Inheritance and inequality when wealth enters the utility function

The distribution of wealth and its dynamic development are analyzed within a non-overlapping generations model. All individuals have identical preferences and abilities. Wealth is represented by land, which is available in fixed aggregate supply. Utility depends on a perishable consumption good and—due to a bequest and/or a prestige motive—in addition on land owned. Two configurations can occur as long run equilbrium: equality and two class dichotomy. All Two Class Equilibria are unstable. The Equality Equilibrium is unstable if and only if land is sufficiently productive. In the case of instability there is a process towards maximal concentration of wealth.For helpful discussions I am indebted to G. Clemenz, S. Krasa, and M. Winkler.     

A method for constructing an intertemporal utility function from a Friedmanian consumption function

It is shown that the intertemporal utility function can be reconstructed from data on demands if they are restricted to be linear in wealth, or Friedmanian.     

Fiscal policy,wealth divergence,and lifetime utility

Using a two-country dynamic optimization model where the less patient country decumulates and the more patient one accumulates wealth, we analyze spillover effects of lump-sum and consumption taxes. A lump-sum tax on a country definitely harms the other country through a change in the rate of interest. A lump-sum tax on either country always improves the less patient country's asset position. A consumption tax has no spillover effect, although it is Pareto-inferior. Applying these results into a closed-country context with heterogeneous agents, we also discuss policy implications of a discriminatory tax.     

V-Branch: A generalized utility function

Much of the work in demand theory is restricted by the functional form of the relationship The S-Branch utility function, which is a generalization of the linear expenditure system, corrects many of the restrictions. Many faults, however, still exist. The Allen partial elasticities of substitution are equal and constant for all commodities from different subsets of the function. The V-Branch utility function corrects many of these faults. The Allen partial elasticities of substitution are not restricted to be constant or equal either within or between commodity subsets. They vary according to the amount consumed of each commodity.     

Co-monotonicity: Toward a utility function capturing envy

Envy affects economic decisions, and can lead to monotonicity violation. We introduce co-monotonicity—a generalization of monotonicity, expected to hold even in the presence of envy. Experimental results and implications for the form of possible utility functions are discussed.     

Aggregation and the existence of a social utility function

In a well-known paper Gorman (Econometrica21 (1953)) established that the necessary and sufficient condition for the existence of an aggregate, or social, utility function, independent of the distribution of income, is that all individuals' income consumption paths be parallel straight lines. Recently Chipman (J. Econ. Theory8 (1974)), building on the paper of Hurwicz and Uzawa (in “Preference Utility and Demand”) has shown that if the distribution of income is proportional and individual preferences are homothetic, aggregate consumption behavior obeys the necessary integrability conditions. It is shown here that the consistency of aggregate behavior can be derived from more general conditions than the ones used by Chipman and Gorman. Examples of demand systems from which aggregate behavior implies a social utility function are provided. It is then shown that if individual demand functions are linear in income—a form employed by both Gorman and Chipman—it is not necessary that the distribution of income be fixed.     

试论财富管理系统的结构及其职能

经济学意义的财富,是人类在一定生产关系下为满足自身需要而创造的物品或劳务的统称.对应由国家通过税收方式占有与支配用于社会公共消费的财富、由政府部门或微观经济组织占有和支配用于社会再生产的财富、由家庭占有和支配用于生活消费或投资的财富、由金融机构占有和支配用于社会资金融通的财富四大组成部分,财富管理系统内舍财政、财务、家政、金融四大子系统.规划决策、调控执行与评价反馈是财富管理系统的基本职能.会计系统是社会财富管理系统的信息系统.审计系统则是社会财富管理系统的稳定器.     

A nested CES-type utility function and its demand and price-index functions

The nested CES-type utility function is introduced in this paper: it consists of an N-level utility tree of slightly modified CES-type functions. Attractive price- and quantity-indices are developed and an elegant system of demand functions, specified in terms of price-indices, results. In addition, some suggestions are made with respect to the estimation of this system.     

Accounting for India's forest wealth

In this paper, we account for forest wealth in India. Changes in the timber and carbon wealth embodied in these forests are related to important green national accounting aggregates such as genuine saving and the change in wealth per capita. Important accounting issues include the timing of carbon releases that occur when forests are disturbed, as well as the valuation of these releases. Our empirical findings suggest that while India's forest wealth is substantial, net changes in this wealth are arguably not so large at least in relation to GNP. However, when viewed in the context of the wealth-diluting effects of population growth this implies a far larger additional savings effort is required to cover the (net) loss in forest values than otherwise appears to be the case. Finally, we examine ways in which the accounting approach that we adopt can be reconciled with approaches which stress conserving forest wealth.     

Existence of a continuous utility function with path monotonicity: the Wold approach

Summary This paper uses the approach of Wold to prove the existence of a continuous utility function on a subset ofR ⁿ with a path monotonicity assumption. This result is then extended to a Banach space.The research for this paper was begun while visiting the University of Cambridge and the London School of Economics in 1988. I should like to thank Dr. A. Beardon, Professor M. Desai, Professor L. Foldes and Dr. A. Horsley for their hospitality. Also, I am grateful to an anonymous referee for comments that led to an improvement in the exposition.     

A simple portfolio allocation model of financial wealth

This paper introduces a simple but highly flexible portfolio allocation model which provides a convenient framework for testing and imposing considerable structure on the data. The model is estimated with Australian data for four financial assets, fixed deposits, savings bank deposits, building society deposits and holdings of a class of government bonds. In contrast to previous findings, interest rate coefficients are estimated precisely and indicate quite a high degree of substitutability.     

A theorem on the identifiability of the von Neumann-Morgenstern utility function from asset demands

If the demand for risky assets is determined by the maximization of an analytical von Neumann-Morgenstern utility function, and if these demands are known as a function of the assets' prices, then this utility function can be constructed without ambiguity.     

A role for preferred stock in the financing decision of a public utility

Summary We have shown that preferred stock has a unique role in the financing of public utility capital expenditures, particulary when returns allowed by regulatory commissions are perceived to be inadequate. From the firm's perspective there is no tax advantage for debt because the commission effectively passes the tax savings through the consumers. If allowed returns on common stock are inadequate and the firm has exhausted its perceived debt capacity, then preferred stock becomes the optimal financing instrument. The regulatory commissions compute the costs of debt and preferred stock so that companies can expect returns to cover payments on debt and preferred stock if the assets being financed are necessary and will be included in the rate base. During extremely bad years when revenues are much less than expected, the companies can delay or miss preferred stock dividends without running the risk of default. The data on new capital sources for the electric and gas utilities indicate that these companies made adjustments which are consistent with the implications of our model, but they did not follow the extreme policy of using only debt and preferred stock when market-to-book ratios for common stock were below one. Regulators have, on occasions, used capital structures for rate-making that differ from actual capital structures, and a utility might be penalized for using an extreme capital structure policy. The main emphasis of regulatory review of capital structure, however, has been on the debt component. One strategy would be to use a debt level that satisfies the regulatory commission and then adjust equity between preferred stock and common stock to maximize value for common stockholders.     

An upper bound for wealth distribution in a model of accidental bequests

An explicit upper bound is calculated for wealth distribution in a model of overlapping generations with uncertain lifetimes and an imperfect annuities market     

A remark on a utility representation theorem of Rader

Summary In this note we consider some problems involved in proving the existence of a continuous real-valued utility function representing a preference relation. We claim that there is an error in the classical Rader proof of the existence of an upper semicontinuous utility function. We also pose some open questions regarding some problems in utility theory.The work for this paper was begun while I was visiting the Department of Applied Economics at the University of Cambridge in 1992. I thank the Department for its hospitality. I should also like to thank A. F. Beardon for some extremely valuable discussions about the general nature of utility functions.