Malthus in cointegration space: evidence of a post-Malthusian pre-industrial England

This paper re-examines the interaction between population growth and income per capita in pre-industrial England. Our results suggest that, as early as two centuries preceding the Industrial Revolution, England had already escaped the Malthusian Epoch and entered a post-Malthusian regime, where income per capita continued to spur population growth but was no longer stagnant. Our formulation of a post-Malthusian hypothesis implies cointegration between vital rates (birth- and death rates) and income and builds explicitly on a simple model of Malthusian stagnation. We show that this hypothesis can be interpreted as an extension of the latter model where the negative Malthusian feedback effect from population on income, as implied by diminishing returns to labor, is offset by a positive Boserupian and/or Smithian scale effect of population on technology.     

FRAMING OF INCENTIVES AND EFFORT PROVISION

A prospect theory model combining loss aversion and diminishing sensitivity predicts that the link between incentives framing and effort is ambiguous: small penalties yield higher effort, but isomorphic contracts with large penalties decrease effort. We conduct two experiments (a framed field and a conventional lab experiment) in which economically equivalent contracts are framed as menus of either (i) bonuses, (ii) penalties, or (iii) bonuses and penalties. The experimental results confirm the main intuition of the model as subjects performed best when bonuses and penalties are combined. A follow‐up lottery experiment confirms that both loss aversion and diminishing sensitivity influenced the performance.     

Individual Differences in the Disposition Effect

The authors model the role of personality traits in explaining the disposition effect building on realization utility theory and Big 5 model and moving from an aggregate level to interindividual differences. The experimental analysis, combining NEO Revised Personality Inventory measures with individual financial data from a trading simulation run by 230 individuals in China and Italy, shows that the disposition effect is driven by 2 distinct psychological processes, one related to holding losers and the other to selling winners. These 2 behavioral mechanisms are uncorrelated and influenced by different personality traits. Controlling for different demographic variables, the authors show (a) a greater sensitivity of the rewarding system that motivates “extroverts” to quickly sell the stock at gain to receive a burst of utility; (b) a tendency for “conscientious” subjects to suppress impulsivity, patiently waiting for higher cumulative returns; and (c) the importance of “openness to experience” to better value information to achieve higher outcomes.     

股权结构、内部现金流和企业投资行为——对自由现金流和信息不对称理论的检验

中国上市公司控制权和现金流权的高度分离为我们提供了一个很好的研究投资现金流敏感性的样本.本文从终极控制人的视角,以我国2003-2007年上市公司为研究对象,研究了终极控制股东现金流权及控制权与现金流权的偏离对企业过度投资的影响.研究表明:企业的投资现金流敏感度随着终极控股股东现金流权的增加而趋于下降;伴随控制权与现金流权分离水平的增加而上升.这种结果和自由现金流假说一致,即控股股东拥有过多的自由现金流可能导致过度投资,并且这种过度投资问题在资产收益率低的公司里更加严重.我们的结果不仅解决了以往关于现金流和投资之间的敏感是由于控股股东偏好过度投资还是投资不足的争论,而且为控股股东存在“激励效应”和“堑壕效应”提供了直接证据     

The Disposition Effect and Individual Investor Decisions: The Roles of Regret and Counterfactual Alternatives

Recent studies have documented a strong tendency for individual investors to delay realizing capital losses, while realizing gains prematurely (Odean [1996], Shefrin and Statman [1985], Weber and Camerer [1996]). This tendency has been termed the "disposition effect." The disposition effect is inconsistent with normative approaches to stock sales, such as those based on tax losses (see, for example, Constantinides [1983]). We surveyed individual investors, and found that more respondents reported regret about holding on to a losing stock too long than about selling a winning stock too soon. This finding suggests that individual investors are consistently engaging in behavior that they have been warned can cost them money and that they regret later. Two additional experiments confirm the disposition effect and the role of regret, and offer evidence about the role of an agent (broker) in the assignment of blame and regret. We show that investor satisfaction and regret are not simply functions of outcome, but are influenced by counterfactual alternatives and the type of action taken (holding versus selling). We suggest that the disposition effect may be highly related to reduction of anticipated regret.     

Individual Characteristics and the Disposition Effect: The Opposing Effects of Confidence and Self-Regard

We conduct two experiments to examine potential causes of the disposition effect. In Experiment 1, we rule out beliefs in mean reversion as a cause of the disposition effect. Although a belief in the mean reversion of stock prices should be independent of whether an investor owns or only follows the stock, we show only investors who own the stock behave as though prices will reverse. In Experiment 2, participants buy and sell securities over multiple periods. We find that self-regard and investing confidence (two types of self-esteem) have opposing influences on investors’ tendency to hold losing investments. Investors with lower self-regard hold losing investments longer than those with higher self-regard, and investors with higher confidence hold losing investments longer than those with lower confidence. We focus on investors’ tendency to hold losing stocks too long because prior research suggests the gain versus loss sides of the disposition effect are driven by different biases.     

Energy intake and productivity of Guatemalan sugarcane cutters: An empirical test of the efficiency wage hypothesis part II

This paper examines additional evidence of an empirical test of the productivity-consumption relation of the efficiency wage hypothesis. A cross-sectional analysis showed sharply diminishing productivity returns to higher levels of daily energy intake of Guatemalan sugarcane cutters. No positive and consistent energy supplementation effect on the daily supply of work units could be demonstrated in a time-series analysis. Energy supplementation did not have a delayed impact on worker productivity. It is concluded that increased energy availability may not necessarily result in increased productivity of rural workers who are moderately energy deficient.     

Dissertation Abstract: Decision-Theoretic Models of Market Equilibration

There has been a surprising dearth of decision-theoretic approaches to market equilibration within the extended Arrow-Debreu-McKenzie framework. While game theory is replete with learning and evolutionary models in which Nash equilibria are not necessarily the only stable states of a game, general equilibrium theorists have generally been content to accept the attainment of competitive equilibrium as a matter of faith. The first two chapters of this dissertation advance the study of behaviorally plausible models of market equilibration. First, we develop the epsilon-intelligent competitive equilibrium algorithm. According to this model, the actions of minimally sophisticated agents based on local information will lead an exchange economy to approximate competitive equilibrium in a larger set of economics than Walras’ tatonnement. The algorithm also supports a behavioral interpretation of Negishi’s existence proof of competitive equilibrium. The second chapter is an empirical analysis of laboratory markets designed to test the extent to which human behavior is consistent with the algorithm’s behavioral restrictions, and suggest alternative hypotheses. The chief finding is that while subjects sufficiently sophisticated to consistently secure competitive utility for themselves exist, the majority are satisficers who follow small modifications of a simple utility-improvement rule.While general equilibrium theory has lacked a behaviorally plausible foundation of price equilibration, behavioral economic models typically ignore general equilibrium implications. In the third chapter of this dissertation, I present the surprising result that loss aversion and diminishing sensitivity for gains imply a greater redistribution of endowments than when otherwise identical preferences are reference-independent. The result is surprising because loss aversion was developed in part to account for the status quo bias, whereby people tend to value a good more when it is in their possession than when it is not. One might reasonably suspect trade to be inhibited by this bias. The counter-intuitive result is driven by the fact that, given the axiomatization of loss aversion and diminishing sensitivity for gains, the acquisition of some quantity of a good increases one’s taste for that good, thus perpetuating a taste for more trade.     

Disposition Effect and Tolerance to Losses in Stock Investment Decisions: An Experimental Study

This study aims to verify whether people tolerate losses within the self-established limit through an experimental methodological procedure. In addition, it aims to analyze the decision behavior in terms of the time they take to realize gains and losses, as a way to test the manifestation of the disposition effect. The experiment consists in decision to sell stock from 4 companies, 2 with potentially negative returns and 2 with positive returns. The participants demonstrated that they accept more losses than they had attested they would bear in advance and manifested the typical disposition effect, under which people sell the winning stock earlier than the losing stock. There was no difference between men and women in the manifestation of the disposition effect, and women performed worse because they had established lower bearable losses and higher required gains in advance.     

The Effect of Life Expectancy on Fertility,Saving, Schooling and Economic Growth: Theory and Evidence*

We construct a simple growth model where agents with uncertain survival choose schooling time, life‐cycle consumption and the number of children. We show that rising longevity reduces fertility but raises saving, schooling time and the growth rate at a diminishing rate. Cross‐section analyses using data from 76 countries support these propositions: life expectancy has a significant positive effect on the saving rate, secondary school enrollment and growth but a significant negative effect on fertility. Through sensitivity analyses, the effect on the saving rate is inconclusive, while the effects on the other variables are robust and consistent. These estimated effects are decreasing in life expectancy.     

Does democracy facilitate economic growth or does economic growth facilitate democracy? An empirical study of Sub-Saharan Africa

This paper examines the relationship between democracy and economic growth in 30 Sub-Saharan African countries. As our proxy for democracy we first use the democracy index constructed by Freedom House and then check the sensitivity of our findings using, as an alternative proxy for democracy, the Legislative Index of Electoral Competitiveness (LIEC). We find support for the Lipset hypothesis - in the long run, real GDP Granger causes democracy and an increase in GDP results in an improvement in democracy - in Botswana and Niger with both datasets, for Chad with the Freedom House data only and for Cote d'Ivoire and Gabon with the LIEC data only. Support for the compatibility hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a positive effect on real income - is found for Botswana with the Freedom House data and for Madagascar, Rwanda, South Africa and Swaziland with the LIEC data. Support for the conflict hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a negative effect on real income - is found for Gabon with the Freedom House data and Sierra Leone with the LIEC data.     

Throwing Good Money After Bad? The Impact of the Escalation of Commitment of Mutual Fund Managers on Fund Performance

Numerous prior studies refer to the potential existence of irrational investment behavior among mutual fund managers, such as disposition effect. However, the focus in such studies has been placed on the irrationality of their selling decisions, although similar problems may be inherent in their buying decisions. This study presents evidence that if mutual fund managers do display a tendency to escalate their commitment to losing stocks, there will be negative impacts on the performance of the funds. Managers continue to buy losers not because they judged to choose rationally but rather because of irrational escalation of commitment.     

The disposition effect and loss aversion: Do gender differences matter?

This paper analyzes gender differences in the disposition effect in an experiment based on Weber and Camerer (1998). The results emphasize that female investors realize less capital losses, have significantly higher disposition effects and are more loss averse than men.     

时间偏好不一致的行为经济学解释

行为经济学摆脱了传统理论抽象的完全理性人假设的束缚,利用实验经济学和心理学的相关知识,提出基于有限理性的行为人的假设,在此基础上,从人们的不耐心递减、有限意志力、估测偏见、参照点依赖四个方面的特性来说明行为经济学对人们时间偏好不一致的解释。     

The Principle of Strong Diminishing Transfer

We reconsider the principles of diminishing transfer and dual diminishing transfer. It appears that if a Rank Dependent Expected Utility (RDEU) maximizer respects the principle of diminishing (resp. dual diminishing) transfer, then he or she behaves in accordance with the Expected Utility model (resp. Yaari's dual model). This leads us to define the principle of strong diminishing transfer, which is a combination of the principles of diminishing and dual diminishing transfer. We give necessary conditions for a RDEU maximizer to respect this principle. These results are applied to the problem of inequality measurement. Journal of Economic Literature Classification Number: D63.     

External Tests of Scope and Embedding in Stated Preference Choice Experiments: An Application to Endangered Species Valuation

A criticism often levied against stated preference (SP) valuation results is that they sometimes do not display sensitivity to differences in the magnitude or scope of the good being valued. In this study, we test the sensitivity of preferences for several proposed expanded protection programs that would protect up to three US Endangered Species Act-listed species: the Puget Sound Chinook salmon, the smalltooth sawfish, and the Hawaiian monk seal. An external scope test is employed via a split-sample SP choice experiment survey to evaluate whether there is a significant difference in willingness to pay (WTP) for protecting more species and/or achieving greater improvements in the status of the species. The majority of 46 scope tests indicate sensitivity to scope, and the pattern of scope test failures is consistent with diminishing marginal utility with respect to the amount of protection to each species. Further tests suggest WTP may be proportional to the number of species valued.     

Explaining the Growth of Divorce in Great Britain

This paper tests whether the liberalisation of divorce law or economic factors can explain the post-war growth of divorce rates in Great Britain. Timing differences regarding the dates of legal innovations in England & Wales relative to Scotland are exploited to test for divorce law effects. No effect on marital dissolution of extending the grounds for the divorce can be detected, though other innovations in family law have had a powerful but generally temporary impact on divorce rates via their effect on transaction costs and settlement rules. Economic theory suggests that rising relative wages of women have reduced the gains from remaining married by inter alia diminishing the benefits of household specialisation and that rising real earnings of women have increased post divorce welfare by providing a measure of financial independence. The results are consistent with the real, but not the relative, wage hypothesis.     

Market Underreaction to Large Stock Price Declines: The Case of ADRs

This paper examines a sample of ADR stocks that experienced significant stock price declines of more than -15% during a specific month, and finds no evidence of a reversal pattern over the long run. The results are consistent with the predictions of the underreaction hypothesis and the existence of a "momentum" effect in stock prices. The underreaction hypothesis is also supported when ADRs are examined across industries, and for a sample of emerging market ADRs.     

Day Traders and the Disposition Effect

The disposition effect refers to the tendency to hold losing investments and sell profitable ones. We examine day trader transactions for evidence of a disposition effect. We find that approximately 65% of sample traders hold losing trades longer than profitable ones, providing evidence that sample day traders display the disposition effect.     

The role of diminishing marginal utility in the ordinal and cardinal utility theories

We illustrate the role of the law of diminishing marginal utility in the two main modern utility theories, the ordinal and cardinal utility theories, using a generalised total utility function. In short, the ordinal utility theory, in which utility is immeasurable, must abandon the law of diminishing marginal utility; the cardinal utility theory, although able to retain this law, suffers from keeping the unrealistic view of utility measurability, which Samuelson criticises as “infinitely improbable.” A new utility theory with the advantages of the two mentioned theories (i.e. the notions of both diminishing marginal utility and utility immeasurability) but without the disadvantages (i.e. the law of diminishing marginal utility is excluded and utility is measurable) therefore still seems to be a Holy Grail deserving search and development by economists.