The conservative equal costs rule, the serial cost sharing rule and the pivotal mechanism: asymptotic welfare loss comparisons for the case of an excludable public project

We examine the asymptotic behavior of two strategyproof mechanisms discussed by Moulin for public goods – the conservative equal costs rule (CER) and the serial cost sharing rule (SCSR) – and compare their performance to that of the pivotal mechanism (PM) from the Clarke–Groves family. Allowing the individuals’ valuations for an excludable public project to be random variables, we show under very general assumptions that expected welfare loss generated by the CER, as the size of the population increases, becomes arbitrarily large. However, all moments of the SCSR’s random welfare loss asymptotically converge to zero. The PM does better than the SCSR, with its welfare loss converging even more rapidly to zero.     

Value-Added Trade and Empirical Distributions of RCA Indices

Revealed Comparative Advantage (RCA) indices aid in identification of the sectors in which countries reveal comparative advantage or disadvantage. Apart from serving such a dichotomous measure, the RCA indices are frequently employed as cardinal or ordinal measures over time. Application of the indices for comparative analyses calls attention towards the distributions of RCA indices, which must reasonably be stable over time, sectors and countries. Stability of index distributions facilitates the usage of indices as cardinal or ordinal measures over time. The present paper therefore analyses the empirical distributions of RCA indices to determine their suitability. However, such an analysis would be incomplete if the implications for RCA indices due to growing significance of global supply chains are not recognized. Hence apart from analyzing the distributions of gross trade based RCA indices, the distributions of domestic value-added in export based indices are also examined, and the differences are noted. Similar extensive analyses on the distributions of RCA indices are lacking in the literature. In this sense, the present paper makes an important contribution to the existing literature on RCA indices.

     

Employee responsibility in benefit change

If employers want to move employees beyond superficial acceptance of benefit changes, organizations need to increase the focus on how they manage the change process and support employee decision making. This article describes how employers can help workers understand changes and, through effective change management and communication, successfully navigate in an evolving benefits world. Using recent survey research about large employer and employee attitudes, the authors demonstrate tangible proof that these efforts pay off, both in financial and cultural terms.     

A note on quantitative trade restrictions, income effects and wage inequality

This paper examines the effects of conversion of one type of physical trade restrictions into another on the intra-country wage inequality in a standard 2 × 2 × 2 Heckscher–Ohlin–Samuelson model. It shows that a conversion of an import-quota into an equivalent voluntary export restraint raises wage-inequality in the country importing the unskilled-labor intensive good and lowers the wage-inequality in its trading partner. This result does not depend on whether the unskilled-labor intensive good or the skilled-labor intensive good was initially subject to an import quota. Conversion of the import-quota into an equivalent import tariff, on the other hand, may lead to a rise in wage inequality in both countries. The driving force behind these results is the real income effect that conversion of one type trade restriction instrument into another results in.     

A testable model of consumption with externalities

This paper presents a nonparametric model of interdependent preferences, where an individual's consumption may act as an externality on the preferences of other consumers. We assume that individual price consumption data is observed for all consumers. It is known that the general consumption model with externalities imposes few restrictions on the observed data, where the consistency requirement is Nash rationalizability. We motivate potential games as an important sub class of games where the family of concave potential games is refutable and imposes stronger restrictions on observed data. We use this framework to extend the analysis of Brown and Matzkin [D. Brown, R. Matzkin, Testable restrictions on the equilibrium manifold, Econometrica 64 (1996) 1249-1262] on refutable pure exchange economies to pure exchange economies with externalities. Finally, we discuss an application of this model to inter-household consumption data.     

A nonparametric analysis of multi-product oligopolies

We develop revealed preference tests for models of multi-product oligopoly, building on the work in Carvajal et al. (Econometrica 81(6):2351–2379, 2013). We analyze a Cournot model with multiple goods and show that it has testable restrictions when at least one good is produced by two or more firms. We also develop a revealed preference test for Bertrand oligopoly in a setting where each firm produces a single differentiated good, and these goods are potentially substitutes for each other. Our tests require qualitative assumptions on the shape of the demand curves and (in the Bertrand case) their evolution across observations, but they do not rely on the estimation of market demand.     

Minimum wage,trade and unemployment in general equilibrium

The path‐breaking work of Card and Krueger, showing that a higher minimum wage can increase employment, turned the age‐old conventional wisdom on its head. This paper demonstrates that this apparently paradoxical result is perfectly plausible in a competitive general equilibrium production structure of a small open economy with a non‐traded good, without recourse to monopsony, spatial heterogeneity, heterogeneity of consumers and so on, the usual theoretical drivers behind the result. Following Jones and Marjit, we build a simple general equilibrium model with production complementarity and we show that a higher minimum wage can raise aggregate employment. Expansion in the non‐traded sector following a wage hike may be consistent with the overall expansion of the export sector in a multi‐good framework, an unlikely outcome in a conventional two‐good model which cannot accommodate with production complementarity.     

The value of 1800 MHz and 2100 MHz spectrums in India and implications for auction design

The sequence of events leading up to the upcoming auction of 1800 MHz spectrum in India has led to the auctions acquiring an extraordinary significance for the future of the Indian mobile industry. A key feature of the auction design proposed by the regulator TRAI is the benchmarking of the reserve price of 1800 MHz to the price of 2100 – 3G spectrum revealed in the 2010 auction. In the context of the low number of LTE devices available and the fragmentation in the 1800 MHz band, this paper proposes reducing the duration of spectrum holding to ten years (from the current level of twenty years), and calibrating the reserve price of 1800 MHz with its value with GSM deployment. An economic model is used to compute the value of startup and incremental 1800 MHz spectrum. The estimated values are shown to differ from the value of 2100 MHz spectrum at a pan-India level and also in their distribution across circles. A new set of reserve prices are computed based on the estimation. The estimated values are also shown to be close to the AGR-adjusted price revealed in the 2001 auction. A reserve price based on the 2001 auction is also provided. Concomitant features of the auction are suggested to give coherence to the auction design.     

Income based price subsidies and parallel imports

We present a policy game where a Rich country has a higher ability than a Poor country to commit to certain elements of health policy such as providing income related price subsidies and allowing parallel imports (PI). When allowing PI is not a choice for the Poor country, the Rich country allows PI and both countries provide a subsidy to their poorer buyers as the subgame perfect equilibrium policies. However, when the Poor is able to PI a different equilibrium may arise. We show that the ability of the Poor to allow PI might increase welfare in this country even if it is never implemented. We also prove that as the Poor country gets richer, it will not be in their best interest to sign an agreement with the Rich to commit to not allowing PI.     

Estimating welfare changes from efficient pricing in public bus transit in India

Three different and feasible pricing strategies for public bus transport in India are developed in a partial equilibrium framework with the objective of improving economic efficiency and ensuring revenue adequacy, namely average cost pricing, marginal cost pricing, and two-part tariffs. These are assessed not only in terms of gains in economic efficiency, but also in changes in travel demand and consumer surplus. The estimated partial equilibrium price is higher in all three pricing regimes when compared to the current price. As a result, consumer surplus falls in all three cases. The price increase is much larger with average cost pricing compared to marginal cost pricing or two-part tariffs, and hence a larger fall in demand and consumer surplus occurs due to average cost pricing. While there is a gain in economic efficiency from marginal cost pricing and two-part tariffs, this improvement comes at the expense of reduced public bus transit demand and consumer surplus, given the price inelastic public bus transit demand estimated for India. Given the mobility needs and the developmental concerns of a growing economy such as India, the challenge for policy makers is to balance the gains in economic efficiency in the public bus transit sector against other social, political, and developmental goals.