The Identification of Preferences from Equilibrium Prices under Uncertainty

The competitive equilibrium correspondence, which associates equilibrium prices of commodities and assets with allocations of endowments, identifies the preferences and beliefs of individuals under uncertainty; this is the case even if the asset market is incomplete. Journal of Economic Literature Classification Numbers: D52, D80.     

Pairwise Multiple Comparisons under Violation of the Independence Assumption

Several multiple comparison procedures (MCPs)were compared for their rates of Type I error and fortheir ability to detect true pairwise differencesamong means when independence of observationsassumption were not satisfied. Monte Carlo resultsshowed that, if independence is not met, none of theprocedures maintain controlled at the chosennominal level, neither using error rate per comparisonor the error rate experimentwise. However, once thedependence of the data was corrected the Type I errorrate was maintained at the same level as when thecorrelation was zero in all the procedures, except forthe Fisher's (1935) least significant differenceprocedure (LSD) and Hayter's (1986) two-stagemodified LSD procedure (FH). At the sametime, conform the correlation increased by a smallamount the power rates also, specially, when the powerwas examined using per-pair power.     

The stock market and investment: another look at the micro-foundations of q theory

This paper introduces a novel distinction between real q andfinancial q. The paper examines three versions of financialq developed by Brainard and Tobin, Minsky and Hayashi, respectively.These theories differ regarding the nature of stock market pricedetermination and their use of marginal productivity theory.It is shown that non-profit maximising behaviour by managersdoes not invalidate q theory. It is also shown that if managersand shareholders have different profit expectations, this leadsto an equilibrium value of q that differs from unity. Lastly,the implicit claims in q theory regarding the efficient roleof stock markets as regulators of capital accumulation are shownto depend on assumptions about stockholder behaviour.     

Changes in managerial pay structures 1986-1992 and rising returns to skill

We examine the relationship between wages and skill requirementsin a sample of over 50,000 managers in 39 companies between1986 and 1992. The data include an unusually good measure ofjob requirements and skills that can proxy for human capital.We find that wage inequality increased both within and betweenfirms from 1986 and 1992. Higher returns to our measure of skillaccounts for most of the increasing inequality within firms.At the same time, our measure of skill does not explain muchof the cross-sectional variance in average wages between employers,and changes in returns to skill do not explain any of the timeseries increase in between-firm variance over time.     

Dynamic Optimization of Long-Term Growth Rate for a Portfolio with Transaction Costs and Logarithmic Utility

We study the optimal investment policy for an investor who has available one bank account and n risky assets modeled by log-normal diffusions. The objective is to maximize the long-run average growth of wealth for a logarithmic utility function in the presence of proportional transaction costs. This problem is formulated as an ergodic singular stochastic control problem and interpreted as the limit of a discounted control problem for vanishing discount factor. The variational inequalities for the discounted control problem and the limiting ergodic problem are established in the viscosity sense. The ergodic variational inequality is solved by using a numerical algorithm based on policy iterations and multigrid methods. A numerical example is displayed for two risky assets.     

Context Variables as Cognitive Effort Modulators in Decision Making Using an Alternative-Based Processing Strategy

This paper examines how a number of decision context variables affect the cognitive effort required for decision making on dichotomical choice tasks. Subjects are trained in the use of a strategy in which information processing is alternative-based. The correlation between the attributes of the alternatives and the mean and variance of the difference between the attributes is manipulated. The results show that the effort needed for decision making increases as the mean of the differences decreases. Yet, neither the variance of the differences nor the correlation context affect the decision making effort in this type of strategies.     

Modelling the Non-market Environmental Costs and Benefits of Biodiversity Projects Using Contingent Valuation Data

CV studies rarely ask willingness to accept (WTA)questions, yet there are a range of environmentalprojects where there are likely to be potential losersas well as gainers. This paper presents evidence fromsix biodiversity projects that the inclusion ofcontingent compensation payments from thoserespondents who preferred the status quo cansubstantially reduce net project benefits, even whenthe proportion of losers is relatively small. Astatistical model for estimating the mean welfaremeasure from dichotomous choice data which allows forboth positive WTP, zero WTP, and WTA is described. Asmany environmental projects are likely to create bothgainers and losers, we recommend that CV analysts giveserious consideration to the collection and analysisof WTA data otherwise they risk generating biasedestimates of project benefits.     

Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs

This article formalizesthe theoretical interconnections among four post–industrialrevolution phenomena—the industrialization and growth take-offof rich northern nations, massive global income divergence, andrapid trade expansion. In stages-of-growth model, the four phenomenaare jointly endogenous and are triggered by falling trade costs.In the first growth stage (with high trade costs) industry isdispersed internationally, and growth is low. In the second (mediumtrade costs), the North industrializes rapidly, growth take-off,and the South diverges. In the third (low trade costs), highgrowth and global divergence become self-sustaining. In the fourthstage, when the cases of ``trading' ideas decreases, the Southquickly industrializes and converges.