Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?

This paper asks whether the income gap between rich and poor nations can be explained by multiple equilibria. We explore the quantitative implications of a simple two-sector general equilibrium model that gives rise to multiplicity, and calibrate the model for 127 countries. Under the assumptions of the model, around a quarter of the world’s economies are found to be in a low output equilibrium. We also find that, since the output gains associated with an equilibrium switch are sizeable, the model can explain between 15 and 25% of the variation in the logarithm of GDP per worker across countries.     

Tradeable permits,missing markets,and technology

This paper examines the effects of missing markets, heterogeneous pollutants, and the pollution technology of firms on the efficacy of transferable pollution permits. Under the assumption of perfect competition in all markets, we show that if firms can substitute among pollutants, then setting the optimal number of permits for only one pollutant will not, in general, lead to an efficient outcome. The degree of the inefficiency will depend on the information set available to the regulator and the substitutability among pollutants by firms. When establishing transferable pollution rights regulators should, therefore, consider the technology of firms. If firms discharge pollutants in the same fixed proportions, then the regulator need only set a market for one of the pollutants to ensure an efficient outcome. Where firms can substitute among pollutants, however, establishing a market for only one pollutant provides an incentive for firms to substitute to unregulated ones. This is an important policy issue as substitutability among pollutants within and across production processes may dampen the dynamic advantages of a tradeable permit policy.     

The New Issues Puzzle

Companies issuing stock during 1970 to 1990, whether an initial public offering or a seasoned equity offering, have been poor long-run investments for investors. During the five years after the issue, investors have received average returns of only 5 percent per year for companies going public and only 7 percent per year for companies conducting a seasoned equity offer. Book-to-market effects account for only a modest portion of the low returns. An investor would have had to invest 44 percent more money in the issuers than in nonissuers of the same size to have the same wealth five years after the offering date.     

Societal aspects of technology assessment

Despite earnest admonitions in most technology assessments that institutional arrangements, social impacts, and societal implications be taken into account, the methodology commonly used not only systematically and systematically excludes these very dimensions but often creates a distorted focus. The paradigm dominating structural modeling in technology assessment is technically-oriented; the techniques, lineal descendants of systems analysis, are no more reliable for “assessing” the uncertain future than have been their ancestors in “managing” the present.     

How to achieve an ROI on your health care dollars

Offering employees self-care information, which encourages them to decide what to do for themselves with and without provider assistance, can be a low-cost, effective approach to health care cost management. Components of such a program may include a printed self-care guide, workshops, software and a nurse advice line. Self-care is a process, not an event and, to be effective, a self-care program needs to be reinforced by ongoing communication.     

Technological Forecasting: Who does it and how useful is it?

This article reports on the results of a survey undertaken to estimate the extent of use of Technological Forecasting (TF) in U.S. industry. The results demonstrate that more firms use TF than eight years ago, and the perception of its importance has increased greatly. The emphasis on TF, the range of time horizons for the forecasts and the use to which TF is put differ according to the nature of the industry and the organizational level within the firm. Based on these results, the characteristics of firms that find TF crucial to their business, and those that find TF unimportant, are developed.     

Fundraising and Optimal Policy Rules

This paper develops a simple spatial model of fundraising, in which charities select a target population to solicit donations. First, we show that in a competitive charity market without any intervention, the number of charities in the market and/or the overall net funds raised by charities may be suboptimal. Next, we analyze whether a social planner can prevent such shortcomings and show that a regulatory mechanism can be designed to achieve socially desirable outcomes. In contrast to the previous literature, our model does not necessarily produce monopoly as the optimal market structure. We show that if fixed costs associated with establishing charities are sufficiently low, then the optimal market structure is not a monopoly. Given the importance of the trade‐off between the volume and variety of charitable services, we argue that this result may be of particular interest to policy makers.     

Is Index Performance Achievable? An Analysis of Australian Equity Index Funds

This article examines the performance of index equity funds in Australia. Despite the significant growth in index funds since 1976, when the first index mutual fund was launched in the U.S., research on their performance is sparse in the U.S. and non-existent in Australia. This study documents the existence of significant tracking error for Australian index funds. For example, the magnitude of the difference between index fund returns and index returns averages between 7.4 and 22.3 basis points per month across index funds operating for more than five years. However, there is little evidence of bias in tracking error implying that these funds neither systematically outperform nor underperform their benchmark on a before cost basis. Further analysis provides evidence that the magnitude of tracking error is related to fund cash flows, market volatility, transaction costs and index replication strategies used by the manager.     

The somatic marker hypothesis: A neural theory of economic decision

Modern economic theory ignores the influence of emotions on decision-making. Emerging neuroscience evidence suggests that sound and rational decision making, in fact, depends on prior accurate emotional processing. The somatic marker hypothesis provides a systems-level neuroanatomical and cognitive framework for decision-making and its influence by emotion. The key idea of this hypothesis is that decision-making is a process that is influenced by marker signals that arise in bioregulatory processes, including those that express themselves in emotions and feelings. This influence can occur at multiple levels of operation, some of which occur consciously, and some of which occur non-consciously. Here we review studies that confirm various predictions from the hypothesis, and propose a neural model for economic decision, in which emotions are a major factor in the interaction between environmental conditions and human decision processes, with these emotional systems providing valuable implicit or explicit knowledge for making fast and advantageous decisions.