Is GDP a Relevant Social Welfare Indicator? A Savers–Spenders Theory Approach

The use of GDP as the main index of progress and welfare of a country has been the subject of a long debate among economists. Using and extending the savers–spenders theory, we analyse the theoretical relationship between GDP and the welfare of a society. This analysis is undertaken using several different overlapping generations models which all take into account the great heterogeneity of consumer behaviour observed in the data (different labour supply choices, different degrees of altruism and/or different degrees of impatience to consume). The results indicate that GDP (per capita) is often a relevant index and is always a decent social welfare indicator.     

Is the ladder sticky? Measuring semi-parametrically state dependence in earnings mobility

Employing the U.S. data for the 1990’s, we disentangle state dependence from unobserved heterogeneity in earnings mobility. The fixed effects dynamic multinomial logit utilized to model earnings quintiles dynamics fits the data very well, much more so than the autocorrelated dynamic ordered probit. Unordered models should thus be preferred to study earnings mobility. State dependence is found to be significant. It has a protective (anti-fall) effect at the top of the distribution and a detrimental (anti-rise) effect at the bottom. Consequently, the difficulty of climbing the ladder is not exclusively a question of individual characteristics. Public policies could thus be implemented to improve information about individuals’ ability and job offers, and to design more efficient wage-setting institutions.     

Cost-effectiveness of golimumab for the treatment of patients with moderate-to-severe ulcerative colitis in Quebec using a patient level state transition microsimulation

Objective: To conduct cost-effectiveness analyses comparing the addition of golimumab to the standard of care (SoC) for treatment of patients with moderate-to-severe ulcerative colitis (UC) who are refractory to conventional therapies in Quebec (Canada).

Methods: An individual patient state transition microsimulation model was developed to project health outcomes and costs over 10 years, using a payer perspective. The incremental benefit estimates for golimumab were driven by induction response and risk of a flare. Flare risks post-induction were derived for golimumab from the PURSUIT maintenance trial and extension study, while those for SoC were derived from the placebo arms of the Active Ulcerative Colitis Trials (ACT) 1 and 2. Other inputs were derived from multiple sources, including retrospective claims analyses and literature. Costs are reported in 2014 Canadian dollars. A 5% annual discount rate was applied to costs and quality-adjusted life-years (QALYs).

Results: Compared with SoC, golimumab was projected to increase the time spent in mild disease or remission states, decrease flare rates, and increase QALYs. These gains were achieved with higher direct medical costs. The incremental cost-effectiveness ratio for golimumab vs SoC was $63,487 per QALY.

Limitations: The long-term flare projections for SoC were based on the data available from the ACT 1 and 2 placebo arms, as data were not available from the PURSUIT maintenance or extension trial. Additionally, the study was limited to only SoC and golimumab, due to the availability of individual patient data to analyze.

Conclusion: This economic analysis concluded that treatment with golimumab is likely more cost-effective vs SoC when considering cost-effectiveness acceptability thresholds from $50,000–$100,000 per QALY.     

Saving and investing for early retirement: A theoretical analysis

We study optimal consumption and portfolio choice in a framework where investors adjust their labor supply through an irreversible choice of their retirement time. We show that investing for early retirement tends to increase savings and reduce an agent's effective relative risk aversion, thus increasing her stock market exposure. Contrary to common intuition, an investor might find it optimal to increase the proportion of financial wealth held in stocks as she ages and accumulates assets, even when her income and the investment opportunity set are constant. The model predicts a decrease in risk aversion following strong market gains like those observed in the nineties.     

Beliefs and Pareto Efficient Sets: A Remark

We show that, in a two-period economy with uncertainty in the second period, if an allocation is Pareto optimal for a given set of beliefs and remains optimal when these beliefs are changed, then the set of optimal allocations of the two economies must actually coincide. We identify equivalence classes of beliefs, giving rise to the same set of Pareto optimal allocations. Journal of Economic Literature Classification Numbers: D51, D61.     

Causality tests of export-led growth: The case of Mexico

Although econometric studies have confirmed the relationship between exports and economic growth, some studies are inherently weak in that they are based on an a priori assumption that export growth causes economic growth. This is erroneous because causality should be tested and proven rather than simply assumed. This paper uses the Granger causality test which takes into consideration the time series properties of the data to examine the incidence of export-led development in Mexico. The authors conclude that Granger causality test confirms the relationship between export growth and GDP growth in the Mexican case as posited by development theory.     

The Impact of Public Infrastructure on the Productivity of the Chilean Economy

The aim of this study is to assess the effect of the change in infrastructure capital on the cost structure of the Chilean economy, and thereby on productivity, differentiating between two key institutional periods. A further aim is to establish the extent to which infrastructure capital formation affects private capital. The authors use an econometric estimation of the cost elasticity of infrastructure. Conclusions indicate that an increased infrastructure capital reduces the production cost of the economy, thereby increasing productivity, mostly in the second period. In turn, especially in this latter period, infrastructure capital formation appears to assert both a positive cost‐share effect on private capital and a negative cost‐share effect on labor. These effects can be explained to a large extent by the significant differences between the institutional structures of the two consecutive periods studied.