Diversified Portfolios in Continuous Time

We study a financial market containing an infinite number of assets, where each asset price is driven by an idiosyncratic random source as well as by a systematic noise term. Introducing asymptotic assets which correspond to certain infinitely well diversified portfolios we study absence of (asymptotic) arbitrage, and in this context we obtain continuous time extensions of atemporal APT results. We also study completeness and derivative pricing, showing that the possibility of forming infinitely well diversified portfolios has the property of completing the market. It also turns out that models where the all risk is of diffusion type are qualitatively quite different from models where one risk is of diffusion type and the other is of Poisson type. We also present a simple martingale based theory for absence of asymptotic arbitrage.     

Proximity changes to what and for whom? Investigating sustainable accessibility change in the Gothenburg city region 1990–2014

This paper operationalizes the concept of sustainable accessibility by emphasizing the environmental and social dimensions of sustainability from a spatial perspective. In doing so, we develop a heuristic model that focuses on the crucial dimensions of who gets access to what by using sustainable means of movement. We apply our conceptual approach in an examination of trends in sustainable accessibility for different social groups living in Gothenburg, Sweden between 1990 and 2014. On the basis of welfare-related and time-geographical considerations, we investigate accessibility by proximity for low- and high-income earners, people with small children, and elderly people. We investigate to what extent proximity to fundamental facilities increases or decreases over time, indicating changing conditions for sustainability. The results show that opportunities for living a local life and achieving accessibility via proximity differ socially. Low-income earners and the elderly generally live closer to the facilities important for daily life than do high-income earners and parents of young children. We also show that the opportunities for various social groups to obtain access by proximity change over time. For example, we observe a trend in which over time older people face reduced opportunities to reach daily facilities in their local neighborhoods.     

Improving Incentives in Unemployment Insurance: A Review of Recent Research

Abstract.  This paper provides a review of the recent literature on how incentives in unemployment insurance can be improved. We are particularly concerned with three instruments, i.e. the duration of benefit payments (or more generally the time sequencing of benefits), monitoring in conjunction with sanctions, and workfare. Our reading of the theoretical literature is that the case for imposing a penalty on less active job search is fairly solid. A growing number of empirical studies, including randomized experiments, are in line with this conclusion.     

Optimal unemployment insurance design: Time limits, monitoring, or workfare?

This paper analyses crucial design features of unemployment insurance (UI) policies. We examine three different means of improving the efficiency of UI: the duration of benefit payments, monitoring in conjunction with sanctions, and workfare. To that end we develop a quantitative model of equilibrium unemployment. The model features worker heterogeneity in preferences for leisure. The analysis suggests that a system with monitoring and sanctions restores search incentives most effectively, since it brings additional incentives to search actively so as to avoid the sanction. Therefore, the UI provider can offer a more generous UI replacement rate in a system with monitoring and sanctions than in the other two systems. Workfare appears to be inferior to the other two systems. JEL Code J64 · J65 · J68     

More or less travel: personal mobility trends in the Swedish population focusing gender and cohort

This study explores mainstream trends and countertrends in the development of spatial mobility in the Swedish population. Tracing incipient change in travel behaviour is important for understanding the preconditions for social and environmental sustainability. We use data from the Swedish national travel surveys, conducted intermittently over almost 30 years (1978–2006), covering both daily and long-distance mobility. International travel is included for the last decade. With respect to mainstream trends, the results primarily concern the continuation of the spatial extension of overall mobility and of the motorization and individualization of travel modes, as well as an upward convergence between women’s and men’s mobility. When it comes to countertrends, substantial reductions in daily mobility and long-distance domestic travel are observed among the young.     

International spillover effects of sectoral tax differentiation in unionized economies

Sectoral tax differentiation has in recent years appeared onthe agenda in European policy discussions concerning unemployment.The member countries of the European Union are allowed to reducethe value added tax rates on goods and services that are particularlylabour intensive and price elastic. This paper provides a theoreticalanalysis of the international repercussions of such policies.We develop a two-country and two-sector model with monopolisticcompetition in the goods market and wage bargaining in the labourmarket. Policy externalities operate through the endogenouslydetermined terms of trade. We examine how national and supranationalcommodity tax policies affect sectoral and total employmentand characterize optimal commodity taxes with and without internationalpolicy cooperation. Some rough estimates of the welfare gainsfrom policy coordination are also presented, using a calibratedversion of the model.     

Rewarding effort

According to liberal egalitarian ethics, individuals should be rewarded for factors under their control (the principle of responsibility), but not for factors outside their control (the principle of equalization). The paper analyses the effects of two requirements on how to reward effort within a liberal egalitarian framework: the requirement of equal reward and the requirement of solidarity. We show that it is impossible to establish a framework that satisfies the principle of equalization in all respects, and that a generalized version of the egalitarian equivalent mechanism is a very plausible liberal egalitarian approach. We should like to thank Aanund Hylland, Dirk Van de Gaer and two anonymous referees for extremely valuable comments.     

Sustainable recursive social welfare functions

What ethical criterion for intergenerational justice should be adopted, e.g., when faced with the task of managing the global environment? Koopmans’ axiomatization of discounted utilitarianism is based on seemingly compelling conditions, yet this criterion leads to hard-to-justify outcomes. The present analysis considers a class of sustainable recursive social welfare functions within Koopmans’ general framework. This class is axiomatized by means of a weak equity condition (“Hammond Equity for the Future”) and general existence is established. Any member of the class satisfies the key axioms of Chichilnisky’s “sustainable preferences”. The analysis singles out one of Koopmans’ original separability conditions (his Postulate 3′a), here called “Independent Present”, as particularly questionable from an ethical perspective.     

An experimental study of prosocial motivation among criminals

The fact that criminal behavior typically has negative consequences for others provides a compelling reason to think that criminals lack prosocial motivation. This paper reports the results from two dictator game experiments designed to study the prosocial motivation of criminals. In a lab experiment involving prisoners, we find a striking similarity in the prosocial behavior of criminals and non-criminals, both when they interact with criminals and when they interact with non-criminals. Similarly, in an Internet experiment on a large sample from the general population, we find no difference in the prosocial behavior of individuals with and without a criminal record. We argue that our findings provide evidence of criminals being as prosocially motivated as non-criminals in an important type of distributive situations.