Hard data or bleeding heart data: The value of qualitative data in research in a rural village in Matatiele District∗

Qualitative data derived from participant observation are often overlooked by development experts anxious to complete their projects speedily. But the surveys they use cannot reveal the details of poor people's lives.

This article presents the case of in‐depth research data about life in areas where development planners often intervene. It demonstrates some ways whereby poor Transkeian villagers deal with the exigencies of dependence on migrant labour, focusing on movements between domestic units and response to the availability of remittances.

It argues that developers should recognise the efficacy of such social practices as developed by the poor themselves. These practices may be usefully applied to effect development so long as this forms part of package aiming to fulfil the vital Southern African need for wealth redistribution. The development practioner's proper role is identified as one demanding direct engagement with the poor, acting as facilitators for their understanding of the structures which constrain them and intending to achieve their own carefully conceived aspirations.     

Stock price volatility in a multiple security overlapping generations model

A number of empirical studies have reached the conclusion thatstock price volatility cannot be fully explained within thestandard dividend discount model. This article proposes a resolutionbased upon a model that contains both a random supply of riskyassets and finitely lived agents who trade in a multiple securityenvironment. As the analysis shows there exist 2^K equilibriawhen K securities trade. The low volatility equilibria haveproperties analogous to those found in the infinitely livedagent models of Campbell and Kyle (1991) and Wang (1993, 1994).In contrast, the high-volatility equilibria have very differentcharacteristics. Within the high-volatility equilibria verylarge price variances can be generated with very small supplyshocks. Adding securities to the economy further reduces therequired supply shocks. Using previously established empiricalresults the model can reconcile the data with supply shocksthat are less than 10% as large as observed return shocks. Theseresults are shown to hold even when the dividend process ismean reverting.     

Auctions with costly information acquisition

We characterize optimal selling mechanisms in auction environments where bidders must incur a cost to learn their valuations. These mechanisms specify for each period, as a function of the bids in previous periods, which new potential buyers should be asked to bid. In addition, these mechanisms must induce the bidders to acquire information about their valuations and to reveal this information truthfully. Using a generalized Groves principle, we prove a very general “full extraction of the surplus” result: the seller can obtain the same profit as if he had full control over the bidders’ acquisition of information and could have observed directly their valuations once they are informed. We also present appealing implementations of the optimal mechanism in special cases. For helpful comments we thank George Deltas, David Martimort, an anonymous referee, and seminar participants in Mannheim, Rutgers, Tel Aviv, Toulouse, the Society for Economic Design 2002 conference in New York, and the 2003 North American Summer Meetings of the Econometric Society in Evanston, IL. Yossi Spiegel thanks the IIBR for financial assistance and Charles Zheng thanks the NSF for grant SES-0214471.     

The optimal supply of congested public goods for homogeneous and heterogeneous customers

Impure public goods resulting from the congestion effect are discussed in the literature solely for the case of homogenous populations where consumers have identical demands. We extend this to include heterogeneous populations, where demands are rectangularly distributed. We compare the optimal values of the control variables (quantity of the public good and the number of users) for both homogeneous and heterogeneous populations, as well as the social optimum values for both cases. We distinguish between two kinds of congestion effects: (1) increased usage which negatively affects the individual consumer's utility, and (2) the affect is located on the supply side, i.e. higher production costs due to an increased number of users.     

Cournot-Nash and Lindahl equilibria in pure public “bad” economies

Summary. Using a general equilibrium framework, this paper analyzes the equilibrium provision of a pure public bad commodity (for example pollution). Considering a finite economy with one desired private good and one pure public “bad” we explicitly introduce the concept of Lindahl equilibrium and the Lindahl prices into a pure public bad economy. Then, the Lindahl provision is analyzed and compared with the Cournot-Nash provision. The main results for economies with heterogeneous agents state that the asymptotic Lindahl allocation of the pure public bad is the null allocation. In contrast, the asymptotic Cournot-Nash provision of the public bad might approach infinity. Other results were obtained in concert with the broad analysis of the large finite economies with pure public bad commodities. Received: July 26, 2001; revised version: March 12, 2002 RID="*" ID="*" We are indebt to Nicholas Yannelis and anonymous referee for their valuable comments and suggestions. Correspondence to: B. Shitovitz     

Price Discrimination with One-way Separated Markets

This paper extends the traditional model of third degree price discrimination which assumes complete separation between markets to the case where markets are only one-way separated. In two periods of time one can carry over quantities of the product from the present to the future but not vice versa. We show that this model provides a wide framework for analysis of several promotional marketing strategies.     

Optimal state‐contingent regulation under limited liability

We consider an optimal regulation model in which the regulated firm's production cost is subject to random, publicly observable shocks. The distribution of these shocks is correlated with the firm's cost type, which is private information. The regulator designs an incentive‐compatible regulatory scheme, which adjusts itself automatically ex post given the realization of the cost shock. We derive the optimal scheme, assuming that there is an upper bound on the financial losses that the firm can sustain in any given state. We first consider a two‐type, two‐state case, and then extend the results to the case of a continuum of firm types and an arbitrary finite number of states. We show that the first‐best allocation can be implemented if the state of nature conveys enough information about the firm's type and/or the maximal loss that the firm can sustain is sufficiently large. Otherwise, the solution is characterized by classical second‐best features.     

The Welfare of Nations in a Globalized Economy

Is free trade always good for advanced industrialized countries? Are fears of globalization and outsourcing imaginary, totally unfounded, and misguided? Is the West always going to benefit from technological improvements in the East? This article constructs a few thought experiments to analyze such issues. The article provides some rational insight into the puzzle of why global trade is so controversial. The effects of technological improvements in the East on the welfare of both the East and the West are analyzed. The conclusion highlights some of the less desirable effects of outsourcing in a more globalized world.     

Quantitative easing and Japanese bank equity values

One of the primary motivations offered by the Bank of Japan (BOJ) for its quantitative easing program—whereby it maintained a current account balance target in excess of required reserves, effectively pegging short-term interest rates at zero—was to maintain credit extension by the troubled Japanese financial sector. We conduct an event study concerning the anticipated impact of quantitative easing on the Japanese banking sector by examining the impact of the introduction and expansion of the policy on Japanese bank equity values. We find that excess returns of Japanese banks were greater when increases in the BOJ current account balance target were accompanied by “non-standard” expansionary policies, such as raising the ceiling on BOJ purchases of long-term Japanese government bonds. We also provide cross-sectional evidence that suggests that the market perceived that the quantitative easing program would disproportionately benefit financially weaker Japanese banks. J. Japanese Int. Economies 20 (4) (2006) 699–721.