Heterogeneity in Economics

This paper argues that heterogeneity of agents’ characteristics plays a fundamental role in the economy and should do so in economic models. Three aspects are considered. Firstly the notion that assuming heterogeneity was a solution to the problem posed by the results of Sonnenschein Mantel and Debreu is considered and it is suggested that the more pragmatic approach adopted by Hildenbrand is likely to be more productive. Next the role of adaptation and evolution which necessarily involve variety or heterogeneity is examined. It is suggested that heterogeneity will persist since agents will only slowly learn to adapt and that in the meantime the environment will change. Lastly the role of heterogeneity in financial markets is examined. It is suggested that heterogeneous and varying expectations may account for many of the stylised facts which do not seem to be consistent with the standard financial markets model.“Variety is the spice of life”     

Unpredictable times: the extent,characteristics and correlates of insecure hours of work in Britain

This article presents new British evidence that suggests that cutting working hours at short notice is twice as prevalent as zero-hours contracts and triple the number of employees are very anxious about unexpected changes to their hours of work. The pay of these employees tends to be lower, work intensity higher, line management support weaker and the threat of dismissal and job loss greater. In addition, the well-being of these employees is lower and they are less committed to the organisations that employ them. However, the prevalence of insecure working hours is reduced by workplace level employee involvement exercised individually or through collective representation.     

Asymmetries between Rich and Poor Countries in Financial Crisis Responses: The Need for a Flow-of-Funds Approach

This paper focuses on the manner in which interest rates have been raised to, and sustained at, extremely high levels in developing and emerging market economies as a consequence of recent financial crises. By contrast rich market economies have typically lowered interest rates and injected liquidity in response to incipient financial crises. The paper first sketches the logic that lies behind extremely high interest rates (nominal and real) as an element of crisis resolution. It suggests that this reflects a money-phobic view of financial markets and also conflicts with some well-established economics. It then reviews the conventional wisdom about why richer economies have enjoyed sustained price stability in recent years and why this in turn has allowed their monetary authorities to be relaxed about injecting additional liquidity in response to LTCM (1998) and September 11 (2001)-type crises. It is pointed out that this conventional wisdom is also money-phobic in that it neglects the build up of corporate and government debt in bond and financial derivative form that has been associated with recent financial developments. This analysis helps to contest the common view that emerging market economies pay a higher price merely because their polices are "bad'. Finally, the paper reviews the manner in which the financial systems of developing and emerging market economies respond to the destabilization created by corrosively high real rates of interest. Even when bankruptcy arrangements are well established, certain new forms of financial flows and instruments are implicit in this response, but are invariably ignored in formal modelling.     

The Prevalence and Effects of Occupational Licensing

Our study provides the first national analysis of the labour market implications of workers who are licensed by any agency of the government in the USA. Using a specially designed Gallup survey of a nationally representative sample of Americans, we provide an analysis of the influence of this form of occupational regulation. We find that 29 per cent of the workforce is required to hold a licence, which is a higher percentage than that found in other studies that rely on state‐level occupational licensing data or single states. Workers who have higher levels of education are more likely to work in jobs that require a licence. Union workers and government employees are more likely to have a licence requirement than are non‐union or private sector employees. Our multivariate estimates suggest that licensing has about the same quantitative impact on wages as do unions — that is about 15 per cent — and that being both licensed and in a union can increase wages by more than 24 per cent. However, unlike unions which reduce variance in wages, licensing does not significantly reduce wage dispersion for individuals in licensed jobs.     

Market Conditions and Housing Choices: A Comparison of Homeownership Across Three Decades

This article uses information on out‐of‐pocket housing cost and house price appreciation along with the geo‐coded version of the Panel Study of Income Dynamics to consider the differences in the impact of these and other variables on the tenure choices of sample households across three time periods, the 1970s, the 1980s and the 1990s. Specifically, an extended continuous time probability model is used to examine households' transitions from renting to owning and subsequent possible transitions either back to rental tenure or to another owned home during our three observation periods. Coefficient estimates show that financial variables such as house price appreciation and out‐of‐pocket housing cost play an important role in determining all the transitions. In addition, the analysis demonstrates the interesting result that the cumulative likelihoods of homeownership derived from the model are consistently lower than the probabilities of an initial transition to homeownership from rental tenure during the observation period. Finally, the magnitude and timing of the impact on homeownership of a policy experiment that eliminates the mortgage interest deduction are shown to differ substantially across the three decades.     

Geography, insolation, and vitamin D in nineteenth century US African-American and white statures

Using a new source of nineteenth century US state prison records I contrast the biological living conditions of comparable African-Americans and whites. Although blacks and whites today in the US reach similar terminal statures, nineteenth century African-American statures were consistently shorter than those of whites. Greater insolation (vitamin D production) is shown to be associated with taller black and white statures and a considerable share of the stature difference between US blacks and whites was attributable to insolation and vitamin D production. Black statures increased during the antebellum period, while white statures declined. Black and white statures both decreased after the Civil War. Farmers were taller than workers in other occupations, and an alternative explanation for stature variation by social class is considered.     

Stuck on gold: Real exchange rate volatility and the rise and fall of the gold standard, 1875-1939

Did the gold standard diminish macroeconomic volatility? Supporters thought so, critics thought not, and theory offers ambiguous messages. Hard regimes like the gold standard limit monetary shocks by tying policymakers' hands; but exchange-rate inflexibility compromises shock absorption in a world of real disturbances and nominal stickiness. A model shows how lack of flexibility affects the transmission of terms-of-trade shocks. Evidence from the late nineteenth and early twentieth century exposes a dramatic change. The classical gold standard did absorb shocks, but the interwar gold standard did not, supporting the view that the interwar gold standard was a poor regime choice.     

Decision parameters in global R&D management

This paper addresses the question of which variables have what kind of impact on the decision to locate new R&D facilities in countries different from the home country of a corporation. In the first section of the paper we demonstrate the complexity of this question by referring to empirical research, managerial statements and literature. We then develop a conceptual model for the location decision of international R&D activities. This is based on Porter's (1990) framework of the factors constituting the competitive advantage of nations. In the final section of this paper we show how such a model helps us to understand and also to explain a number of management issues related to global R&D activities.     

An Empirical Analysis of Hedonic Regression and Grid-Adjustment Techniques in Real Estate Appraisal

Multiple regression analysis has become increasingly popular when appraising residential properties for tax purposes. Alternatively, most fee appraisers and real estate brokers use the traditional sales comparison approach. This study combines the two techniques and uses multiple regression to generate the adjustment coefficients used in the grid adjustment method. The study compares the combined grid-regression method with ordinary regression and defines the market conditions under which each method is likely to be more effective. The grid-regression method is found to be more accurate for relatively homogeneous housing markets, and the multiplicative percentage adjustment method (MPAM) the preferred approach.     

Nutrition planning is alive and well, thank you

This article is a rejoinder to an article by John Osgood Field which discussed the failure of multisectoral nutrition planning. The author argues that, although nutrition planners may have been overly optimistic in their hopes that political systems could be made responsive to the problems, significant advances have been achieved. He outlines many of the successes of nutrition planning and the importance of multisectoral work. Malnutrition is a problem that escapes all the standard programmes, and cannot be tackled through the health and agriculture sectors alone.