Exit from Rent‐Seeking Contests

The object of this paper is to investigate the long‐run behaviour of rent‐seekers in a situation where they incur negative expected payoffs due to increasing returns to rent‐seeking expenditures. To this end, we embed the one‐shot rent‐seeking game presented by Tullock (1980) in the war‐of‐attrition framework. In this multi‐period setting, each player not only determines his or her rent‐seeking expenditure but also chooses a mixed strategy on whether to stay in or exit from rent‐seeking competition in each period. JEL Classification Numbers: D72, C72, L12     

Pseudo-likelihood estimation and bootstrap inference for structural discrete Markov decision models

This paper analyzes the higher-order properties of the estimators based on the nested pseudo-likelihood (NPL) algorithm and the practical implementation of such estimators for parametric discrete Markov decision models. We derive the rate at which the NPL algorithm converges to the MLE and provide a theoretical explanation for the simulation results in Aguirregabiria and Mira [Aguirregabiria, V., Mira, P., 2002. Swapping the nested fixed point algorithm: A class of estimators for discrete Markov decision models. Econometrica 70, 1519–1543], in which iterating the NPL algorithm improves the accuracy of the estimator. We then propose a new NPL algorithm that can achieve quadratic convergence without fully solving the fixed point problem in every iteration and apply our estimation procedure to a finite mixture model. We also develop one-step NPL bootstrap procedures for discrete Markov decision models. The Monte Carlo simulation evidence based on a machine replacement model of Rust [Rust, J., 1987. Optimal replacement of GMC bus engines: An empirical model of Harold Zurcher. Econometrica 55, 999–1033] shows that the proposed one-step bootstrap test statistics and confidence intervals improve upon the first order asymptotics even with a relatively small number of iterations.     

HONG KONG'S INFLATION AND DEFLATION UNDER THE US DOLLAR PEG: THE BALASSA-SAMUELSON EFFECT OR EXPORT PRICE SHOCKS?

Hong Kong's US dollar peg, adopted in 1983, has failed to deliver price stability. Hong Kong experienced high inflation before the Asian financial crisis and prolonged deflation after it. The annual rate of inflation (GDP-deflator based) was 7.4% in the first period (1985–97) and −2.0% in the second (1998–2007). There was no clear trend for the inflation rate to converge to the US level. The nominal anchor via a fixed exchange rate in Hong Kong had an upward and downward drift in the order of 4% from the US inflation rate, casting doubt on the anchor's efficacy. Despite Hong Kong's high output growth relative to that of the United States, the Balassa-Samuelson effect was not the main factor behind the pre-Asian crisis inflation. Price shocks in service exports played a major role in Hong Kong's general prices through the two periods.     

Solutions For Some Dynamic Problems With Uncertainty Aversion

In a discounted expected-utility problem, tomorrow's utilities are aggregated across tomorrow's states by the expectation operator. In our problems, this aggregation is accomplished by a Choquet integral of the form ∫ u d P ^α, where α specifies uncertainty aversion. We solve all finite-state problems by either a closed form or a finite-dimensional iteration, and show that uncertainty aversion reduces the perceived return on investment, thereby decreasing the saving rate given elastic preferences and increasing the saving rate given inelastic preferences.
JEL Classification Numbers: C61, D81, D9.     

OUTPUT-INFLATION TRADEOFF IN CHINA

High growth and wide fluctuations in fixed investment are the main driving forces causing inflation in China during its economic reform period. Investment expansion generates strong demand pressures in the consumption goods market. Its inflationary impact is magnified further as it brings about higher wage costs during economic booms. In the paper, an implied short-run tradeoff has been derived from the dynamic simulation of a small macroeconomic model. In a given year, each additional percentage point of aggregate output growth or investment growth will bring about a 2.6 or a 0.9 per cent increase, respectively, in the rate of inflation for that year. These estimates suggest that the surge in fixed investment accounts almost fully for the 1993–95 inflationary spell.     

Parallel Consultant-Guided Search with Crossover

Consultant-guided search (CGS) is a recent metaheuristic method. This approach is an algorithm in which a virtual person called a client creates a solution based on consultation with a virtual person called a consultant. In this study, we propose a parallel CGS algorithm with a genetic algorithm’s crossover and selection, and calculate an approximation solution for the traveling salesman problem. We execute a computer experiment using the benchmark problems (TSPLIB). Our algorithm provides a solution with less than 3.3% error rate for problem instances using less than 6000 cities.     

Conditional implicit mean and the law of iterated integrals

This paper presents a new framework which generalizes the concept of conditional expectation to mean values which are implicitly defined as unique solutions to some functional equation. We call such a mean value an implicit mean. The implicit mean and its very special example, the quasi-linear mean, have been extensively applied to economics and decision theory. This paper provides a procedure of defining the conditional implicit mean and then analyzes its properties. In particular, we show that the conditional implicit mean is in general “biased” in the sense that an analogue of the law of iterated expectations does not hold and we characterize the quasi-linear mean as the only implicit mean which is “unbiased”.     

Variability in agricultural productivity and rural household consumption inequality: Evidence from Nigeria and Uganda

This paper uses multiple rounds of panel data to assess the distributional implications of the variability in agricultural productivity in Nigeria and Uganda. It uses both a conventional decomposition and a regression‐based inequality decomposition approach to estimate the impact of climate‐induced variability in agricultural productivity. To mitigate the endogeneity associated with unobserved time‐invariant and time‐variant household fixed effects, we use rainfall shocks as a proxy for estimating the exogenous variability in agricultural productivity that affects consumption. Results suggest that a 10% increase in the variability of agricultural productivity tends to decrease household consumption by 38 and 52% on average for Nigeria and Uganda, respectively. Controlling for other factors, variability in agricultural productivity contributed to between 25% and 43% of consumption inequality between 2010 and 2015 for Nigeria; and 16% and 31% of consumption inequality between 2009 and 2011 for Uganda. We also show that variability in agricultural productivity increases changes in consumption inequality over time.     

Characteristics of Private‐Sector Tractor Service Provisions: Insights from Nigeria

Agricultural mechanization has been integral to agricultural transformation during periods of development. Mechanization‐service provisions can be constrained by economies of scale, seasonality, limited mobility, or heterogeneous inputs quality. However, information has been scarce regarding how the private sector has overcome these constraints especially in countries like Nigeria that are at low agricultural development stages. We present the results of a small survey of tractor owner‐operators conducted in Nigeria. We find that existing private‐sector tractor‐hiring services in Nigeria are indeed constrained. However, we also find heterogeneity among these owner‐operators. In particular, those who buy tractors from private markets or from private individuals are more efficient than those who receive tractors through government programs, providing services to a greater area at lower costs, including during off‐peak seasons, sometimes selecting machinery types according to soil types. We conclude with a discussion of some policy implications.     

Factors determining intercropping by rubber smallholders in Sri Lanka: a logit analysis

Variables related to farmers' awareness and attitudes towards intercropping of immature rubber (Hevea brusiliensis) stands, extension contacts, education level, and experience with farming other crops are positively associated with the probability of adoption. Higher levels of off‐farm income are associated with reduced intercropping in immature rubber stands. Farmers who are sole owners of the land and engaged in full or part‐time rubber farming show lower adoption rates than other land ownership groups. Social participation, family size, experience with farming rubber, immature and mature rubber stands size, and the nature of the land (flat/sloped) do not significantly influence adoption. These conclusions were obtained from a logit model estimated by employing the results of a survey of 588 smallholder rubber farmers from five major rubber‐growing regions in Sri Lanka.