Price Discrimination with Private and Imperfect Information

In this paper, I investigate the competitive and welfare effects of the improvements in information accuracy in markets where firms can price discriminate after observing a private and noisy signal about a consumer's brand preference. I show that when firms believe that consumers have a brand preference for them, then they charge more to these consumers, and this price has an inverse U‐shaped relationship with the signal's accuracy. In contrast, the price charged after a disloyal signal has been observed falls as the signal's accuracy rises. While industry profit and overall welfare fall monotonically when price discrimination is based on increasingly more accurate information, the reverse happens to consumer surplus.     

Is Private Saving in Latin America and the Caribbean Different?

Private saving and economic growth are intimately linked, and low saving rates in Latin America and the Caribbean (LAC) have often been held responsible for disappointing growth in the region. Thus, identifying factors that spur saving is critical. This paper surveys previous empirical studies on LAC, highlighting contradictions, omissions and in some cases inconclusiveness of findings. Relying on a large dataset and a nested econometric framework, it analyzes private saving patterns and explores the role of its determinants in LAC, across LAC sub‐regions and compared with other regions. While the results highlight great heterogeneity in private saving rates within LAC and compared with the rest of the world, saving determinants are broadly the same notwithstanding some differences in sensitivity and contributions' sizes, and include its lag, income, demographics and public saving.     

Country Differences in Material Deprivation in Europe

This paper assesses to what extent differences in the characteristics of individuals (micro‐level perspective) and country‐specific factors (macro‐level perspective) can explain country differences with respect to material deprivation levels. Thus, our work aims to simultaneously consider the macro dimension and the predominantly individually‐oriented study field of material deprivation using multilevel techniques. We make use of the European Union Statistics on Income and Living Conditions. Our results show that country‐specific factors seem to be much more relevant than individual effects in explaining country differences in material deprivation. We estimate that the introduction of country‐specific factors reduces the proportion of total variance due to between‐country differences in deprivation by 72.7 percent, while individual‐level variables reduce this proportion by only 9.4 percent. We also show, through interaction variables, that the effect of sociodemographic characteristics can be shaped by institutional and structural factors, especially by the level of GDP.     

Dissecting Exchange Rates and Fundamentals in the Modern Floating Era: The Role of Permanent and Transitory Shocks

In this paper, we apply a permanent–transitory decomposition method to analyze the link between nominal exchange rates and fundamentals in the modern floating era. The results suggest that transitory shocks dominate nominal exchange rate fluctuations, while permanent shocks dominate the variations in fundamentals. Therefore, the findings suggest that the nominal exchange rate should not be approximated by a pure random walk. Moreover, we find that unobserved fundamentals in the Taylor rule model can explain the transitory components in exchange rates.     

EFFECTS OF A CHILD'S DISABILITY ON AFFECTED FEMALE'S LABOUR SUPPLY IN AUSTRALIA

Australia has experienced a growing rate of child disability, with the rate of 3.7 per cent in 1998 increasing to 4.3 per cent in 2003 for children aged under four years and from 9.5 per cent to 10 per cent for children aged five to 14 years in the same period. However, surprisingly no study has examined the economic effects of child disability in the Australian context. This paper attempts to quantify the link between a child's disability and the work behaviour of the female in the affected family. Our findings provide empirical justifications for the current policy linking the severity level of child disability to the assessment of eligibility for Carer Payment (Child). We also found that child disability has different impacts on the labour market activities of married women and non‐married women. It appears that child disability imposes a greater hardship on non‐married women than on married women in terms of work choice decision. Once non‐married women manage to enter the labour force, they may have to stay on to work as usual even if they have a disabled child, because they may not have other family members to turn to for help as married women do.     

Has the IASB Been Successful in Making Accounting Earnings More Useful for Prediction and Valuation? UK Evidence

When producing International Financial Reporting Standards (IFRS), one of the main goals of the International Accounting Standards Board (IASB) was to create a set of standards which were more useful to investors as a predictive tool. We assess the success of the IASB in achieving this goal by investigating the effects of the introduction of IFRS on the relative information content of reported earnings and forecasted earnings under UK generally accepted accounting practices (GAAP) and IFRS. Results indicate that the value relevance of forecasted earnings is significantly lower under IFRS while the value relevance of reported earnings is significantly larger. These findings suggest that IFRS substitutes price‐relevant information previously provided to the market in the form of analyst forecasts with information encoded by companies in their reported earnings. This implies that the IASB was indeed successful in its stated goal and points towards IFRS forecasts being more accurate and less dispersed than UK GAAP forecasts. This, in turn, implies that analysts are able to provide more informative forecasts under IFRS than under pre‐IFRS regimes and that the aforementioned substitution effect is not a consequence of any decrease in the quality of forecasts under the new regime.     

Capital Market Development,Competition, Property Rights,and the Value of Insurer Product‐Line Diversification: A Cross‐Country Analysis

In this article, we show that the effect of product diversification on performance is not homogeneous across countries. Diversified insurance companies perform significantly worse than their focused competitors in countries with well‐developed capital markets, high levels of property rights protection, and high levels of competition. In addition, we find that the diversification–performance relationship for insurance companies depends on company size. For large insurers operating in countries with less developed capital markets, diversification significantly increases performance. Our results suggest that the optimal organizational structure may be different for insurers operating in emerging economies than for insurers operating in developed countries.     

Tax Auditing as a Public Good Game: An Experimental Study on Punishment and Compliance

Prior experimental studies on tax evasion generally assume that the budget and the probability of audit are exogenously given, and ignore taxpayers' incentives to detect evasion and their compliance behaviour under such incentives. The experimental evidence of the present paper shows that, on average, subjects are willing to spend 20 to 30% of their tax revenue on auditing. Compliance is also greatly improved if subjects can determine the budget and, hence, the probability of audit. These findings suggest that taking taxpayers' incentives to detect evasion into consideration is important for the design of compliance‐improvement audit schemes.     

Multivariate choices and identification of social interactions

This paper considers the identification of social interaction effects in the context of multivariate choices. First, we generalize the theoretical social interaction model to allow individuals to make interdependent choices in different activities. Based on the theoretical model, we propose a simultaneous equation network model and discuss the identification of social interaction effects in the econometric model. We also provide an empirical example to show the empirical salience of this model. Using the Add Health data, we find that a student's academic performance is not only affected by academic performance of his peers but also affected by screen‐related activities of his peers.