A political economy perspective on persistent inequality,inflation, and redistribution

In this paper we examine the dynamics of the link between inequality and inflation from a political economy perspective. We consider a simple dynamic general equilibrium model in which agents vote over the desired inflation rate in each period, and inequality is persistent. Inflation in our model is a mechanism of redistribution, and we find that the link between inequality and inflation within any period or over time depends on institutional and preference related parameters. Furthermore, we find that differences in the initial distributions of wealth can yield a diverse set of patterns for the evolution of the inflation and inequality link. Relative to existing literature, our model leads to more precise predictions about the inflation–inequality correlation. To that end, results in the extant empirical literature on the inflation and inequality link need to be interpreted with caution.     

Strategic Environmental Policies in the Presence of Foreign Direct Investment

We analyze strategic environmental standards in the presence of foreign direct investment. A number of foreign firms located in a host country compete with a domestic firm in another country to export a homogeneous good to a third country. When the number of foreign firms is exogenous, the host country applies a stricter environmental regulation than the other producing country. However, under free entry and exit of foreign firms, the host country may apply a less severe standard under both non-cooperative and cooperative equilibrium. We also find that the nature market structure does not affect the equilibrium values of total pollution if export subsidies are also used.JEL Classification: F2, H2     

A panel data analysis of productive efficiency in freestanding health clinics

By using a panel data on a number of freestanding health clinics in New York State over 1984–1987, we have estimated the production function for ambulatory care after controlling for unmeasured clinic-specific managerial efficiency. We found significant differences in management efficiency, which peaks around 50500 visits per year. The optimal staffing ratio between doctors, extenders and nurses was found to be around 1∶1/3∶1, in order for a clinic to be on the efficiency frontier.     

A note on a theorem by Professor Chow

Dhrymes (1973) pointed out an error in the determinant-minimizing algorithm worked out by Chow (1964) to obtain the Three-State Least Squares estimator. We prove that the procedure suggested by Dhrymes (1973) in this connection does not yield the 3SLS estimator either.     

Some concepts of distributive justice in bargaining problems

In this article we study the problems associated with distributive justice in an abstract framework originally conceived for the analysis of social choice and bargaining problems. Induced social choice correspondences are derived by considering alternatives which are invariant under permutations of the status quo point. We study in particular the fairness correspondence and a generalized Walrasian bargaining solution and establish links between the two concepts. The analysis in this article can be extended far beyond the point at which it ends.     

Subjective Probability Forecasts for Recessions

Probabilistic forecasts are often more useful in business than point forecasts. In this paper, the joint subjective probabilities for negative GDP growth during the next two quarters obtained from the Survey of Professional Forecasters (SPF) are evaluated using various decompositions of the Quadratic Probability Score (QPS). Using the odds ratio and other forecasting accuracy scores appropriate for rare event forecasting, we find that the forecasts have statistically significant accuracy. However, compared to their discriminatory power, these forecasts have excess variability that is caused by relatively low assigned probabilities to forthcoming recessions. We suggest simple guidelines for the use of probability forecasts in practice. JEL Classification E32,E37