Asset Markets and Investment Decisions*

In an incomplete asset market, firms assign values to investment plans by projecting their payoffs on the span of the payoffs of marketed assets. This is a criterion that does not require firms to possess information, such as the marginal valuation of revenue across date‐events by shareholders, which is not directly observable; rather, it is based on the prices and payoffs of marketed assets. Under standard assumptions, competitive equilibria exist. However, even in the absence of nominal assets, competitive equilibrium allocations are generically indeterminate. The set of competitive equilibria is indexed by the price level at each state of the world, which has implications for the effectiveness of monetary policy.     

Tax Incentives and Household Investment in Complementary Pension Insurance: Some Recent Evidence From the Italian Experience

We show by a simple difference‐in‐difference methodology that, contrary to prior research, robustly raising the deductibility limit associated to pension fund holdings in Italy did not succeed in boosting households’ contributions to this form of savings. Some other empirical findings also suggest that this policy measure may have not even increased the average amount of first‐time contributors to such funds. In view of the specific features of the Italian market for complementary insurance (relatively young and less developed), these empirical results might be of interest to policymakers acting in countries with similar features (for instance, some of the more recent EU members).     

Taxes and Marriage: A Two‐Sided Search Analysis*

This article analyzes the effects of differential tax treatment of married and single individuals in the United States on marriage formation and composition, divorce, and labor supply. We develop a marriage‐market model with search frictions and heterogeneous agents that is sufficiently rich to capture key elements of the problem under consideration. We then calibrate the model and use it to evaluate the quantitative effects of several tax reforms aimed at making the tax law neutral with respect to marital status. We find that these reforms (i) systematically increase the labor supply of married females, with changes ranging from 0.3 to 10.1 percent; (ii) have substantial effects on the correlation of spouses’ incomes, which changes from 0.2 to values between 0.185 and 0.334; (iii) can lead to either an increase or decrease in the fraction of people married, with changes that range from ?0.6 to 2.4 percent.     

Distortions,endogenous managerial skills and productivity differences

We develop a span-of-control model where managerial skills are endogenous and the outcome of investments over the life cycle of managers. We calibrate this model to U.S. plant-size data to quantify the effects of distortions that are correlated with the size of production units, and how these effects are amplified by managerial investments. We find a quantitatively important role for managerial investments. Distortions that consist of a tax rate of 20% on the top 50% managers reduce steady-state output by about 14.6% in our benchmark model. When skills are exogenous the reduction is about 9.2%.     

On the correlation between stocks and art market returns

We estimate the correlation between the returns of an S&P 500-based portfolio and Renoir paintings. Unlike previous studies that relied on single-point estimates of the correlation to explore the merits of adding art assets to a portfolio of stocks, we rely on a wild bootstrap algorithm to determine confidence intervals for the correlation estimates. We find that these confidence intervals are so wide (a situation not peculiar to our example) that it seems impossible to make absolute remarks about the merits of adding art-related assets to stocks portfolios. Moreover, our results suggest that previous conclusions regarding the correlation between art and stocks should be taken with some scepticism.     

Affective commitment and future purchase intentions in the performing arts: An empirical approach

We examine whether affective commitment can influence customers' future purchase intentions. Our empirical approach focuses on the performing arts sector in which we interviewed 927 theatregoers at the entrances or exits to 150 theatres throughout Spain. The theoretical relationship management model proposed herein provides an analysis of the role played by satisfaction, trust, and commitment in future purchase intentions. Our findings reveal that affective commitment mediates the relationship between future purchase intention and both satisfaction and trust. We discuss the theoretical and management implications of our findings and identify some possible future research directions. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

The origin of money: A survey of the contemporary literature

Introducing money into a scheme of general economic equilibrium entails manifold problems, which have emerged in many contributions to the literature. Some of these problems have been adequately addressed at the level of micro-based approaches which can be traced back to the monetary theory of Carl Menger. In this survey we shall review such issues, after which we shall attempt to illustrate the contribution to solving the problem of the origin of money offered by the literature on transaction and information costs inspired by Menger's monetary theory. (JEL: E40, E42, D83) Although this paper is the fruit of a common effort, credit for Sections 1, 2, 3, 5, 5.1, 5.2, 5.3 goes in particular to Giuseppe Mastromatteo, and for Sections 4, 4.1, 4.2, 4.3, 4.4, 6 to Luigi Ventura. The authors would like to thank the referees for most useful comments and suggestions; the usual disclaimer applies.     

Fertility,income distribution and economic growth: theory and cross-country evidence: comments

In a recent paper, Galor and Zang attempt to explain the large observed cross-country disparities in the levels and growth rates of per capita output. Cross-country variation in family size and income distribution patterns are an important element of such an explanation. Galor and Zang support the arguments put forth in their paper by using a simple variation of the model published by Galor and Zeira in 1993 and 70 cross-sectional growth regressions in the style of Barro's 1991 work. Some points in Galor and Zang's recent work require clarification. The author therefore reviews their work with the goal of clarifying some of Galor and Zang's underlying assumptions which are not that clear in their paper. The aim is to give the reader an idea of what Galor and Zang's paper does and does not do.     

Prudence and precautionary saving

Households save income for various reasons, including the need to plan for the future, the intention to leave a bequest, and the desire to guard against unforeseen expenditures and income fluctuations. Although it is widely believed that prudent individuals engage in precautionary saving, the extent of such saving is not well understood. This paper develops a model of saving with an explicit role for the Leland-Kimball measure of prudence. Estimation of the model using household-level data from Italy suggests an average value of relative prudence near 4 or 5, with approximately 15 to 36 percent of total saving being precautionary. The authors are grateful to an anonymous referee for helpful comments.