Migration decisions under ambiguity: Migration distance effects revisited

There is ample evidence that distance has a strong negative effect on migration. Despite its significance in migration decisions, scholars rarely explore the migration distance effect deeper than the first level of interpretation derived from the simple neoclassical theory of migration. This study revisits the migration distance effect in the spirit of Knightian distinction between risk and uncertainty. To this end, this study attempts to construct estimates of the risk premium migrants are willing to pay to avoid the risk associated with migration distance. The results show that the magnitude of the distance effect is not rationalized by risk aversion in the Arrow–Pratt sense (Arrow, 1965, The theory of risk aversion, Yrjo Jahnssonin Saatio, Helsinki, Finland, 90; Pratt, 1964, Econometrica, 32, 122). In particular, the risk premium demanded by distant rural residents is unjustifiably higher compared with that of those living closer to urban areas in their migration decisions. The results suggest that the migration distance effect is analogous to the equity home bias puzzle and the Ellsberg paradox in that the assumption of subjective expected utility can lead to seemingly irrational human behaviors. Some of the findings in this study shed light on the role of subjective aspects such as perception, confidence, and pessimism in migration decisions, which have been neglected in the literature.     

Learning and the monetary policy strategy of the European Central Bank

This paper examines the welfare implications of alternative inflation targeting proposals for the monetary policy of the European Central Bank. We assume that policy makers have to “learn” the laws of motion of inflation in an economy characterized by “stickiness” in domestic price setting behavior and subjected to recurring shocks to productivity, exports and foreign price. We find that a switch from an “asymmetric” inflation targeting strategy to an “symmetric” makes little difference in welfare payoffs, but it comes at a cost of much higher interest-rate variability. We also find that there are practically no welfare gains from switching from an inflation-targeting strategy based on the Harmonized Index of Consumer Prices (HICP) to a strategy based on the domestic price component of the HICP.     

Early Retirement and Bridge Employment Intentions Among Older Workers in Singapore

This paper examined the relevance of 14 demographic, cognitive, and affective factors in individuals' intentions to voluntarily retire early and to secure bridge employment after retirement. Results based on a sample of 361 respondents aged between 40 and 59 suggested that marital status, perceived negative age-health relationship, gender psychological readiness for retirement, and family orientation were related to early retirement intentions. Work centrality, perceived organisational attitude towards older employees, and psychological readiness for early retirement were related to bridge employment intentions. Implications for research were discussed.     

A comparison of Ad valorem and per unit taxes in regulated monopolies

This paper compares the output and revenue effects in the rate-of-return regulated monopoly model. Both the ad valorem and the unit tax generally decrease the use of capital, and as such, reduce the output and raise the price. In addition, it is shown that Suits and Musgrave's conclusion of higher revenue of an ad valorem tax at a given output can apply to a regulated monopolist if the marginal product of labor under the ad valorem tax is greater than or equal to that under the unit tax. Similarly, their second conclusion, that for a given tax revenue an ad valorem tax has a larger output than a unit tax rate before the revenue-maximizing tax rate, can also apply to the regulated monopolist.     

Pricing options using implied trees: Evidence from FTSE‐100 options

Previously, few, if any, comparative tests of performance of Jackwerth's ( 1997 ) generalized binomial tree (GBT) and Derman and Kani ( 1994 ) implied volatility tree (IVT) models were done. In this paper, we propose five different weight functions in GBT and test them empirically compared to both the Black‐Scholes model and IVT. We use the daily settlement prices of FTSE‐100 index options from January to November 1999. With both American and European options traded on the FTSE‐100 index, we construct both GBT and IVT from European options and examine their performance in both the hedging of European option and the pricing of its American counterpart. IVT is found to produce least hedging errors and best results for American call options with earlier maturity than the maturity span of the implied trees. GBT appears to produce better results for American ATM put pricing for any maturity, and better in‐sample fit for options with maturity equal to the maturity span of the implied trees. Deltas calculated from IVT are consistently lower (higher) than Black‐Scholes deltas for both European and American calls (puts) in absolute term. The reverse holds true for GBT deltas. These empirical findings about the relative performance of GBT, IVT, and Standard Black‐Scholes models are important to practitioners as they indicate that different methods should be used for different applications, and some cautions should be exercised. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:601–626, 2002     

Hedonic models and air pollution: Twenty-five years and counting

This paper reports a meta analysis of how effectively hedonic property models have detected the influence of air pollution on housing prices. Probit estimates are reported describing how data, model specification, and local property market conditions in cities represented in thirty-seven studies influence the ability of hedonic models to uncover negative, statistically significant relationships between housing prices and air pollution measures.Partial support for this research was provided by the Russell Sage Foundation. Thanks are due David Cordray, Heidi Hartman, and Larry Hedges of the Foundation's Meta-Analysis Panel for constructive comments, to Ray Palmquist for suggestions and assistance in assembling the results from his studies, to Rick Freeman and Tom Tietenberg and two anonymous referees for comments on the research, and to Barbara Scott for constructive editing of earlier drafts of this paper.     

Stationary solution to the overlapping generations model of fiat money: Experimental evidence

Overlapping generations model of fiat money yields an infinity of competitive equilibrium solutions, only one of which is stationary. Economies reported in this paper involved a sequence of overlapping generations of three or four individuals; each individual lived for two periods. In their young age individuals were endowed with chips that could be traded for fiat money wish the individuals of the old generation. In their old age, individuals could exchange their units o flat money for the consumption good. Results of the experiments exhibit some support for the stationary solution. The results are robust to two designs of exchange institutions (double oral auctior and supply schedule auction) and to two different endogenous ways of converting money into chips at the end of the game (average price prevailing during the last period the game is actually played and the average price forecast made during the last period the game is actually played).A preliminary version of this paper was presented at the meeting of the Economic Science Association and at the Federal Reserve Bank of Minneapolis. The authors are grateful for comments received from various participants at both presentations. Financial support was provided by the McKnight Foundation, the Honeywell Foundation, National Science Foundation (SES 89-12552), and Richard. M. and Margaret Cyert Family Funds.     

IPO anomalies and innovation capital

Innovation capital are typically expensed and/or unrecognized as assets under current generally accepted accounting principles. This results in accounting-related information asymmetry. This paper examines the association of innovation capital (as measured here by the proxies of R&D expenditures and granted patents) and initial public offerings (IPO) anomalies. These anomalies include initial IPO underpricing, duration of honeymoon (a distinct feature of the Taiwanese IPO environment), and long-term performance. The theoretical model underlying this research is a signaling model. The results indicate that more innovative firms are more likely to be underpriced, and have longer honeymoon periods than less innovative firms. Further, the more innovative firms have positive and growing long-term market-adjusted returns. This stands in contrast to the declining long-term stock performance of initial public offering firms that is evidenced in the literature. We conclude that pre-IPO research and development expenditures disclosed in the IPO prospectus, official monthly reports of newly developed patents released to the public, and the frequency of patent citations significantly signal both underpricing and future market performance of IPO firms in Taiwan.