Microstructure Noise, Realized Variance, and Optimal Sampling

A recent and extensive literature has pioneered the summing of squared observed intra-daily returns, "realized variance", to estimate the daily integrated variance of financial asset prices, a traditional object of economic interest. We show that, in the presence of market microstructure noise, realized variance does not identify the daily integrated variance of the frictionless equilibrium price. However, we demonstrate that the noise-induced bias at very high sampling frequencies can be appropriately traded off with the variance reduction obtained by high-frequency sampling and derive a mean-squared-error (MSE) optimal sampling theory for the purpose of integrated variance estimation. We show how our theory naturally leads to an identification procedure, which allows us to recover the moments of the unobserved noise; this procedure may be useful in other applications. Finally, using the profits obtained by option traders on the basis of alternative variance forecasts as our economic metric, we find that explicit optimization of realized variance's finite sample MSE properties results in accurate forecasts and considerable economic gains.     

A voting model for the allocation of public goods: Existence of an equilibrium

It is well known that equilibria may not exist for majority voting over multidimensional policy spaces. This paper shows that certain institutional constraints can be imposed upon the voting process to ensure existence of a restricted equilibrium. A restricted equilibrium point must defeat only those points connected to it by one of an exogenously given set of linearly independent voting vectors. Using this procedure in a general equilibrium model to determine demands for public goods, existence of a general political equilibrium is proven. The equilibrium need not be Pareto optimal and may be manipulated by changing the vectors.     

Similarity in trade structures,integration and catching‐up1

In this paper, we look at the role of export composition in the growth process, considering how increased similarity in trade structure among countries can induce catching‐up in income levels in a group of countries in transition. We analyze the sectoral export patterns of the Central and Eastern European countries (CEECs) by comparing them to those of the current members of the European Union (EU), focusing on countries’ specialization as suppliers for the EU market, and we assess whether similar export patterns foster the catching‐up process of the CEECs. Our main result is that similarity in export composition has a positive, significant and non‐linear impact on catching‐up, and seems to be driven by the growth of the main export market and delocalization of production more than by other factors.     

Elementary results on solutions to the bellman equation of dynamic programming: existence,uniqueness, and convergence

We establish some elementary results on solutions to the Bellman equation without introducing any topological assumption. Under a small number of conditions, we show that the Bellman equation has a unique solution in a certain set, that this solution is the value function, and that the value function can be computed by value iteration with an appropriate initial condition. In addition, we show that the value function can be computed by the same procedure under alternative conditions. We apply our results to two optimal growth models: one with a discontinuous production function and the other with “roughly increasing” returns.     

Wage bargaining, labor-tax progression, and welfare

This paper analyzes the effect of labor-tax progression on employment and welfare in an economy with a unionized labor market. The government influences wage bargaining through its tax policies. Wages can be reduced by increasing the marginal labor-tax rate. If there are no restrictions on profit taxation, a first-best optimum with full employment is realized; this first-best optimum can always be implemented by a progressive tax schedule. If profit taxation is restricted, unemployment may arise. For this case, we show that the welfare-maximizing degree of tax progression is influenced by a variety of factors, in particular the wage elasticity of labor demand, the distribution of bargaining power, and the existence of unemployment benefits. Examples are given for both progressive and regressive tax structures. Comparative-static analysis reveals that a decline in union bargaining power, an increase in unemployment benefits, and an increase in the overall work force reduce the efficient degree of tax progression.     

Forecasting the forecasts of others: Implications for asset pricing

We study the properties of rational expectation equilibria (REE) in dynamic asset pricing models with heterogeneously informed agents. We show that under mild conditions the state space of such models in REE can be infinite dimensional. This result indicates that the domain of analytically tractable dynamic models with asymmetric information is severely restricted. We also demonstrate that even though the serial correlation of returns is predominantly determined by the dynamics of stochastic equity supply, under certain circumstances asymmetric information can generate positive autocorrelation of returns.     

Approachability with bounded memory

We study Blackwell's approachability in repeated games with vector payoffs when the approaching player is restricted to use strategies with bounded memory: either strategies with bounded recall, or strategies that can be implemented by finite automata. Our main finding is that the following three statements are equivalent for closed sets. (i) The set is approachable with bounded recall strategies. (ii) The set is approachable with strategies that can be implemented with finite automata. (iii) The set contains a convex approachable set. Using our results we show that (i) there are almost-regret-free strategies with bounded memory, (ii) there is a strategy with bounded memory to choose the best among several experts, and (iii) Hart and Mas-Colell's adaptive learning procedure can be achieved using strategies with bounded memory.     

区域城市化与生态环境耦合特征及机制--以江苏省为例

根据城市化与生态环境耦合涵义及规律,在灰色关联技术的支持下,构建了耦合系统评价指标体系和评价模型。通过对江苏省的实证分析揭示出该省城市化与生态环境交互作用的主要因素,并探讨它们耦合作用的时空特征。研究表明:①江苏省城市化与生态环境的耦合总体上表现在城市化对生态环境的胁迫作用和生态环境对城市化的约束作用两个方面,由此遴选出作用于生态环境的8项主要的城市化指标和影响城市化的9项主要的生态环境指标,它们较为全面反映出系统交互作用的机制;②计算显示1990—2003年间江苏省耦合强度的变化呈现出先大后小,再变大的“U”型形状,依据其变化特点将其划分为两个阶段;③江苏省区域城市化与生态环境耦合度分布基本符合南北空间分异的规律,依据其耦合特性,将全省13个行政市划分为4种耦合类型。     

Exceptions to the Rules: Variances from Regulatory Standards

In the major areas of regulation, standards can be violated through an appeal process set up as a part of the statutes. This paper formulates a model of the variance appeal process, characterizes the (perfect Bayesian) equilibria of this procedure and studies the welfare properties of these equilibria. I consider two versions of the decision rule used by the appeal board and suggest institutionally feasible alterations in these rules which can improve equilibrium welfare. I also study how obstructionist interest groups can affect the welfare performance of the decision rules.     

Hours Worked in Europe and the United States: New Data,New Answers*

We use national labor force surveys from 1983 to 2015 to construct hours worked per person on the aggregate level and for different demographic groups for 18 European countries and the United States. We apply a harmonization procedure to measure hours worked consistently across countries and over time. In the recent cross‐section, Europeans work 14 percent fewer hours than US Americans. Differences in weeks worked and in the educational composition each account for one quarter to one half of this gap. In addition, lower hours worked per person than in the United States are driven by lower weekly hours worked in Scandinavia and Western Europe, but by lower employment rates in Eastern and Southern Europe.     

Weak links, good shots and other public good games: Building on BBV

We suggest an alternative way of analyzing the canonical Bergstrom-Blume-Varian model of non-cooperative voluntary contributions to a public good that avoids the proliferation of dimensions as the number of players is increased. We exploit this approach to analyze models in which the aggregate level of public good is determined as a more general social composition function of individual gifts — specifically, as a CES form — rather than as an unweighted sum. We also analyze Hirshleifer's weakest-link and best-shot models. In each case, we characterize the set of equilibria, in some cases establishing existence of a unique equilibrium as well as briefly pointing out some interesting comparative static properties. We also study the weakest-link and best-shot limits of the CES composition function and show how the former can be used for equilibrium selection and the latter to establish that equilibria of some better-shot games are identical to those of the much simpler best-shot game.     

Inference for Optimal Split Point in Conditional Quantiles

In this paper we show the occurrence of cubic-root asymptotics in misspecified conditional quantile models where the approximating functions are restricted to be binary decision trees. Inference procedure for the optimal split point in the decision tree is conducted by inverting a t-test or a deviation measure test, both involving Chernoff type limiting distributions. In order to avoid estimating the nuisance parameters in the complicated limiting distribution, subsampling is proved to deliver the correct confidence interval/set.     

A semantic analysis approach for identifying patent infringement based on a product–patent map

Identifying patent infringement beforehand is highly important for reducing the risk of damages. However, as the approach to patents is changing from the technological and legal approaches of the past to the business approach, strategic patent infringement litigation and securement of patents can be important tools for companies. From various viewpoints, companies can consider an aggressive patent infringement litigation as well as evasion strategy of patent infringement litigation to keep competitors in check. Previous research on patent infringement identification only considered the possibility of infringement between patents. However, infringement cases between patent and product are prevalent. Thus, this research aims to suggest an automated method for identifying patent infringement between the patent and product in business. To this end, this paper proposes the subject–action–object (SAO) semantic technological similarity-based product–patent method for generating infringement maps. Several indices and subgrouping methods are suggested to interpret the map. As an exemplary case, data on technology and products related to the light emitting diode (LED) lamp are collected and exploited.     

SOME PUZZLING BEHAVIOR BY OWNERS OF INTELLECTUAL PRODUCTS: AN ANALYSIS

Creators of intellectual properties frequently seem to prefer "rental," or sale with restricted rights, over outright sale of the intellectual properties. Surprisingly, these individuals also seem to prefer legislative provisions forcing them to restrict purchasers' rights rather than allowing this result to be achieved through voluntary negotiations. In this paper, I examine two examples of this behavior: the sale of syndication rights for television programs and the separation of broadcast rights from synchronization rights for music in television broadcasts. The desire to restrict purchasers' rights is explained in two ways. First, I appeal to recent developments in utility theory, namely, regret theory. Second, I show that sales of intangible goods such as intellectual properties are less closely related to use than are sales of tangible goods, and that restricting rights is an attempt to enhance such a linkage. I give several explanations for using legislative solutions, although I acknowledge that further research is needed on both questions before definitive answers can be given.     

Human Fallibility, Complementarity, and Fiscal Decentralization

This paper examines economic growth properties under alternative fiscal organizations when a bureau's decisions are fallible. A country consists of J jurisdictions, which need a public service. In a centralized government, one authority decides on services in every jurisdiction. In a decentralized government, J authorities are in charge of each public service. An authority can have high ability or low ability, and an authority with high ability draws a good project with higher probability. We first show that the decentralized government provides the same average quality of public services, with lower variance, than does the centralized government. We then apply this result to an economic growth model where the value of the Solow residual is a constant elasticity of substitution (CES) function of public services. We show that there is a critical value of the degree of complementarity below which fiscal decentralization is more desirable than fiscal centralization for an expected economic growth, and the decentralized government has a lower variance of GDP growth.     

Testing restrictions in hierarchical normal data models using Gibbs sampling

The problem of testing a set of restrictions in a complex hierarchical normal model is considered and a numerical Bayesian method proposed. The suggested approach is based on the comparison of two density functions easily obtained as a by-product of the Gibbs sampling. The procedure is easy to implement and can be computed also when some priors in the hierarchy are diffuse. Monte Carlo simulations show that the procedure has good statistical properties.     

Globalization,welfare, and the attitudes toward higher education

In this paper we study how the attitudes toward higher education may affect labor market outcomes in the context of globalization. In particular, we show that different educational attitudes are responsible for differences in the wage differential among countries. Using a matching model with two types of workers and firms, we find that there is a trade-off between the wage differential and the workers’ welfare, namely, that an economy that is less willing to educate itself will display a lower wage differential but will lose in terms of welfare. Moreover, from a policy perspective, we show that the negative effects on welfare due to this disinclination to study can be offset by increased labor market flexibility. All things considered, policy makers ought to keep in mind that both a positive attitude toward higher education and labor market flexibility, can lead to improved overall performance in this increasingly globalized world.     

Economic growth,corruption and tax evasion

In this paper, we explore tax revenues in a regime of widespread corruption in a growth model. We develop a Ramsey model of economic growth with a rival but non-excludable public good which is financed by taxes which can be evaded via corrupt tax inspectors. We prove that the relationship between the tax rate and tax collection, in a dynamic framework, is not unique, but is different depending on the relevance of the “shame effect”. We show that in all three cases — “low, middle and high shame” countries, the growth rate increases as the tax rate increases up to a threshold value, after which the growth rate begins to decrease as the tax rate increases. But, for intermediate tax rates, the rate of growth for “low shame” countries is lower than that of “uniform shame” countries which is, in turn, lower than that of “high shame” countries. This happens because the growth rate is more sensitive to variations of t in an honest country rather than in a corrupt country.     

International trade, flexible manufacturing, and outsourcing

Abstract .  This study analyzes the impact of opening up markets on the diffusion of flexible manufacturing in a general equilibrium framework. With flexible manufacturing, suppliers can service a range of downstream industries and do not have to be concerned about being held up. Instead, the vertical structure is determined by the trade-off between economies of scale in flexible manufacturing and product specificity of in-house production. The analysis derives a number of testable predictions with regard to firm size and productivity measures and shows that globalization can lead to a consolidation in upstream markets, lower real wages, and reduce welfare.     

Experimentation by firms,distortions, and aggregate productivity

Recent empirical research has documented that distortions of allocative efficiency among heterogeneous firms can have large aggregate consequences. This paper evaluates the size of these effects when distortions affect not only resource allocation but also the evolution of firm-level productivity itself. To this end, we partially endogenize the evolution of firm-level productivity in a standard heterogeneous firm model by allowing firms to engage in costly, purposeful experimentation: Firms can engage in risky experiments, which take the form of productivity shocks. Results from failed experiments can be discarded. We then show that endogenous productivity implies up to twice as large effects of productivity-dependent distortions on aggregate consumption.