Event History Data and Making a History out of Cross-Sectional Data

At the turn of 20th century social scientists have built up a large stock of cross-sectional data-sets to study social change. However, scholars more and more collect event history data containing the exact timing of events. Comparing the (dis)advantages event history data are to be preferred. However, for research on value change the event history approach is inapplicable, since it is not possible to ask the timing of a value change retrospectively. I will illustrate that value change (i.e. cohort differences) can be studied adequately with cross-sectional data, if information about the historical context is added. For this purpose I test Inglehart's value change thesis.Interestingly, there are also topics in which cross-sectional data-sets are unnecessarily being used. Using research on secularization as an example, I show that the event-history approach can be used to answer the question whether the decreasing number of religious people concerns a cohort-effect. However, whatever data-set is being used, to study cohort differences, one should always give a theoretical answer to the key-question: what exactly makes cohorts different     

A Tale of Two Models: Comparing structuralist and neoclassical computable general equilibrium models for South Africa

This paper compares two working models of the South African economy, an orthodox, neoclassical computable general equilibrium model in which savings drive investment, and a more structuralist, eclectic, model for which there is an independent investment function. Both models are calibrated to the same social accounting matrix. Comparative statics of simplified prototype models are presented and identical simulations with the corresponding applied versions are compared. It is seen that the neoclassical model fully supports the principles of the 'Washington Consensus' while the structuralist model requires a far more heterodox set of policies to avoid slow growth or high inflation.     

Experimentation in Markets

We present a model of entry and exit with Bayesian learning and price competition. A new product of initially unknown quality is introduced in the market, and purchases of the product yield information on its true quality. We assume that the performance of the new product is publicly observable. As agents learn from the experiments of others, informational externalities arise.
We determine the Markov Perfect Equilibrium prices and allocations. In a single market, the combination of the informational externalities among the buyers and the strategic pricing by the sellers results in excessive experimentation. If the new product is launched in many distinct markets, the path of sales converges to the efficient path in the limit as the number of markets grows.     

Investment behavior and the biased perception of limited loss deduction in income taxation

We use a laboratory experiment to study the extent to which investors’ choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors significantly reduce their risk-taking as predicted by theory. Next we compare the baseline investment choices to choices under three different types of income taxation. We observe that risk-taking is significantly increased with partial and with capped loss deduction, but is unaffected by a tax system that allows no loss deduction. Since in all these treatments the after tax outcomes of the prospects were identical, we conjecture that investors have a positively biased perception of partial and capped loss deduction that promotes their willingness to take risks.     

Location: A Neglected Determinant of Firm Growth

This paper links the performance of new technology firms, measured in terms of employment growth, to geographic location. We introduce a model of firm growth that is specific to characteristics of the location as well as the firm and industry. The model is estimated using a unique data set identifying the growth performance of small technology-based firms in Germany. We find that firm performance, as measured by employment growth, does appear to be influenced by locational characteristics as well as characteristics specific to the firm and the industry. In particular, the empirical evidence suggests that being located in an agglomeration rich in knowledge resources is more conducive to firm growth than being located in a region that is less endowed with knowledge resources. These results suggest the economic value of location as a conduit for accessing external knowledge resources, which in turn, manifests itself in higher rates of growth. JEL no. L10, R11, O12, O30     

THIS IS NOT A CREDIT CRISIS – IT IS A DEBT CRISIS

Using an analogy with ancient Babylonia as its leading theme, this viewpoint argues that the credit crisis is the symptom of an underlying problem. Fuelled by government policies, unprecedented debt levels were run up in industrialised countries over the last quarter century. Present policies of financial sector bailouts are not only an unwise use of taxpayers' money; they maintain economic structures opposed to what classical liberals such as J. S. Mill envisaged as a free-market economy.