Adjustable rate mortgages and housing demand: The impact of initial rate discounts

This article investigates the impact of ARM initial rate (teaser) discounts on mortgage choice and housing demand. Because discounted ARM loans may reduce expected user costs, theoretical models predict a positive impact on housing expenditures. To test the hypothesis, a simultaneous model of housing expenditures conditioned upon mortgage instrument choice is estimated using a national sample of transactions for the 1986 to 1988 period. The results indicate that overall housing demand would have been reduced by approximately 13 percent during the period in the absence of ARM loans.     

Optimal Factor Income Taxation in the Presence of Unemployment

According to conventional wisdom internationally mobile capital should not be taxed or should be taxed at a lower rate than labour. An important underlying assumption behind this view is that there are no market imperfections, in particular that labour markets clear competitively. At least for Europe, which has been suffering from high unemployment for a long time, this assumption does not seem appropriate. This paper studies the optimal factor taxation in the presence of unemployment which results from the union-firm wage bargaining both with optimal and restricted profit taxation when capital is internationally mobile and labour immobile. In setting tax rates the government is assumed to behave as a Stackelberg leader towards the private sector playing a Nash game. The main conclusion is that in the presence of unemployment, the conventional wisdom turns on its head; capital should generally be taxed at a higher rate than labour.     

In Support of Trigger Strategies: Experimental Evidence from Two-Person Noncooperative Games

Cooperative equilibria can be supported in a repeated game when players use trigger strategies. This paper tests how well trigger strategies explain behavior in two-person experimental games. Reducing payoffs for choices larger than the Cournot level induces smaller average outputs, behavior generally consistent with trigger strategy models. Reducing payoffs for choices well above the Cournot level will not affect behavior if actions are consistent with a trigger strategy involving longer-lived, less intense punishment phases (the grim-reaper strategy), but would matter for trigger strategies with short-lived but intense punishment phases. Results show that behavior is most consistent with the former.     

What It Was Like,What Happened,and What It's Like Now: Developments in Telecommunications Over Recent Decades

A survey of telecommunications over past decades. Overall prices of services have declined less rapidly since deregulation, with local rates rising, long-distance rates falling. Productivity increased strongly during period of Bell System regulated monopoly. Service quality of traditional telephone services has fallen, but many new services have been added. Innovations in customer premise equipment since deregulation far exceed those in prior years. Many major network innovations occurred during years of Bell System monopoly and network innovations have continued since. Actions by the Federal Communications Commission actions anteceded government antitrust case and are responsible for most of the changes since 1978. Most of the beneficial changes have little, if anything, to do with antitrust case and divestiture.     

Equalizing opportunity through small business development: A south african perspective

The active development of the small firm sector is thought to present a vehicle highly appropriate to the task of equalizing opportunity in a very unequal society—the developing country of South Africa. This article seeks to evaluate the merits of the above assumption. It calls for a closer understanding of the unique difficulties encountered by a minority business group that has experienced a long history of prejudice and discrimination, namely the black, essentially small business sector of South Africa. The author calls for careful appraisal of available development initiatives in order to effectively serve the interests of this group.     

Rational choice models of crimes by youth

This article presents research findings from three analyses of criminal activity among youth. The data set used in all three is the National Longitudinal Survey of Young Americans, a data set that is particularly appropriate for this type of analysis. The work examined the relationship between criminal behavior and family and moral influences; the impact of legitimate labor market activity on participation in crime; and the effect of school enrollment on criminal activity. The findings confirm the hypothesis that black and white differences in criminal participation partially reflect differences in economic opportunity.     

BETTER THAN KYOTO: CLIMATE STABILITY BONDS

The Kyoto Treaty is flawed in that it attempts to tackle greenhouse gas emissions, rather than climate instability. This article describes a new financial instrument, Climate Stability Bonds, which would inject market incentives into the achievement of a stable climate. The bonds would be redeemed only when a specified degree of climate stability has been achieved. Because the bonds reward the desired outcome, rather than activities, programmes or institutions, they would provide incentives to achieve climate stability more cost-effectively than Kyoto.     

An Introduction to Best Empirical Models when the Parameter Space is Infinite Dimensional*

Ploberger and Phillips (Econometrica, Vol. 71, pp. 627–673, 2003) proved a result that provides a bound on how close a fitted empirical model can get to the true model when the model is represented by a parameterized probability measure on a finite dimensional parameter space. The present note extends that result to cases where the parameter space is infinite dimensional. The results have implications for model choice in infinite dimensional problems and highlight some of the difficulties, including technical difficulties, presented by models of infinite dimension. Some implications for forecasting are considered and some applications are given, including the empirically relevant case of vector autoregression (VAR) models of infinite order.     

Implementation of International Environmental Commitments in Countries in Transition

MOCT-MOST: Economic Policy in Transitional Economies -