An evolutionary game theory approach to the dynamics of the labour market: A formal and informal perspective

A stylized fact of the labour market in developing countries is that it is highly segmented in informality. One of the main factors that induce workers and firms into informality is an excessive regulatory system that makes formal economy little attractive. This study aims to analyze the dynamics of workers and firms’ entrance and withdrawal of the formal and informal economy, assessing the impact of taxes by using an evolutionary game theory approach in which economic agents decide for one these markets according to the expected pay-off. Moreover, the optimal relation between regulatory and enforcement action by the government is evaluated.     

Scale,Scope and Survival: A Comparison of Cooperative and Capitalist Modes of Production

This paper draws on a comprehensive data set from Portugal to investigate the activities, internal characteristics and survival prospects of cooperatives and capitalist enterprises. Consistent with theory, high levels of market concentration and low entry costs were shown to be conducive to cooperatives. Cooperatives were found to be, on average, older and to operate with a larger, more highly educated and more productive labour force than do their capitalist counterparts. Finally, we show that cooperatives have a markedly higher probability of survival than do capitalist enterprises due, in part, to differences in industry of operation and internal characteristics.     

Working under pressure: Evidence from the impacts of soccer fans on players’ performance

In this paper we study how pressure affects individual’s behavior. For this purpose we use sports data, where the attendance is a proxy for pressure, to investigate if the number of fans in the stadium affects the performance of the players. We overcome the reverse causality problem by proposing an instrument variable: a promotion in Brazil during which low cost tickets were assigned to random soccer matches. In contrast to previous literature, our results suggest that pressure does not significantly affect players’ behavior.     

Is inflation targeting a good remedy to control inflation?

Since the 1990s inflation targeting (IT) has been adopted by several central banks as a strategy for monetary policy. It is expected that the adoption of this monetary regime can reduce inflation and inflation volatility. This article is concerned with these issues and makes use of the Propensity Score Matching methodology on a sample of 180 countries for the period from 1990 to 2007. For analysis, the sample is split into two sets of countries (advanced and developing). The findings suggest that the adoption of IT is an ideal monetary regime for developing economies and, in addition to reducing inflation volatility, can drive inflation down to internationally acceptable levels. Regarding advanced economies, the adoption of IT does not appear to represent an advantageous strategy. In brief, the empirical results indicate that the adoption of IT is useful for countries that must enhance their credibility for the management of monetary policy.     

Coming out of the shadows? Estimating the impact of bureaucracy simplification and tax cut on formality in Brazilian microenterprises

This paper evaluates the impact of a program of bureaucracy simplification and tax reduction on formality among Brazilian microenterprises — the SIMPLES program. We document an increase of 13 percentage points in formal licensing among retail firms created after the program when compared to firms in ineligible sectors. The impact on retailers is robust to a series of tests. We find no impact on construction, transportation, services and manufacturing sectors.     

The multi-state latent factor intensity model for credit rating transitions

A new empirical reduced-form model for credit rating transitions is introduced. It is a parametric intensity-based duration model with multiple states and driven by exogenous covariates and latent dynamic factors. The model has a generalized semi-Markov structure designed to accommodate many of the stylized facts of credit rating migrations. Parameter estimation is based on Monte Carlo maximum likelihood methods for which the details are discussed in this paper. A simulation experiment is carried out to show the effectiveness of the estimation procedure. An empirical application is presented for transitions in a 7 grade rating system. The model includes a common dynamic component that can be interpreted as the credit cycle. Asymmetric effects of this cycle across rating grades and additional semi-Markov dynamics are found to be statistically significant. Finally, we investigate whether the common factor model suffices to capture systematic risk in rating transition data by introducing multiple factors in the model.     

Corruption and auctions

We investigate how corruption affects the outcome of a first-price auction (bidding behavior, efficiency and the seller’s expected revenue). The auctioneer approaches the winner to offer the possibility of a reduction in his bid in exchange for a bribe. The bribe can be a percentage of the difference between the winning and the second-highest bid or a fixed amount. We show that there exists a symmetric bidding strategy equilibrium that is monotone, i.e., higher valuation buyers bid higher. Corruption does not affect efficiency but both the auctioneer’s expected bribe and the seller’s expected revenue depend on the format of the bribe payments. We also find the optimal bribe scheme.     

Habit Formation, Catching Up with the Joneses, and Economic Growth

Our objective is to investigate how alternative assumptions about preferences affect the process of economic growth. To do this, we analyze a neoclassical growth model under three alternative preference specifications: (i) time separable, (ii) catching up with the Joneses, and (iii) habit formation. Departing from the time separable specification leads to important differences in the dynamic structure, the adjustment path followed by key economic variables, the correlation patterns implied by the time series generated by the model, and the speed of convergence to the new steady state. In the catching up with the Joneses economy the differences arise from a consumption externality, while in the habit formation economy the difference arises from the fact that agents not only smooth consumption but also its rate of change.     

Consumption externalities, production externalities, and efficient capital accumulation under time non-separable preferences

The effects of consumption and production externalities on economic performance under time non-separable preferences are examined both theoretically and numerically. We show that a consumption externality alone has long-run distortionary effects if and only if labor is supplied elastically. With fixed labor supply, it has only transitional distortionary effects. Production externalities always generate long-run distortions, irrespective of labor supply. The optimal tax structure to correct for the distortions is characterized. We compare the implications of this model with those obtained when the consumption externality is contemporaneous. While some of the long-run effects are robust, there are also important qualitative and quantitative differences, particularly along transitional paths.