Endogenous structural change and crisis in a multiple time-scales growth model

The slow and endogenous twist of economic macro-structure makes up an important evolutionary feature of capitalist economies, and may be at the root of structural crisis. In this line, a Goodwinian growth model with increasing returns and profit-sharing that tries to picture a simple scenario of the seventies crisis is considered. It is shown that the exhaustion of the Kaldor-Verdoorn “productivity law” can entail, in a nonlinear framework, a “catastrophic” bifurcation from a “high” to a “low” growth path. Slow/fast dynamical systems then allow one to formalize a multiple time-scales dynamics where the growth path is shaped by the structural framework in which it takes place, but has also a long -un feedback. Structural change and crisis appear as long term and endogenous outcomes.     

Political pressures and the credibility of regulation: can profit sharing mitigate regulatory risk?

When price-cap rules determine the structure of prices for a long period, they suffer a credibility problem and introduce an element of risk especially if a firm’s profits are “too large”. Profit sharing may be seen as a device to pre-determine price adjustments and thus to decrease regulatory risk. We analyse the effects of profit sharing on the incentives to invest, using a real option approach. Absent credibility issues, a well designed profit sharing system may be neutral relative to a pure price cap. With regulatory risk, profit sharing is preferable to a pure price-cap one, if it intervenes for high enough profit levels.

The Study of Ethnicity and Nationalism Needs Better Categories: Clearing up the Confusions that Result from Blurring Analytic and Lay Concepts

Synopsis It has been difficult to make progress in the study of ethnicity and nationalism because of the multiple confusions of analytic and lay terms, and the sheer lack of terminological standardization (often even within the same article). This makes a conceptual cleaning-up unavoidable, and it is especially salutary to attempt it now that more economists are becoming interested in the effects of identity on behavior, so that they may begin with the best conceptual tools possible. My approach to these questions has been informed by anthropological and evolutionary-psychological questions. I will focus primarily on the terms ‘ethnic group’, ‘nation’, and ‘nationalism’, and I will make the following points: (1) so-called ‘ethnic groups’ are collections of people with a common cultural identity, plus an ideology of membership by descent and normative endogamy; (2) the ‘group’ in ‘ethnic group’ is a misleading misnomer—these are not ‘groups’ but categories, so I propose to call them ‘ethnies’; (3) ‘nationalism’ mostly refers to the recent ideology that ethnies—cultural communities with a self-conscious ideology of self-sufficient reproduction—be made politically sovereign; (4) it is very confusing to use ‘nationalism’ also to stand for ‘loyalty to a multi-ethnic state’ because this is the exact opposite; (5) a ‘nation’ truly exists only in a politician’s imagination, so analysts should not pretend that establishing whether something ‘really’ is or is not ‘a nation’ matters; (6) a big analytic cost is paid every time an ‘ethnie’ is called a ‘nation’ because this mobilizes the intuition that nationalism is indispensable to ethnic organization (not true), which thereby confuses the very historical process—namely, the recent historical emergence of nationalism—that must be explained; (7) another analytical cost is paid when scholars pretend that ethnicity is a form of kinship—it is not.     

On the evolutionary edge of migration as an assortative mating device

In a haystack-type representation of a heterogeneous population that is evolving according to a payoff structure of a prisoner’s dilemma game, migration is modeled as a process of ‘swapping’ individuals between heterogeneous groups of constant size after a random allocation fills the haystacks, but prior to mating. Migration is characterized by two parameters: an exogenous participation-in-migration cost (of search, coordination, movement, and arrangement-making) which measures the migration effort, and an exogenous technology—of coordinating and facilitating movement between populated haystacks and the colonization of currently unpopulated haystacks—which measures the migration intensity. Starting from an initially heterogeneous population that consists of both cooperators and defectors, a scenario is postulated under which ‘programmed’ migration can act as a mechanism that brings about a long-run survival of cooperation.

Multiclass Corporate Failure Prediction by Adaboost.M1

Predicting corporate failure is an important management science problem. This is a typical classification question where the objective is to determine which indicators are involved in the failure or success of a corporation. Despite the complexity of the matter, a two-class problem has usually been considered to tackle this classification task. The objective of this paper is twofold. On the one hand, we apply the Adaboost.M1 algorithm to improve the accuracy of a classification tree in a multiclass corporate failure prediction problem using a set of European firms. On the other, we introduce novel discerning measures to rank independent variables in a generic classification task.

Priorities in the location of multiple public facilities

A collective decision problem is described by a set of agents, a profile of single-peaked preferences over the real line and a number of public facilities to be located. We consider public facilities that do not suffer from congestion and are non-excludable. We characterize the class of rules satisfying Pareto-efficiency, object-population monotonicity and sovereignty. Each rule in the class is a priority rule that selects locations according to a predetermined priority ordering among “interest groups”. We characterize the subclasses of priority rules that respectively satisfy anonymity, avoid the no-show paradox, strategy-proofness and population-monotonicity. In particular, we prove that a priority rule is strategy-proof if and only if it partitions the set of agents into a fixed hierarchy. Any such rule can also be viewed as a collection of generalized peak-selection median rules, that are linked across populations, in a way that we describe.     

Strategy-proof Location on a Network

We consider rules that choose a location on a graph (e.g. a road network) based on agents' single-peaked preferences. First, we characterize the class of strategy-proof, onto rules when the graph is a tree. Such a rule is based on a collection of generalized median voter rules (Moulin, 1980) satisfying a consistency condition. Second, we characterize such rules for graphs containing cycles. We show that while such a rule is not necessarily dictatorial, the existence of a cycle grants some agent an amount of decisive power, unlike the case of trees. Rules for this case can be described in terms of a subclass of such rules for trees. Journal of Economic Literature Classification Numbers: C72, D78.     

Dynamic R&D choice and the impact of the firm's financial strength

ABSTRACT

This article investigates how a firm's financial strength affects its dynamic decision to invest in R&D. We estimate a dynamic model of R&D choice using data for German firms in high-tech manufacturing industries. The model incorporates a measure of the firm's financial strength, derived from its credit rating, which is shown to lead to substantial differences in estimates of the costs and expected long-run benefits from R&D investment. Financially strong firms have a higher probability of generating innovations from their R&D investment, and the innovations have a larger impact on productivity and profits. Averaging across all firms, the long-run benefit of investing in R&D equals 6.6% of firm value. It ranges from 11.6% for firms in a strong financial position to 2.3% for firms in a weaker financial position.     

Cost-effectiveness analysis of disease modifiying drugs (interferons and glatiramer acetate) as first line treatments in remitting-relapsing multiple sclerosis patients

Abstract

Objective:

The aim of this study was to assess cost-effectiveness of the different Disease Modifying Drugs (DMD) used as first-line treatments (interferons IM IFNβ-1a, SC IFNβ-1a, SC IFNβ-1b, and glatiramer acetate, GA) in Remitting-Relapsing Multiple Sclerosis (RRMS) in Spain.

Methods:

A Markov model was developed to simulate the progression of a cohort of patients with RRMS, during a period of 10 years. Seven health states, defined by the Expanded Disability Status Scale (EDSS), were considered in the model. Patients with an EDSS score less than 6.0 were assumed to be treated with one of the DMD. In addition, all patients were assumed to receive symptomatic treatment. The monthly transition probabilities of the model were obtained from the literature. The analysis was performed from the societal perspective, in which both direct and indirect (losses in productivity) healthcare costs (€, 2010) were included. A discount rate of 3% was applied to both costs and efficacy results.

Results:

GA was the less costly strategy (€322,510), followed by IM IFNβ-1a (€329,595), SC IFNβ-1b (€ 333,925), and SC IFNβ-1a (€348,208). IM IFNβ-1a has shown the best efficacy results, with 4.176 quality-adjusted life years (QALY), followed by SC IFNβ-1a (4.158 QALY), SC IFNβ-1b (4.157 QALY), and GA (4.117 QALY). Incremental costs per QALY gained with IM IFNβ-1a were €?1,005,194/QALY, €?223,397/QALY, and €117,914/QALY in comparison to SC IFNβ-1a, SC IFNβ-1b, and GA, respectively.

Conclusions:

First-line treatment with GA is the less costly strategy for the treatment of patients with RRMS. Treatment with IM IFNβ-1a is a dominant strategy (lower cost and higher QALY) compared with SC IFNβ-1a and SC IFNβ-1b. However, IM IFNβ-1a is not a cost-effective strategy vs GA, because incremental cost per QALY gained with IM IFNβ-1a exceeds the €30,000 per QALY threshold commonly used in Spain.

Limitations:

The highly-restrictive inclusion criteria of clinical trials limits generalization of the results on efficacy to all patients with multiple sclerosis. Availability of data for head-to-head comparisons is associated with the use of information from clinical trials.     

Giving gifts to groups: How altruism depends on the number of recipients

When a single gift goes to a group of recipients, how does giving depend on the size of the group? This question is important for understanding charitable giving and fund-raising, public goods provision, family altruism, and more. If we think of the gift as giving up a dollar to create a social surplus, then we want to know how the number of recipients of that surplus affects its value to the giver. In other words, how congestible is altruism? This paper builds a theoretical framework for this question and begins to answer it with a controlled experiment. The finding is that for most subjects altruism is congestible. For the average subject, a gift that results in one person receiving x is equivalent to one in which n people receive x / n^0.68 each.     

Imitation processes with small mutations

This note characterizes the impact of adding rare stochastic mutations to an “imitation dynamic,” meaning a process with the properties that absent strategies remain absent, and non-homogeneous states are transient. The resulting system will spend almost all of its time at the absorbing states of the no-mutation process. The work of Freidlin and Wentzell [Random Perturbations of Dynamical Systems, Springer, New York, 1984] and its extensions provide a general algorithm for calculating the limit distribution, but this algorithm can be complicated to apply. This note provides a simpler and more intuitive algorithm. Loosely speaking, in a process with K strategies, it is sufficient to find the invariant distribution of a K×K Markov matrix on the K homogeneous states, where the probability of a transit from “all play i” to “all play j” is the probability of a transition from the state “all agents but 1 play i, 1 plays j” to the state “all play j”.     

Industry specific effects in investment performance and valuation of firms

A necessary criterion for a performance measure in corporate governance is the degree to which it mirrors how well the management succeeds in maximizing firm value. Such a performance measure is marginal q which links changes in firm value to the investments undertaken by the management. Empirical studies of investment and performance based on marginal q have demonstrated the usefulness of this measure. Most research however, has mainly focused on long-term performance. This paper takes a short-term perspective and, based on the marginal q-theory, considers how firms’ market values change in the extreme stock price cycle of a stock market bubble. Using a data set of listed Swedish corporations we find an anomaly in form of a new industry specific effect that, in addition to investment, explains changes in firm value.

From scholarly idea to budgetary institution: the emergence of cost-benefit analysis

Cost-Benefit Analysis (CBA) is typically portrayed as a technique for promoting efficiency in government. We don’t deny that CBA can be used in this manner, but instead focus on a different property of CBA, namely, its evolution from scholarly musings into a framing institution within which budgetary processes operate. The evolution of CBA into institutional status, moreover, shows the value of bringing a polyarchical perspective to bear on fiscal organization, wherein budgetary outcomes emerge through structured interaction among participants. CBA is a product of interaction within a political ecology, as distinct from being the product of some person’s optimizing choice.

Glatiramer acetate and interferon beta-1a for intramuscular administration: a study of outcomes among multiple sclerosis intent-to-treat and persistent-use cohorts

Abstract

Objective:

To study outcomes of multiple sclerosis (MS) patients treated with either glatiramer acetate (Copaxone) or interferon beta-1a for once-weekly, intramuscular administration (Avonex).

Methods:

An ‘intent-to-treat’ (ITT) cohort (n?=?1282) was established, consisting of patients diagnosed with MS who began therapy on either glatiramer acetate (GA) or intramuscular interferon beta-1a (IFN beta-1a-IM) and had continuous insurance coverage from 6 months before to 24 months after the date when they began taking the medication. A ‘persistent use’ (PU) cohort (n?=?639) was also constructed, consisting of individuals who, in addition to the criteria listed above, had a claim for GA or IFN beta-1a-IM within 28 days of the end of the 2-year post-period. Data were obtained from the i3 InVision Data Mart Database from July 2001 to June 2006. Multivariate regressions were used to examine both the 2-year total direct medical costs and the likelihood of relapse associated with the use of each of these alternative MS medications. A relapse was defined as either being hospitalized with a principal diagnosis of MS or having an outpatient visit with a MS diagnosis followed within 7 days by a claim for a corticosteroid. All regressions controlled a wide range of factors that may potentially affect outcomes.

Results:

In the ITT cohort, patients who started therapy on GA had a significantly lower 2-year risk of relapse (10.01 vs. 5.18%; p?=?0.0034) as well as significantly lower 2-year total medical costs ($44,201 vs. $41,121; p?=?0.0294). In the PU cohort, patients who used GA also had a significantly lower 2-year risk of relapse (7.25 vs. 2.16%; p?=?0.0048) as well as significantly lower total medical costs ($67,744 vs. 63,714; p?=?0.0445).

Limitations:

The analyses relies on an administrative claims database of an insured population and hence, may not be generalizeable to other populations. In addition, such a database precludes measurement of lost work time, unemployment, caregiver burden or other costs associated with MS.

Conclusions:

Results from this study indicate that the use of GA is associated with significantly lower probability of relapse as well as significantly lower 2-year total direct medical costs than IFN beta-1a-IM.     

Ill-behaviour of transformation-frontiers with environmental quality versus pollution

If one looks at environmental quality N as a renewable natural resource (with its own natural dynamics) which is changed by emissions Z, then one gets a better understanding of the shape of the damage function. In the case of a logistic growth dynamics one obtains a well-shaped transformation frontier N(Z), even in a two-species natural dynamics. For a more general natural interaction in the framework of a prey-predator model one obtains the possibilities of a cusp catastrophe which makes the transformation frontier N(Z) ill-shaped for the standard arguments of economists and their most favoured environmental policy instruments.     

The International Politics of Reactive Currency Statecraft: Japan’s Reaction to the Rise of the Chinese Renminbi

This study analyses how a state’s reactive currency statecraft – its strategic reaction to an international currency issued by a foreign state – is shaped, by devoting special attention to its broad foreign policy stance towards the state issuing that international currency, with a main empirical focus on the Japanese case with regard to the Chinese renminbi. This research argues that a state uses its policy related to a foreign international currency as a diplomatic means of managing its political relationship with the state issuing that currency, while also showing that in general most market actors are not greatly interested in their governments’ policies regarding foreign international currencies, especially those that are newly internationalising ones. This study finds as well that the conventional notion of ‘competition’ between international currencies does not necessarily affect a state’s reactive currency statecraft, even if its own currency is a major international one. All of this suggests that the inter-state politics between the state issuing an international currency and foreign states does have a crucial impact on the currency’s international use, especially during its early stages of internationalisation. It also implies that a state’s reactive currency statecraft can be fluid, depending upon the directions of its foreign policy.     

Test for the real option in consumer behavior

Consumers become indecisive when facing too many choices. Economic analysis suggests that when a decision involves uncertain outcome, can be delayed and is irreversible, there will be a real option in the cost–benefit analysis. For example, the option to keep alive a consumer's purchasing decision has a significant value. It allows the consumer to take advantage of any future advantageous deals while avoiding the bad choices. This renders the consumer more hesitant. When a consumer decides to exercise his buying decision, he demands a compensation for the loss of this option. Hence, the benefits of a purchase must be over and above its costs by a wide margin (the option value). Data from a survey at a Turkish university on hypothetical purchase decisions confirmed the existence of this real option. We conclude with marketing policy recommendations and future research directions. Connection to the Prospect Theory is briefly explored.Note: Although the 3rd person singular pronoun he/his was used throughout to describe the consumer, he was intended to be gender-neutral.     

Von Neumann-Morgenstern stable sets in matching problems

The following properties of the core of a one-to-one matching problem are well-known: (i) the core is non-empty; (ii) the core is a distributive lattice; and (iii) the set of unmatched agents is the same for any two matchings belonging to the core. The literature on two-sided matching focuses almost exclusively on the core and studies extensively its properties. Our main result is the following characterization of (Von Neumann-Morgenstern) stable sets in one-to-one matching problems. We show that a set V of matchings is a stable set of a one-to-one matching problem only if V is a maximal set satisfying the following properties: (a) the core is a subset of V; (b) V is a distributive lattice; and (c) the set of unmatched agents is the same for all matchings belonging to V. Furthermore, a set is a stable set if it is the unique maximal set satisfying properties (a), (b), and (c).     

Stochastic stability in a double auction

In a k-double auction, a buyer and a seller must simultaneously announce a bid and an ask price respectively. Exchange of the indivisible good takes place if and only if the bid is at least as high as the ask, the trading price being the bid price with probability k and the ask price with probability (1−k). We show that the stable equilibria of a complete information k-double approximate an asymmetric Nash bargaining solution with the seller's bargaining power decreasing in k.Note that ceteris paribus, the payoffs of the seller of the one-shot game increase in k. Nevertheless, as the stochastically stable equilibrium price decreases in k, choosing the seller's favorite price with a relatively higher probability in individual encounters makes him worse off in the long run.