A generalized maximum likelihood characterization of the normal distribution

LetP be a probability measure on ℝ andI _x be the set of alln-dimensional rectangles containingx. If for allx ∈ ℝⁿ and θ ∈ ℝ the inequality holds,P is a normal distributioin with mean 0 or the unit mass at 0. The result generalizes Teicher’s (1961) maximum likelihood characterization of the normal density to a characterization ofN(0, σ²) amongall distributions (including those without density). The m.l. principle used is that of Scholz (1980).     

The excess burden of the tax and social premium system for Dutch married women

Summary The excess burden of a tax is the diminution of utility above that which would have occurred had the tax been collected as a lump sum. Computing the excess burden for the 1983 and 1985 Dutch tax and social premium system enables a partial welfare evaluation of the recent changes in the system, the so-called Tweeverdienersmaatregelen. Based on the equivalent and compensating variation, the excess burden as a percentage of the taxes and social premiums for the 1983 and 1985 system are valued at 27010 and 84010, and 37010 and 58010 respectively. This result indicates that, welfare-theoretically, the old system seems preferable to the new one.The author wishes to thank Hans Doodeman, Paul Renaud and Jacques Siegers for their critical remarks on an earlier version of this article.     

Integration in the mortgage market

The deregulatory trend and advances in technology during the 1980s removed many restrictions on the ability of U.S. depository financial institutions to obtain and redistribute funds across diverse geographical markets. This pervasive deregulation and innovation should have increased the degree of integration between different geographical financial markets. Yet there is little empirical evidence available on the validity of this expectation. It is important to provide such evidence since much of the U.S. depository institution regulatory policy is predicated on the assumption of highly localized, segmented financial markets. Considering alternative breakpoints at 1980 (DIDMCA) and at 1982 (Garn-St Germain), the current study tests the hypothesis that the degree of geographical financial integration after this period exceeded that prior to this period. Mortgage markets are focused on due to their historical importance in the regulation of funds flows. The study finds a significant increase in the mean contemporaneous correlation among FHLB districts' mortagage rate residuals in a vector-autoregressive system between two test periods. Further analysis shows that the distance between FHLB districts' headquarters and their respective pairwise interdistrict correlation coefficients are negatively related in the prior period but not significantly related in the later period. Economic booms and busts alternated among the districts over the two sample periods in a manner consistent with the reallocation of capital among more integrated financial markets. Individual districts' mortgage rates have been more sensitive to variations in national credit market conditions since deregulation was legally recognized by DIDMCA in 1980. Thus, the collective empirical evidence found in this study indicates that mortgage markets have responded to deregulation and marked technological advances by moving toward a national, highly integrated market. Regulators' preoccupation with highly localized, segmented markets must consequently be reexamined.     

A development model of developing economies with capital and knowledge accumulation

This study suggests a model of economic development which treats knowledge accumulation as an endogenous variable. It examines possible dynamic processes in an economic system which accumulates knowledge from developed nations. We describe the dynamics of the system by the interactions of three variables—economic conditions, level of knowledge, and openness. The introduction of openness as an important endogenous variable is due to the fact that the development model considered here is primarily concerned with the economic dynamics of the People's Republic of China. We are especially interested in nonlinear phenomena such as catastrophes and limit cycles. We show that small shifts in political policies may result in great social structural changes.The author is very grateful to two anonymous referees for important comments and to an anonymous referee for linguistic help.     

The aggregated excess demand function and other aggregation procedures

Summary Two theorems are given; the first extends the Sonnenschein-Mantel-Debreu theorem characterizing aggregate demand functions from the set ofn2 commodities to all of the 2 ⁿ –(n+1) subsets of two or more commodities. The second theorem concerns spatial voting models for k2 candidates over a space of n2 issues. The theorem characterizes the sincere elecion rankings of thek candidates over all of the 2 ⁿ –1 subsets of one or more issues. Both theorems have the same kind of conclusion; anything can happen. By demonstrating the mathematical reasons for these conclusions and by recalling related, recent results from statistics, voting, and economics, it is argued that this anything can happen conclusion is the type one must anticipate for aggregation procedures; particularly for the processes commonly used in economic models where the procedure is responsive to changes in agents' preferences, changes in data, etc.I am pleased to acknowledge conversations with L. Hurwicz, A. Mas-Colell and C. Simon about this material. In particular, I want to thank J. Jordan for his several helpful suggestions. Also, I benefited from comments made at meetings and seminars where these results were presented; this includes a June, 1990, conference in Stockholm, Sweden. Some stylistic suggestions were made by Arvid and Padon Kalinen. This research was supported, in part, by NSF Grant IRI-8803505.     

An appreciation of our referees

Editorial

An appreciation of our referees     

Operational Research and the environment

The discipline of Operational Research (OR) is primarily concerned with improving the effectiveness and efficiency of decision processes. These processes take place everywhere in society: industry, banking, agriculture, government, politics. Frequent use of mathematical optimization models is typical of OR. Since the early '80s these models are increasingly packaged in a user-friendly way, as Decision Support Systems. In the following we will illustrate how OR can be used to describe and solve a number of environmental problems.     

On modeling incentive systems which utilize pollution charges for pollution abatement

This paper examines a scheme of economic incentives for environmental protection, in which spatially differentiated pollution taxes are in use in compensating the pollution abatement costs. A simple mathematical model is described which determines an incentive system that encourages polluters to reduce the discharges to an acceptable level of ambient quality standards in a cost-effective manner. It is shown that the vector of pollution charges has to be proportional to the marginal abatement cost vector, but is smaller than the latter in magnitude. It is demonstrated that a necessary incentive effect may be achieved even if the total pollution charge is much lower (about three times) than the total abatement costs. It is also estimated how this charge incentive system reconciles conflicting criteria of cost-effectiveness and of equity. These conclusions are verified by numerical experiments with real data.     

Determinants of technical change: Empirical evidence from Switzerland

The purpose of this paper is to analyse both theoretically and empirically those factors which underlay the—empirically observable—inter-industry differences in technical progress. At the theoretical level economists agree more and more that technical progress can be explained at the industry level ey the following three factors: 1. the technological opportunities, 2. the appropriability conditions, meaning the ability to capture and protect the results of technical innovations, and 3. the market demand conditions.The basic theoretical model was tested with the help of two sets of Swiss data. One set was made available by Swiss Federal Office of Statistics and consists of quantitative information on R&D expenditures, R&D personnel, total employment and sales figures for 124 (4-digit SIC) industries for the year 1986. The second set was derived from a survey I carried out in the summer of 1988. 940 industry experts were approached: 358 of them, or 38 percent, covering 127 industries, completed the questionnaire. The items on the questionnaire were related to the two supply-side determinants of technical progress—items 1. and 2. above. For the empirical specification of the theoretical model, technical progress (as the dependent variable) was measured by three indicators: an output indicator, representing the introduction rate of innovations since 1970; two input indicators, share of R&D expenditures in sales and share of R&D personnel in total employment. All data were aggregated at the industry level (4-digit SIC). Three equations were estimated individually, using the OLS, GLS and Tobit methods.     

Policies for economic growth

Summary The old growth theory of the 1950s led to certain conclusions about the sorts of economic policies that would promote economic growth, and also about their limitations. The new growth theory of the 1980s makes much stronger assumptions and leads to correspondingly stronger conclusions about the scope of growth-promoting policy. This article argues that: (1) empirical work so far has neither confirmed nor denied the strong assumptions underlying the new theory; (2) the theory is worth pursuing because of its intrinsic interest and the possibilities it opens up; (3) whatever the final verdict on the new theory, both theory and evidence support the belief that significant long-run gains, even if not permanent changes in the growth rate, can be achieved by increased investment in the broadest sense, including human capital, technological knowledge, and industrial plant and equipment.Fifth Tinbergen Lecture delivered on October 4, 1991, in Amersfoort for the Royal Netherlands Economic Association