Capital–skill complementarity and inequality: A sensitivity analysis

Krusell et al. in [Krusell, P., Ohanian, L., Ríos-Rull, J.V., Violante, G.L., 2000. Capital–skill complementarity and inequality: A macroeconomic analysis. Econometrica 68 (5), 1029–1053] analyzed the capital–skill complementarity hypothesis as an explanation for the behavior of the US skill premium. We refit Krusell et al.'s [Krusell, P., Ohanian, L., Ríos-Rull, J.V., Violante, G.L., 2000. Capital–skill complementarity and inequality: A macroeconomic analysis. Econometrica 68 (5), 1029–1053] model with two alternative capital equipment price series: One proposed by Greenwood et al. [Greenwood, J., Hercowitz, Z., Krusell, P., 1997. Long-run implications of investment-specific technological change. Amer. Econ. Rev. 87 (3), 342–362] and the official, revised National Income and Product Accounts (NIPA) data. We find that capital–skill complementarity is preserved, but other results were sensitive to the data used. Specifically, the fit of the model was similar to Krusell et al.'s [Krusell, P., Ohanian, L., Ríos-Rull, J.V., Violante, G.L., 2000. Capital–skill complementarity and inequality: A macroeconomic analysis. Econometrica 68 (5), 1029–1053] using the NIPA data, but not the Greenwood et al. [Greenwood, J., Hercowitz, Z., Krusell, P., 1997. Long-run implications of investment-specific technological change. Amer. Econ. Rev. 87 (3), 342–362] data. Also, both series produce estimates of the elasticity of substitution between unskilled labor and equipment that are substantially larger than Krusell et al.'s [Krusell, P., Ohanian, L., Ríos-Rull, J.V., Violante, G.L., 2000. Capital–skill complementarity and inequality: A macroeconomic analysis. Econometrica 68 (5), 1029–1053] estimates.     

Investment-specific technological change, skill accumulation, and wage inequality

Wage inequality between education groups in the United States has increased substantially since the early 1980s. The relative number of college-educated workers has also increased dramatically in the postwar period. This paper presents a unified framework where the dynamics of both skill accumulation and wage inequality arise as an equilibrium outcome driven by measured investment-specific technological change. Working through equipment–skill complementarity and endogenous skill accumulation, the model does well in capturing the steady growth in the relative quantity of skilled labor during the postwar period and the substantial rise in wage inequality after the early 1980s. Based on the calibrated model, we examine the quantitative effects of some hypothetical tax-policy reforms on skill accumulation, wage inequality, and welfare.     

Constitutional choice and European immigration policy

The EU’s immigration policy is evaluated from the standpoint of constitutional economics. The main conclusion is that European immigration policy is trapped in a system of constitutional regulations that is too rigid as it is exclusively oriented towards the protection and securitisation of European borders. As such, it is not capable of allowing the development of a problem-solving capacity based on successive trials, and this produces negative outcomes for the whole of the EU.

Capital–labor substitution and balanced growth

This paper explores how different values of the elasticity of substitution between capital and labor (σ) impact on the balanced growth paths and growth potential of a country in exogenous growth models. The behavior of the system depends on the value of σ and the passage of σ through two critical values causes a qualitative change in the nature of the singular points and of its trajectories. The balanced growth path defined by a singular point in the form of a saddle-path exists and is locally stable if σ lies between two critical values.     

Financial frictions and the ratio in UK manufacturing

This note concerns an asymptotic distribution result from the literature on nonlinear estimation with integrated variables. It points out a way of strengthening local asymptotic distribution results towards results that hold for the global minimizer of the criterion function.     

Nonlinearities in Capital–Skill Complementarity

This paper uses a novel dataset to test the capital–skill complementarity hypothesis in a cross-section of countries. It is shown that for the full sample there exists evidence in favor of the hypothesis. When we arbitrarily split the full sample into OECD and non-OECD countries, we find no evidence in favor of the hypothesis for the OECD subsample, but strong evidence for the non-OECD subsample. When we use Hansens [Econometrica 68 (2000) P. 576] endogenous threshold methodology we find that initial literacy rates and initial per capita output are threshold variables that can cluster countries into three distinct regimes that obey different statistical models. In particular, the regime with moderate initial per capita income but low initial education exhibits substantially higher capital–skill complementarity than the regime with low income and low education and the regime with high education. This cross-country nonlinearity in capital–skill complementarity is consistent with the time-series nonlinearity found by Goldin and Katz [Quarterly Journal of Economics 113 (1998) 693] using U.S. manufacturing data, and promotes the view that the phenomenon maybe a transitory one.JEL classification: O40, O47     

Another direct proof of the Gibbard–Satterthwaite Theorem

This paper provides a new and direct proof of the Gibbard–Satterthwaite Theorem based on induction on the number of individuals.     

A NEW MULTIPLICATIVE DECOMPOSITION FOR THE FOSTER–GREER–THORBECKE POVERTY INDICES

This paper shows that Foster–Greer–Thorbecke poverty indices can be written as the product of components summarizing the incidence, intensity and inequality dimensions of poverty and provides an empirical illustration of the decomposition using Spanish household budget surveys data.     

The labor market impact of immigration in Western Germany in the 1990s

In this article we estimate the wage and employment effects of recent immigration in Western Germany. Using administrative data for the period 1987-2001 and a labor-market equilibrium model, we find that the substantial immigration of the 1990s had very little adverse effects on native wages and on their employment levels. Instead, it had a sizeable adverse employment effect on previous immigrants as well as a small adverse effect on their wages. These asymmetric results are partly driven by a higher degree of substitution between old and new immigrants in the labor market and in part by the rigidity of wages in less than flexible labor markets. In a simple counter-factual experiment we show that in a world of perfect wage flexibility and no unemployment insurance the wage-bill loss of old immigrants would be much smaller.     

The appeals process in principal–agent relationships

The appeals process is employed in many organizations including administrative agencies, regulatory authorities, sports organizations, and private companies. This paper examines the dual role of the appeals process in enhancing fairness and inducing performance in principal–agent relationships in the presence of imperfect performance evaluation. Some surprising results emerge. For example, the merit of the appeals process depends on the agent’s aversion to unfairness, and appeals may be optimally denied even if the appeals process is more accurate than the initial evaluation and is costless. An increase in the accuracy of the initial evaluation may reduce the principal’s welfare. Furthermore, the principal’s welfare can increase as the cost of the appeals process increases.     

CSR and financial performance: complementarity between environmental,social and business behaviours

This article analyses the interactions between various dimensions of corporate social responsibility (CSR) that mediate the relationship between CSR and financial performance. We hypothesize that the absence of consensus in the empirical literature on the CSR–financial performance relationship may be explained by the existence of synergies (complementarity) and trade-offs (substitutability) between the different CSR components. We investigate such relationship using a final unbalanced panel sample of 1094 observations (around 300 firms per year) from 15 countries over the 2002–2007 period. Our results show that responsible behaviours towards employees (human resources dimension) and towards customers and suppliers (business behaviour dimension) appear as complementary inputs of financial performance, indicating mutual benefits and less conflict between those stakeholders. Conversely, responsible behaviours towards customers and suppliers and towards the environment appear as substitutable inputs of financial performance, suggesting more conflict between or over-investment towards those stakeholders.     

Aggregation in macroeconomic models: an empirical input–output approach

The aggregation level of industries in the Danish macroeconomic model ADAM is examined using a new indicator of aggregation bias. The indicator is decomposed into contributions from the original industries, thereby clearly identifying the aggregation problems which caused the six industry groups of the older versions of ADAM to be disaggregated into the current 19 groups. An aggregation key minimizing the new bias indicator is found: from the microlevel of 64 industries, 18 ‘optimal’ industry groups are formed through ‘clustering’; these groups are very similar to the current ADAM groups. Altogether, the conclusions based on the new indicator closely resemble those reached through years of practical experience.     

A Hotelling–Downs model of electoral competition with the option to quit

We study a variant of the multi-candidate Hotelling–Downs model that recognizes that politicians, even after declaring candidacy, have the option of withdrawing from the electoral contest before the election date and saving the cost of continuing campaign. We find that this natural variant significantly alters equilibrium predictions. We give conditions for the existence of an equilibrium for an arbitrary finite number of candidates and an arbitrary distribution of single-peaked preferences of voters. We also provide a partial characterization of the equilibrium outcomes that addresses whether policy convergence can be a feature of equilibrium outcomes when more than two candidates enter the electoral contest.     

Assessment of the immigration effect and choice of development pattern for scenic areas： a case study of Wuyi Mountain, China

Mountainous regions face a series of Conflicts betWeen the natural resources conservation and the economic development, especially in protected areas, where are the home to some of the poorest people in＇the world In China, the Protected Areas Authorities （such as Protected Areas Authorities of Wuyi Mountain） transferred the mountainous people out of the protected areas. We found that it is not a good approach of immigration project, as fal economic and ecological effect is concerned. Although remote and majestic, beauty attracted many tourists, mass tourism is not a good approach to soh,e the development problem in mountainous areas because it can not provide enough opportunites to make local people live a comfortable life, and the high volume of tourists indicates that the resources, face significant threats. Because many fandscapes,are run by Private enterprises, local residents and government only get limited benefits. Alihough ecotourism principles expatiate on economic development and resource, onservation, local people income and tourists feelings, it has discordance between the theory and the praciice Therefore. the term of ＂integrated ecotourism ＂ was coined in the paper.based on the ecotourism theory, Integrated ecotourism means a broadly tourism resources and pendulum spatial pattern which will come into being with the movement of local,people and tourists from protected areas io the nearby town or city： and it also tries to solve the property right conflict of mountain land between the local people and the private enterprises according to property right theory.     

The Feldstein–Horioka puzzle across EU members: Evidence from the ARDL bounds approach and panel data

This paper addresses the saving-investment (SI) correlation for the EU15 member countries, using the ARDL approach and panel regressions. If we accept the Feldstein–Horioka [Feldstein, M. and C. Horioka, 1980, Domestic saving and international capital flows, Economic Journal 90, 314–329.] interpretation of the SI correlation, the evidence from the ARDL approach does not point to any particular direction in terms of country size, or level of development, or economic and capital market structure. Panel regressions yield an SI coefficient in the range of 0.148–0.157. This finding is attributed to higher capital mobility, lower transaction costs in the international capital markets, and the declining status of long-run current account targeting as a primary government objective.     

Cournot–Nash equilibria in continuum games with non-ordered preferences

In the usual framework of continuum games with externalities, we substantially generalize Cournot–Nash existence results [Balder, A unifying approach to existence of Nash equilibria, Int. J.Game Theory 24 (1995) 79–94; On the existence of Cournot–Nash equilibria in continuum games, J. Math. Econ. 32 (1999) 207–223; A unifying pair of Cournot–Nash equilibrium existence results, J. Econ. Theory 102 (2002) 437–470] to games with possibly non-ordered preferences, providing a continuum analogue of the seminal existence results by Mas-Colell [An equilibrium existence theorem without complete or transitive preferences, J. Math. Econ. 1 (1974) 237–246], Gale and Mas-Colell [An equilibrium existence theorem for a general model without ordered preferences, J. Math. Econ. 2 (1975) 9–15], Shafer and Sonnenschein [Equilibrium in abstract economies without ordered preferences, J. Math. Econ. 2 (1975) 345–348], Borglin and Keiding [Existence of equilibrium actions and of equilibrium: a note on the “new” existence theorems, J. Math. Econ. 3 (1976) 313–316] and Yannelis and Prabhakar [Existence of maximal elements and equilibria in linear topological spaces, J. Math. Econ. 12 (1983) 233–245].     

Reconciling sustainability and discounting in Cost–Benefit Analysis: A methodological proposal

The incorporation of the intergenerational equity objective has rendered the traditional Cost–Benefit Analysis (CBA) approach obsolete for the evaluation of projects presenting an important number of environmental externalities and for those whose impacts extend throughout a long period of time.Based on the assumption that applying a discount rate rewards current consumption and, therefore, that it is only possible to introduce a certain intergenerational equity in a Cost–Benefit Analysis, in this work we propose an approach to discounting based on a different rationale for tangible and intangible effects. We designed two indicators of environmental profitability: a) the Intergenerational Transfer Amount (ITA), which quantifies in monetary units what the current generation is willing to pass on future generations when an environmental restoration project is carried out, and b) the Critical Environmental Rate (CER), measures the implicit environmental profitability.These concepts were tested through an empirical case study pertaining to the assessment of an Erosion Control Project in the southeast of Spain. The results yield traditional profitability indicators that are higher — and probably closer — to the real values set by the contemporary society. The information provided by the environmental profitability indicators proposed renders more transparency to the quantification of the levels of intergenerational equity applied, thereby facilitating the difficult reconciliation of the CBA technique with the objective of sustainability.     

On weighted Kalai–Samet solutions for non-transferable utility coalitional form games

We investigate the implications of the axiom of coalitional concavity for non-transferable utility coalitional form games. This axiom says that if the feasible set of some coalition is uncertain whereas the feasible sets of other coalitions are known, then all players in the coalition with the uncertain feasible set should (weakly) benefit from reaching a compromise before the uncertainty is resolved. By imposing this axiom, in addition to other minor axioms, we characterize the weighted Kalai–Samet [Econometrica 53 (1985) 307] solutions: these solutions coincide with the weighted egalitarian solutions on the domain of bargaining problems, and with the weighted Shapley values on the domain of transferable utility coalitional form games.     

The Black–Scholes model as a determinant of the implied volatility smile: A simulation study

The paper represents an initial effort to shed light on the determinants of the implied volatility smile in financial (derivative) markets. It fully details the implications of the institutionalization of the Black–Scholes model in an uncertain world populated by individuals who are bounded by the amount of calculation or accounting which is technically possible. Combining model simulations, empirical analysis, and mathematical derivations, the paper proposes that the determinants of the volatility smile might be related to the behavior of traders. In pricing options, they use the widely accepted Black–Scholes formula with a measure of stock volatility that they derive from their subjective beliefs. Moreover, heterogeneity of traders’ beliefs and the way traders update their expectations have nontrivial effects, both on equilibrium prices and on the emergence of the implied volatility smile.