What are we learning from the life satisfaction literature?

The recent availability of cross-sectional and longitudinal survey data on life satisfaction in a large number of countries gives us the opportunity to verify empirically (and not just to assume) what matters for individuals and what economists and policymakers should take into account when trying to promote personal and societal well-being. We now have ample evidence, generally robust to different cultural backgrounds, on the effects of some important happiness drivers (income, health, unemployment, marital status, etc.) which can be considered “quasi-stylized facts” of happiness. If economic policies, for many obvious reasons, cannot maximize self-declared life satisfaction as such, we are nonetheless learning a lot from these findings. In particular, results on the relevance of relational goods, on the inflation/unemployment trade-off in terms of welfare and, more in general, on the measurement of the shadow value of non-market goods obtained with life satisfaction estimates are conveying relevant information about individual preferences and what is behind utility functions. Such findings suggest that the anthropological reductionism characterizing most economic models can be misleading and that target indicators of economic policies have to be refocused if we want to minimize the distance between economic development and human progress.     

Employers' hiring practices,employment protection,and costly search: A vacancy-level analysis

An employer with a vacancy may respond to high search costs by lowering hiring requirements. While such an adjustment increases the employer's chances of filling the vacancy, it also more likely results in a match that terminates when the match is hit by match-specific productivity shocks. Drawing on a novel Slovenian vacancy dataset, we find that employers who are searching to fill temporary positions are more likely to hire underqualified workers when search costs are high. We find that search costs are taken into consideration when employers are searching to fill permanent positions in some specifications but not all. These findings suggest that for employers who are searching to fill a permanent position, the benefits of lowering hiring requirements when search costs are high are likely outweighed by: a) high firing costs if an under-qualified worker is hired on a permanent contract or b) the costs of undertaking a new search later if an under-qualified worker is hired on a temporary contract. These are novel findings about the employers' hiring practices in the presence of employment protection laws and costly search.     

Detecting changes in a multivariate renewal process

Some recent extreme value asymptotics for multivariate renewal processes are used to derive an asymptotic changepoint test. This test is proven to be consistent in the multivariate framework where we assume that at most one change (AMOC) occurrs in any of the component renewal processes. Since the actual covariance structure is often unknown, we also suggest an appropriate estimate. This research was partially supported by an Auckland University Research Grant and by a travel grant of the Deutsche Forschungsgemeinschaft.     

Evolution of Female Labor Force Participation in the United States: 1967 to 2003

This paper describes the changes in the employment choices of prime working-age women from 1967 to 2003. A neoclassical labor market participation model is presented and applied to data from the March Current Population Surveys (CPS). The paper provides a new insight: It highlights the different patterns of labor force participation by family-status categories. Also, the paper introduces the average annual unemployment rate at the state level as an explanatory variable to capture the demand-side constraint of the labor market. The results of the paper support the finding that since 1990, the increase in the participation of women in the labor force has slowed from previous decades.An earlier draft of this paper was presented at the 59th International Atlantic Economic Conference, London, England, March 9–13, 2005.     

On the Institutional Design of the European Monetary Union: Conservatism, Stability Pact and Economic Shocks

The aim of this paper is to design the optimal institutional arrangement for a monetary union. Using a two-country rational expectations model, the study analyses how the conservatism of the area-wide central bank and the penalty system for fiscal deviation (Stability and Growth Pact) should be designed with respect to different economic shocks. The optimal institutional arrangement is also dependent on who is the 'leader' of the policy game. When national governments move first, the independent area-wide central bank can exercise greater discipline over national fiscal policies, making the Stability Pact unnecessary.
(J.E.L.: E58, E63, F42).     

Evaluation of the effect of investor psychology on an artificial stock market through its degree of efficiency

The main objective of this article is to develop a Cellular Automaton Model in which more than one type of stockbroker interact, and where the use and exchange of information between investors describe the complexity measured through the estimation of the Hurst exponent. This exponent represents an efficient or random market when it has a value equal to 0.5. Thanks to the various proposals, it can be determined in this investigation that a rational component must exist in the simulator in order to generate an efficient behavior.     

Information,belief elicitation and threshold effects in the 5X1000 tax scheme: a framed field experiment

In this paper, we study by means of a framed field experiment on a representative sample of the population the effect on people’s charitable giving of three, substantial and procedural, elements: information provision, belief elicitation and threshold on distribution. We frame this investigation within the 5X1000 tax scheme, a mechanism through which Italian taxpayers may choose to give a small proportion (0.5%) of their income tax to a voluntary organization to fund its activities. We find two main results: (i) providing information or eliciting beliefs about previous donations increases the likelihood of a donation, while thresholds have no effect; (ii) information about previous funding increases donations to organizations that received fewer donations in the past, while belief elicitation also increases donations to organizations that received most donations in the past, since individuals are more likely to donate to the organizations they rank first.     

Earnings Reported under IFRS Improve the Prediction of Future Cash Flows? Evidence from European Banks

This paper examines the relative costs and benefits of International Financial Reporting Standards (IFRS) adoption in the European Union by testing the ability of earnings computed under IFRS to predict future cash flows. The study considers the contribution of net income, comprehensive income and other comprehensive income to the usefulness of earnings to predict cash flows, and it compares IFRS with domestic Generally Accepted Accounting Principles (GAAP). Evidence from a sample of Continental European banks shows that IFRS improve the ability of net income to predict future cash flows. Comprehensive income, too, provides relevant information to predict future cash flows, although with a measurement error which is higher than that in net income for greater lags of time. In our interpretation, these findings are consistent with unrealised gains and losses recognised in other comprehensive income being more transitory and volatile in nature. Overall, our results are relevant to academics and standard setters debating the merits of IFRS adoption and to those who use financial statements and adopt reported earnings to form expectations about future cash flows.     

Development as leapfrogging,not convergence,not catch-up: towards schumpeterian theories of finance and development

Our aim is to demark a pathway towards Schumpeterian theories of finance and development. To do this, we offer four basic propositions for discussion. First, we suggest that ‘convergence’ and ‘catch-up’ are, from a Schumpeterian perspective, theoretically inadequate concepts as they frame development narratives similarly to the Rostovian idea of a linear path towards some sort of ‘equilibrium imposed on history’. Leapfrogging by means of innovation and finance is put forward as a better approach to analyzing development trajectories. Second, we contend that rather than the often-assumed convergence among nations, history shows that ‘divergence’ is a more common result of development trajectories; this is especially visible in the last half a century. Third, we outline the key features of this Schumpeterian framework, centered on the concept of leapfrogging through innovation and finance. We conclude by highlighting the essential roles of finance and financial governance within this alternative framework for understanding successful development trajectories, and posit that this construct may be labeled a Schumpeterian entrepreneurial state.