EQUIVALENCE SCALE SENSITIVITY OF POVERTY STATISTICS FOR THE MEMBER STATES OF THE EUROPEAN COMMUNITY

Using microdata from Household Budget Surveys of the Member States of the European Community, this paper examines the sensitivity of poverty statistics with respect to the choice of the equivalence scale. The results show that the ranking of the countries with respect to the overall poverty incidence is hardly affected when different equivalence scales are used. However, the composition of the poor population shows considerable changes when e.g. subjective equivalence scales are used instead of the OECD equivalence scale. The poverty incidence among specific household groups, such as single elderly and households with children, is particularly sensitive to the choice of the equivalence scale.     

Public pricing of final and intermediate goods in the presence of externalities

The purpose of this paper is to investigate the impact of externalities on pricing decisions by a public or a private regulated firm selling both final and intermediate goods. The externalities generate feedbacks in demand that affect both consumers and producers. The model is very general in that it does not impose constant returns to scale on private production, allows for distributional effects of both the publicly determined prices and private sector profits, and captures the general equilibrium effects of public pricing. Socially optimal pricing rules are derived, and the relation of the results with previous models of pricing in the presence of externalities is investigated.     

Trade Gains, Paretian Transfer and the Tragedy of the Commons

Consider trade liberalization between two countries, each of which produces two private goods and provides on a voluntary basis one public good (the common). In these circumstances, what are the consequences of trade liberalization on the production of the public good and on welfare in both countries? Using a Ricardian framework, we first show that the opening of trade increases the opportunity cost of producing the public good in both countries and will therefore reduce the aggregate supply of the public good. On the other hand, at the autarky equilibrium, only one country supplies the public good, the other “free rides”. The analysis of the welfare incidence of the opening of trade then reveals that the country which provides the public good under autarky always enjoys a welfare gain from trade while the free rider under autarky does not unless the terms of trade are sufficiently in its favour to compensate for the reduction in the supply of the common. Finally, if all countries involved in trade liberalization can without cost coordinate their supplies of the common, then the implementation of the first-best outcome is shown to be possible with a conditional Paretian transfer scheme.     

How Proper Is Sequential Equilibrium?

A strategy profile of a normal form game is proper if and only if it is quasi-perfect in every extensive form (with that normal form). Thus, properness requires optimality along a sequence of supporting trembles, while sequentiality only requires optimality in the limit. A decision-theoretic implementation of sequential rationality, strategic independence respecting equilibrium (SIRE), is defined and compared to proper equilibrium, using lexicographic probability systems. Finally, we give tremble-based characterizations, which do not involve structural features of the game, of the rankings of strategies that underlie proper equilibrium and SIRE.Journal of Economic LiteratureClassification Numbers: C70, C72.     

I did not call him “Fritz”: Personal recollections of Professor F. A. v. Hayek

Nobel Laureate in Economic Sciences, 1986.     

The convertibility of the rouble

Conclusion After a relatively long period of discussion, characterised by an uncertain approach towards transition, the Soviet authorities are now moving with decision towards the market. This statement applies to the reform as a whole and in particular to convertibility.The convertibility process in the Soviet Union started from a relatively unfavourable position: not only because of the complete (internal and external) inconvertibility of the Rouble, but also because the country's past displays a sort of structural propensity towards inconvertibility.It took the Soviet authorities some years to dismiss the doctrine of a parallel currency and the idea that convertibility is the final step of the transition. Recent legislative production in the Soviet Union (in particular the Banking law and the Currency law) are a good sign that they are proceeding in the right direction and practical experience seems to confirm this statement.In 1991 the process has accelerated and more important progress was made towards unification of the exchange rates and the creation of a currency market: these are two steps which are fundamental for achieving partial external convertibility (current account operations made by non-residents), which in its turn is the first step towards broader convertibility. Probably within the end of the year external partial convertibility will be reached. This at last will increase the foreign contribution to the Soviet economy, thus improving domestic conditions. The events of August 1991 will most likely further accelerate the pace of the process, which is now without doubt irreversible.Even if qualitatively positive results are achieved in the reform process however, great effort must still be made not only to complete and consolidate these results, but also to proceed further towards internal and financial convertibility.