REAL EXCHANGE RATE CYCLES AROUND ELECTIONS

We develop the implications of devaluation cycles for real exchange rates in a two-sector small open economy with a cash-in-advance constraint. Policy-makers are office-motivated politicians. Voters have incomplete information on the competence and the opportunism of incumbents. Devaluation acts like a tax, and is politically costly because it can signal the government is incompetent. This provides incumbents an incentive to postpone devaluations, and can lead to an overvalued exchange rate before elections. We compare the implied cycle of appreciated/depreciated exchange rates with empirical evidence around elections from Latin America.     

Weekend Effect, 'Reverse' Weekend Effect, and Investor Trading Activities

Abstract:   In this study, we document evidence of a 'reverse' weekend effect – whereby Monday returns are significantly positive and they are higher than the returns on other days of the week – over an extended period of eleven years (from 1988 to 1998). We also find that the 'traditional' weekend effect and the 'reverse' effect are related to firm size in that the 'traditional' weekend effect tends to be associated with small firms while the 'reverse' weekend effect tends to be associated with large firms. In addition, we find that during the period in which the 'reverse' weekend effect is observed, Monday returns for large firms tend to follow previous Friday returns when previous Friday returns are positive , but they do not follow the previous Friday returns when Friday returns are negative . Furthermore, we find that during the period in which the 'reverse' weekend effect is observed, Monday returns are positively related to the volume of medium‐size and block transactions, but negatively related to the volume of odd‐lot transactions.     

Valuing the social cost of corruption using subjective well being data and the technique of vignettes

Corruption can have an effect on people's happiness and satisfaction, and therefore, can generate a social cost. However, the perceptions of corruption and satisfaction can also vary across subjects, due to socioeconomic and cultural characteristics. This article studies the differences in the perceptions of corruption and satisfaction across subjects, utilizing the technique of vignettes for the correction of the bias that follows from the differences in the response scale across individuals. The evidence comes from a sample of citizens in Spain, who are asked about their perceptions of corruption and personal satisfaction. The results show that there exists a response scale bias, both for corruption and satisfaction. These results are utilized to approximate the social cost of corruption.     

On fair allocations and monetary compensations

Summary In this paper we study fair division problems with the special feature that there exists only one transferable good that everyone likes. This good will be used to compensate some individuals for their differences in other non-transferable resources (like talents or handicaps). In this context we test the traditional no-envy solution and we verify that: 1) its ethical content can be a matter of discussion, and 2) frequently it does not select a non-empty set of allocations. We propose an extension of this criterion that partially solves the existence problem while also retaining the main ethical properties of the preceding solution.Comments and criticisms on earlier drafts by Ahmet Alkan, Marc Fleurbaey, Louis Gevers, Leonid Hurwicz, Mathew Jackson and an anonymous referee are gratefully acknowledged. Financial support has been provided by Spanish DGICYT, PT 90-0654 and Protocolo Aquitania-Navarra-Pais Vasco.     

A Pasinettian Amend to Growth and Distribution in an Open Economy

We show that Pasinetti's insight into the relationship between the equilibrium rate of profits, the capitalists' saving ratio and the natural growth rate can be extended beyond the original formulations for a closed economy. This result does not depend on a particular hypothesis about the ownership of foreign assets and thus is of great generality.     

Information brokers and the use of budgetary and financial information by politicians: the case of Portugal

This paper analyses the intermediary role of the technical bodies that support the use of budgetary and financial information by central government politicians in Portugal. The main findings show that information brokers are playing a central role in preparing this information in a credible, simple and understandable way. However, even if not intentionally, the information they present can be biased. Politicians need to be aware that the information brokers they rely on may not be giving them ‘neutral’ information.     

Consumer Information and Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?

Using a large dataset of automobile transaction prices, we find that offline African-American and Hispanic consumers pay approximately 2% more than do other offline consumers; however, we can explain 65% of this price premium with differences in observable traits such as income, education, and search costs. Our estimates of unexplained race premia are smaller than previous estimates in the literature. Online, we find that minority buyers pay nearly the same prices as do whites controlling for consumers' income, education, and neighborhood characteristics. These results are consistent with the Internet facilitating information search and removing cues to a consumer's willingness to pay. Our results imply that the Internet is particularly beneficial to those whose characteristics disadvantage them in negotiating.