IS THERE PROGRESS IN ENVIRONMENTAL POLICY?

Environmental reformers often seek to impose partial, market-like mechanisms into costly, complex new environmental statutes. These mechanisms are likely to offset only a small fraction of the loss in economic welfare created by the rest of the legislation. A far better approach is to write cost-benefit requirements directly into all new legislation. Such requirements, when enforced by the courts, are likely to yield far greater improvements in economic welfare than are the weak market mechanisms found in new statutes such as the 1990 Clean Air Act.     

Medicare risk HMOs: careful consideration can yield rewards

Enlightened employers have discovered that Medicare HMOs, especially risk HMOs, offer employees and retirees a win-win alternative. They lower today's costs, controlling-term increases and offer the broadest, quality coverage. Implementing a "winning" Medicare risk HMO requires careful scrutiny of how the HMO operates and delivers care to the Medicare audience and depends on effective communication that is sensitive to the special needs of retirees.     

Trade liberalization and industrial structure in Spain: An applied general equilibrium analysis

We empirically evaluate the aggregate welfare effects and structural adjustment for the Spanish economy that would follow from trade liberalization with the European Economic Community. Recent theory suggests that the classical gains form more liberal trade relations could be amplified substantially if EEC liberalization permits Spanish industries to realize economies of scale. These effects depend upon the extent of trade creation and trade diversion resulting from preferential liberalization, which in turn depend on the existing patterns of Spanish resource allocation, trade, and comparative advantage. The estimated results are derived from disaggregated microeconomic model of the Spanish economy. We find that increasing returns can actually be beneficial or detrimental, depending upon the interactions between trade and policy toward domestic industry.     

Cross Validation Calibration Based Shrinkage – Revisited for the Construction of Prognostic Indices

The use of shrinkage methods for the construction of prognostic indices has been paid increasing attention in the literature on medical statistics in the last years. One approach for the construction of a shrinkage factor is cross validation calibration as suggested by van H ouwelingen and le C essie (1990). We investigate this approach in more detail. First we try to clarify why shrinkage factors constructed by cross validation calibration tend to be smaller than 1. Second we explain why use of this shrinkage factor can result in an improvement of the average prediction error. Third we investigate the possible gain for constellations relevant in medical research by means of a simulation study, focusing on the dilemma, that the improvement on average has to be paid by distinct deteriorations for some patients. Finally we conclude that it is necessary to rethink the choice of loss functions in constructing prognostic indices before recommendations about the use of shrinkage methods can be made.     

Rotation Patterns and Trend Estimation for Repeated Surveys Using Rotation Group Estimates

A general approach for constructing filters to produce trend estimates from a repeated survey is described. This approach accounts for the correlation structure induced by the rotation pattern used in the survey. Different filters are developed depending on whether the trend analysis is based on elementary estimates available for each rotation group or overall estimates obtained by combining the rotation group estimates. The properties of trend estimates obtained directly from the elementary estimates, those obtained from the simple average of the rotation group estimates and trend estimates obtained from the best linear unbiased estimates of the population characteristics of interest are compared. These comparisons are done for a number of rotation pattern, enabling an assessment of the impact of the choice of rotation patterns on trend estimation.     

Strategic Quality Decisions under Heterogeneous Resource Endowments

The literature on product competition advocates a differentiation strategy assuming firm homogeneity in resources. However, firm heterogeneity in resource endowments has long been recognized in economics. Merging these two perspectives, we show that the increase in consumer preference for quality leads to firms' aggressive price competition instead of quality differentiation. As consumers look for higher quality, the cost advantage arising from superior resources increases and makes head-to-head competition more profitable than accommodating a less efficient rival. When consumers are highly concerned about quality, even a small resource difference leads a more efficient firm to initiate cutthroat price competition for market dominance.     

Optimal restructuring under a political constraint

This paper considers the generalised second-best analytics of optimal restructuring under a political constraint, building on the modelling approach in Dehejia (1997, CEPR Discussion Paper No. 1552, Centre for Economic Policy Research, London, January 1997). It is shown that the second-best optimum entails administering the terms-of-trade shock fully at the initiation of the reform, just as in shock therapy, but that this must be supplemented with interventions in domestic factor markets. The effects of these interventions are to speed up the exit of the politically affected factor, labour, and to retard the exit of the other factor, capital, both of which serve to prop-up the wages of workers in the declining sector and hence address the political constraint. The results are in the spirit of the neoclassical theory of distortions and welfare: the optimal intervention targets the affected margin directly, in consonance with the ‘targeting’ principle of Bhagwati–Ramaswami–Johnson.     

Sectoral Shocks and Metropolitan Employment Growth

In this paper, we study the sources of industry employment growth in each of five metropolitan statistical areas (MSAs). The objective is to understand the relative importance of aggregate disturbances versus local sectoral shocks in generating observed employment fluctuations at the MSA level. The empirical evidence presented in this paper derives from structural vector autoregressions (SVARs), estimated for each of the five MSAs. Estimations use monthly employment data covering nine one-digit industrial categories for the period 1951:1–1999:8, as well as two variables that capture the influences of aggregate (i.e., national) shocks on MSAs. We find that within-MSA industry shocks explain considerably more of the forecast error variance in industry employment growth than do aggregate shocks. Sectoral shocks account for between 87 and 94% of the 36-month-ahead forecast error variance. Among individual local sectors, shocks to MSA-specific government, manufacturing, and service sector employment growth are the predominate sources of variability.     

A model of Russia's “virtual economy”

The Russian Economy has evolved into a hybrid form, a partially monetized quasi-market system that has been called the virtual economy. In the virtual economy, barter and non-monetary transactions play a key role in transferring value from productive activities to the loss-making sectors of the economy. We show how this transfer takes place, and how it can be consistent with the incentives of economic agents. We analyze a simple partial-equilibrium model of the virtual economy, and show how it might prove an obstacle to industrial restructuring and hence marketizing transition.