Long-Term Yield Rates for Actuarial Valuations

Consider the problem of valuing a life insurance or annuity on a person aged 20. The valuation formula requires that we know the prices of pure-discount bonds with maturities of up to 100 years. This article investigates the problem of estimating the yield rate for a pure-discount bond that matures in 100 years. It is shown how to estimate this yield rate with parametric and nonparametric models on the price of U.S. Treasury strips. Moreover, confidence intervals on these rates are constructed with bootstrap methods.     

Taxes,female labour supply and household income: differences between the Netherlands and the Federal Republic of Germany

The article investigates the effect of taxes and social premiums on female labour supply and household income. A comparison is made between labour supply and household income between the Netherlands and the Federal Republic of Germany in 1992. A discrete choice model for labour supply is used in which taxes and social premiums are implicitly incorporated. As male labour supply is highly inelastic an individual, male chauvinist model is used. The estimated models are used to simulate the effect of the differences in the tax and social premium system on the differences in labour supply and income between both countries. The results indicate that labour force participation is higher the more individualized the system. The German system leads to a lower tax burden compared to the Dutch system. It is concluded that differences in the tax and social premium system between both countries have hardly any influence on the differences in the inequality of net household labour income. There is evidence that the German system leads to a slightly more unequal distribution of household income. It is also concluded that although the tax and social premium system does influence labour supply and income, it can be doubted whether these effects are substantial.     

Information provision in financial markets

We set up a rational expectations model in which investors trade a risky asset based on a private signal they receive about the quality of the asset, and a public signal that represents a noisy aggregation of the private signals of all investors. Our model allows us to examine what happens to market performance (market depth, price efficiency, volume of trade, and expected welfare) when regulators can induce improved information provision in one of two ways. Regulations can be designed that either provide investors with more accurate information by improving the quality of prior information, or that enhance the transparency of the market by improving the quality of the public signal. In our rational expectations equilibrium, improving the quality of the public signal can be interpreted as a way of providing information about the anticipations and trading motives of all market participants. We find that both alternatives improve market depth. However, in the limit, we show that improving the precision of prior information is a more efficient way to do so. More accurate prior information decreases asymmetric information problems and consequently reduces the informativeness of prices, while a more accurate public signal increases price informativeness. The volume of trade is independent of the quality of prior information and is increasing in the quality of the public signal. Finally, expected welfare can sometimes fall as prior information or the public signal become more precise.     

III. Weltwirtschaft und wirtschaft einzlner länderund und gebiete

Ohne Zusammenfassung     

Implementation of the revenue-maximizing auction by an ignorant seller

In a general auction framework with independent private values, we propose a game, with a simple economic interpretation, that allows to implement the revenue-maximizing auction outcome when the seller ignores the distributions of the different bidders’ valuations. In this detail-free implementation procedure, an ascending-price contest is organized and the winner volunteers a payment to the seller; this payment can then be challenged by another bidder who knows the distribution of the winner’s valuation.Received: 4 June 2003, Accepted: 4 April 2005, We have benefited from comments by seminar participants at the Econometric Society North American Winter Meeting and European Meeting, PURC University of Florida, University of Wisconsin, as well as by two referees and an Associate Editor. The authors also wish to acknowledge the hospitality of IDEI in Toulouse where they started this research. The second author acknowledges the financial support of CRSHC, CIRANO and the Bell University Labs.