Correlated risks,bivariate utility and optimal choices

In this paper, we consider a decision-maker facing a financial risk flanked by a non-financial background risk such as health or environmental risk. A decision has to be made about the amount of an investment (in the financial dimension) resulting in a future benefit either in the same dimension (savings) or in the other dimension (environmental quality or health improvement). In this framework, we study the impact of the correlation between the two risks on optimal choices. In the saving problem, we find conditions ensuring that positive correlation between the two risks implies that the optimal amount of savings increases. These conditions involve specific requirements on the direct and cross derivatives of the two-argument utility function. Similarly, we find a different and specific set of conditions ensuring that the same conclusion on optimal investment for health (environmental) improvement is reached. The two sets of conditions determined support the conclusion that the signs of the derivatives of the two-argument utility function should alternate.     

Ample Consumption Period Available Until Use-by Dates: A Potential Marketing Position for Store Brands

SUMMARY

Store brands, when moving upscale, inevitably relinquish their value for money appeal and therefore require some quality dimension to compete. This article is proposing that the promise of “generous” use-by dates as a surrogate for quality could be considered as a positioning plank to promote store brands as alternatives to manufactured brands. Logit analysis is employed to explain shoppers' perceptions and responses to use-by dates, of products that they regularly buy, and of alternative products that they have never bought before if the use-by dates of their regular items are perceived to be too short.     

Export Product Composition Indexes in Developing Countries: The Case of Peru, 1993–2004

Liberal structural reforms associated to changes in the export product composition may affect economic growth, and at the same time, may yield biases in the official standard trade index numbers from developing countries and error measures in the real rate of economic and exports growth. This paper proposes a set of index numbers which incorporates the export product composition in a standard export index in such a way that changes in the current export value can be decomposed into: price changes; quantity changes, and product composition changes. In the applications of those indexes for the Peruvian case, it is found that the estimated overvaluations in the official annual average rate of growth of the real exports value and the GDP, were, respectively 3% and 0.6%, for the period 1993–2004.     

A comparative analysis of stock market cycles

In this article, we date the ‘recession’ and ‘expansion’ phases of 46 stock markets around the world from December 1994 to September 2013. We use the Harding and Pagan methodology to identify peaks and troughs in these stock market indices. This approach enables us to establish periods of synchronization between the markets based on the timing of peaks and troughs and to measure this synchronization by means of the Harding and Pagan statistic. We find that several recent world crisis episodes and simultaneous recoveries can be identified with this method. We also present evidence demonstrating an increase in the pro-cyclicality of stock markets around the world.     

The Capitalisation of CAP Payments into Land Rental Prices: A Panel Sample Selection Approach

The empirical literature suggests that farmland prices and rents capitalise agricultural subsidies and that the 2003 reform of the EU Common Agricultural Policy, which decoupled subsidies from production and attached them to land, may have increased the extent of the phenomenon. Employing a farm‐level dataset, the Farm Accountancy Data Network (FADN) for Italy, we investigate this issue while accounting for selectivity, endogeneity and unobserved individual heterogeneity. To understand the impact of the reform we compare the estimates of capitalisation rate for decoupled payments with those for coupled payments. After correcting for unobserved individual heterogeneity and selectivity, our results reveal no capitalisation of coupled payments and only limited capitalisation of decoupled area payments into farmland rents in Italy.     

New development: Are social impact bonds (SIBs) viable in Italy? A new roadmap

This paper presents a roadmap to support the development of social impact bonds (SIBs) in Italy. Current barriers and opportunities are explained. SIBs should be piloted in areas where the cultural, ideological, technical and governance barriers are low. Accurate measurement systems will be necessary and an effective governance structure needs to be agreed. With careful piloting and follow-up, the SIB model could be a solution to welfare and public service funding in Italy.     

The Engines of Inequality

In Europe and in the United States, one of the legacies of the economic and financial crisis will no doubt be a high and particularly worrying level of economic inequality. Inequality has roots that go well beyond the 2008 collapse, but the stagnation that has followed it has made disparities in income and wealth more serious and more difficult to eradicate. The challenge now is to turn the injustice of current inequality into a theme of public mobilisation and political action.