Excess payoff dynamics and other well-behaved evolutionary dynamics

We consider a model of evolution in games in which agents occasionally receive opportunities to switch strategies, choosing between them using a probabilistic rule. Both the rate at which revision opportunities arrive and the probabilities with which each strategy is chosen are functions of current normalized payoffs. We call the aggregate dynamics induced by this model excess payoff dynamics. We show that every excess payoff dynamic is well-behaved: regardless of the underlying game, each excess payoff dynamic admits unique solution trajectories that vary continuously with the initial state, identifies rest points with Nash equilibria, and respects a basic payoff monotonicity property. We show how excess payoff dynamics can be used to construct well-behaved modifications of imitative dynamics, and relate them to two other well-behaved dynamics based on projections.     

Bank Mergers,REIT Loan Pricing and Takeover Likelihood

The impact of bank mergers on Real Estate Investment Trust (REIT) loan pricing and takeover likelihood is assessed. REITs that lose their primary banking relationship due to bank mergers pay higher interest rates on future borrowings. Bank consolidation reduces bank competition for REIT loans which affects loan pricing. Moreover, based on randomly matched samples of REITs, the results imply that firms losing their agent banks due to bank mergers and those with limited access to bank debt are more likely to be acquired while REITs associated with acquiring banks are more likely to acquire other firms. Additional analysis of the 92 merged REITs reveals that 33% of the target REITs’ banks are merged with their REIT acquirers’ banks prior to the REIT mergers while 67% of the target REITs share at least one major bank with their acquirer.     

Formal targets, central bank independence and inflation dynamics in the UK: A Markov-Switching approach

We examine inflation and uncertainty in the UK with a version of the Markov Switching model, which allows for changes in the variance as well as in the mean and persistence of a series. We find that the UK’s attempts at exchange rate pegs in the form of shadowing the deutschmark and entering the ERM were ineffective, and in the latter case counterproductive in lowering inflation uncertainty. The 1981 budget, however, greatly lowered uncertainty, and the adoption of a formal inflation target also had a palpable, negative impact on inflation uncertainty. As a suggestive exercise, we examine inflation uncertainty in the US, and find that, over 2005–2008, in the absence of an inflation target, uncertainty rose in the US, while uncertainty remained low in the UK over this period of rising commodity prices and financial turmoil.     

Supply and marginal firms in general equilibrium

For economies with a large number of small firms, price induced changes in supply are decomposed into substitution and entry effects. Marginal firms (those earning zero profit) play a significant role in the determination of the slope of aggregate supply.     

Stochastic imitative game dynamics with committed agents

We consider models of stochastic evolution in two-strategy games in which agents employ imitative decision rules. We introduce committed agents: for each strategy, we suppose that there is at least one agent who plays that strategy without fail. We show that unlike the standard imitative model, the model with committed agents generates unambiguous infinite horizon predictions: the asymptotics of the stationary distribution do not depend on the order in which the mutation rate and population size are taken to their limits.     

Design limits and dynamic policy analysis

This paper characterizes the frequency domain properties of feedback control rules in linear systems in order to better understand how different policies affect outcomes frequency by frequency. We are especially concerned in understanding how reductions of variance at some frequencies induce increases in variance at others. Tradeoffs of this type are known in the control literature as design limits. Design limits are important in understanding the full range of effects of macroeconomic stabilization policies. We extend existing results to account for discrete time bivariate systems with rational expectations. Application is made to the evaluation of monetary policy rules.     

The European origins of economic development

Although a large literature argues that European settlement outside of Europe during colonization had an enduring effect on economic development, researchers have been unable to assess these predictions directly because of an absence of data on colonial European settlement. We construct a new database on the European share of the population during colonization and examine its association with economic development today. We find a strong, positive relation between current income per capita and colonial European settlement that is robust to controlling for the current proportion of the population of European descent, as well as many other country characteristics. The results suggest that any adverse effects of extractive institutions associated with small European settlements were, even at low levels of colonial European settlement, more than offset by other things that Europeans brought, such as human capital and technology.     

Identification of technological structures using patent statistics

This paper studies the use of patent statistics in identifying four aspects of technological structure, namely, the potential knowledge pool, cumulativeness, inter-firm homogeneity in technology levels, and the scope of innovations. The firms are sampled from the chemical (CHEM), the computer (COM) and the electrical and electronic (EE) industries worldwide. Using the proxies defined, we find that (i) the contributions of intra-industry spillover are low, at 12%, 10%, and 9% for the three industries respectively; (ii) they can internalize 15%, 19% and 13% of their previous research efforts respectively; and (iii) a positive relationship between knowledge spillover and technology overlap, and between scope of innovation and number of patents being cited in future.     

Poverty, food security, and nutrition in Central Asia: a case study of the Kyrgyz Republic

This paper attempts to provide insights into poverty, food insecurity, and malnutrition in Central Asia in the period following independence, and presents the available evidence from household-level data in the Kyrgyz Republic. It finds that although some improvement has been made in recent years, significant levels of poverty, food insecurity, and child malnutrition still exist. The paper argues that, in the short run, efforts should be made to protect vulnerable groups by investing in information generation and building capacity to design and implement food security and nutrition policies and programs. Increasing the speed of policy reforms and investment in productivity-enhancing agricultural research and rural infrastructure are fundamental for long-tern sustainable development in Central Asia.     

A Pathway Forwards for the Social Capital Metaphor

A major topic in economics is the analysis of a broad class of phenomena associated with interpersonal relationships, a topic that originally grew from theories of “social capital.” While the concept has been instrumental in bringing increased attention to social effects on economic outcomes, it has increasingly been replaced with approaches that consider instead networks and discrete interactions rather than aggregate measures of social capital. This has been an analytical improvement, but a great deal of work remains to bring empirical validity and relevancy to social network analysis. This paper presents two important approaches for achieving this, statistical analysis and agent-based modeling, and discusses their benefits, limitations, and complementary nature. Rather than waiting for either approach to achieve an ambiguous quality of maturity, integrating statistical analysis with simulation models of networks must begin now to push the frontiers of social network analysis forward.