Fourier-analytic measures for heavy-tailed insurance losses

We propose a family of three ‘Fourier-analytic’ measures to extend the conventional concepts of standard deviation, variance, and coefficient of variation to insurance losses with arbitrarily heavy tails. After motivating and computing their mathematical forms, we apply the proposed measures to the case of Lévy-stable loss portfolios. Finally, the new measures are used to study the diversification properties of heavy-tailed losses.     

Impacts of meat product recalls on consumer demand in the USA

The impact of meat product recall events on consumer demand (beef, pork, poultry, and other consumption goods) in the USA is tested empirically. Beef, pork, and poultry recall indices are constructed from both the Food Safety Inspection Service's meat recall events and from newspaper reports over the period 1982–1998. Following previous product recall studies, recall indices are incorporated as shift variables in consumers’ demand functions. Estimating an absolute price version of the Rotterdam demand model, findings indicate that Food Safety Inspection Service's meat recall events significantly impact demand, and newspaper reports do not. Moreover, although elasticities related to recall events are significant they are small in magnitude relative to price and income effects. Any favourable effects on the demands of meat substitutes for a recall are offset by a more general negative effect on meat demand. The general negative effect indicates a shift out of meat to non-meat consumption goods.     

Central city crime and suburban economic growth

This paper explores the relationship between inner-city crime patterns and suburban income growth, analysing data on 318 US counties for selected metropolitan statistical areas of 32 states within the United States from 1982 to 1997. The findings suggest that violent crime does seem to have a negative impact on close-in suburbs, with a less negative impact farther away from the central city (becoming positive at some point). While results are not as robust as we had hoped they are consistent with flight to further-out suburbs rather than migration to different metropolitan areas in response to urban crime.     

Blinder–Oaxaca decomposition for Tobit models

In this article, a decomposition method for Tobit models is derived, which allows the differences in observed outcome variables between two groups to be decomposed into a part that is explained by differences in observed characteristics and a part attributable to differences in the estimated coefficients. Monte Carlo simulations demonstrate that in the case of censored dependent variables this decomposition method produces more reliable results than the conventional Blinder–Oaxaca decomposition for linear regression models. Finally, our method is applied to a decomposition of the gender wage gap using German data.     

Directional heterogeneity of environmental disamenities: the impact of crematory operations on adjacent residential values

A hedonic study of residential house sales in Rawlins, Wyoming, was conducted to estimate the impact of an environmental shock from a new point source upon adjacent residential property values. We use a unique data base of house sale prices and associated house attributes, including structural and neighbourhood characteristics and geographic distances and directions from the source of the shock, atmospheric emissions from a new crematory. Our data spans 27 months of house sales: 7 months before, and 20 months after the startup of crematory operations. Results indicate that proximity, measured both in terms of direction and distance from the crematory, imparts a statistically significant negative impact on average house sale prices–an increase of 0.3 to 3.6% of average sale price for every one-tenth mile increase up to one-half mile in distance away from the crematory, but depending on direction from the crematory. This distance benefit increases somewhat with calendar time only for houses located west of the crematory.     

Measurement of labour quality growth caused by unobservable characteristics

The standard economy-wide indices of labour quality (or human capital) largely ignore the role of unobservable worker characteristics. In this article, we develop a methodology for identifying the contributions of both observable and unobservable worker characteristics in the presence of the incidental parameter problem. Based on data for Switzerland over the period 1991 to 2006, we find that a large part of growth in labour quality is caused by shifts in the distribution of unobservable worker characteristics. The overall index differs little from the standard indices, but contributions to growth attributed to education and age are corrected downwards.     

ROY MODEL SORTING AND NONRANDOM SELECTION IN THE VALUATION OF A STATISTICAL LIFE*

Wage‐hedonics is used to recover the value of a statistical life (VSL) by exploiting the fact that workers choosing riskier occupations are compensated with a higher wage. Roy (Oxford Economic Papers 3 (1951), 135–46) suggests that observed wage distributions will be distorted if individuals choose jobs according to idiosyncratic returns. We describe how this type of sorting biases wage‐hedonic VSL estimates and implement two new estimation strategies that correct that bias. Using data from the Current Population Surveys, we recover VSL estimates that are three to four times larger than those based on the traditional techniques, statistically significant, and robust to a wide array of specifications.     

Volume XXXIV – 2000

In the attempt to deepen the understanding of Keynes' thought as an international macroeconomist, we explore the hypothesis of consistency between his general methodological approach to the economic material and his way of reasoning about international economic relations. As a first step toward this direction, we investigate the methodology of The Economic Consequences of the Peace and find that it reflects Keynes' attempt to cope with the attributes of the complexity characterizing the European settlement for the post-war period, e.g., 1) organic interdependence among variables at play, 2) irreducible dilemmas and situations of conflict, as well as 3) the need for external, public assistance to overcome the impasse and promote a "shared responsibilities" approach to the imbalances. Striking similarities appearing with the method of Keynes' economic diplomacy in the 1940s are shown to substantiate the current rediscovery of his plans for Bretton Woods.     

The Pro‐Poorness,Growth and Inequality Nexus: Some Findings From a Simulation Study

An income growth pattern is pro‐poor if it reduces a (chosen) measure of poverty by more than if all incomes were growing equiproportionately. Inequality reduction is not sufficient for pro‐poorness. In this paper, we explore the nexus between pro‐poorness, growth, and inequality in some detail using simulations involving the displaced lognormal, Singh–Maddala, and Dagum distributions. For empirically relevant parameter estimates, distributional change preserving the functional form of each of these three‐parameter distributions is often either pro‐poor and inequality reducing, or pro‐rich and inequality exacerbating, but it is also possible for pro‐rich growth to be inequality reducing. There is some capacity for each of these distributions to show trickle effects (weak pro‐richness) along with inequality‐reducing growth, but virtually no possibility of pro‐poorness for growth which increases overall inequality. Implications are considered.