On the shape of the single-country and world commodity-substitution and factor-substitution surfaces under conditions of joint production

In recent years trade theorists have completed the task of specifying necessary and sufficient conditions for the single-country and world transformation surfaces to be locally of any assigned degree of flatness. However those conditions are relevant only if the technology is of the no-joint-products type. In the present note we derive necessary and sufficient conditions for the single-country and world transformation surfaces to be of any assigned degree of flatness under conditions of joint production; and we also obtain, as a by-product, necessary and sufficient conditions for the single-country and world equal-product surfaces to be of any assigned degree of flatness.     

International trade and capital accumulation in an overlapping generations model with a public intermediate good

We investigate the effects of a public intermediate good on trade patterns, capital accumulation, and the gains from trade in a two‐country, three‐sector overlapping generations model. A public intermediate good affects not only the productivity of private production but capital accumulation; thus, the results differ from those obtained in previous studies. First, opening to trade may accelerate capital accumulation in the higher‐savings country. Additionally, the country producing a public intermediate good more (which is labor‐intensive) may be the importer of the investment good (which is the most capital‐intensive). Finally, the lower‐savings country may have lower steady‐state welfare under trade.     

Optimal chaos,nonlinearity and feasibility conditions

Summary This study constructs a class of dynamic models in which optimal paths are generated by nonlinear transition functions similar to a tent map. We provide a sufficient condition under which such a transition function is a chaotic map. This characterization provides a way to construct complex nonlinear dynamics in a broad range of dynamic economic models.We would like to thank Michele Boldrin, William Brock, Richard Day, Mukul Majumdar, Lionel McKenzie, Tapan Mitra, Luigi Montrucchio, Jose Scheinkman, Rangarajan Sundaram and the referees for comments and discussions.     

Bank risk and non-interest income activities in the Indonesian banking industry

The recent trend of product diversification in the Indonesian banking industry underscores the importance of non-interest income activities. This study examines the relationship between product diversification and bank risk over the period of 2002–2008. Our analysis shows clear evidence that the effect of product diversification on bank risk depends highly on the bank's asset size. Specifically, the degree of product diversification is negatively associated with bank risk for small-sized banks. Conversely, the degree of product diversification is positively related to bank risk for large-sized banks. This finding suggests that deregulation encouraging banks to become more involved in non-traditional activities may have an adverse effect on the overall banking system where large-sized banks are playing a significant role in Indonesia.     

HOME EQUITY IN RETIREMENT

Retired homeowners dissave more slowly than renters, which suggests that homeownership affects retirees' saving decisions. We investigate empirically and theoretically the life-cycle patterns of homeownership, housing, and nonhousing assets in retirement. Using an estimated structural model of saving and housing decisions, we find first that homeowners dissave slowly because they prefer to stay in their house as long as possible but cannot easily borrow against it. Second, the 1996–2006 housing boom significantly increased homeowners' assets. These channels are quantitatively significant; without considering homeownership, retirees' net worth would be 28%–44% lower, depending on age.