Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?

This paper asks whether the income gap between rich and poor nations can be explained by multiple equilibria. We explore the quantitative implications of a simple two-sector general equilibrium model that gives rise to multiplicity, and calibrate the model for 127 countries. Under the assumptions of the model, around a quarter of the world’s economies are found to be in a low output equilibrium. We also find that, since the output gains associated with an equilibrium switch are sizeable, the model can explain between 15 and 25% of the variation in the logarithm of GDP per worker across countries.     

Identification and Measurement of Australian Consumer Sentiment

This article was prepared by Dr L. V. Defris and J. S. McDonnell of the Institute research staff. The authors wish to thank Professor R. F. Henderson and Dr P. J. Sheehan for their helpful comments.     

Changing rewards in contests: Has the three-point rule brought more offense to soccer?

In the mid-nineties FIFA decided to increase from two to three the number of points assigned to the winning team of a soccer match played under traditional round-robin national leagues. Since a game of soccer can be regarded as a contest, FIFA's measure provides an interesting case-study for analysing how a change in the system of rewards (from a zero to a non-zero sum rule) may affect the contestants' equilibrium behaviour. In this paper we try to assess, both theoretically and empirically, whether FIFA's new point rule has changed soccer towards a more offensive game, in which teams adopt more risky strategies. In particular, we evaluate the “na?ve hypothesis” according to which the measure would induce every team to play always more offensively, and we explore the extent to which the change in teams' behaviour may be affected by quality differentials between teams. Our most important hypothesis is that when the asymmetry between opposing teams is large enough, an increase in the reward for victory induces the weaker team to play more defensively, rather than the opposite. By looking at a subset of matches held in the Portuguese first division league, which approximate the conditions of our model, we find support for this hypothesis. First version received: July 1999/Final version received: May 2001     

Estimation of household preferences for long distance telecommunications carrier

The competitive environment in long-distance telecommunications markets changed considerably with the divestiture of AT&T in 1982. A variety of providers appeared, offering myriad services. In this environment, customer selection of preferred long-distance carrier became more complicated and more important.In this paper, we analyze and quantify the determinants of this choice. To our knowledge, this focus is distinct. By contrast, the literature to date has analyzed the behavioral determinants of calling volume (local and long-distance) and the selection of local service options.In our analysis, we allow the alternative carriers to differ in terms of tariffs, reputation, quality, access, and specialized customer services. We quantify the interactive effects of these carrier attributes and customer demographics upon the selection of carrier. Price and income elasticities are estimated. A distinguishing feature of our analysis is that it examines behavioral differences among households in equal-access and unequal-access areas. We find that households assured of the convenience of 1 + dialling for their chosen carrier in equal-access areas display more rational and sophisticated decision making. On the other hand, households in unequal-access areas display greater status quo effects in their decision making.     

Trucking deregulation and highway safety: The effect of the 1980 Motor Carrier Act

The relationship between deregulation in the trucking industry and highway safety is an important economic and social issue. Analyses thus far have concentrated on the relationship between the downward pressure imposed on freight rates by deregulation and total safety investment by firms. Two issues which have been ignored are the effects that deregulation had on route carriage restrictions and total firm mileage. We show that the inclusion of these factors yields a model in which the relationship between motor carrier deregulation and highway safety is dependent upon the relative effects of all three factors. Estimation of the model using accident data implies that trucking deregulation did not deteriorate highway safety and may have actually improved it.     

On the concept of optimum population

The economic welfare of a community is affected by policies that determine both the rate of capital accumulation and the rate of growth of population. The optimum size of population at any point is time will depend on the size of the existing capital stock and the optimum rate of savings will depend on the existing number of people. Consequently, in this sense, a population policy cannot be developed without a concurrent savings policy. The criterion of optimality that will be used is the ma ximization of the total discounted welfare of all generations from now to infinity. The problem will be to select that rate of savings and that size of population at every moment which will achieve this maximum welfare if, in fact, a maximum exists. An inquiry is made into the existence of an optimum policy under various circumstances. An attempt is made to evaluate the consequences of various ethical beliefs.     

An application of the extended cross impact method to generating scenarios of social change in Japan

Scenarios of Japanese society in 2000 are obtained by applying an extended correlational cross impact analysis. Since the scope of the scenarios is extensive, a procedure is developed to generate the scenarios that consists of a preprocessing of the events of interest and a step-by-step application of a cross impact method. Three scenarios are described, based on a workshop where the procedure was applied.     

Rational expectations in microeconomic models: An overview

This paper is an expository introduction to several topics of current research in the general equilibrium theory of rational expectations. More specifically, we discuss the existence of exact and approximate rational expectations equilibria, the implementation of equilibria, the behavior of learning and smoothing processes by which traders construct expectations from repeated observations of the market, and the lagged use of the information revealed by prices in an intertemporal sequence of markets. The purpose of this discussion is to introduce papers on these topics appearing in the Journal of Economic Theory Symposium on Rational Expectations in Microeconomic Models.