Benchmarking and industry performance

In this paper I interrelate productivity analysis and the theory of industrial organization. A proposition proves that an industrial organization is efficient if and only if it is supportable in the entry-proofness sense. Industrial performance is decomposed in efficiency and technical change terms as well as an industrial organization component. The performance measure is shown to be consistent with the Solow residual and Malmquist productivity indices for its components are provided.     

Debt stabilization games in the presence of risk premia

As a result of the recent financial crisis and the ensuing economic recession, fiscal deficits have soared in many OECD countries. As a consequence, government debt has been on the rise again after a period of stable or declining government debt. In this paper we analyze debt stabilization in a country that features endogenous risk premia, imposed by financial markets that evaluate the probability of debt default by governments. Endogenous risk premia arise by assuming, e.g., simple linear relations between risk premia and the level of debt. As a result the real interest rate on government debt can be written as a constant (measuring the risk-free real interest rate corrected for real output growth) plus an endogenous risk premium that depends on the debt level. We bring such an endogenous risk premium into Tabellini (1986) model and analyze the impact of it. This gives rise to a non-linear differential game. We solve this game for both a cooperative setting and a non-cooperative setting. The non-cooperative game is solved under an open-loop information structure. We present a bifurcation analysis w.r.t. the risk premium parameter.     

Choice Based on Goals

This article introduces a goal-based view of consumer choice in which (1) choice is influenced by three classes of goals (consumption goals, criterion goals, and process goals), (2) goals are cognitively represented, and (3) the impact of a goal on choice depends on its activation. For each class of goals, we discuss how goal activation is influenced by direct (subconscious) goal priming, by spreading activation from choice options, from other goals, and from the context, and by goal (non-)achievement. Opportunities for modeling goal-based choice, the integration of emotions in a theory of goal-based choice, and relationships with dual-process theories of decision making are discussed. An expanded version of this paper is available from the first author.     

不完全竞争下区际贸易政策选择

大国的国内区际贸易可以为该国产业和企业在国际市场提供竞争力支撑。我国作为一个大国,区际贸易因贸易壁垒的广泛存在而受阻,难以为我国产业和企业在国际市场提供竞争力支撑。本文分析了不完全竞争产业区际贸易壁垒存在的经济驱动力,其基本结论是:区际贸易壁垒不仅有利于本地区厂商在本地市场中获得较大的市场份额(即地方保护效应),而且还可以增加本地区厂商的利润(即利润转移效应),并增加本地区的福利;但当所有地方政府都采取贸易保护政策时,会导致所有区域福利水平的降低,从而导致一国整体国民福利的损失。这一结论为中央政府采取相应的措施协调国内区际贸易政策以消除国内市场分割提供了理论依据。     

How useful is the PSE in determining agricultural support?

The support of the agricultural sector in developed countries plays a major role in the international policy agenda. The producer support estimate (PSE) is one of the best known measures which has been developed by OECD and is used all over the globe. In the PSE all types of support are aggregated and one of the main components (70% at OECD level) is the market price support (MPS). Here we show by means of characteristic examples that the MPS has no clear relation to basic economic measures determining support for producers as a consequence of policy intervention. The MPS overestimates the consequences of tariffs and export subsidies and underestimates the consequences of quota systems in determining producer support. Misperception of the size and directions of support may affect policy decision-making wrongly. The paper indicates that weighted average producer prices, corrected for quantity restrictions, may be more useful than the reference prices and quantities used by OECD.     

Wage–productivity differentials and Indian economic efficiency

A frontier-general equilibrium analysis with skill transformation evaluates the productivities of skilled and unskilled labor and potential of the Indian economy. We compare the wages of skilled and unskilled labor between 1994 and 2002 with their respective productivities over this period. Education is considered to be responsible for the skill formation over this period: the change in skilled labor supply is endogenous in the model. Compared to its productivity, skilled labor is underpaid in the initial period and overpaid in the second period. Unskilled labor is underpaid in both periods. A decomposition exercise shows that skilled labor gains from free trade, and stands to lose due to education and domestic competition in the second period. The annualized rate of return to education is between 7 and 10%. The economy operates below its potential in both periods, particularly in the second—due to trade limitations and the failure to capture the return to education. Service sectors are found to have potential to grow significantly.     

When are two-stage and three-stage least squares estimators identical?

Necessary and sufficient conditions are derived for the numerical equivalence of the two-stage and three-stage least squares estimators in a linear simultaneous equations model. The conditions are easy to verify in any practical application.     

Interdependent welfare functions and optimal income distribution

The relationship between income distribution and social welfare is empirically analyzed, while explicitly allowing for the interdependence of individual welfare functions. The social welfare function is taken to be an additive function of individual welfare functions of income (WFIs). On the basis of Dutch data it is found that under certain conditions (such as absence of effects of income redistribution on productivity) an equal distribution of incomes is suboptimal. The interdependence of WFIs appears to have a pronounced effect on policy conclusions concerning the desirability of income redistribution vis-à-vis economic growth.