INEQUALITY OF OPPORTUNITIES VS. INEQUALITY OF OUTCOMES: ARE WESTERN SOCIETIES ALL ALIKE?

This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the 1990s. Equality of opportunity is defined as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. We measure social origin by parental education and occupation and use the database built by Roemer et al. (2003 ). Stochastic dominance is assessed using nonparametric statistical tests. Our results indicate strong disparities in the degree of equality of opportunity across countries and a strong correlation between inequality of outcomes and inequality of opportunity. The U.S. and Italy show up as the most unequal countries in terms of both outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are almost the same in Scandinavian countries even before any redistributive policy. We complement the ordinal comparison by resorting to an original scalar “Gini” index of opportunities, which can be decomposed into a risk and a return component. In our sample, inequality of opportunity is mostly driven by differences in mean income conditional on social origin, and differences in risk compensate the return element in most countries.     

Spillovers of the Conventional and Unconventional Monetary Policy from the US to South Africa

This paper assesses the effect of US monetary policy on South Africa during the period 1990–2018. We separately analyse and compare the effect of conventional monetary policy, before the Global Financial Crisis, and unconventional monetary policy, after the US monetary policy reached the zero-lower bound. Our impulse response function results indicate that monetary policy in South Africa responds mainly to local inflation, economic activity and financial conditions. While there is strong correlation between the global and South African financial cycle, the financial cycle is not transmitted to the real economy because of the sluggish response of industrial production and domestic credit, especially after the global financial crisis. We see this as an indication of the effects of structural issues to the real economy and constrained households’ balance sheet which has prevented the local economy to take advantage of low local interest rates and the global economic recovery after the crisis.     

The social cost problem,rights, and the (non)empty core

We revisit the “Coase theorem” through the lens of a cooperative game model which takes into account the assignment of rights among agents involved in a problem of social cost. We consider the case where one polluter interacts with many potential victims. Given an assignment or a mapping of rights, we represent a social cost problem by a cooperative game. A solution consists in a payoff vector. We introduce three properties for a mapping of rights. First, core compatibility indicates that the core of the associated cooperative games is nonempty. Second, Kaldor‐Hicks core compatibility indicates that there is a payoff vector in the core where victims are fully compensated for the damage once the negotiations are completed. Third, no veto power for a victim says that no victim has the power to veto an agreement signed by the rest of the society. We then demonstrate two main results. First, core compatibility is satisfied if and only if the rights are assigned either to the polluter or to the entire set of victims. Second, there is no mapping of rights satisfying Kaldor‐Hicks core compatibility and no veto power for a victim.     

The Transmission of Monetary Policy in South Africa Before and After the Global Financial Crisis

This paper examines whether the transmission mechanism of monetary policy in South Africa has changed after the global financial crisis (GFC). We use a Bayesian vector autoregressive (BVAR) model with Minnesota priors and 15 monthly variables, extending the system of Christiano, Eichenbaum, with Evans (1999). The benefit of the BVAR approach is that it can accommodate a large cross section of variables without running out of degrees of freedom. To identify the change in the transmission process, we divide the sample size into two subsamples, namely the pre‐GFC period (March 2001 to August 2008) and the post‐GFC period (September 2008 to February 2016). The results indicate that a change in the transmission of monetary policy occurred after the GFC. The magnitude of the effect of a monetary policy shock on output is considerably greater in the pre‐GFC period compared to the post‐GFC period. Moreover, the impact of a policy shock on inflation is not statistically significant in the post‐GFC period. The variance decomposition shows that the interest‐rate channel has possibly weakened in the post‐GFC period.     

Biased and overconfident,unbiased but going for it: How framing and anchoring affect the decision to start a new venture

Cognitive heuristics, biases, and overconfidence have been suggested as an explanation for entrepreneurial entry. Nevertheless, empirical research on the subject has produced mixed findings and has under-explored the cognitive mechanisms leading to overconfidence in entrepreneurial settings. In two within-subject experiments, we focus on three cognitive heuristics—reference point framing, outcome salience framing, and anchoring in conjunctive events—and examine their effects on perceived risk, confidence, required and estimated probabilities of success, and the decision to start a new venture. Our findings show that reference point framing and outcome salience framing affect the decision to enter directly and indirectly via risk perception, but do not affect confidence. In addition, the effect of anchoring is contingent on the congruence between its semantic and its numeric influences. Overconfidence only obtains when the numeric and semantic influences of anchoring are aligned and aimed at enhancing the salience of potential positive outcomes, i.e., through high probabilities of success.     

ASSESSING MONETARY POLICY IN SOUTH AFRICA IN A DATA‐RICH ENVIRONMENT

This paper examines the efficacy of monetary policy in the South African economy using a data‐rich framework. We use the Factor‐Augmented Vector Autoregressive (FAVAR) methodology, which contains 110 monthly variables for the period 1985:02‐2007:11. The results, based on impulse‐response functions, provide no evidence of the price puzzle observed in traditional Structural Vector Autoregressive analysis and confirm that monetary policy in South Africa is effective in stabilising prices. Unlike the traditional vector autoregressive approach, the FAVAR methodology allows further analysis of a large number of variables. Variables from real and financial variables react negatively to a contractionary monetary policy shock. Finally, we find evidence of the importance of a confidence channel transmission following a monetary policy shock.     

How far an Austrian law and economics should be Posnerian?

The purpose of this note is to stress that Posner??s conception of law and of the role of judges in a legal system might be problematic for an Austrian approach to law and economics, despite the praxeological dimension of his analysis.     

Nowcasting causality in mixed frequency vector autoregressive models

This paper introduces nowcasting causality as the mixed-frequency version of instantaneous causality. We analyze the relationship between nowcasting and Granger causality in a mixed-frequency VAR and illustrate its impact on the significance of high-frequency variables in mixed-frequency conditional models.