Welfare comparisons with bounded equivalence scales

The paper considers the problem of comparing income distributions for heterogeneous populations. The first contribution of this paper is a precise dominance criterion combined with a simple algorithm for implementing the criterion. This criterion is shown to be equivalent to unanimity among utilitarian social planners whose objectives are compatible with given intervals of equivalence scales. The second contribution of the paper is to show that this criterion is equivalent to dominance for two different families of social welfare functions, one inspired by Atkinson and Bourguignon (in: G.R. Feiwel (Ed.), Arrow and Foundation of the Theory of Economic Policy, Macmillan, London, 1987), in which household utility is a general function of income and needs, and a second family inspired by Ebert (Soc. Choice Welfare 16 (1999) 233), in which household utility is a function of equivalent incomes. Finally, we extend our results to the case where the distributions of needs differ between the two populations being compared.     

An operational structure for clarity in ecosystem service values

Analyses used to value ecosystem services often confuse final ecosystem services with ecological functions that provide indirect benefit. Typologies of ecosystem services, such as that developed by the Millennium Ecosystem Assessment, do not ameliorate these challenges. Among the causes of ambiguity in classifying values associated with intermediate versus final ecosystem services are (1) the lack of simple, broadly applicable guidelines to assist natural and social scientists in deriving consistent and replicable classifications, and (2) attempts to define universal typologies of final services that apply to all beneficiaries. This paper presents an operational mechanism for determining whether a biophysical feature, quantity, or quality represents a final ecosystem service for an inclusive suite of beneficiaries. It is designed for straightforward application by those without expertise in natural or social sciences, and can be used within existing typologies. Illustrations of the structure demonstrate how the resulting classifications avert double counting and other ambiguities.     

Prices, wages and fertility in pre-industrial England

To shed light on the economic-demographic mechanisms operating in the epoch of pre-industrial economic stagnation, a two-sector Malthusian model is formulated in terms of a cointegrated vector autoregressive model on error correction form. The model allows for both agricultural product wages and relative prices to affect fertility. The model is estimated using new data for the pre-industrial period in England, and the analysis reveals a strong, positive effect of agricultural wages as well as a nonnegative effect of real agricultural prices on fertility. Furthermore, it is demonstrated that there is strongly decreasing returns to scale with respect to labour in the agricultural sector and approximately constant returns to scale in the manufacturing sector. The analysis provides evidence in favour of the usual Malthusian model, as invoked by unified growth theories such as e.g. Galor and Weil (Am Econ Rev 90:806–828, 2000).     

Price manipulation in an experimental asset market

We analyze in the laboratory whether an uninformed trader is able to manipulate the price of a financial asset by comparing the results of two experimental treatments. In the benchmark treatment, 12 subjects trade a common value asset that takes either a high or a low value. Only three subjects know the actual value of the asset while the market is open for trading. The manipulation treatment is identical to the benchmark treatment apart from the fact that we introduce a computer program as an additional uninformed trader. This robot buys a fixed number of shares in the beginning of a trading period and sells them again afterwards. Our main result shows that the last contract price is significantly higher in the manipulation treatment if the asset takes a low value and that private information is very well disseminated by both markets if the value of the asset is high. Finally, even though this simple manipulation program loses money on average, it is profitable in some instances.     

The Role of Industry Effects in Simultaneous Reversal and Momentum Patterns in One-Month Stock Returns

When stocks are ranked by returns in one month, the portfolio of loser stocks tends to outperform the portfolio of winner stocks in the subsequent month. Yet industry portfolios tend to display momentum. We develop a model of information diffusion among agents with constrained information processing ability that reconciles these well-documented phenomena. We test whether this model or the overreaction hypothesis is consistent with the data. Additionally, a trading strategy based on the model outperforms strategies based on overreaction and on industry momentum. The strategy produces abnormal returns while controlling for market–risk and the size, book value, January, momentum, and liquidity effects.     

Post‐Malthusian Dynamics in Pre‐Industrial Scandinavia

Theories of economic growth hypothesize that the transition from pre‐industrial stagnation to sustained growth is associated with a post‐Malthusian phase in which technological progress raises income and spurs population growth while offsetting diminishing returns to labor. Evidence suggests that England was characterized by post‐Malthusian dynamics preceding the Industrial Revolution. However, given England's special position as the forerunner of the Industrial Revolution, it is unclear if a transitory post‐Malthusian period is a general phenomenon. Using data from Denmark, Norway, and Sweden, this research provides evidence for the existence of a post‐Malthusian phase in the transition from stagnation to growth in Scandinavia.     

Capital account liberalization and dynamic price discovery: evidence from Chinese cross-listed stocks

We analyse the effects of a recent financial reform (Shanghai-Hong Kong Stock Connect) that enables cross-market investment between Hong Kong and Shanghai stock exchanges. Using a VECM, we find that the reform announcement considerably narrows the equilibrium level of price disparity and strengthens the price comovement of shares that are cross-listed in both markets. The estimated equilibrium relationship is in support of the relative law of one price. We find that both markets adjust in response to a disequilibrium in price disparity, leading to a sizeable error correction activity. The Shanghai market contributes to approximately two-thirds of the price discovery process. Competition and informativeness of trading affect the relative role of price discovery in each market. Finally, the reform implementation reinforces the long-run cointegration relationship and strengthens the short-run price comovements of cross-listed stocks despite the widening price disparity during the period.     

Von Thünen's model of the dual economy

We are indebted to Heinz König, John Mellor, and Hans van Beek, and to three anonymous referees of the journal for helpful comments, and to Victoria Dalko for her able research assistance. Financial assistance from the Foerder Institute for Economic Research and the International Food Policy Research Institute is gratefully acknowledged. A version of the paper also appears as Working Paper No. 989 of the Foerder Institute and Discussion Paper No. A 269 of the University of Bonn.     

Rational Nonprofit Entrepreneurship

This paper derives the decision to found a nonprofit firm as the equilibrium outcome of a multistage game among individuals who would like a public good to be provided. The model predicts that if individuals will voluntarily contribute towards provision of the public good, then it is in the self-interest of the entrepreneur to impose a nondistribution constraint on herself by founding a nonprofit firm.     

Corporate groups,liquidity, and overinvestment by Belgian firms quoted on the Brussels stock exchange

For a sample of large Belgian non-financial firms quoted on the Brussels stock exchange, it is found that investment of firms borrowing on an internal capital market is not determined by internal cash flow, while cash flow has a significant effect on investment for the other firms in the sample. Further analysis indicates that the cash flow effect is caused by overinvestment, not by financing constraints. No evidence is found that firms borrowing on an internal capital market in turn transfer surpluses of funds to other group members by investing in financial fixed assets. © 1998 John Wiley & Sons, Ltd.