Is power more evenly balanced in poor households?

The structure of intra-household allocation is crucial to know whether a transfer from a rich household to a poor one translates into a transfer from a rich individual to a poor one. If rich households are more unequal than poor ones, then a progressive transfer among households reduces intra-household inequality, hence inequality among individuals. More specifically, two conditions have to be satisfied for extending Generalized Lorenz judgments from household level to individual one. The fraction of the couple's expenditures devoted to goods jointly consumed should decrease at the margin with the couple's income as well as the part of private expenditure devoted to the disadvantaged individual. This double concavity condition is non-parametrically tested on the French Household Expenditure Survey (2000). It is not rejected by the data and supports the view that power is more evenly distributed in poor households.     

Consuming in one's mind: An exploration

Consumer research generally focuses on the consumption of tangible objects and experiences, which are concrete. However, consumers often consume in their minds by fantasizing, dreaming, or imagining that they possess some desired object or that they are living some experience. In this article, the term consumption dreams is used to refer to mental representations of consumption objects that consumers desire and experiences that they want to realize. These are distinguished from uncontrolled mental activities that occur when asleep. The results of two exploratory studies that examined consumption dreams are presented. In the first study, five adult consumers were asked about their most important consumption dream, as well as the factors that influenced this dream and the behaviors that ensued. The second study consisted of a survey of 195 adult consumers where the determinants and consequences of consumption dreaming were probed. It was found that indulging in consumption dreaming is a common activity among most consumers and that consumption dreams and their characteristics depend on general as well as dream‐based variables. In addition, those dreams were found to impact on several consumer behaviors. A causal model involving a subset of the variables examined in this exploratory research was put forward and tested with the survey data. The results showed the value of a proposed conceptual framework to generate theoretical propositions about consumption dreaming. © 2005 Wiley Periodicals, Inc.     

Frequency of observation and the estimation of integrated volatility in deep and liquid financial markets

Using two newly available ultrahigh-frequency datasets, we investigate empirically how frequently one can sample certain foreign exchange and U.S. Treasury security returns without contaminating estimates of their integrated volatility with market microstructure noise. Using the standard realized volatility estimator, we find that one can sample dollar/euro returns as frequently as once every 15 to 20 s without contaminating estimates of integrated volatility; 10-year Treasury note returns may be sampled as frequently as once every 2 to 3 min on days without U.S. macroeconomic announcements, and as frequently as once every 40 s on announcement days. Using a simple realized kernel estimator, this sampling frequency can be increased to once every 2 to 5 s for dollar/euro returns and to about once every 30 to 40 s for T-note returns. These sampling frequencies, especially in the case of dollar/euro returns, are much higher than those that are generally recommended in the empirical literature on realized volatility in equity markets. The higher sampling frequencies for dollar/euro and T-note returns likely reflect the superior depth and liquidity of these markets.     

Estimating Cost of Equity: Do You Need to Adjust for Foreign Exchange Risk?

Empirical reports of priced foreign exchange (FX) risk raise the question of whether managers should adjust their cost of equity estimates for FX risk. To study this question, we empirically compare the cost of equity estimates of several risk–return models, including some that have explicit FX risk premia and others that do not. We find that adjusting for FX risk makes little difference, on average, in the cost of equity estimates, even for small firms and firms with extreme FX exposure estimates.     

Expectation-driven fluctuations and welfare loss under free trade in two-country models

This paper investigates the interlinkage in the business cycles based on expectation-driven fluctuations of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model with sector-specific externalities. We show that some country's expectation-driven fluctuations can spread throughout the world once trade opens even if the other country has determinacy under autarky. We thus prove that under free trade, globalization and market integration can have destabilizing effects on a country's competitive equilibrium. Finally, we characterize a configuration in which opening to international trade improves the stationary welfare at the world level but deteriorates the stationary welfare of the country that imports investment goods and exports consumption goods. We conclude that in opposition to the standard belief, international trade might not be beneficial to all trading partners in the long run.     

An International Analysis of Earnings, Stock Prices and Bond Yields

Abstract:  This paper assesses the contemporaneous relationship between stock prices, earnings and long-term government bond yields for a large number of countries. The time period of our data spans several decades. In a time series framework our analysis first tests the presence of a long-term contemporaneous relationship between these three variables (the so-called Fed model). Next, we assess if government bond yields play a significant role in the long-run relationship. Our empirical results question the validity of the Fed model in the sense that we show that long-term market movements are mainly driven by the earnings yield and not the differential between bond and earnings yields. As such, our analysis validates the results of Asness (2003) for a much larger collection of countries while using a dynamic time series (cointegration) framework. Finally, we also show that changes in long-term government bond yields have a short-term impact on stock prices.     

Measurement and its Uses: Harmonization and Quality in Social Statistics

The European construction has induced a strong demand of harmonization of statistics of the various countries. The latter can be focused on an harmonization of outputs , already practised for a long time by national accountants: the statistical variables are defined in common, then each country measures them according to its own means. On the other hand, the harmonization of inputs, more ambitious, seeks a standardization of all the construction process and data collection. This leads to distinguish clearly the two moments of use and of production of economic and social statistics. Now the same distinction is made in the debates over the notion of quality of statistics, which contrast the quality of the product with the one of the process. This quality cannot be judged independently from the expected uses of these statistics and of their form of social credibility. From this point of view, the various harmonization levels are compared with the various forms of connection and convertibility between the national currencies.