Means‐Tested Long‐Term Care and Family Transfers

One of the pervasive problems with means‐tested public long‐term care programs is their inability to prevent individuals who could afford private long‐term services from taking advantage of public care. They often manage to elude the means‐test net through ‘strategic impoverishment’. We show in a simple model how this problem comes about, how it affects welfare and how it can be mitigated.     

Long‐Term Contracts,Irreversibility, and Uncertainty

Long‐term contracting implies contracting based on expected future demand. In this paper, I develop a multiperiod procurement model where, once the actual level of demand is realized, the irreversible initial provision level may be supplemented by additional provisions. This paper shows that, with the possibility of additional upward adjustments, the first‐period provision level will be lower than when no additional adjustments are possible. This reduction in first‐period provision level is higher under complete contracting than under incomplete contracting, and because of the reduction in information rents it yields a higher expected utility to the principal but lower total welfare.     

Exchange Rates and Long‐Term Bonds*

There is tentative evidence to suggest that the well‐documented empirical failure of uncovered interest parity (UIP) is confined to short‐term interest rates. However, tests of UIP for long‐term bonds are thwarted by various data problems. These data problems can be avoided by focusing on short investments in long‐term bonds. This paper concerns the relationship between changes in the US dollar–Deutsche Mark exchange rate and returns to short investments in US and German long‐term government bonds. The hypothesis that expected returns to investments in bonds denominated in the two currencies are equal is not rejected, and the estimated slope coefficients are positive. For corresponding short‐term interest rates, the typical finding of negative and large Fama coefficients is confirmed. We conclude that it is the maturity of the asset, rather than the investment horizon, that matters for the results.     

Pensions,Ageing and Retirement in Australia: Long‐Term Projections and Policies

Australia's retirement income provision system, comprising the ‘three pillars’ of a means‐tested aged pension, mandatory occupational superannuation and other, voluntary long‐term savings, is at the heart of understanding the fiscal implications of ageing. While the Intergenerational Report, an account of long‐term fiscal sustainability, is celebrating its tenth birthday since the first edition was published, the Superannuation Guarantee, first implemented in 1992, turns a sprightly 20 years old. This article considers the Intergenerational Report as a prism for studying fiscal, demographic and policy developments in the Australian retirement income system over the last decade and into the future.     

Self‐Assessed Social Position and Poverty

In this article, we use microlevel data extracted from the 2006 Japanese General Social Surveys to analyze the relationships between self‐assessed social position and socioeconomic factors such as income and poverty. We provide the posterior results of the estimation of the Bayesian multivariate ordered probit model and propose an inequality measure for self‐assessed social position on the basis of the posterior results. We call the inequality measure “regret” and show that the distributions of regret differ for people above and below the poverty line.     

Managed Futures for Long‐Term Investors: A DEA Ranking Analysis

This study proposes an alternative Data Envelopment Analysis ranking model to evaluate the relative performance efficiency of commodity‐trading advisors. I measure the performance efficiency using the decision‐making process quality/trading skills framework and depart from the traditional risk–return framework. The Data Envelopment Analysis rankings produced some interesting results. First, similarly to the previous studies, I successfully isolated two ‘superstar’ commodity‐trading advisors with the highest Sharpe ratios as the Grade A commodity‐trading advisors. However, as an improvement over the similar studies that used the traditional risk–return framework, I also isolated two commodity‐trading advisors with average and below‐average Sharpe ratios as Grade A commodity‐trading advisors.     

Public Provision of Private Goods,Self‐Selection,and Income Tax Avoidance

Redistributive taxation should benefit those with low earnings capacity rather than those who choose a lower income to obtain tax savings. Several contributions have highlighted how public provision of work complements can discourage people from lowering labor supply to diminish taxable income. We show how tax avoidance, previously neglected, can alter the conclusions regarding public provision. Tax avoidance breaks the link between labor supply and reported income. An agent reducing his reported income to escape taxes might no longer forego a publicly provided labor complement, because he can now lower his income by avoiding more rather than working less.     

Long‐Term Unemployment and the Great Recession: Evidence from UK Stocks and Flows

Long‐term unemployment more than doubled during the United Kingdom's Great Recession. Only a small fraction of this persistent increase can be accounted for by the changing composition of unemployment across personal and work history characteristics. Through extending a well‐known stocks‐flows decomposition of labour market fluctuations, the cyclical behaviour of participation flows can account for over two‐thirds of the high level of long‐term unemployment following the financial crisis, especially the procyclical flow from unemployment to inactivity. The pattern of these flows and their changing composition suggest a general shift in the labour force attachment of the unemployed during the downturn.     

Availability of Long‐term Care Facilities and Middle‐aged People's Labor Supply in Japan

This paper estimates the effect of the availability of long‐term care facilities in the prefecture or medical district where middle‐aged men and women reside on their labor supply. Prefecture‐ and medical district‐ level panel datasets of the capacity of long‐term care facilities are merged with individual level employment data, and each individual's employment status is regressed on the capacities of long‐term care facilities. I find no evidence for a positive impact of the long‐term care availability on labor supply, although the estimates are unstable in sign and not estimated precisely enough to draw any strong conclusions.     

Ability Matters: Effects of Youth Labor‐Market Opportunities on Long‐Term Labor‐Market Outcomes

Utilizing registry data from cognitive ability tests for all Norwegian males born between 1962 and 1973, I study whether labor‐market conditions at the age of graduation have differential effects on earnings and employment for different ability groups. I find that low‐ability males are more vulnerable to local business cycles at the expected time of labor‐market entry. In particular, I demonstrate that low‐ability males suffer larger long‐term earnings losses than the rest of the population.     

A Decade of Intergenerational Reports: Contributing to Long‐Term Fiscal Sustainability

The Intergenerational Reports have helped lengthen the horizon of public policy analysis in Australia, enabling governments to focus on the longer term implications of policy changes, particularly their fiscal implications. Nonetheless, it is important to note that the reports have examined fiscal sustainability from the Commonwealth's perspective, notwithstanding that fiscal sustainability is also an issue for the states and territories. Additionally, the reports have not incorporated contingent fiscal liabilities, notwithstanding their relevance to fiscal sustainability.     

Private Information in Life Insurance,Annuity, and Health Insurance Markets

Economic theory predicts that private information on risks in insurance markets leads to adverse selection. To counterbalance private information, insurers collect and use information on applicants to assess their risk and to calculate premiums in an underwriting process. Using data from the English Longitudinal Study of Ageing (ELSA), this paper documents that differences in the information used in underwriting across life insurance, annuity, and health insurance markets attenuate private information to different extents. The results are in line with – and might help to reconcile – the mixed empirical evidence on adverse selection across these markets.     

Reforms of Environmental Policies in the Presence of Cross‐border Pollution and Public–Private Clean‐up*

We construct a two‐country model where pollution from production is transmitted across borders. Pollution abatement is undertaken by both private producers and the public sector. We characterize Nash optimal levels of the policy instruments in the two countries: emission taxes and funds allocated for public abatement activities. We examine the implications of a number of multilateral policy reforms. One of our findings is that the magnitude of the beneficial effect of a reform depends on the scope of the reform; if it is restricted to a subset of policy instruments, then the efficacy of environmental policy reform can be greatly undermined.     

Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market

We demonstrate the existence of multiple dimensions of private information in the long-term care insurance market. Two types of people purchase insurance: individuals with private information that they are high risk and individuals with private information that they have strong taste for insurance. Ex post, the former are higher risk than insurance companies expect, while the latter are lower risk. In aggregate, those with more insurance are not higher risk. Our results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence. The results also suggest a general test for asymmetric information.     

The Long‐Term Impacts of the 1998 Nagano Winter Olympic Games on Economic and Labor Market Outcomes

This paper aims to assess the long‐term effects of the 1998 Nagano Winter Olympic Games on various economic and labor market outcomes in Nagano Prefecture. One‐shot and large‐size events, such as the Olympic Games, are expected to boost the local economy and create jobs, thus leading to lower unemployment. In addition, the tightening of the local labor market eventually raises wages. Using the synthetic control methodology, we build counterfactual dynamics of various economic and labor market outcomes for Nagano Prefecture, and then compare these outcomes with the actual data for these variables. This allows us to determine how the local economic and labor market outcomes in Nagano Prefecture would have been different had the 1998 Olympic Games not been held there.     

Education,Innovation and Long‐Run Growth

We extend a second‐generation Schumpeterian growth model to incorporate human capital accumulation to clarify the general equilibrium effects of subsidy policies on human capital accumulation and R&D activities in a unified framework. Despite the conventional argument that subsidies always stimulate these growth‐promoting activities, we find that subsidies asymmetrically affect human capital accumulation and R&D activities. Our theoretical results suggest that research using standard models of human capital might find false negative relationships between education subsidies and economic growth.     

Determinants of the Timing of Downsizing Among Large Japanese Firms: Long‐Term Employment Practices and Corporate Governance

This paper analyses the relation between corporate governance and employment adjustment behaviour among Japanese firms. The results are summarized in the following two points. First, in the period before 1997, although main banks were likely to allow firms' employment maintenance until they experienced 2 consecutive years of losses, they tended to press firms to downsize once firms faced financial distress. Second, the reduced function of main banks and the increased influence of foreign owners have changed the timing of downsizing since 1997. Changes in corporate governance have brought about slight but non‐negligible changes in Japanese employment practices.     

Long‐Run PPP under the Presence of Near‐to‐Unit Roots: The Case of the British Pound–US Dollar Rate*

Empirical tests typically provide evidence that the British pound–US dollar exchange rate and the relative wholesale price index contain exact unit roots and exhibit cointegration. However, the cointegrating vector is significantly different from [1, ?1], thus raising doubts on the validity of the purchasing power parity (PPP) hypothesis. Following Elliott (1998 ), we show that if the exchange rate and relative price series contain near‐to‐unit roots in the context of a bivariate system, then any inference on the “cointegrating” vector and consequently on PPP, which is based on standard cointegration estimation methods, will be misleading. We then argue that the existing evidence against the PPP hypothesis in the British pound–US dollar market can be attributed to the finite sample bias of the standard cointegration estimators, arising from an endogenous and “nearly” nonstationary regressor. We also show that when robust procedures are employed the evidence favors the PPP hypothesis.     

Immigration Policy,Self‐selection,and the Quality of Immigrants*

This paper investigates the effects of immigration quotas on the average quality of immigrants by developing a human capital migration model where efficiency in migration depends on skills and emigration rates are higher among skilled workers. Studying the joint determination of the domestic level of wages and immigrants' self‐selection, we find a negative relationship between the wage level and the percentage of educated workers among immigrants, which results in a nonstandard downward‐sloping labor supply. In our framework, a higher quota increases the skill mix of immigrants through its negative effect on wages and raises aggregate national income.