care and vote for public health expenditure. The health status of an agent is determined by a CES composite of public and private health expenditure. The existence and uniqueness of the voting equilibrium are established. A quantitative exercise reveals the importance of the relative effectiveness of public and private health expenditure and their substitutability in determining the public‐private mix of health expenditure and in accounting for the observed differences across a sample of 22 advanced democratic countries.     

Is the age 60 rule relevant?

In 1960 the Federal Aviation Administration in the United states put in place the age 60 rule that required airline pilots to retire upon reaching the age of 60 years. This rule has been challenged on numerous occasions, but the FAA has not changed the rule. A logit model is used to analyse accidents and incidents for 1989. Such factors as piolt training and experience, aircraft characteristics and whether are considered in analysing the impact of pilot age (to age 65) on accidents. Age is not found to be a statistically significant factor for pilots in three licence classes. This study provides indirect evidence that the age 60 rule may be unwarranted.     

Making Good Decisions with Minimal Information: Simultaneous and Sequential Choice

The adaptive pressures facing humans and other animals to make decisions quickly can be met both by increasing internal information-processing speed and by minimizing the amount of information to be used. Here we focus on the latter effect and ask how, and how well, agents can make good decisions with a minimal amount of information, using two specific tasks as examples. When a choice must be made between simultaneously-available options, minimal information in the form of binary recognition (whether or not each item is recognized) can be used in the recognition heuristic to choose effectively. When options are encountered sequentially one at a time, minimal information as to whether or not each option is the best encountered so far is sufficient to guide agents using a simple search-cutoff rule to high performance along several choice criteria. Both of these examples have important economic as well as biological applications, and show the power of simple fast and frugal heuristics to produce good decisions with little information. This revised version was published online in August 2006 with corrections to the Cover Date.     

Travel patterns and environmental effects now and in the future:: implications of differences in energy consumption among socio-economic groups

Travel patterns among different socio-economic groups in Sweden are investigated. It is shown that elderly persons, persons with low incomes and women in general do not travel extensively. Middle-aged persons, persons with high incomes and men travel much farther. Cars are the dominant transportation mode for all population groups. Aeroplanes are used mostly by high-income earners and men, while public transportation is mostly used by young people and women. Energy consumption for the different travel patterns differs substantially. Men with high incomes consume the most energy, with 94 000 MJ during one year, while elderly women consume 12 000 MJ. When compared to a calculated sustainable level of energy consumption for travel, most population groups are in excess. The level for sustainable energy consumption is calculated based on an assumed global potential for renewable energy of 360 EJ per year, divided equally among the global population. A certain share of this energy potential is supposed to be used for travelling. A scenario for 2020 is presented in which vehicle energy efficiency has increased and travel patterns have changed from what they are today. Sustainability can only be reached when both travel patterns and vehicle technology have changed radically. Differences in energy consumption for travel due to age and gender are likely to remain in the future. Scientific knowledge from the social domains seems to be important for devising efficient strategies for a sustainable society. Current focus on policy measures has been mainly on technical issues.     

"What Goes Up Must Come Down"-How Charts Influence Decisions to Buy and Sell Stocks

Five experiments examine how charts depicting past stock prices influence investing decisions. We expected investors to use extreme past prices depicted in charts as comparison standards to which expectations about future prices are assimilated. Investors should thus expect stocks depicted in a chart with a salient high to perform better than stocks depicted in a chart with a salient low. And as a consequence, investors should be more likely to buy and less likely to sell stocks depicted in a chart with a salient high than a low. Results of five experiments support this reasoning. Whether investors are private or professional and whether background information about the stock was limited or abundant, expectations about future prices assimilated to extreme past prices. Consequently, investors buy more and sell less when the critical chart is characterized by a salient high than a low. The implications of these findings for the core role comparison processes play in investing decisions are discussed.     

Changing patterns of transfers in Slovenia in the last three decades: transition from a socialist economy to a market economy

Rapid population ageing increases interest in economic flows across ages and intergenerational transfers in general. This article uses the National Transfer Accounts methodology to measure consumption and production at each age, and how the difference between consumption and production is financed through (private and public) transfers and the interaction with assets, i.e. ‘asset-based reallocations’. During working ages, people earn more than they consume and with the surplus they finance the deficit of the young and old generations who consume more than they produce. Such a pattern of economic dependency is universal across countries and across time, but huge differences exist in the ages at which individuals produce more than they consume and vice versa. Moreover, the importance of private and public transfers and asset-based reallocations varies across countries and times. In the last three decades, life expectancy at birth in Slovenia increased by 9.3 years, while the age span in which production exceeds consumption narrowed rather than increased. Child dependents are predominantly financed by private transfers, whereas the elderly mainly rely on public transfers. Young and old individuals increasingly rely on public transfers. Together with rapid population ageing, this is likely to jeopardise the public finance system in the future.     

A censored system of cigarette and alcohol consumption

Many previous studies of US cigarette and alcohol consumption have focused on single equations. However, the addictive nature of consumption suggests that it is more appropriate to model these products as a system. We propose a two-step estimation procedure and apply the procedure to a system of equations for cigarette, beer and wine consumption. Results differ from those derived from an existing two-step procedure. Findings suggest that consumption of cigarettes, beer and wine is responsive to income changes but the elasticities are rather small. Personal physiques, education, age, race, ethnicity, health, gender, employment status, and regions also play significant roles in consumption.     

Uncertainty and Consumption in Keynes's Theory of Effective Demand

Keynesian uncertainty normally exercises influence over effective demand via private investment. This paper expands the scope of influence of uncertainty to comprise private consumption as well. When private spending is explicitly made subject to uncertainty the individual consumer is forced to take active steps to make the future predictable. Contracted, sticky money prices are key tools in the consumer's efforts to keep uncertainty at a minimum and match earnings with consumption costs. However, even if prices are successfully contracted there is still need for preparedness against contingencies. Consumers therefore regulate their propensity to consume with reference to their confidence in the future: the propensity to consume is high when confidence is strong and low when confidence is weak. Because of its effect on the propensity to consume, consumer confidence exercises a significant influence on macroeconomic activity in general.