Inference on an extended Roy model,with an application to schooling decisions in France

This paper considers the identification and estimation of an extension of Roy’s model (1951) of sectoral choice, which includes a non-pecuniary component in the selection equation and allows for uncertainty on potential earnings. We focus on the identification of the non-pecuniary component, which is key to disentangling the relative importance of monetary incentives versus preferences in the context of sorting across sectors. By making the most of the structure of the selection equation, we show that this component is point identified from the knowledge of the covariate effects on earnings, as soon as one covariate is continuous. Notably, and in contrast to most results on the identification of Roy models, this implies that identification can be achieved without any exclusion restriction nor large support condition on the covariates. As a by-product, bounds are obtained on the distribution of the ex ante   monetary returns. We propose a three-stage semiparametric estimation procedure for this model, which yields root-n$n$ consistent and asymptotically normal estimators. Finally, we apply our results to the educational context, by providing new evidence from French data that non-pecuniary factors are a key determinant of higher education attendance decisions.     

Mapping AcroQoL scores to EQ-5D to obtain utility values for patients with acromegaly

Aims: To estimate a preference-based single index for the disease-specific instrument (AcroQoL) by mapping it onto the EQ-5D to assist in future economic evaluations.

Materials and methods: A sample of 245 acromegaly patients with AcroQoL and EQ-5D scores was obtained from three previously published European studies. The sample was split into two: one sub-sample to construct the model (algorithm construction sample, n?=?184), and the other one to confirm it (validation sample, n?=?61). Various multiple regression models including two-part model, tobit model, and generalized additive models were tested and/or evaluated for predictive ability, consistency of estimated coefficients, normality of prediction errors, and simplicity.

Results: Across these studies, mean age was 50–60 years and the proportion of males was 36–59%. At overall level the percentage of patients with controlled disease was 37.4%. Mean (SD) scores for AcroQoL Global Score and EQ-5D utility were 62.3 (18.5) and 0.71 (0.28), respectively. The best model for predicting EQ-5D was a generalized regression model that included the Physical Dimension summary score and categories from questions 9 and 14 as independent variables (Adj. R²?=?0.56, with mean absolute error of 0.0128 in the confirmatory sample). Observed and predicted utilities were strongly correlated (Spearman r?=?0.73, p?<?.001) and paired t-Student test revealed non-significant differences between means (p?>?.05). Estimated utility scores showed a minimum error of ≤10% in 45% of patients; however, error increased in patients with an observed utility score under 0.2. The model’s predictive ability was confirmed in the validation cohort.

Limitations and conclusions: A mapping algorithm was developed for mapping of AcroQoL to EQ-5D, using patient level data from three previously published studies, and including validation in the confirmatory sub-sample. Mean (SD) utilities index in this study population was estimated as 0.71 (0.28). Additional research may be needed to test this mapping algorithm in other acromegaly populations.     

Turning regulation into business opportunities: A brief history of French food mass retailing (1949–2015)

Abstract

The French retail market stands out among its European counterparts as being more concentrated. Relative to its neighbors, it has a higher number of large stores, such as hypermarkets. This article explains the origins of this market structure by assessing the impact of regulation on the French food retail industry between 1949 and 2015. Despite legislation aimed at curtailing their growth, retailers were able to circumvent legal constraints. Over the period considered, three ‘regulation-adaptation’ loops are described. Retailers’ responses to regulatory regimes affected both their bargaining mechanisms with suppliers and the business models they used to sell their products. By turning regulation into business opportunities, French retailers have managed to create a powerful oligopolistic industry, and are now among the largest retail groups in the world.     

Generational accounts for Belgium: fiscal sustainability at a glance

This paper uses generational accounts to analyse the long term sustainability of Belgian public finances. We derive age-profiles of detailed tax and expenditure categories from micro data and microsimulation models, and plug them into a long run demographic projection. We assess fiscal long term sustainability under current fiscal and budgetary policy for the base year 2010, and perform simulations of counterfactuals to determine the relative contribution of the most important factors of the long run unsustainability. This update of the generational accounts for Belgium shows that, not unexpectedly, the budgetary situation in Belgium violates the intertemporal budget constraint and hence is unsustainable in the long run. The current level of explicit debt, however, only plays a minor role in explaining this sustainability problem. Ageing and the related increase in age related expenditures are the main drivers of the long run fiscal imbalance and the high level of implicit debt. We disentangle the Belgian generational accounts into their regional components and show that the major explanation for regional differences in generational accounts is not divergent demographic projections, but the wide differences in socio-economic situations, as revealed by the region specific age-profiles.     

A cardinal approach to straightforward probabilistic mechanisms

In every probabilistic mechanism, society selects an alternative, through a random device, out of a subset of indifferent alternatives. Consequently, in this context individuals face uncertainty and value the different lotteries on alternatives by their expected utility, so that they make use of a Von Neumann-Morgenstern cardinal utility function. Surprisingly, the social choice approach to probabilistic mechanisms assumes the use of ballots which preclude the complete expression of behaviour towards risk: individuals can only announce their ordinal preferences, or an approximation of their cardinal preferences, since in any case only a finite number of representations of preferences is available. This paper attempts to study voting systems in which individuals can express the cardinality of their preferences by assigning weights to the alternatives. It is shown that by voting with ballots which reflect weighting a new class of straightforward probabilistic mechanisms is defined, and that this class strictly contains the class of probabilistic straightforward mechanism designed by Gibbard.     

Estate taxes, consumption externalities, and altruism

We study how the introduction of consumption externalities affects the optimality of the dynamic equilibrium in an economy displaying dynastic altruism. When the bequest motive is inoperative consumption externalities affect the intertemporal margin between young and old consumption and thus modify the intertemporal path of aggregate consumption and capital. The optimal tax policy that solves this intertemporal suboptimality consists of a tax on capital income and a pay-as-you-go social security system. The latter solves the excess of capital accumulation due to the inoperativeness of the bequest motive and the former solves the suboptimal allocation of consumption due to consumption externalities. When the bequest motive is operative consumption externalities only cause an intratemporal misallocation of consumption but do not affect the optimality of the capital stock level. This suboptimal allocation of consumption implies in turn that the path of bequest deviates also from optimality. The optimal tax policy in this case consists of an estate tax and a capital income tax.     

Getting bang for your buck: the specificity of compensation and benefits information in job advertisements*

Even though some organizations are trying to attract high-level applicants through offering superior compensation and benefits, reward statements in job advertisements are sometimes rather general and vague. On the basis of person-environment fit theories, we examine whether providing more specific information on attractive reward packages in job advertisements leads to higher perceived person-reward fit and subsequent job pursuit intentions. Furthermore, based on signaling theory, we propose that person-reward fit allows job seekers to make inferences about broader person-organization fit. Applying an online experimental design among 283 experienced potential applicants, we find that more specific compensation and benefits information results in higher job pursuit intentions and that this relationship is fully mediated by person-reward fit perceptions. In turn, the effect of person-reward fit is partially mediated by perceptions of person-organization fit, indicating that people might use reward information as signals for other organizational attributes in early stages of recruitment.     

The new stability and growth pact: A first assessment

The paper proposes a theoretical model of fiscal policy offering new insights on some of the key policy trade-offs involved in the recent reform of the Stability and Growth Pact. As suggested by the proponents of the reform, greater room for case-specific economic judgment in the implementation of the pact may improve welfare. In our model, these gains occur because the consolidation path implied by the implementation of the pact does not discourage high-quality measures. In practice, however, the difficulty to extract true policy intent from budget figures may hinder the qualitative assessment of fiscal policy. Hence, reforming a rules-based fiscal framework with a view to enhance its “economic rationale” would also require closer monitoring, a better grasp of the policies underlying the budget, and ultimately stricter enforcement. In that sense, recent reforms are at best unhelpful.     

A positive theory of social security

In this paper I make two points. First, I argue that social security programs around the world link public pensions to retirement: people do not lose their pensions if they make a million dollars a year in the stock market, but they do confront marginal tax rates of up to 100 percent if they choose to work. Second, after arguing that most existing theories cannot explain this fact, I construct a positive theory that is consistent with it. The main idea is that pensions are a means to induce retirement—that is, to buy the elderly out of the labor force because aggregate output is higher if the elderly do not work. This is modeled through positive externalities in the average stock of human capital: because skills depreciate with age, the elderly have lower-than-average skill and, as a result, have a negative effect on the productivity of the young. When the difference between the skill level of the young and that of the old is large enough, aggregate output in an economy where the elderly do not work is higher. Retirement is desirable in this case, and social security transfers are the means by which such retirement is induced. The theory developed in this paper is also shown to be consistent with a number of other regularities documented in Section 1.     

Labor adjustment costs and complex eigenvalues

Aggregate variables display both persistence and damped oscillations in response to temporary external shocks. The standard real business cycles (RBC) model cannot explain these patterns, because its stable eigenvalues are positive and real. We demonstrate that this model with labor adjustment costs can yield complex eigenvalues. However, numerical experiments suggest that the model cannot display distinguishable damped oscillations of aggregate variables.