On estimation of almost ideal demand system using moving blocks bootstrap and pairs bootstrap methods

This paper applies a bootstrap method to the Almost Ideal Demand System (AIDS) proposed by Deaton and Muellbauer (Am Econ Rev 70:312–326, 1980), where the moving blocks bootstrap (MBB) and pairs bootstrap (PB) methods are adopted taking into account serially correlated error terms and limited dependent variables (note that the dependent variables in the AIDS model lie on the interval between zero and one). We aim to obtain the empirical distribution of the expenditure and price elasticities. Note that, the expenditure and price elasticities are obtained using the parameter estimates included in the AIDS model. In the past, a few studies report both the elasticity estimates and their standard errors obtained from the Delta method, but most of studies show only the elasticity estimates (i.e., statistical tests have not been done in most of the past studies). Applying MBB and PB methods to the AIDS model and using Japanese monthly household expenditure data from January, 1975 to December, 2012, we show in this paper that a few elasticities are statistically insignificant. We also compare the standard errors based on the bootstrap method with those based on the Delta method. We obtain the results that the differences between the Delta method and the bootstrap method are not negligible. In addition, the validity of the linear approximated AIDS (LA–AIDS) model which is commonly used in empirical studies is examined. In consequence, we find that the LA–AIDS model shows a poor performance, compared with the AIDS model, because the LA–AIDS model yields inconsistency on the elasticity estimates.     

Evolutionary economics and the case for a constitutional libertarian paternalism—a comment on Martin Binder, “should evolutionary economists embrace libertarian paternalism?”

In his article “Should evolutionary economists embrace libertarian paternalism?”(Journal of Evolutionary Economics 24(3), 2014, 515–539) Martin Binder discusses the pros and cons of “libertarian paternalism” (LP) from an explicitly evolutionary viewpoint, concluding that as a general rule, evolutionary economists should be cautious regarding this new and highly influential policy approach. In this comment I argue that Binder starts from an incomplete model of the institutional status quo and neglects an obvious alternative to the standard variant of LP, namely, a constitutionally constrained LP. Most of Binder’s objections do not apply with equal force to such a refined variant of LP.     

Supermarket responses to Wal-Mart Supercenter expansion: a structural approach

The impact of Wal-Mart in lowering incumbents’ retail prices has been well documented by previous studies using reduced form models. This article uses a structural model to examine the pricing behavior and promotion responses of incumbent supermarkets to a rapid expansion of Wal-Mart Supercenters (WMS) using the Dallas–Fort Worth milk market as a case study. Empirical results verify that WMS expansion disciplines incumbent supermarkets by decreasing oligopoly power and numbing consumer responsiveness to promotion. In addition, WMS expansion lures away price-sensitive consumers, leaving incumbent supermarkets to face more price-inelastic but lower demands for milk.     

Taking,giving, and impure altruism in dictator games

We show that, if giving is equivalent to not taking, impure altruism could account for List’s (in Journal of Political Economy 115(3):482–493, 2007) finding that the payoff to recipients in a dictator game decreases when the dictator has the option to take. We examine behavior in dictator games with different taking options but equivalent final payoff possibilities. We find that recipients tend to earn more as the amount the dictator must take to achieve a given final payoff increases, a result consistent with the hypothesis that the cold prickle of taking is stronger than the warm glow of giving. We conclude that not taking is not equivalent to giving and agree with List (in Journal of Political Economy 115(3):482–493, 2007) that the current social preference models fail to rationalize the observed data.     

A note concerning the proposed emasculation of the legal services corporation

In its frenzy to dismantle the New Deal and Great Society programs of past progressive administrations, the Reagan administration has taken a special interest in the emasculation of the Legal Services Corporation. This should come as no great surprise.Then Governor Reagan and thethen Legal Services Program became immediate adversaries at the time of the program's inception. The purpose in this paper is to examine the pending emasculation of this instrumentality of legal reform in the context of structural changes elsewhere in the American legal profession.     

The accuracy of OECD forecasts

This paper examines the accuracy and properties of forecasts by the OECD for 24 countries and 8 variables. First the forecasts made in December of yeart?1 for yeart are examined, with the largest errors being for investment, industrial production and foreign balance. Next the way forecasts are revised between December and July is considered. Systematic revisions occur for Iceland, Turkey and Luxembourg. Finally the accuracy of forecasts made before, during and after the 1979 oil price rises are compared, and no evidence of a worsening of accuracy is found.     

Inflation,relative prices and household saving behavior

This article contains tests for the direct effects of inflation on household saving. Empirical results with cross-country data from five OECD countries indicate that both unanticipated and anticipated inflation affect the household savings ratio. This latter result, which furthermore turns out to be robust in terms of aggregation and additional variables, is clearly at variance with some previous analyses, particularly those of Deaton.     

Estimating leisure goods models on time series of cross sections

This paper analyses the joint modelling of labour supply and consumer expenditure in a utility maximizing framework. A recent demand system (AIDS) is augmented to include labour supply and incorporate time series/cross section wage rate variation and, then, estimated on pooled F.E.S. data [Family Expenditure Surveys]. A method of non linear FIML is applied. The paper questions the near unanimous ‘evidence’ on backward bending labour supply in previous studies and, using counter evidence, argues that such a bend could have been partly due to the restrictive utility forms usually employed. In addition, hypotheses relating to effects of price/wage movements on composition of ‘full income’ are tested, and the welfare implications of the estimated parameter estimates worked out.     

Understanding the culture of markets: A reflection

This essay examines Virgil Storr’s (2013) Understanding the Culture of Markets, particularly the relationship between cultures and constitutions and the particulars of the ideal-typical ‘spirit’ of capitalism. Culture cannot be viewed as a constitution, I argue, because of fundamental differences between the two types of guidance to conduct, both for the actors within them and the researchers studying them. I also consider possibly conflicting interpretations of the idea of the animating spirit(s) of a market in the context of Storr’s example of the economic culture of the Bahamas.     

The impact of science and technology parks on firms’ product innovation: empirical evidence from Spain

Science and Technology Parks (STP) have attracted considerable attention and public funds in recent years. However, the conclusions on their effectiveness remain mixed. This work evaluates the impact of STP on firm product innovation in the Spanish context, as an example of a less developed innovation system in which regional and national governments are prioritizing STP initiatives. This work draws on a large sample of firms provided by the Spanish Survey on Technological Innovation that is conducted annually by the National Statistical Institute. We explore alternative econometric methods to obtain average treatment effects for firms located in 22 Spanish STPs. Our results show that Spanish STPs have a strong and positive impact on the probability and amount of product innovation achieved by STP located firms. These results hold when the endogeneity of STP location is taken into account.     

Inflation and interest rates: Some time series evidence from 6 OECD countries

This study examines the time series properties of inflation and interest rates variables using monthly data from 6 OECD countries covering the period 1972.1–1984.8. The analysis focuses on the hypotheses that real rates of interest are constant over time and that movements in nomial rates can be explained by inflation only. These hypotheses are tested by applying both formal and informal test procedures and by carrying out tests both in the time and in the frequency domain. On the whole, the empirical evidence is at variance with these hypotheses. Only in the case of the United States do the results lend some support for the existence of the Fisher relationship.     

Do Balkan economies catch up with EU? New evidence from panel unit root analysis

This paper explores empirically the issue of income convergence for the Balkans over the period 1994–2011 and the investigation relies on income differentials from both the averages of the European Union’s-15 (EU-15) and the European Union’s-24 (EU-24) as well as within the Balkan group. The adopted methodology deploys the non stationary panel unit root framework to cope with the problem of limited sample providing more reliable insight and, in particular, the analysis uses the univariate and panel minimum Lagrange Multiplier (LM) unit root tests, suggested by Lee and Strazicich (2003, 2004) and Im et al. (2005), that accounts for one and two endogenously determined structural breaks. The overall evidence is in favor of catching up with the EU benchmark cases as well as in favor of convergence within the Balkan area. However, disparities for some countries are confirmed.     

Lender deception as a response to moral hazard

The paper considers a principal–agent relationship between a borrower and lender based on a model from Bowles (Microeconomics: behavior, institutions, & evolution. Princeton University Press, Princeton, 2003). It expands the model by incorporating borrower collateral as an exogenous variable to partly assuage lender concerns about excessive risk, and a theory of lender deception is then developed. Deception is posited as a costly activity that effectively makes fraud undetectable and extracts the borrower’s economic rent arising from moral hazard despite the presence of third-party enforcement and borrower collateral. We identify under what conditions a lender may have sufficient incentives for employing deception and to what extent they would employ it. The likelihood of, and outcomes from, deception are compared between monopoly lenders those in competitive markets. The model suggests that competitive lenders have more incentive to deceive than a monopoly lender facing the same borrower.     

Modeling equilibrium trends and interventions in commodity markets

The monthly spot prices in the international tin and copper and U.S. domestic lead markets are modeled based on the “supply of storage” concept. In all cases the lag-1 natural logS/C (stocks/consumption) was highly important in the final fitted equation. For copper and lead, trend directions in the U.S. Index of Leading Economic Indicators modified theS/C dependency. Disaggregation of the tin stocks showed the special model sensitivity to the level of the ITC buffer stock. The underlying econometric models are used to estimate the price intervention effects of international political-economic crises, and commodity producer cartel actions.     

The influence of money on prices in 14 OECD countries 1958–1975

A simple monetarist model is specified which has a reduced form relating the rate of change of prices to lagged price changes and current and lagged rates of change of money supply. The reduced form is estimated for 14 OECD countries using quarterly data for 1958–1975 and the stability of the estimated equations is examined. A policy of a constant rate of growth of money supply is found to imply a cyclical or fluctuating adjustment in the rate of price change.     

New techniques for estimation of rational expectation models and Volcker deflation

Multivariate autoregressive moving average models are used to form the “reduced forms” of Muth's rational expectation models. One implication of the modern macroeconomic theory is that economic agents' expectations should change in the presence of major policy changes. This paper proposes a simple method for directly comparing the formulation of expectations, and illustrates it by considering the impact of a recent policy change in the US under Paul Volcker of the Federal Reserve Bank. Many new interpretations are based on transfer functions, “gain” calculations, Green's function matrices from solutions of difference equations, and complex conjugate roots to measure cyclical phenomena. Furthermore, the traditional distributed lag models are criticized for arbitrarily assuming that the gain is unity. We provide an equation for minimum mean squared error regulation, and indicate the role played by rational two-step ahead speculations made by economic agents, along with changes therein emanating from the policy change.     

Further results on the number of non-zero eigenvalues of a dynamic linear Econometric Model

This comment reconsiders a problem, discussed some time ago in this journal, concerning the determination of the exact number of non-zero eigenvalues of an Econometric Model of the Federal Republic of Germany. See Wolters (1976), Uebe (1977) and Schoonbeek (1983). We demonstrate in a straightforward way, by using theoretical arguments, that the number of such eigenvalues is at most 7.     

Nonlinear relationship between health care expenditure and its determinants: a panel smooth transition regression model

This paper employs a panel of 16 OECD countries over the period 1975–2009 to reexamine the health care expenditure (HCE)-income relationship by considering a lagged ratio of public expenditures on health as the transition variable in panel smooth transition regression (PSTR) models. PSTR models can capture the heterogeneity of any individual country, provide more detailed information for policy makers of an individual government, and resolve the insufficient observations problem that frequently appears in annual country-level data. Our empirical results indicate that the relationship between HCE and its determinants, including income, time (trend), and age structure variables, is nonlinear and varies with time and across countries. The time (trend) variable—a proxy for technical progress in health care—has a non-linear impact on HCE. Ignoring the variables—technological change of health care and age structure of population—will result in over-estimates of the income elasticities of HCE. Moreover, HCE behaves as a necessity good, and the income elasticity increases when the five-period lagged ratio of public expenditures on health increases. Clearly, the ratio of government financing on health plays an important role in influencing HCE.     

Jacques Maritain and human rights

Jacques Maritain’s concern and thoughts on human rights and natural law are analyzed and studies in the context of the humanist tradition of mankind. For this, St. Thomas Aquinas-J. Maritain types of law: 1) the natural law, 2) the people law, and 3) the positive law are discussed in relation to the three Maritain characteristics of the human being, i.e., wholeness, independence, and belonging to a society of human beings. From these considerations emerges the superadditive property of society, which is in complete agreement with Aristotle's principe that the whole is more than the addition of its parts. Maritain’s concept of normal functioning (doing) jointly with the ontological (being) and the teleological (the goals) dimensions of the human being and society form the basic framework for the analysis of the individualistic, the communist, and the humanistic types of society. This study concludes with the proposition of 1) freedom 2) economic efficiency, 3) social justice, and 4) preservation of the human species and its natural habitat, as the four essential principles for the realization of human rights in a society of societies.