Calvo vs. Rotemberg in a trend inflation world: An empirical investigation

This paper estimates and compares New-Keynesian DSGE monetary models of the business cycle derived under two different pricing schemes—Calvo (1983) and Rotemberg (1982)—under a positive trend inflation rate. Our empirical findings (i) support trend inflation as an empirically relevant feature of the U.S. great moderation; (ii) provide evidence in favor of the statistical superiority of the Calvo setting; (iii) point to a substantially lower degree of price indexation under Calvo. We show that the superiority of the Calvo model is due to the restrictions imposed by such a pricing scheme on the aggregate demand equation.     

An algebraic index theorem for non-smooth economies

In this paper, we prove an existence theorem for equilibria in production economies with increasing returns, which generalizes the classic results on this topic. In particular, we eliminate both the free-disposal assumptions and any smoothness requirements on the boundary of the production sets. For this purpose, we propose a new definition of the topological degree for non-convex-valued correspondences defined on non-smooth topological manifolds.     

Generic properties of the core and equilibria of pure exchange economies

We show that for an open dense set of markets with a continuum of traders the number of equilibrium allocations [which by the celebrated theorem of ^{Aumann (Econometrica. 1964, 32. 39–50)} coincide with the core allocations for such markets are finite. This presents a limiting case result that complements similar asymptotic theorems for cores of large economies proved by ^{Bewley (Econometrica 1973, 41, 425–454)}, and ^{Dierker (Journal of Mathematical Economics 1975, 2. 155–169)}. If we require that the measure on the space of agents be one with a finite number of atoms of equal weight, our reasoning recovers the classical results obtained by ^{Debreu (Econometrica. 1970. 38, 387–392)} for economies with a finite number of agents.     

A social choice function implementable via backward induction with values in the ultimate uncovered set

We prove the existence of a social choice function implementable via backward induction which always selects within the ultimate uncovered set. Whereas the uncovered set is the set of maximal elements of the covering relation, the ultimate uncovered set is the set obtained by iterative application of this covering operation. Dutta and Sen (1993) showed that any social choice function which is the solution of a generalized binary voting procedure is implementable via backward induction. Our result follows from Dutta and Sen's theorem, in that we construct a binary voting procedure always selecting within the ultimate uncovered set. We use the classical multistage elimination procedure, which always selects an alternative within the uncovered set. When this procedure is also used to select among all of the possible agendas or orderings of alternatives within the procedure, the alternative selected (from the agenda selected) will be within the uncovered set of the uncovered set. Our result follows from repeated application of this construction. Intuitively, the procedure constructed consists of requiring agents to vote on how they should vote and so on. Received: 7 April 1997 / Accepted: 15 October 1998     

Existence of equilibria in economies with externalities and non-convexities in an infinite-dimensional commodity space

We prove an equilibrium existence theorem for economies with externalities, general types of non-convexities in the production sector, and infinitely many commodities. The consumption sets, the preferences of the consumers, and the production possibilities are represented by set-valued mappings to take into account the external effects. The firms set their prices according to general pricing rules which are supposed to have bounded losses and may depend upon the actions of the other economic agents. The commodity space is L_∞(M,M,μ), the space of all μ-essentially bounded M-measurable functions on M.As for our existence result, we consider the framework of Bewley (1972). However, there are four major problems in using this technique. To overcome two of these difficulties, we impose strong lower hemi-continuity assumptions upon the economies. The remaining problems are removed when the finite economies are large enough.Our model encompasses previous works on the existence of general equilibria when there are externalities and non-convexities but the commodity space is finite dimensional and those on general equilibria in non-convex economies with infinitely many commodities when no external effect is taken into account.     

A remark on topological robustness to bounded rationality in semialgebraic models

In this short note, we show that the compact semialgebraic class of Anderlini and Canning (2001) is topologically robust, i.e. the topological properties of the equilibrium set are preserved, deviating parameter values and introducing a small amount of bounded rationality.     

Semiparametric estimation of a bivariate Tobit model

The existing semiparametric estimation literature has mainly focused on univariate Tobit models and no semiparametric estimation has been considered for bivariate Tobit models. In this paper, we consider semiparametric estimation of the bivariate Tobit model proposed by Amemiya (1974), under the independence condition without imposing any parametric restriction on the error distribution. Our estimator is shown to be consistent and asymptotically normal, and simulation results show that our estimator performs well in finite samples. It is also worth noting that while Amemiya’s (1974) instrumental variables estimator (IV) requires the normality assumption, our semiparametric estimator actually outperforms his IV estimator even when normality holds. Our approach can be extended to higher dimensional multivariate Tobit models.     

Uniqueness conditions for strongly point-rationalizable solutions to games with metrizable strategy sets

This paper introduces the iterative solution concept of strong point-rationalizability as a strengthening of standard point-rationalizability by stipulating that any two players have identical beliefs about the strategy choices of their common opponents. By adopting and generalizing the contraction-property approach of Moulin [Moulin, H., 1984. Dominance solvability and cournot stability. Mathematical Social Sciences 7, 83–102] and Bernheim [Bernheim, B.D., 1984. Rationalizable strategic behavior. Econometrica 52, 1007–1028] we derive sufficient conditions for the existence of unique strongly point-rationalizable strategies in strategic games with best response functions. These uniqueness results are derived under fairly general assumptions and are especially useful for complete and bounded, as well as finite strategy sets. For games with monotonic individual best response functions, equivalence between a unique strongly point-rationalizable and a unique point-rationalizable solution in the standard sense is established. Furthermore, the existence of unique fixed points is proven under conditions that generalize for bounded metric spaces an established fixed point theorem by Bonsall [Bonsall, F.F., 1962. Lectures on Some Fixed Point Theorems of Functional Analysis. Tata Institute of Fundamental Research, Bombay] and Smart [Smart, D.R., 1974. Fixed Point Theorems. Cambridge University Press, Cambridge, London]. Possible extensions of our findings to games with multi-valued best response correspondences are discussed.     

Hedonic estimation of housing demand elasticity with a markup over marginal costs

We show that recent developments in hedonic pricing theory allow modeling of the equilibrium pricing function as the marginal cost of an additional housing unit plus a markup that varies inversely with the elasticity of demand. Useful information about demand elasticity at a given point on the envelope function can be recovered from the hedonic regression and limited information on marginal costs. In particular, the elasticity of the envelope with respect to any characteristic such as interior area provides information on the elasticity of demand. Relative price elasticities (i.e., elasticities that vary from a base value in a known way with interior area, unit type or neighborhood characteristics) can be computed from the elasticity of the hedonic envelope. Like Yinger (2010), our method is based on a single hedonic equation.We test our method using sales of new high rise condominiums in two districts within Shenzhen, China: Futian and Longgang. The results strongly confirm the main hypothesis of this paper: price elasticity with respect to size is increasing for more complex types of units. Together with estimates of marginal costs of production, these results imply that relative demand elasticity is declining for larger, more complex units.     

Existence of equilibrium actions and of equilibrium : A note on the ‘new’ existence theorems

A lemma by Ky Fan, which asserts the existence of a maximal element relative to some ordering (an equilibrium action) in a compact choice set, is extended to a larger class of orderings. This extension allows one to generalize slightly several existence theorems and seems to be useful for the applications. Kakutani's fixed-point theorem and the existence of an equilibrium in a generalized game are used to exemplify this. In the last case the method of proof may be of some independent interest involving, as it does, the reduction of an n-person game to a corresponding 1-person game.     

Weakly rational expectations

Aumann and Drèze (2008) characterised the set of interim expected payoffs that players may have in rational belief systems, in which there is common knowledge of rationality and a common prior. We show here that common knowledge of rationality is not needed: when rationality is satisfied in the support of an action-consistent distribution (a concept introduced by Barelli (2009)), one obtains exactly the same set of rational expectations, despite the fact that in such ‘weakly rational belief systems’ there may not be mutual knowledge of rationality, let alone common knowledge of rationality. In the special case of two-player zero-sum games, the only expected payoff is the minmax value, even under these weak assumptions.     

Gender differences in the effect of downward influence strategies on perceived stress and general-health: The mediating role of organizational justice

This study examined the effects of supervisor’s downward influence strategies (DIS) on subordinates’ perceived stress and general-health. The influencing effects of DIS were also analyzed in the light of the mediating effects of organizational justice dimensions, namely, distributive justice (DJ), procedural justice (PJ) and interactional justice (IJ). Responses were collected from three organizations through survey method (Males, N = 91; females, N = 74). Gender differences were observed in the perceptions of DIS which affected perceived stress and general-health conditions of both male and female employees. Further, the results revealed that supervisor’s task-oriented DIS (e.g., negative sanctions) increase perceived stress and negative health conditions in both genders. Supervisor’s people-oriented DIS (e.g., ingratiation) lowered perceived stress and triggered botheration-free existence in the employees. The mediation analysis of justice dimensions indicated that, in the case of males, IJ and PJ positively mediate people-oriented DIS effects on stress and general health. However, in females, supervisor’s ingratiation and positive sanctions helped in ameliorating stress through their positive PJ perceptions. Strong indirect effects of supervisor’s task-oriented strategy (e.g., rationality) were observed on male’s stress and general-health through IJ. On the other hand, supervisor’s rationality and assertiveness reduced female employees’ perceived stress through their PJ and DJ perceptions, respectively.     

Inference with dependent data using cluster covariance estimators

This paper presents an inference approach for dependent data in time series, spatial, and panel data applications. The method involves constructing t and Wald statistics using a cluster covariance matrix estimator (CCE). We use an approximation that takes the number of clusters/groups as fixed and the number of observations per group to be large. The resulting limiting distributions of the t and Wald statistics are standard t and F distributions where the number of groups plays the role of sample size. Using a small number of groups is analogous to ‘fixed-b’ asymptotics of [Kiefer and Vogelsang, 2002] and [Kiefer and Vogelsang, 2005] (KV) for heteroskedasticity and autocorrelation consistent inference. We provide simulation evidence that demonstrates that the procedure substantially outperforms conventional inference procedures.     

Valuing intangible assets with a nested logit market share model

This paper develops an econometric method for valuing intangible assets using nested logit market share assumptions. Specifically, a method is developed to measure the value to a license holder of owning a branded consumer product. While it is well known that brands confer values to their owners, existing methods for establishing a brand's value via comparable, profit, or income methods are often fraught with imprecision or are frequently based on untested assumptions. An economic approach to brand valuation is developed in which the demand for branded goods is estimated and compared to the demand for comparable unbranded goods including both private label and generic commodities. The economic analysis relies on oligopoly pricing models and certain assumptions regarding the opportunity use of the brand holder's fixed investment. This paper extends the multinomial logit structure of preferences assumed in Dubin [1998a. The Demand for Branded and Unbranded Products—An Econometric Method for Valuing Intangible Assets. Studies in Consumer Demand—Econometric Methods Applied to Market Data. Kluwer Academic Publishers, Massachusetts, Boston, pp. 77–127] and derives trademark valuation fractions with a nested logit market share model. The market share demand model in Dubin [1998a. The Demand for Branded and Unbranded Products—An Econometric method for Valuing Intangible Assets. Studies in Consumer Demand—Econometric Methods Applied to Market Data. Kluwer Academic Publishers, Massachusetts, Boston, pp. 77–127] is re-estimated under nested logit assumptions and results for the trademark fraction are compared.     

Monotonicity and continuity of the critical capital stock in the Dechert–Nishimura model

We show that the critical capital stock of the Dechert and Nishimura (1983) model is a decreasing and continuous function of the discount factor. We also show that the critical capital stock merges with a nonzero steady state as the discount factor decreases to a certain boundary value, and that the critical capital stock converges to the minimum sustainable capital stock as the discount factor increases to another boundary value.     

Measure preserving derivatives and the pricing kernel puzzle

Recent empirical studies have found evidence of nonmonotonicity in the pricing kernels for a variety of market indices. This phenomenon is known as the pricing kernel puzzle. The payoff distribution pricing model of Dybvig predicts that the payoff distribution of a direct investment of $1 in a market index may be replicated by investing less than $1 in some derivative written on that market index whenever the associated pricing kernel is nondecreasing. Using the Hardy–Littlewood rearrangement inequality, we obtain an explicit solution for the cheapest replicating derivative, which we refer to as the optimal measure preserving derivative. The optimal measure preserving derivative is the permutation appearing in Ryff’s decomposition of the pricing kernel with respect to the market payoff measure. We compute optimal measure preserving derivatives corresponding to the estimated physical and risk neutral distributions in the paper by Jackwerth (2000) that first brought attention to the pricing kernel puzzle.     

Continuous representation of a preference relation on a connected topological space

Necessary and sufficient conditions are given for the existence of two continuous real valued functions u and v on a connected topological space X endowed with a preference relation ≺ (i.e., an asymmetric binary relation) such that y is preferred to x if and only if v(y)>u(x). It is shown that these conditions - a slight generalization of the usual ones encountered in classical utility theory - entail the existence of such a continuous representation u, v with u and v continuous utility functions for two complete preorders intimately connected with the preference relation ≺.     

Growth, development and natural resources: New evidence using a heterogeneous panel analysis

This paper explores whether natural resource abundance is a curse or a blessing. To do so, we firstly develop a theory consistent econometric model, in which we show that there is a long run relationship between real income, the investment rate, and the real value of oil production. Secondly, we investigate the long-run (level) impacts of natural resource abundance on domestic output as well as the short-run (growth) effects. Thirdly, we explicitly recognize that there is a substantial cross-sectional dependence and cross-country heterogeneity in our sample, which covers 53 oil exporting and importing countries with very different historical and institutional backgrounds, and adopt the non-stationary panel methodologies developed by Pesaran (2006) and Pedroni (2000) for estimation. Our results, using the real value of oil production, rent or reserves as a proxy for resource endowment, reveal that oil abundance has a positive effect on both income levels and economic growth. While we accept that oil rich countries could benefit more from their natural wealth by adopting growth and welfare enhancing policies and institutions, we challenge the common view that oil abundance affects economic growth negatively.     

The effects of IT-enabled supply chain process change on job and process outcomes: A longitudinal investigation

Prior research on information technology (IT)-enabled supply chain management (SCM) has primarily focused on macro-level issues (e.g., IT capabilities related to SCM, and SCM design and optimization) and outcomes (e.g., firm performance). There has been limited research that focuses on micro-level outcomes related to employees who actually execute SCM processes in organizations. These employee-level outcomes are important because successful implementation of SCM systems and processes hinges on SCM employees’ support and commitment. I develop and test a model positing that SCM employees’ perceptions of changes in their work process characteristics, i.e., process complexity and process rigidity, following a new SCM system implementation will influence their job outcomes, i.e., job performance, job satisfaction, job anxiety, and job security, and their perceptions of process outcomes, i.e., process performance and relationship quality. The model incorporates a holistic appraisal of the extent of change—change radicalness—as a mechanism between work process characteristics and outcomes. The model is supported in three studies conducted in the context of three different SCM system implementations (N = 278, 282, and 304, respectively). In particular, I found that individuals perceived a significant change in their work process characteristics following an SCM system implementation, and changes in work process characteristics had a significant impact on job and process outcomes. These findings contribute to the information systems and operations management literatures and their intersections by offering insights on challenges related to IT-enabled SCM innovation implementation in organizations.     

(Non-)Existence of Equilibria in Multicommunity Models

This paper reconsiders equilibrium existence in models with migration and voting over local public goods. We show that under some straightforward assumptions on preferences and income distributions, the basic structure of multicommunity models (i.e., perfect mobility, majority rule, single crossing property) implies that no equilibrium with jurisdictions conducting different policies can exist. Stratification equilibria—with sorting of the population according to income classes—are therefore not as natural as is sometimes suggested. Mechanisms that can serve to support stratification (i.e., tight housing markets, returns to scale in the provision of publicly consumed goods) are discussed.