A component model for dynamic correlations

We propose a model of dynamic correlations with a short- and long-run component specification, by extending the idea of component models for volatility. We call this class of models DCC-MIDAS. The key ingredients are the Engle (2002) DCC model, the Engle and Lee (1999) component GARCH model replacing the original DCC dynamics with a component specification and the Engle et al. (2006) GARCH-MIDAS specification that allows us to extract a long-run correlation component via mixed data sampling. We provide a comprehensive econometric analysis of the new class of models, and provide extensive empirical evidence that supports the model’s specification.     

Industrial efficiency and the West German worker

British industrial performance and the attitudes of workers have been unfavourably compared with Germany for more than 100 years. Much has been made of non-militant German workers, implying a deep-rooted psychology which harmonises the interests of workers and employers. This article argues that West German workers are as sceptical of employers' motivations as their British counterparts.     

A flexible inventory model for municipal solid waste recycling

State laws mandate the recycling of municipal solid waste (MSW) across most of the United States. In order to comply, municipalities recycle quotas of materials, generally without regard to fluctuating prices. An inventory system is proposed that allows municipalities to be sensitive to materials prices as they recycle in accordance with state mandates. A dynamic model is developed that uses historical secondary material prices as exogenous inputs to minimize the net present value of MSW recycling system cost. The model provides a cost effective method for municipalities to achieve their MSW recycling targets. The savings is approximately $1.28 per ton of MSW generated as based on total MSW management costs of $13.5 per ton. The model also allows one to investigate the effectiveness of various strategies for increasing the recycling rate, including reducing the transportation cost for recyclables, supporting the market price of selected secondary materials, and landfill bans on selected materials. Our proposed model may also be used to investigate the effect of market price changes on the portfolio of materials held in inventory for recycling.     

A model of child support and the underground economy

We develop and estimate a model of the informal and formal employment decisions of American noncustodial fathers who have never married the mother of their child, as well as the paternity establishment decisions of the mothers. Fathers may evade child support payment through informal child support payments to induce the mother not to cooperate with the child support authorities or through underground work. To estimate the model, we use data drawn from the Fragile Families dataset and a discrete model of no work, part-time work and full-time work in both sectors, as well as paternal child support payment. Simulation results indicate that an increase in the order amount leads to small but statistically significant decreases in formal child support, as well as an increase in underground work.     

The dynamic Laurent flexible form and the demand for money

I derive the dynamic full Laurent model to estimate economic models that assume a dynamic process. The application in this paper is to use the dynamic full Laurent to estimate a system of dynamic asset demand equations. The main results are that the dynamic full Laurent rejects its static version and the estimated elasticities are variable over time. Results from a Monte Carlo analysis, using a dynamic data-generating process, show that the prediction errors from the dynamic full Laurent are much smaller than those from the static version. Thus when the data are generated by a dynamic process, inferences from the static full Laurent model can be severely biased. © 1997 John Wiley & Sons, Ltd.     

A political economy model of road pricing

In this paper, we use a simple majority voting model to study the introduction of urban congestion tolls. The model allows for different types of uncertainty and considers different uses of the toll revenues. The following results are obtained. First, we show that individual uncertainty with respect to modal substitution costs may imply that a majority votes against road pricing ex ante, although a majority would have been in favor after its introduction ex post. Moreover, if a majority is against road pricing ex ante, there will also be no majority for organizing an experiment that would take away the individual uncertainty. Second, political uncertainty with respect to the use of the revenues corroborates the finding that ex ante more voters will be against the introduction of tolls. Third, both types of uncertainty suggest that fewer voters are against road pricing when toll revenues are used to subsidize public transport than when they are redistributed to all voters. Importantly, the results of this paper are consistent with a number of recent empirical observations on efforts to introduce road pricing, including the systematic rejection of road pricing in referenda, the more favorable attitudes towards road pricing after than before its introduction, and tying the toll revenues to support public transport.     

A political economy model of immigration quotas

The paper examines a model in which the number of immigrants allowed into a country is the outcome of a costly political lobbying contest between a firm and a union. The union and the firm bargain over the wage of natives after the number of immigrants that will be permitted is known. I assume that the lobbying contest is an all-pay auction (i.e., the lobbyist with the higher effort wins with certainty). Comparative statics results are derived to show how the reservation wage of immigrants, the price of the firms product, the size of the union and the cost of lobbying affect immigration quotas and the post-immigration wage of natives.Received: 4 June 2003, Accepted: 23 June 2004 JEL Classification: D72, D73, J5, J61I thank the editor, Amihai Glazer, Don Devoretz, Dan Usher, and three anonymous referees for helpful comments. My thanks are especially due to Doug Allen and Gordon Myers who supervised this work as part of my doctoral thesis at Simon Fraser University, Canada. An earlier version of this paper was circulated as RIIM working paper #00-01, Simon Fraser University, Canada and also presented at the 2001 meetings of the Canadian Public Economics Study Group in Montreal, Canada.     

Labor-Management Cooperation and the West German System of Codetermination

The purpose of this article is to assess recent developments in Mitbestimmung within the Federal Republic, to analyse the role which codetermination plays in the German firm and economy, to examine the attitudes of German management and labor toward the system, and to speculate about possible future changes in the laws regarding labor participation.     

A dynamic generalization of the tobin model

The paper studies the stability and the non-neutrality of money issues of the neoclassical monetary growth theory when the liquidity preference function and the price dynamics equation are generalized in the Tobin model. Our generalization introduces Tobin's real purchasing power into the liquidity preference function, thereby allowing real balance flows to exert direct income effects. Such effects allow a number of separate cases in the price dynamics behavior, some of which lead to results that differ from the neoclassical propositions. Thus, these propositions are sensitive to the choice of a particular proxy measure of the transactions motives of the demand for money.     

Costs and goals of the multiproduct firm

A profit-maximizing multiproduct firm's optimum production and pricing decision rules are different if the firm's fixed resources are fully employed than if they are underutilized. If they are fully employed, the opportunity cost of using a fixed input affects the firm's pricing decisions. The way for a multiproduct firm to maximize profit is to lose money on a product if large volume and low price of that product increases sales or reduces cost for other products sufficiently. Decision rules are different for a revenue-maximizing firm than for a profit-maximizing one.     

A dynamic model of training transfer

We expand our understanding of the training transfer process by developing the Dynamic Transfer Model (DTM). We develop and examine linkages between intentions to transfer, the initial attempts to utilize training, and the integration of feedback received from the transfer attempt. We propose that this process repeats itself over time in subsequent transfer attempts to impact work behavior and performance. Implications for transfer criteria, the dynamic interaction between the trainee and context, and the personalization of transfer are discussed. Based on the DTM, we suggest future research directions that can enrich our understanding of transfer as well as derive practical implications for improving training effectiveness.     

A dynamic model of housing production

This paper derives the optimal development strategy for a housing producer with perfect foresight in a steady-state environment where dwellings deteriorate as they age. Under the assumption of zero demolition costs, the optimal strategy is an infinite sequence of identical buildings. Building abandonment is shown to be possible with positive demolition costs. A solution highlighting the model's spatial properties is computed using Cobb-Douglas functions.     

A model of the economy based on an interpolated growth matrix

This paper deals with direct and indirect growth rates of sectors and with the interpolated growth matrix of the economy. Its purpose is to determine the model based on the interpolated growth matrix which enables a new approach in the planning of the growth of the economy. The formulation of such a model is useful for the expression of specific structural problems as well as for the extrapolation of system elements into the future. It is characterized by the use of lower and upper projections of growth and mutual relations of sector growths as a basis for programming future sector changes. In contrast to methods in which the direct growth rates of sectors are given, in this case such trends are determined as endogenous variables. At the same time, we use a large amount of data by means of the indirect growth rates in order to describe more completely the dependences among the sectors.     

A more flexible joint latent model for longitudinal and survival time data

In this article, a more flexible and easily explained joint latent model with time-varying coefficients is used to characterize time-dependent responses and a failure time. The dependence within time-dependent responses and between time-dependent responses and a failure time, and the heterogeneity in both processes are established through partially non-parametric latent variables. Based on longitudinal and survival time data, an estimation procedure is proposed for the parameter functions of the joint latent model. In our estimation, the approximated likelihood is constructed via substituting the basis function expansions for parameter functions. The expectation and maximization (EM) algorithm is then implemented to obtain the maximizer of the approximated likelihood function, and, hence, the estimated parameter functions. The validity of the considered joint latent model enables us to derive the asymptotic properties of the estimated functions. Moreover, the corresponding finite sample properties and the usefulness of our methods are demonstrated through a Monte Carlo simulation and the AIDS Clinical Trials Group (ACTG) 175 data. A possible extension of our joint latent model and some additional topics of interest are also discussed herein.     

Implications of quality standard regulation for multiproduct monopoly pricing

An important concern of regulatory agencies is the quality and variety of products offered for sale. This paper considers the effects of introducing quality standards in a monopolized market where the monopoly sells a range of qualities of a product to consumers with varying taste for quality. The introduction of a minimum acceptable quality can alter the entire price and quality schedule offered by the monopolist. Both a uniform and a more general distribution of consumers are studied to examine these changes and their implications for general welfare.