An N-dimensional generalization of the Amiti–Weinstein estimator

Amiti and Weinstein proposed an estimation framework to disentangle credit demand and supply shocks using matched bank-firm loan data. Here, we show that their estimator can be generalized to capture shocks arising in an arbitrary number of dimensions. Our algorithm permits empirical researchers to analyse multi-dimensional data sets using the Amiti–Weinstein framework. This may be beneficial both for studies on micro-level outcomes as well as for the literature on assessing the macroeconomic impact of idiosyncratic shocks. In an empirical application to a firm-product-country export data set, we highlight the usefulness of the generalized Amiti–Weinstein estimator, and we demonstrate the importance of considering additional dimensions when gauging the effect of granular shocks on aggregate fluctuations.     

Reviews

Book reviewed in this article:
The Australian Economy in the Long Run , edited by Rodney Maddock and Ian W. McLean
Privatisation, the British Experience: an Australian Perspective , by Kenneth W. Wiltshire
Privatisation and Regulation: the UK Experience , edited by John Kay, Colin Mayer and David Thompson
Mathematical Economics: Twenty Years of Gerard Debreu , by G. Debreu
Data-FTT An Interactive Econometric Software Package , by M Hashem Pesaran and Bahrain Pesaran
The Treasury Line , by G. Whitwell
Lifestyle Economics: Consumer Behaviour in a Turbulent World , by P. Earl
Inside the Firm: The Inefficiencies of Hierarchy , by H. Leibenstein
ASEAN-Australia Trade in Manufactures , edited by David Lim
Student Economics Briefs 198718: twelve essays on key issues of economics, Australian economic policy, finance and commerce , by D. Clark
Theories of Income Distribution , by A. Asimakopulos, Recent Economic Thought Series
International Economic Policy Coordination , edited by W.H. Buiter and R.C. Marston     

Reviews

Book reviewed in this article: Collected Papers of Kenneth J. Arrow, Volume 1, Social Choice and Justice by K. J. Arrow Collected Papers of Kenneth J. Arrow, Volume 2, General Equilibrium, by K. J. Arrow Collected Papers of Kenneth J. Arrow, Volume 3, Individual Choice under Certainty, by K. J. Arrow Collected Papers of Kenneth J. Arrow, Volume 4, The Economics of Information, by K. J. Arrow Rational Expectations: Macroeconomics for the 1980's?, by M. Carter and R. Maddock Public Policy for Sustainable Growth, a special issue of the Australian Economic Review, 3rd Quarter 1984 Growth, Profits and Property. Essays in the Revival of Political Economy, edited by Edward J. Nell Free Market Conservatism. A Critique of Theory and Practice, edited by Edward J. Nell Incomes and Policy, by Ian Manning Optimization in Economic Analysis by G. Mills     

Optimal money supply rules under asymmetric objective criteria

This paper examines the derivation and properties of optimal money supply rules when such rules are chosen to minimize a loss function with asymmetric properties. Optimal money supply rules derived under symmetric and asymmetric objective criteria are compared under alternative expectations scenarios. When shocks have no impact on variables in the loss function, the optimal rule under a symmetric objective criterion is then also optimal under an asymmetric objective criterion. When shocks have some impact on variables in the loss function, the optimal policy rule will be different under the alternative criteria.Earlier versions of this paper were presented to the Seventh Analytic Economics Workshop, Australian National University, to the Australasian Meetings of the Econometrics Society, University of New England, and to seminars at the University of Waikato, the University of Canterbury at Christchurch, and the University of Guelph. The author is grateful to participants in those sessions for helpful comments. Particular thanks go to Louis Christofides, John Fender, Rod Maddock, Adrian Pagan, John Pitchford, and Larry Taylor for helpful discussions. The author is also grateful to the editor and two anonymous referees of this Journal for their constructive comments and criticisms. Of course, any remaining errors are the sole responsibility of the author.     

Time-consistent fiscal policy and heterogeneous agents

This paper characterizes the time-consistency properties of the set of Pareto efficient (or second best) fiscal policies, in a two-class, stochastic economy similar to that in [Judd, K.L., 1985, Redistributive taxation in a simple perfect foresight model, Journal of Public Economics 28, 59–83]. The key finding is that the continuation of any Pareto efficient policy is always Pareto efficient. Hence, to require any policy revision to be approved by unanimity safeguards the time consistency of efficient fiscal policy. I also show that any Pareto efficient policy from a timeless perspective can be rendered time consistent by a policymaker whose objective function is given by a utilitarian social welfare function with precise welfare weights. These results link the policymaker's equity considerations with the credibility of efficient fiscal policy.     

Efficient government size: France in the 20th century

The benefits and costs of government suggest an efficient government size. We investigate efficient government size by analyzing the relation between public spending and real GDP for France in the period 1896–2008. The results show a co-integration nonlinear relationship. Our time-series data on France represents one of the longest periods studied in literature. Our empirical findings suggest that efficient government size measured by public spending was reached when public spending was around 30% of GDP. Conclusions point to particularities of countries that suggest efficient government size is specific to different countries.     

Book Review

The authors present a simple diagrammatic exposition of a pollution-permit market in which both firms that generate pollution and consumers who are harmed by pollution are allowed to purchase permits at a single market price. They show that the market equilibrium is efficient if and only if the endowment of permits is equal to the efficient level of pollution. Furthermore, if consumers actually participate in the market, then the equilibrium is not efficient. Welfare can be improved by decreasing the endowment of permits and thereby pricing consumers out of the market.     

Pareto optima and equilibria when preferences are incompletely known

An exchange economy in which agents have convex incomplete preferences defined by families of concave utility functions is considered. Sufficient conditions for the set of efficient allocations and equilibria to coincide with the set of efficient allocations and equilibria that result when each agent has a utility in her family are provided. Welfare theorems in an incomplete preferences framework therefore hold under these conditions and efficient allocations and equilibria are characterized by first order conditions.     

Designing incentives for online question-and-answer forums

We provide a game-theoretic model of sequential information aggregation motivated by online question-and-answer forums. An asker posts a question and each user decides when to aggregate a unique piece of information with existing information. When the quality exceeds a certain threshold, the asker closes the question and allocates points to users. We consider the effect of different rules for allocating points on the equilibrium behavior. A best-answer rule provides a unique, efficient equilibrium in which all users respond in the first round, for substitutes valuations over information. However, the best-answer rule isolates the least efficient equilibrium for complements valuations. We demonstrate alternate scoring rules that provide an efficient equilibrium for distinct subclasses of complements valuations, and retain an efficient equilibrium for substitutes valuations. We introduce a reasonable set of axioms, and establish that no rule satisfying these axioms can achieve the efficient outcome in a unique equilibrium for all valuations.     

Efficient payments: How much do they cost for the Central Bank?

Previous works related to optimal denominations for coins and banknotes consider that the “principle of least effort” that defines an efficient payment is the most important criterion for two main reasons. Firstly, it is more convenient for transactors and, secondly, it limits the production costs of denominations incurred by the central bank. Exploiting production cost data for the U.S. currency system in 2010, we show using simulations that efficient payments actually increase the annual production costs of the Federal Reserve by $156 million. As a consequence, we raise a larger issue for central banks which consists in issuing an efficient denominational mix that is more convenient for transactors and that reduces the production costs of denominations.     

Life insurance and consumption

Life insurance is a very efficient form of saving for contingencies. This letter argues that under certain conditions it may be even more efficient than intended and desirable, by virtually severing the connection between income and consumption.     

Are inefficient entrepreneurs driven out of the market?

This paper challenges the widespread belief that competitive markets favor entrepreneurs who operate efficient technologies. In the context of a dynamically incomplete markets model, I show that, ceteris paribus, entrepreneurs operating efficient technologies can be driven out of a competitive market by entrepreneurs operating inefficient technologies.     

浙江省农业生产系统的有效性研究

选取了浙江省11个市的农业生产系统参加测评。结果表明：浙江省各市的农业生产系统总体上的有效性较高。其中,浙东北6市全部达到纯技术有效。浙西南有4个市未达到纯技术有效。可以通过对这4个市农业生产系统纯技术无效原因的具体分析,找到改进的途径,最终全面提高浙江省农业生产系统的有效性。     

Private Provisions of a Discrete Public Good with Voluntary Participation

This paper studies the mechanism that a profit-making principal should adopt to provide a discrete public good when the values of the consumers are their private information and their participation is voluntary. The free-riding issue is resolved through threatened nonprovision of the good by the provider. Every bidder is asked to announce his or her virtual value as defined in Myerson (1981) . The public good is provided if and only if the sum of the bidders' announced virtual values exceeds the provision cost. When a provision decision results, each bidder pays an amount that is determined by the announcement of other consumers. No one pays when a nonprovision decision results. We find that this mechanism is implementable through an all-pay auction. A restricted profit-maximizing mechanism that implements efficient allocation is also characterized. As in Gradstein (1994) , when provision is always efficient, that is, the sum of consumers' values always exceeds the provision cost, efficient allocation is achievable through a profit-maximizer. However, this is not the case when provision is not efficient.     

INCENTIVE EFFICIENT PRICE SYSTEMS IN LARGE INSURANCE ECONOMIES WITH ADVERSE SELECTION

We decentralize incentive efficient allocations in large adverse selection economies by introducing a competitive market for mechanisms, that is, for menus of contracts. Facing a budget constraint, informed individuals purchase (lottery) tickets to enter mechanisms, whereas firms sell tickets and supply slots at mechanisms at given prices. Beyond optimization, market clearing, and rational expectations, an equilibrium requires that firms cannot favorably change, or cut, prices. An equilibrium exists and is incentive efficient. An equilibrium can be computed as the solution to a programming problem that selects the incentive efficient outcome preferred by the highest type within an appropriately defined set. For two‐types economies, this is the only equilibrium outcome.     

Pricing inputs to induce efficient Make-or-Buy decisions

We investigate input pricing regimes that induce efficient Make-or-Buy decisions by entrants when there is constant returns in the production of the input(s) and simultaneous noncooperative price competition in downstream retail markets. Necessary and sufficient conditions for efficient Make-or-Buy decisions are derived. The necessary condition shows that input prices are relevant for Make-or-Buy decisions except under restrictive and often unverifiable assumptions on the demand structure, and that the least informationally-demanding way to ensure efficient Make-or-Buy decisions is to price inputs at marginal cost provided changes in the entrant’s cost have a “normal” effect on the entrant’s profit. The conditions also show that pricing the incumbent’s input at the entrant’s marginal cost always ensures efficient Make- or-Buy decisions. The extent to which input prices can depart from marginal cost while still inducing efficient Make-or-Buy decisions increases with the efficiency differential between the incumbent and entrant and with the demand displacement ratio.      

Evolutionary Stability in the Investment-Opportunism-Retaliation Game

Can economically efficient outcomes be obtained and sustained in the absence of externally enforced property rights? We study the evolutionary properties of a game that exhibits two well-defined Nash equilibria: one generates an inefficient outcome while the other set generates an efficient outcome supported by the potential for retaliation. Although standard forward-looking refinements eliminate the efficient equilibrium, neither equilibrium type satisfies strict evolutionary stability criteria. However, both types of equilibrium define strategies that are neutrally stable, which makes them vulnerable to drift in dynamic environments. We conduct computer simulation experiments in which players learn adaptively via a tournament selection mechanism called sophisticated experimentation. Our simulations demonstrate that while the system spends a disproportionately high proportion of time in the inefficient equilibrium set, the efficient equilibrium is pervasive as the system drifts back and forth between the equilibrium sets, never settling on one or the other.     

Generalized least squares and maximum likelihood estimation of the logistic function for technology diffusion

Given a simple stochastic model of technology adoption, we derive a function for technological diffusion that is logistic in the deterministic part and has an error term based on the binomial distribution. We derive two estimators—a generalized least squares (GLS) estimator and a maximum likelihood (ML) estimator—which should be more efficient than the ordinary least squares (OLS) estimators typically used to estimate technological diffusion functions. We compare the two new estimators with OLS using Monte-Carlo techniques and find that under perfect specification, GLS and ML are equally efficient and both are more efficient than OLS. There was no evidence of bias in any of the estimators. We used the estimators on some example data and found evidence suggesting that under conditions of misspecification, the estimated variance-covariance of the ML estimator is badly biased. We verified the existence of the bias with a second Monte-Carlo experiment performed with a known misspecification. In the second experiment, GLS was the most efficient estimator, followed by ML, and OLS was least efficient. We conclude that the GLS estimator of choice.     

新常态下内需拉动经济增长是否存在有效边界*

新常态下,中国如何维持经济中高速增长既是重点,也是难点。由于外需拉动型经济增长方式逐渐难以为继,扩大内需的重要性日益突出。然而,扩大内需真的是有效国策吗？投资和消费拉动经济增长,是否存在有效边界？基于此,本文通过构建面板门限模型,利用2012-2013年中国275个市级数据,对内需拉动经济增长是否存在有效边界问题进行了实证检验。研究结果显示：投资拉动经济增长确实存在有效边界,当投资率较低时,增加投资能够有效拉动经济增长,当投资率已经较高时,增加投资对经济增长的拉动作用将不再显著;消费拉动经济增长也存在有效边界,当投资效率较低时,增加消费会抑制经济增长,当投资效率足够高时,增加消费才能够有效拉动经济增长。\     

Efficiency in an Economy with Fixed Costs

It is by now well known that in an economy with increasing returns, first-best efficiency may be impossible to attain through an equilibrium concept based on market prices, even if firms are regulated to follow marginal cost pricing. We examine the efficiency issue in a special but important class of economies in which the only source of nonconvexities is the presence of fixed costs. Even in this context, it is possible that none of the equilibria based on marginal cost pricing are efficient (unless additional, strong assumptions are made). We argue that available results on the existence of an efficient two-part tariff equilibrium rely on very strong assumptions, and we provide a positive result using a weak surplus condition. Our approach can also be used to establish the existence of an efficient marginal cost pricing equilibrium with endogenously chosen lump-sum taxes if the initial endowment is efficient in the economy without the production technology.