Giving Stated Preference Respondents “Time to Think”: Results From Four Countries

Previous studies have found that contingent valuation (CV) respondents who are given overnight to reflect on a CV scenario have 30–40% lower average willingness-to-pay (WTP) than respondents who are interviewed in a single session. This “time to think” (TTT) effect could explain much of the gap between real and hypothetical WTP observed in experimental studies. Yet giving time to think is still rare in binary or multinomial discrete choice studies. We review the literature on increasing survey respondents’ opportunities to reflect on their answers and synthesize results from parallel TTT studies on private vaccine demand in four countries. Across all four countries, we find robust and consistent evidence from both raw data and multivariate models for a TTT effect: giving respondents overnight to think reduced the probability that a respondent said he or she would buy the hypothetical vaccines. Average WTP fell approximately 40%. Respondents with time to think were also more certain of their answers, and a majority said they used the opportunity to consult with their spouse or family. We conclude with a discussion of why researchers might be hesitant to adopt the TTT methodology.     

Was the emergence of the international gold standard expected? Evidence from Indian Government securities

The emergence of the gold standard has for a long time been viewed as inevitable. We analyze agents' expectations using the spread between gold and silver bonds issued by the Indian government. We find that bimetallism was credible until France surprised markets by suspending domestic operation of bimetallism, triggering a run away from silver. Thereafter, markets began demanding a premium to hold silver bonds, indicating their belief that silver would depreciate in the future as more countries moved on gold.     

Forecasting the Yen/U.S. Dollar exchange rate: Empirical evidence from a capital enhanced relative PPP-based model

This study uses a relative purchasing power parity (PPP) model based on price indexes (consumer, CPI or traded-goods price indexes, TPI), interest rate differentials, and a linear forecasting technique to determine the horizon over which such a model outperforms a random walk in forecasting the Yen/U.S. Dollar exchange rates out-of-sample. The results improve if one adjusts a simple CPI-based PPP-model by interest rate differentials, while the best results are obtained using a TPI-based PPP-model. For example, the TPI-based model, adjusted by interest rate differentials, is able to statistically significantly outperform the pure random walk starting at forecast horizons of 1 month.     

Central Bank Actions and Words: The Intraday Effects of FOMC Policy Communications on Individual Equity Volatility and Returns

We compare intraday impacts of the release of Federal Reserve decision announcements and of Federal Open Market Committee minutes between 2004 and 2015 on 1,997 equity return and volatility series. We find that returns are unresponsive to either news release, but conditional volatility increases for both, manifesting immediately after each information release, and persisting for 30 minutes post‐announcement. These effects are larger for decisions than for minutes. On stratifying firms by trading intensity, we find most “high trading intensity” firms respond to these announcements, while “low trading intensity” firms are less affected. Our results show that traders respond, albeit differently, to both sets of information releases.     

Physical and Economic Consequences of Sea-Level Rise: A Coupled GIS and CGE Analysis Under Uncertainties

This paper develops a modelling framework that links GEMINI-E3, a multi-regional, multi-sectoral computable general equilibrium model with a cost-benefit analysis approach at local level using geographical information system tools to assess the physical and economic consequences of sea-level rise (SLR) in the twenty first century. A set of future scenarios is developed spanning the uncertainties related to global warming, the parameters of semi-empirical SLR estimates, and coastal developments (cropland, urban areas and population). The importance of incorporating uncertainties regarding coastal development is highlighted. The simulation results suggest that the potential development of future coastal areas is a greater source of uncertainty than the parameters of SLR itself in terms of the economic consequences of SLR. At global level, the economic impact of SLR could be significant when loss of productive land along with loss of capital and forced displacement of populations are considered. Furthermore, highly urbanised and densely populated coastal areas of South East Asia, Australia and New Zealand are likely to suffer significantly if no protective measures are taken. Hence, it is suggested that coastal areas needs to be protected to ameliorate the overall welfare cost across various regions.     

FAIR RETIREMENT UNDER RISKY LIFETIME*

A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime and compare the laissez‐faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare, allowing for a compensation for unequal life expectancies, and (2) the maximin on realized lifetime welfare, allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles as well as raising the retirement age. This result is robust to the introduction of unequal life expectancies and unequal productivities.     

An Ex Post Assessment of Investor Response to Catastrophes

A large body of research has examined abnormal stock returns for insurance companies in the wake of major catastrophes. Most of these studies have investigated the ex ante factors that investors may consider when generating expectations of future profits, represented by postcatastrophe stock returns. We instead ask whether these expectations were ultimately correct by investigating the relationship between returns and the disaster’s effect on future earnings. We find that returns immediately following a disaster are not associated with future earnings. Approximately six days following a catastrophe, however, returns begin to show a significant positive relationship with future earnings. This relationship becomes stronger in subsequent days. We conclude that investors are unable to correctly predict a disaster’s net impact on profits immediately after a disaster because existing public information is insufficient or misunderstood. Only once insurers begin disclosing their estimated losses can investors make accurate predictions about a disaster’s effect on earnings. Our study shows that the investor expectations inferred in much of the existing literature are not predictive of future profits. Our findings are consistent with semistrong-form market efficiency in the wake of a major disaster.     

Financial Participation: Does the Risk Transfer Story Hold in France?

Several articles report a positive effect of financial participation (profit sharing (PS) and employee share ownership) on firms' economic performance. This increase can be obtained in two main ways: by increasing the effort (extrinsic, intrinsic or commitment) of workers, directly or indirectly through worker selection; or by transferring more risk to the workers. The question is, of course, not neutral. Indeed, if the risk transfer story is true then it means that the increase of economic performance is obtained at the expense of workers, who take on the burden of more risks. The question is especially important in France where financial participation is associated with tax exemption for firms and where it is forbidden by law to substitute base wage and PS. The purpose of our article is to use an employer–employee dataset to answer the question of whether financial participation schemes are mainly designed as a risk transfer (from firms to workers) device.