Ricardian equivalence and fiscal distortions in the Dominican Republic

This paper tests the Ricardian equivalence hypothesis in the context of the Dominican Republic (DR). The results rejected the Ricardian theorem but a weaker version is shown to have significant implications for the DR. If the government borrows to increase spending, private consumption is crowded out and the economy will suffer in the long run. The outcome is worst if the government borrows to deliver a tax cut. In particular, for every RD$ 1.00 of additional debt incurred to finance government primary spending, private consumption and gross domestic product (GDP) fall by a meaningful RD$ 2.15 and RD$ 1.15 respectively. If the debt is used to finance the tax cut, the fall is RD$ 2.15 in both consumption and output. Interestingly, if the government uses taxes to cover a budget deficit, the effect is neutral and consistent with Ricardian equivalence. The paper argues that fiscal distortions are in part responsible for these multipliers. Distortions are estimated to be 21 % coming from different sources including taxes evasion and fiscal drainage. These findings suggest that the DR could benefit from either reducing the level of fiscal distortions or the size and scope of the Dominican government. If, however, the government continues to pursue an active fiscal role under the current environment, it will generate an unnecessary burden to consumption and economic growth.     

Property rights as a complex adaptive system: how entrepreneurship transforms intellectual property structures

This article aims to provide some elements of an evolutionary theory of property rights. It applies a systems-based capital-theoretic perspective to explain the formation and transformation of property rights structures. The approach emphasizes how entrepreneurs create capital combinations by connecting capital goods—defined widely to include property rights, such as patents—in their production plans. Their actions change complementarity relations between property rights as used in production. We treat the property rights structure as a complex adaptive system that exhibits increasing structural complexity as it evolves. Entrepreneurs discover gaps in the property rights system. As they organize production to exploit profit opportunities, entrepreneurs regroup existing intellectual property rights (IPR) into new modules, such as patent pools, that encapsulate more complex combinations of basic building blocks of intellectual property. A patent pool constitutes an interpolation of a new meso level within the macro IPR structure. We apply our framework to the first of the patent pools for digital video compression technology used in digital television and DVDs.     

The best-shot all-pay (group) auction with complete information

We analyze an all-pay group contest in which individual members’ efforts are aggregated via the best-shot technology and the prize is a public good for the winning group. The interplay of within-group free-riding and across-group competition allows for a wide variety of equilibria, according to how well groups overcome internal free-riding. In contrast with the existing literature, we derive equilibria of a symmetric model in which multiple agents per group are active. Our findings differ qualitatively from those of the individualistic all-pay auction: rents are not necessarily dissipated in equilibrium, total expected efforts vary across equilibria, and participation is expected to be greater. Moreover, equilibria with greater symmetry of behavior within a group are shown to have more “wasted” effort but also greater payoffs as overall efforts are lower. In contrast to standard economic intuition, free-riding can be beneficial for players as it reduces competition among groups. Examples of asymmetric group contests are also studied.     

Do Institutional and Individual Investors Differ in Their Preference for Financial Skewness?

Employing a unique sample of individual and institutional investors, we conduct experiments to determine investors’ preference for (or indifference to) financial skewness. We present investors with a series of stocks with varying levels of skewness. Using Instant Response Devices, we then collect investors’ choices to hold or sell each stock. Among stocks with equal expected returns, we find strong evidence that the sample investors use a prospect theory utility function rather than a mean-variance expected utility function to decide to sell or hold stocks. In the loss domain, we find that investors are ambivalent about the choice between positively and negatively skewed stocks. However, in the gain domain, we find that both individual and institutional investors prefer negatively skewed stocks—a contrast from previous research suggesting that individuals (and not institutional investors) prefer positive skewness. We also find evidence suggesting that reference points are important in financial decision making.     

Comparing post-operative resource consumption following transcatheter aortic valve implantation (TAVI) and conventional aortic valve replacement in the UK

Objective:

To define the in-hospital and 6-month post-discharge resource use, following Transcatheter Aortic Valve Implantation (TAVI) and conventional Aortic Valve Replacement (AVR) surgery within a single UK hospital.

Methods:

A local service evaluation of patients undergoing TAVI or AVR between January 2011 and May 2012 captured data until 6-months post-procedure, collected from hospital records and via a General Practitioner questionnaire. The main end-points were mortality, time in ITU/HDU, hospital length of stay (LoS), discharge destination, re-admission, and post-discharge primary/secondary care resource use. Sub-group analyses were performed for AVR patients aged ≥80 (AVR?≥?80) and with EuroSCORE of ≥10 (AVR ES?≥?10) to allow more direct comparison with ‘TAVI type’ patients.

Results:

Results are given as means (standard deviation) for TAVI (n?=?51), AVR (n?=?188), AVR?≥?80 (n?=?48), and AVR ES?≥?10 (n?=?47), respectively, unless otherwise stated. Age in years was 83.0 (8.1), 71.2 (13.1), 84.1 (2.7), 79.4 (7.1); EuroSCORE was 24.7 (11.9), 8.1 (6.4), 12.0 (6.0), and 16.5 (6.6); post-operative LoS (days) was 11.5 (11.2), 10.9 (10.8), 14.3 (16.7), and 15.2 (17.7). For discharged patients, 0%, 7%, 13%, and 9% had unplanned cardiac-related re-admissions within 30-days of discharge. Time to first readmission was 74.6 (34.0), 35.0 (34.2), 20.8 (9.7), and 22.6 (14.3) days.

Limitations:

This was a single-center retrospective evaluation, not prospectively powered to confirm differences in outcomes.

Conclusions:

Despite TAVI being performed in an older, higher risk population, LoS was similar to AVR. Most strikingly there were no cardiac-related re-admissions within 30-days for TAVI and time to first re-admission was significantly longer. This evaluation suggests that TAVI is clinically appropriate and provides economic advantages in both the hospital and post-discharge setting in this high risk group. Many patients undergoing TAVI are considered unfit for surgery and, hence, TAVI offers a treatment that delivers similar results to traditional AVR without the high risk associated with surgery.     

Regulatory Institutions And Structures

This article presents a legal perspective on regulatory institutions, procedures and processes. Analysis of legal instruments examines justifications for regulatory interventions, and considers the inadequacies of private law remedies to instances of market failure (such as monopolies, inadequate or asymmetric information, externalities and co–ordination problems). A distinction is drawn between social and economic regulation: the former deals with such matters as health and safety, and environmental and consumer protection; and the latter is needed where there is insufficient competition. Instruments of social regulation include prior approval, mandatory standards and information disclosure. A range of instruments of economic regulation is also assessed, including competition law, public ownership, price and quality regulation, and competitive public franchising. Analysis of regulatory processes focuses on regulatory rule–making, delegated regulation and self–regulation. Particular weight is given to different forms of accountability—financial, procedural and substantive—which draws attention to the significance of the public interest dimension of regulatory systems.     

Social Preferences,Sorting, and Competition*

In this paper, I investigate how an increase in competition for workers influences the impact of social preferences on labor‐market outcomes. By sorting themselves into firms with homogeneous work forces, workers can ensure that they suffer less from social comparisons. Competition promotes choice and thus facilitates sorting. However, competition also boosts rent differences in the labor market, because firms cannot curb internal inequity among its employees without losing workers to competitors. To reduce their exposure to social comparisons, workers might engage in inefficient sorting into unemployment. Consequently, social preferences can have strong effects (i.e., unemployment) in a competitive labor market, whereas they only have a slight impact on labor‐market outcomes in a monopsony.     

Growth Optimal Investment Strategy: The Impact of Reallocation Frequency and Heavy Tails

The strategy to maximize the long‐term growth rate of final wealth (maximum expected log strategy, maximum geometric mean strategy, Kelly criterion) is based on probability theoretic underpinnings and has asymptotic optimality properties. This article reviews the allocation of wealth in a two‐asset economy with one risky asset and a risk‐free asset. It is also shown that the optimal fraction to be invested in the risky asset (i) depends on the length of the basic return period and (ii) is lower for heavy‐tailed log returns than for light‐tailed log returns.     

Effective tax and subsidy rates on human capital in Canada

Abstract. Effective tax and subsidy rates (ETRs and ESRs) on human capital investment via post‐secondary education are estimated for Canada in the years 2000 and 2006. The flattening of the federal personal income tax structure in 2001 substantially reduced the tax disincentive for investment in human capital. Effective subsidy rates also declined as public spending did not keep pace with rising tuition fees. The change on the tax side was strong enough to dominate the subsidy reduction according to our main results, but disaggregation shows that this result did not hold in all cases. Results are shown for College, Master's, and PhD programs, in addition to Bachelor's degrees. They are also broken down by gender, and are shown for the 25th and 75th percentiles as well as the median. Provincial detail and 1997 results are provided in the case of Bachelor's graduates.