The moments of ols and 2sls when the disturbances are non-normal

This paper examines the exact moments of OLS and 2SLS structural estimators under the assumption that the reduced form disturbances follow a non-normal distribution of the Edgeworth type with specified skewness (λ₃) and kurtosis (λ₄). The exact results are given as functions of hypergeometric functions and λ₃ and λ₄. The technique used is that developed by Davis (1976), and it is shown that when λ₃ = λ₄ = 0 the results correspond to Sawa's (1972).     

Optimal law enforcement when victims are rational players

The economic analysis of crime usually views a victim as a passive party whose role is limited to suffering harm. In this paper, we extend the economic theory of law enforcement by modeling victims as an active party in criminal deterrence. First, they may take some precautions to avoid victimization. Second, they may or may not report their victimization. The lack of reporting weakens law enforcement and criminal deterrence by reducing detection rates. This suggests that victims could be encouraged to report by being paid a compensation. Nevertheless, compensating victims certainly reduces precaution. We argue that such effect never offsets the gains obtained in terms of criminal detection and apprehension. Received: December 1998 / Accepted: January 2000     

Properties of shrinkage estimators in linear regression when disturbances are not normal

This paper considers a class of recently developed biased estimators of regression coefficients and studies its sampling properties when the disturbances are not normally distributed. It has been found that the conditions of dominance of these estimators over the least squares estimator, under non-normality, are quite different than their well-known dominance conditions under normality. Some implications of the results are also discussed.     

Optimal wage contracts under asymmetric information and moral hazard when investment decisions are delegated

I derive an optimal wage contract when risky investment decisions are delegated by riskaverse owners/investors to risk-neutral agents. The owners/investors do not know the probability distribution over the returns of any investment made by an agent. They know only the mean and the variance, and the upper and lower bounds of the return realizations of the different positive net present value (NPV) investment opportunities that can be discovered by their agents. They observe only the returns realized at the end of the period. Moral hazard with respect to investments made by agents, who are protected by limited liability, is also possible: an agent can falsely claim to have invested in one type of positive NPV investment opportunity and invest in another, or the agent can falsely claim to have invested in a positive NPV investment and invest in a negative NPV investment. I show that an optimal wage contract is simple under such conditions of severe asymmetric information and moral hazard. (JEL G20, G31)     

Bootstrap validity for the score test when instruments may be weak

It is well-known that size adjustments based on bootstrapping the t$t$-statistic perform poorly when instruments are weakly correlated with the endogenous explanatory variable. In this paper, we provide a theoretical proof that guarantees the validity of the bootstrap for the score statistic. This theory does not follow from standard results, since the score statistic is not a smooth function of sample means and some parameters are not consistently estimable when the instruments are uncorrelated with the explanatory variable.     

Tests with correct size when instruments can be arbitrarily weak

This paper applies classical exponential-family statistical theory to develop a unifying framework for testing structural parameters in the simultaneous equations model under the assumption of normal errors with known reduced-form variance matrix. The results can be divided into the limited-information and full-information categories. In the limited-information model, it is possible to characterize the entire class of similar tests in a model with only one endogenous explanatory variable. In the full-information framework, this paper proposes a family of similar tests for subsets of endogenous variables’ coefficients. For both limited- and full-information models, there exist power upper bounds for unbiased tests. When the model is just-identified, the Anderson–Rubin, score, and (pseudo) conditional likelihood ratio tests are optimal. When the model is over-identified, the (pseudo) conditional likelihood ratio test has power close to the power envelope when identification is strong.     

Optimal investment decisions when time-horizon is uncertain

Many investors do not know with certainty when their portfolio will be liquidated. Should their portfolio selection be influenced by the uncertainty of exit time? In order to answer this question, we consider a suitable extension of the familiar optimal investment problem of Merton [Merton, R.C., 1971. Optimal consumption and portfolio rules in a continuous-time model. Journal of Economic Theory 3, 373–413], where we allow the conditional distribution function of an agent’s time-horizon to be stochastic and correlated to returns on risky securities. In contrast to existing literature, which has focused on an independent time-horizon, we show that the portfolio decision is affected.     

Income taxation when markets are incomplete

We investigate the welfare effects of proportional income taxation in a standard general equilibrium model with incomplete markets (GEI). Formally, our analysis is on the allocative effects of state-contingent income tax reforms. Tax reforms are restricted to be anonymous, publicly and truthfully announced before markets open, and they are required to result in an ex-post constrained efficient allocation. Our main result is to show that there do typically exist contingent tax reforms that are Pareto improving. These reforms, acting directly on the asset span, modify private risk-sharing opportunities. Thus, unlike most of the GEI literature, the type of policy transmission mechanism considered does not rely on second-order, relative spot price effects. Yet, the key welfare effects of our tax reforms are substantially equivalent to those induced through changes in relative spot prices, as, for example, in Geanakoplos and Polemarchakis (1986), Geanakoplos et al. (1990), or in Citanna et al. (2001). Mathematics Subject Classification (2000): 58E17, 46N10, 93B29 Journal of Economic Literature Classification: D52, H21, H24, H25     

Strategy-proof allocation when preferences are single-plateaued

Abstract. We consider private good economies with single-plateaued preferences. A solution selects for each preference profile a non-empty set of allocations. An agent strictly prefers a set of allocations to another set of allocations if and only if he strictly prefers any allocation in the first set to any in the second set according to his single-plateaued preference relation. We characterize the class of sequential-allotment solutions by essentially single-valuedness, Pareto-indifference, and coalitional stragety-proofness. These solutions are the Pareto-indifferent extensions of the solutions studied by Barberà et al. 1997. Received: 9 May 2000 / Accepted: 1 May 2001     

Constrained suboptimality when prices are non-competitive

The paper addresses the following question: how efficient is the market system in allocating resources if trade takes place at prices that are not competitive? Even though there are many partial answers to this question, an answer that stands comparison to the rigor by which the first and second welfare theorems are derived is lacking. We first prove a “Folk Theorem” on the generic suboptimality of equilibria at non-competitive prices. The more interesting problem is whether equilibria are constrained optimal, i.e. efficient relative to all allocations that are consistent with prices at which trade takes place. We discuss an optimality notion due to Bénassy, and argue that this notion admits no general conclusions. We then turn to the notion of p-optimality and give a necessary condition, called the separating property, for constrained optimality: each constrained household should be constrained in each constrained market. If the number of commodities is less than or equal to two, the case usually treated in the textbook, then this necessary condition is also sufficient. In that case equilibria are constrained optimal. When there are three or more commodities, two or more constrained households, and two or more constrained markets, this necessary condition is typically not sufficient and equilibria are generically constrained suboptimal.     

Optimal fiscal zoning when the local government is a discriminating monopolist

Monopoly zoning by local governments has been studied extensively since the original article by White [1975, in: E. Mills and W. Oates, eds., Fiscal zoning and land use controls (Lexington Books, Lexington, MA)]. However, little or no attention has been paid to the possibility of monopolistic discrimination under such a regime. The question is: When will zoning multiple lot sizes be feasible given that buyers with different valuations of land cannot be coerced into purchasing particular lots? The literature on imperfect price discrimination by monopolists is brought to bear on this question. It is shown that the resulting zoning strategy may or may not involve multiple lot sizes. The factors determining the optimal strategy are studied in detail, with particular emphasis on the nature of the market for undeveloped land in the community.     

Intergenerational justice when future worlds are uncertain

Let there be a positive (exogenous) probability that, at each date, the human species will disappear. We postulate an Ethical Observer (EO) who maximizes intertemporal welfare under this uncertainty, with expected-utility preferences. Various social welfare criteria entail alternative von Neumann Morgenstern utility functions for the EO: utilitarian, Rawlsian, and an extension of the latter that corrects for the size of population. Our analysis covers, first, a cake-eating economy (without production), where the utilitarian and Rawlsian recommend the same allocation. Second, a productive economy with education and capital, where it turns out that the recommendations of the two EOs are in general different. But when the utilitarian program diverges, then we prove it is optimal for the extended Rawlsian to ignore the uncertainty concerning the possible disappearance of the human species in the future. We conclude by discussing the implications for intergenerational welfare maximization in the presence of global warming.     

Credit rationing when banks are funding constrained

Credit crunches, such as in the recent financial crisis, generally occur when banks are themselves funding constrained. We use this observation to repair the workhorse Stiglitz–Weiss model of credit rationing. Recent research has invalidated the distributional assumption on which that model is based. This paper shows that by adding the assumption that banks are capacity constrained, Stiglitz–Weiss rationing can occur again. It discusses how this finding can be related to the current policy debates on bank funding and credit provision.     

Model selection when there are multiple breaks

We consider model selection facing uncertainty over the choice of variables and the occurrence and timing of multiple location shifts. General-to-simple selection is extended by adding an impulse indicator for every observation to the set of candidate regressors: see Johansen and Nielsen (2009). We apply that approach to a fat-tailed distribution, and to processes with breaks: Monte Carlo experiments show its capability of detecting up to 20 shifts in 100 observations, while jointly selecting variables. An illustration to US real interest rates compares impulse-indicator saturation with the procedure in Bai and Perron (1998).     

Optimal tax auditing when some individuals need not file

In a situation in which people who are required to fill in a tax-return coexist with tax-return-exempt people, we prove that the optimal audit policy leads to different tax compliance behavior, depending on the difficulty of detecting an evader who does not fill in a tax return, passing himself of as a non-taxpayer.     

股市震荡调整楼市在反弹吗？

自“5·30”以来，持续一个多月的股市调整，让不少此前冲着牛市来股市赚一把的投资者失望之极。股市的小调必然导致资金的外流，最近一周以来沪深两市的交易量持续萎缩就是强有力的证据。     

Academic-industry linkages and small firm innovation: evidence from the scientific instruments sector

This paper explores the role of academic linkages in the product development efforts of small and medium-sized manufacturing firms (SMFs). Data from a sample of 204 SMFs in New York State's scientific instruments sector suggest that university research units can play a helpful role in small firm innovation. Knowledge spillovers from the academic sector are shown to be geographically localized. A key finding is that the intensity of academic-SMF interaction varies inversely with the time-distance that separates firms from major campuses. A related finding is that innovation rates are higher among SMFs that enjoy close proximity to academic resources. The paper concludes with a brief discussion of the role of micro-geographical factors in regional knowledge diffusion.     

Estimating demand systems when outcomes are correlated counts

We describe and employ a Bayesian posterior simulator for fitting a high-dimensional system of ordinal or count outcome equations. The model is then applied to describe the multiple site recreation demands of individual agents, and we argue that our approach provides advantages relative to existing methods commonly applied in this area. In particular, our model flexibly adjusts to match observed frequencies in trip outcomes, permits a flexible correlation pattern among the sites visited by individuals, and the posterior simulator for fitting this model is relatively easy to implement in practice. We also describe how the posterior simulations produced from the model can be used to conduct a variety of counterfactual experiments, including predicting behavioral changes and describing welfare implications resulting from shifts in exogenous demographic and site characteristics. We illustrate our method using data from the Iowa Lakes Project by modeling the visitation patterns of individuals to a set of twenty-nine large Iowa lakes. Consistent with previous findings in the literature, we see strong evidence that own and cross-price effects on trip demand are negative and positive, respectively, that higher income increases the likelihood of visiting most sites, and that a commonly used indicator of water quality, Secchi transparency, is positively correlated with the number of trips taken. In addition, the correlation structure among the errors reveals a complex pattern in which unobserved factors affecting trip demand are generally (though not strictly) positively correlated across sites. The flexibility and richness with which we are able to characterize the demand system provides a solid platform for counterfactual analysis, where we find significant behavioral and welfare effects from changes in site availability, water quality, and travel costs.