Mechanisms for a spatially distributed market

We consider the problem of a spatially distributed market with strategic agents. A single good is traded in a set of independent markets, where shipment between markets is possible but costly. The problem has previously been studied in the non-strategic case, in which it can be analyzed and solved as a min-cost-flow problem. We consider the case where buyers and sellers are strategic. Our first result gives a double characterization of the VCG prices, first as distances in a certain residue graph and second as the minimal (for buyers) and maximal (for sellers) equilibrium prices. This provides a computationally efficient, individually rational and incentive compatible welfare maximizing mechanism. This mechanism is, necessarily, not budget balanced and we also provide a budget-balanced mechanism (which is also computationally efficient, incentive compatible and individually rational) that achieves high welfare. Finally, we present results for some extensions of the model.     

Towards a Healthy Indonesia?

Abstract

During his first presidential term, Joko Widodo increased expenditure on, and the coverage of, several social protection policies, including the conditional cash transfer program. These policies began in the aftermath of the 1997–98 Asian financial crisis and have proliferated in recent years. This Survey will examine these policies, paying particular attention to implementation problems, including effective targeting through the construction of a unified database. It will also examine both food policy and broader health policy issues. It is widely agreed that health problems, such as those relating to early childhood development, must be addressed in Indonesia in a wider context, including through the provision of clean water and sanitation facilities, food security, and social assistance. The Survey will also examine recent discussions of trends in inequality and poverty, several of which claim that inequality has been increasing. Using recent figures published by Statistics Indonesia, it is argued that expenditure inequality has in fact been trending downward in recent years.     

Does Sentiment Explain Closed-end Fund Discounts? Evidence from Bond Funds

This paper documents that discounts and premia on closed-end bond funds exhibit the same sensitivity to broad market returns as stock fund discounts. Despite this, stock funds sell on average at discounts from net asset value while bond funds sell at small premia. This pattern calls into question the conclusion that the average level of the discount rate can be rationalized by appealing to the systematic nature of discount risk. These results indicate that appeals to investor sentiment, which have been hypothesized as a source of fund discounts, do not fully resolve the puzzle of closed-end fund discounts.     

The Formateurs’ Role in Government Formation

Following an election, Heads of State typically choose a formateur to report back a prospective government by some deadline. If this formateur fails then another party leader is chosen on the same terms. We model this mechanism as a bargaining game, in which a single party leader has exclusive access to the Head of State, but does not have a monopoly on making proposals. We characterize the unique equilibrium of the game in which all parties are symmetric and parties split a fixed-size pie. We also show that supra-minimal governments may form when parties are asymmetrically sized: a result consistent with the evidence on government formation in countries which use a formateur mechanism. We are grateful to Maria Montero, Rick Thomas and Paul Warwick for valuable conversations, and to seminar participants in UBC and Warwick.     

Does human capital raise farm or nonfarm earning more? New insight from a rural Pakistan household panel

This study explores how human capital affects farm household earnings using two tools to refine measurement of human capital effects. First, it employs a two‐sector model to allow the allocation of family labor between farm and nonfarm activities. Second, it accounts for village fixed effects to evaluate whether results from panel data differ meaningfully from a cross‐sectional data analysis with local binary variables. The results show that education has a negligible effect on farm earnings; instead, experience appears to be the principal channel by which human capital affects agricultural performance in a traditional rural setting. Our results also suggest that prior models that fail to separate nonfarm activities spuriously exaggerated the effect of education to the farm sector. In addition, typical cross‐sectional analyses that ignore fixed effects may cause the effects of education on rural household earnings to be significantly overstated. The fact that panel data regressions accounting for village‐level fixed effects found only one instance of education raising earnings—the effect of literacy on nonfarm income—suggests that considerable heterogeneity may have been ignored in cross‐sectional data analyses, especially ones that omitted village‐level effects.