http://hdl.handle.net/2123/194 2013-05-26T03:04:01Z 2013-05-26T03:04:01Z Che, XiaoGang Lee, Peter Yang, Yibai http://hdl.handle.net/2123/9029 2013-04-12T18:52:33Z 2013-04-01T00:00:00Z

Title: The Impact of Resale on Entry in Second Price Auctions Authors: Che, XiaoGang; Lee, Peter; Yang, Yibai Abstract: This paper investigates the effect of resale allowance on entry strategies in a second price auction with two bidders whose entries are sequential and costly. We first characterize the perfect Bayesian equilibrium in cutoff strategies. We then show that there exists a unique threshold such that if the reseller's bargaining power is greater (less) than the threshold, resale allowance causes the leading bidder (the following bidder) to have a higher (lower) incentive on entry; i.e., the cutoff of entry becomes lower (higher). We also discuss asymmetric bidders and the original seller's expected revenue.

2013-04-01T00:00:00Z Edwards, Ben Fiorini, Mario Stevens, Katrien Taylor, Matthew http://hdl.handle.net/2123/9020 2013-04-05T17:52:34Z 2013-04-01T00:00:00Z

Title: Is Monotonicity in an IV and RD design testable? No, but you can still check it Authors: Edwards, Ben; Fiorini, Mario; Stevens, Katrien; Taylor, Matthew Abstract: Whenever treatment effects are heterogeneous and there is sorting into treatment based on the gain, monotonicity is a condition that both Instrumental Variable and fuzzy Regression Discontinuity designs have to satisfy for their estimand to be interpretable as a LATE. Angrist and Imbens (1995) argue that the monotonicity assumption is testable whenever the treatment is multivalued. We show that their test is informative if counterfactuals are observed. Yet applying the test without observing counterfactuals, as it is generally done, is not. Nevertheless, we argue that monotonicity can and should be investigated using a mix of economic intuition and data patterns, just like other untestable assumptions in an IV or RD design. We provide examples in a variety of settings as a guide to practice.

2013-04-01T00:00:00Z Prasad, Suraj DeVaro, Jed http://hdl.handle.net/2123/9015 2013-04-03T15:52:24Z 2013-03-01T00:00:00Z

Title: The Relationship Between Delegation and Incentives Across Occupations: Evidence and Theory Authors: Prasad, Suraj; DeVaro, Jed Abstract: A large literature, both theoretical and empirical, suggests that delegation of authority and incentives should have a positive relationship. Using data from a large cross section of British establishments, we show that the positive relationship between incentives and delegation that has been consistently documented in the empirical literature masks a stark difference between job types. We classify jobs into two categories: complex jobs include professional, technical and scientific occupations and simple jobs consist of all other occupations with a lower-level code in the Standard Occupational Classification (SOC) system. We find that for simple jobs, the relationship between delegation and incentives is positive as has been found in the previous literature, whereas for complex jobs it is negative. To explain this negative relationship for complex jobs, we develop a model where tasks have a risk-return tradeoff and where a single performance measure has to induce both task selection and effort. We find that if tasks vary sufficiently by risk and return and if effort is noisy to measure, then delegation and incentives have a negative relationship.

2013-03-01T00:00:00Z Atalay, Kadir Whelan, Stephen Yates, Judith http://hdl.handle.net/2123/8975 2013-03-14T15:52:29Z 2013-03-01T00:00:00Z

Title: Housing Wealth and Household Consumption: New Evidence from Australia and Canada Authors: Atalay, Kadir; Whelan, Stephen; Yates, Judith Abstract: Over the past two decades a number of countries have experienced an increase in house prices at the same time that aggregate consumption has been observed to increase. Alternative hypotheses have been put forward to explain this pattern. In this paper we test these hypotheses by using repeated Household Expenditure Surveys from Canada and Australia to identify the transmission mechanism that links consumption and household wealth. The empirical analysis suggests that neither a direct wealth effect nor a common causal factor is a likely explanation for the observed correlation between wealth and consumption. Rather, indirect factors such as relaxation of credit constraints are more likely explanations.

2013-03-01T00:00:00Z Atalay, Kadir Kim, Woo-Yung Whelan, Stephen http://hdl.handle.net/2123/8925 2013-02-08T17:52:25Z 2013-02-01T00:00:00Z

Title: The Decline of the Self-Employment Rate in Australia Authors: Atalay, Kadir; Kim, Woo-Yung; Whelan, Stephen Abstract: This paper using the Australian panel data(HILDA) investigates the declining trend of self-employment rate in Australia, a pattern observed in a number of other developed countries in the 2000s. We focus on the entry into and the exit from self-employment, treating males and females separately. Our results show that the self-employment rate has declined in Australia because older workers, especially older female workers, remained longer in paid-employment. This finding indicates that although the self-employment rate of older workers is higher than that of younger workers, the gap has decreased in recent years so that the average self-employment rate has declined. In addition, we provide some evidence that industry and institutional changes, such as reforms in tax and pension systems, may have contributed to an increase in the labour force participation of older females, which may explain why the decline of self-employment has been severe for this group.

2013-02-01T00:00:00Z Newton, Jonathan http://hdl.handle.net/2123/8898 2013-01-22T15:52:20Z 2012-10-01T00:00:00Z

Title: Stochastic stability on general state spaces Authors: Newton, Jonathan Abstract: This paper studies stochastic stability methods applied to processes on general state spaces. This includes settings in which agents repeatedly interact and choose from an uncountable set of strategies. Dynamics exist for which the stochastically stable states differ from those of any reasonable finite discretization. When there are a finite number of rest points of the unperturbed dynamic, sufficient conditions for analogues of results from the finite state space literature are derived and studied. Illustrative examples are given

2012-10-01T00:00:00Z Newton, Jonathan http://hdl.handle.net/2123/8897 2013-01-22T15:52:20Z 2011-09-01T00:00:00Z

Title: Limitations of Network Games - a brief discussion Authors: Newton, Jonathan

2011-09-01T00:00:00Z Newton, Jonathan http://hdl.handle.net/2123/8896 2013-01-22T15:52:19Z 2013-01-01T00:00:00Z

Title: Cheap talk and editorial control Authors: Newton, Jonathan Abstract: This paper analyzes simple models of editorial control. Starting from the framework developed by Krishna and Morgan (2001a), we analyze 2-sender models of cheap talk where one or more of the senders has the power to veto messages before they reach the receiver. A characterization of the most informative equilibria of such models is given: it is shown that editorial control never aids communication and that for small biases in the senders’ pref­erences relative to those of the receiver, necessary and sufficient conditions for information transmission to be adversely affected are that the senders have opposed preferences relative to the receiver and that they both have powers of editorial control. It is shown that the addition of further senders beyond two weakly decreases information transmission.

2013-01-01T00:00:00Z Newton, Jonathan http://hdl.handle.net/2123/8895 2013-01-22T15:52:20Z 2013-01-01T00:00:00Z

Title: Coalitions, tipping points and the speed of evolution Authors: Newton, Jonathan Abstract: This study considers pure coordination games on networks and the waiting time for an adaptive process of strategic change to achieve efficient coordination. Although it is in the interest of every player to coordinate on a single globally efficient norm, coalitional behavior at a local level can greatly slow, as well as hasten convergence to efficiency. For some networks, parameter values exist at which the effect of coalitional behavior changes abruptly from a conservative effect to a reforming effect. These effects are confirmed for a variety of stylized and empirical social networks found in the literature. For coordination games in which the Pareto efficient and risk dominant equilibria differ, polymorphic states can be the only stochastically stable states.

2013-01-01T00:00:00Z White, Graham http://hdl.handle.net/2123/8876 2013-01-15T15:52:39Z 2012-11-01T00:00:00Z

Title: The New Keynesian view of aggregate demand: some reflections from a Sraffian standpoint Authors: White, Graham Abstract: The paper contends that the derivation of the aggregate demand curve in the new Keynesian literature is insufficient to provide the theoretical ground for the use to which it is usually put; namely, as a theoretical basis for the claim that long-run wage and price flexibility would push a capitalist economy to the full-employment or “natural” level of output. It is argued that the derivation solely on the basis of the propositions about optimising household consumption expenditures is insufficient to guarantee a decreasing aggregate demand function without circular reasoning. This point is clarified by use of a very simple two-commodity production model of long-run steady states due to Spaventa and Nell. To guarantee a decreasing aggregate demand function, the new Keynesian approach must invoke the kinds of propositions used in more traditional derivations; propositions which themselves are in question on capital-theoretic grounds.

2012-11-01T00:00:00Z Bel, Roland Smirnov, Vladimir Wait, Andrew http://hdl.handle.net/2123/8799 2012-11-30T17:52:31Z 2012-11-01T00:00:00Z

Title: On Broadway and strip malls: how to make a winning team Authors: Bel, Roland; Smirnov, Vladimir; Wait, Andrew Abstract: A successful organization – or Broadway production – needs the right team. A potential issue is that an existing synergy between complementary agents (or assets) can reduce the marginal return of effort, creating a disincentive to invest. While agents always prefer to be in a team of complementary workers, a principal may wish to use non-complementary agents; this can occur if the loss from lower investment is sufficiently large. A principal, however, may opt for non-complementary agents when complementary workers would produce greater surplus. These insights have implications for job rotation, the central­ization versus decentralization of decision making and mergers.

2012-11-01T00:00:00Z Cheung, Stephen L. Coleman, Andrew http://hdl.handle.net/2123/8752 2012-11-08T15:52:39Z 2012-11-01T00:00:00Z

Title: League-Table Incentives and Price Bubbles in Experimental Asset Markets Authors: Cheung, Stephen L.; Coleman, Andrew Abstract: We study experimental markets in which participants face incentives modeled upon those prevailing in markets for managed funds. Each participant’s portfolio is periodically evaluated at market value and ranked in a league table according to short-term paper returns. Those who rank highly attract a larger share of new fund inflows. In an environment in which prices are typically close to intrinsic value, the effect of incentives is mild. However in an environment in which markets are prone to bubble, mispricing is greatly exacerbated by incentives and even become more pronounced with experience.

2012-11-01T00:00:00Z Wright, Donald J. http://hdl.handle.net/2123/8583 2012-07-06T18:52:36Z 2012-07-01T00:00:00Z

Title: An Equilibrium Model of General Practitioner Payment Schemes Authors: Wright, Donald J. Abstract: In an environment where GPs are of differing quality and heterogeneous patients have different preferences for quality, it is shown that fee-for-service coupled with balance billing is a superior payment scheme to just fee-for-service or capitation payments as it generates an efficient allocation of GPs between high and low quality and an efficient allocation of patients between GPs. Where patients have more than one condition it is shown that fee-for-service allows patients to seek treatment from GPs of differing quality conditional on the medical condition they have.

2012-07-01T00:00:00Z Appelbaum, Elie Melatos, Mark http://hdl.handle.net/2123/8381 2012-06-01T18:52:25Z 2012-05-01T00:00:00Z

Title: Camouflaged Trade Agreements Authors: Appelbaum, Elie; Melatos, Mark Abstract: We raise the possibility that at least some of the free trade areas observed in practice are customs unions in disguise. We distinguish between generalized and standard customs unions. While members of the former can choose different external tariff rates, members of the latter levy a common external tariff. The chief insight is that, in practice, it is typically not possible to differentiate between a generalized customs union and a free trade area. We demonstrate that generalized customs unions will be established and offer an ex­planation for the design of Article XXIV of the General Agreement on Tariffs and Trade.

2012-05-01T00:00:00Z Cheung, Stephen L. Hedegaard, Morten Palan, Stefan http://hdl.handle.net/2123/8368 2012-10-17T05:05:34Z 2012-05-01T00:00:00Z

Title: To See Is To Believe: Common Expectations In Experimental Asset Markets Authors: Cheung, Stephen L.; Hedegaard, Morten; Palan, Stefan Abstract: We challenge the recent claim that mispricing in the experimental asset markets introduced by Smith, Suchanek, and Williams (1988) is merely an artefact of confusion over declining fundamental value, and can be eliminated through appropriate training. We instead propose that when training is public knowledge, it reduces uncertainty over the behavior of others and facilitates the formation of common expectations. We disentangle the effect of training from the effect of its public knowledge, and find that when all subjects are trained to understand fundamental value, but this is not public knowledge, mispricing is as great as when training is absent.

2012-05-01T00:00:00Z Merrett, Danielle http://hdl.handle.net/2123/8256 2012-08-16T06:02:35Z 2012-04-01T00:00:00Z

Title: Estimation of Public Goods Game Data Authors: Merrett, Danielle Abstract: This paper compares the performance of alternative estimation approaches for Public Goods Game data. A leave-one-out cross validation was applied to test the performance of five estimation approaches. Random effects is revealed as the best estimation approach because of its un-biased and precise estimates and its ability to estimate time-invariant demographics. Surprisingly, approaches that treat the choice variable as continuous out-perform those that treat the choice variable as discrete. Correcting for censoring is shown to induce biased estimates. A finite Poisson mixture model produced relatively un-biased estimates however lacked the precision of fixed and random effects estimation.

2012-04-01T00:00:00Z Appelbaum, Elie Melatos, Mark http://hdl.handle.net/2123/8207 2012-08-16T06:02:00Z 2012-04-01T00:00:00Z

Title: How Does Uncertainty Affect the Choice of Trade Agreements? Authors: Appelbaum, Elie; Melatos, Mark Abstract: This paper analyzes how uncertainty and the timing of its resolution influence the formation and design of regional trade agreements. Two sources of uncertainty — in demand and costs — are considered. We compare the case in which uncertainty is resolved “early” (before tariffs are chosen), with the case in which uncertainty is resolved “late” (after tariffs are chosen). These cases are, in turn, compared with the benchmark case of no uncertainty. We demonstrate that, as long as some decisions are made after uncertainty is resolved, trade agreements have option values. These option values differ across agreements, reflecting members’ different degrees of (trade policy) freedom to respond to changes in the trading environment. Moreover, these option values may be sufficiently large as to lead prospective members to opt for a more flexible trading arrangement (such as a free trade area) over a less flexible agreement (such as a customs union). Indeed, countries may even prefer to stand alone than join a free trade area under some circumstances. Finally, we show that the timing of the resolution of uncertainty can significantly impact the type of trade agreement that countries wish to form.

2012-04-01T00:00:00Z Dutta, Dilip Yang, Yibai http://hdl.handle.net/2123/8198 2012-12-12T04:13:42Z 2012-03-01T00:00:00Z

Title: Endogenous time preference: evidence from Australian households’ behaviour Authors: Dutta, Dilip; Yang, Yibai Abstract: Recently, the focus has been increasingly on the importance of endogenous time preference and its varying degrees of marginal impatience. Two types of marginal impatience can change the representative household's endogenous discount function: increasing (Koopmans-Uzawa type) and decreasing (Becker-Mulligan type), which are induced by current consumption and the investment on future-oriented capital, respectively. By modifying the endogenous discount factor in a small-open-economy RBC model, the equilibrium levels of the turnover in future-oriented capital and current consumption are obtained in a reduced form, which overcomes the non- stationarity problem. The relation between current consumption and the turnover in future-oriented capital is consistent with the empirical evidence from Australia.

2012-03-01T00:00:00Z Singh, Aarti Stone, Sophie http://hdl.handle.net/2123/8187 2012-08-16T06:00:53Z 2012-03-01T00:00:00Z

Title: Asset Prices, Monetary Policy and Determinacy Authors: Singh, Aarti; Stone, Sophie Abstract: We study whether central banks should respond to asset prices in their policy rules. Using a modified version of Bernanke, Gertler and Gilchrist’s (1999) model—a standard dynamic stochastic general equilibrium New Keynesian model with a financial accelerator effect—we explore how equilibrium determinacy is impacted when the central bank reacts to asset prices. Our results indicate that by reacting to asset price movements in its Taylor-type nominal interest rate feedback rule, a central bank makes determinacy of the rational expectations equilibrium more likely relative to a standard policy rule where the central bank does not react to asset prices.

2012-03-01T00:00:00Z Kim, Chang-Jin Eo, Yunjong http://hdl.handle.net/2123/8150 2012-10-30T05:06:44Z 2012-02-01T00:00:00Z

Title: Markov-Switching Models with Evolving Regime-Specific Parameters: Are Post-War Booms or Recessions All Alike? Authors: Kim, Chang-Jin; Eo, Yunjong Abstract: In this paper, we relax the assumption of constant regime-specific mean growth rates in Hamilton’s (1989) two-state Markov-switching model of the business cycle. We first present a benchmark model, in which each regime-specific mean growth rate evolves according to a random walk process over different episodes of booms or recessions. We then present a model with vector error correction dynamics for the regime-specific mean growth rates, by deriving and imposing a condition for the existence of a long-run equilibrium growth rate for real output. In the Bayesian Markov Chain Monte Carlo (MCMC) approach developed in this paper, the counterfactual priors, as well as the hierarchical priors for the regime-specific parameters, play critical roles. By applying the proposed model and approach to the postwar real GDP growth data (1947Q4-2011Q3), we uncover the evolving nature of the regime-specific mean growth rates of real output in the U.S. business cycle. An additional feature of the postwar U.S. business cycle that we uncover is a steady decline in the long-run equilibrium output growth. The decline started in the mid-1950s and ended in the mid-1980s, coinciding with the beginning of the Great Moderation. Our empirical results also provide partial, if not decisive, evidence that the central bank has been more successful in restoring the economy back to its long-run equilibrium growth path after unusually severe recessions than after unusually good booms.

2012-02-01T00:00:00Z Eo, Yunjong http://hdl.handle.net/2123/8149 2012-08-16T06:00:23Z 2012-02-01T00:00:00Z

Title: Bayesian Inference about the Types of Structural Breaks When There are Many Breaks Authors: Eo, Yunjong Abstract: I propose a Bayesian approach to making an inference about complicated patterns of structural breaks in time series. Structural break models in the literature are mainly considered for a simple case in which all the parameters under the structural changes are restricted to have breaks at the same dates. Unlike the existing literature, the proposed method in this paper allows multiple parameters such as intercept, persistence, and/or residual variance to undergo mutually independent structural breaks at different dates with the different number of breaks across parameters. To estimate the complex structural break models considered in this paper, structural breaks in the multiple parameters are interpreted as regime transitions as in Chib (1998). The regime for each parameter is then indicated by a corresponding discrete latent variable which follows a first-order Markov process. A Markov-chain Monte Carlo scheme is developed to estimate and compare the complex structural break models, which are potentially non-nested, in an efficient and tractable way. I apply this approach to postwar U.S. inflation and find strong support for an autoregressive model with two structural breaks in residual variance and no break in intercept and persistence.

2012-02-01T00:00:00Z Wu, Kevin Guillen, Pablo http://hdl.handle.net/2123/8091 2012-08-16T05:58:38Z 2012-01-01T00:00:00Z

Title: Social Comparison, Aspirations and Priming: When Fiction is as Powerful as Fact Authors: Wu, Kevin; Guillen, Pablo Abstract: This study uses a novel application of priming to provide experimental evidence that aspirations and social comparisons may be influenced by non factual sources. A textual narrative eliciting social comparison is shown to dramatically alter material aspirations. This is despite the narrative not presenting any new information, relying instead on participants’ existing knowledge. However the effect of the priming rapidly dissipates when attention is redirected to unrelated tasks. These findings build on literature examining the influence of media, social comparison and aspirations on well-being. The findings build support for the claim that media exposure may distort perceptions of status with implications for satisfaction, education attainment and risk preferences. It also demonstrates that at least in the short run, preferences in general and aspirations in particular are highly suggestible.

2012-01-01T00:00:00Z Chong, Sophia Guillen, Pablo http://hdl.handle.net/2123/8090 2012-08-16T05:59:15Z 2012-02-01T00:00:00Z

Title: The discreet charm of the collective contract Authors: Chong, Sophia; Guillen, Pablo Abstract: We compare individual with collective contracts using variations of a repeated gift- exchange game. Firms consist of one employer and three workers. In the individual variation (I) different workers can receive separate wages. In the collective variation (C) workers receive the same wage. I and C are played altering the order across sessions resulting in four treatments: 1I, 1C, 2I, 2C. The wage offered in the first period of 1C is significantly higher than the wage offered in the first period of 1I. Average wage and effort become indistinguishable in phase 1 afterwards. Individual contracts resulted on higher average effort but undistinguishable wages when comparing 2I with 2C. In spite of an experimental design favourable to individual contracts, collective contracts fared unexpectedly well.

2012-02-01T00:00:00Z Cheung, Stephen L. http://hdl.handle.net/2123/8089 2013-04-23T16:52:27Z 2012-01-01T00:00:00Z

Title: New Insights into Conditional Cooperation and Punishment from a Strategy Method Experiment Authors: Cheung, Stephen L. Abstract: This paper introduces new experimental designs to examine how conditional cooperation and punishment behaviours respond to the full range of variation in the contributions of others. It is shown that contributions become significantly more selfish-biased as others contribute more unequally, while punishment increases both with decreasing contributions by the target player and increasing contributions by a third player. Low contributors who punish antisocially do not direct their punishment specifically toward high contributors, while their beliefs indicate that they expect to themselves be punished.

2012-01-01T00:00:00Z Adda, Jérôme Dustmann, Christian Stevens, Katrien http://hdl.handle.net/2123/8068 2012-04-05T17:02:53Z 2011-11-01T00:00:00Z

Title: The Career Costs of Children Authors: Adda, Jérôme; Dustmann, Christian; Stevens, Katrien Abstract: This paper analyzes the life-cycle career costs associated with child rearing and decomposes their effects into unearned wages (as women drop out of the labor market), loss of human capital, and selection into more child-friendly occupations. We estimate a dynamic life-cycle model of fertility, occupational choice, and labor supply using detailed survey and administrative data for Germany for numerous birth cohorts across different regions. We use this model to analyze both the male-female wage gap as it evolves from labor market entry onward and the effect of pro-fertility policies. We show that a substantial portion of the gender wage gap is explainable by realized and expected fertility and that the long-run effect of policies encouraging fertility are considerably lower than the short-run effects typically estimated in the literature.

2011-11-01T00:00:00Z Dwyer, Jack http://hdl.handle.net/2123/8007 2012-05-01T17:09:38Z 2012-01-04T00:00:00Z

Title: Keynes’s economics and the question of public debt Authors: Dwyer, Jack Abstract: The Global Financial Crisis generated renewed interest in the relevance of John Maynard Keynes’s economic policy proposals, particularly those related to budget deficits, public debt and government expenditure. ‘Keynesian’ economic policies are commonly understood as entailing short-run fiscal activism, by which is meant discretionary, counter-cyclical fiscal policy together with deliberate budget deficits. However, this was not Keynes’s actual position. In the General Theory Keynes contended that demand-deficiency was a permanent problem in a modern capitalist economy. Seen in this light, Keynes’s central policy concern was with maintaining full employment through a permanent enlargement of the public sector and associated public expenditures. Keynes also held a rather conservative view towards public debt and was opposed to debt-financed current expenditure. This thesis reappraises Keynes’s policy views by reference to the relevant primary and secondary materials. Particular attention is given to Keynes’s much neglected policy writings contained in the 1942-45 Treasury Memoranda. The core logic of Keynes’s policy position is then captured in an illustrative model of a demand-led economy. Keynes’s central policy objectives are represented by requiring that the growth in public expenditure is sufficient to maintain full employment, but subject to a debt sustainability constraint.

2012-01-04T00:00:00Z Swain, Richard http://hdl.handle.net/2123/7947 2012-05-01T17:09:44Z 2011-12-07T00:00:00Z

Title: The Macroeconomic Effects of Quantitative Easing Authors: Swain, Richard Abstract: The recent crisis has raised two key macroeconomic issues. First, has the quantitative easing policy pursued by the Federal Reserve had an effect on output, employment and prices? Second, whether ‘quantitative easing,’ is a mechanism through which monetary policy may continue to be able to stimulate economic activity despite the presence of the zero lower bound and various financial market frictions. This paper surveys the recent empirical evidence of the policy having a substantial impact on various interest rates in the United States because of certain financial frictions. It then uses this evidence to analyse the macroeconomic effects of the quantitative easing policy by simulating a New Keynesian macroeconomic model shown to closely fit the U.S. economy. It is concluded that the quantitative easing policy has had an impact on output, prices and employment, irrespective of any plausible financial frictions arising from the GFC. The result also demonstrates that the policy could be used as a monetary policy instrument. The paper ends with an examination of the numerous avenues of research that must be pursued before a firm conclusion can be made regarding the use of quantitative easing as a viable instrument of monetary policy.

2011-12-07T00:00:00Z Wu, Kevin http://hdl.handle.net/2123/7946 2012-05-01T17:09:43Z 2011-12-07T00:00:00Z

Title: Mass Media and Aspiration Manipulation: An Experiment Altering Preferences Over Goals Authors: Wu, Kevin Abstract: Mass media consumption has increasingly been found to adversely impact upon psychological states but research has largely neglected the potential influence of media on aspirations. An experiment demonstrates aspirational incomes to be dramatically altered by a textual narrative despite it not presenting any new information. The narrative is constructed to elicit peer comparison effects, a common element of a variety of media formats. The effect of the narrative rapidly dissipates when concentration is redirected to unrelated tasks however, suggesting any influence media presentations have on aspirations may only be fleeting. Nevertheless the results suggest that mass media might currently be augmenting aspirations with potential implications for satisfaction levels, educational attainment and risk preferences. Also the results imply preferences can be altered without new information being presented, a violation of individual decision making theory. An amendment to the theory is proposed.

2011-12-07T00:00:00Z Walsh, Conor http://hdl.handle.net/2123/7945 2012-05-01T17:09:42Z 2011-12-07T00:00:00Z

Title: A Search Theory of Dowry Authors: Walsh, Conor Abstract: Dowries have traditionally been viewed in economics as arising from a supply imbalance of the marriage market which disadvantages women. In this thesis, a different cause is proposed. Dowries are modelled as arising from an intertemporal bargaining process in a frictional search market, with differential aging in favour of men. This extends the insights of the standard model and is able to explain several puzzling stylised facts. Most notably, dowries may occur when there are more men than women in the market, and dowry and brideprice can coexist in the same market. The model is extended to include heterogeneous males of different quality.

2011-12-07T00:00:00Z Yadav, Anirudh http://hdl.handle.net/2123/7944 2012-05-01T17:09:41Z 2011-12-07T00:00:00Z

Title: Trend Inflation and Inflation Persistence in Australia: A New Keynesian Perspective Authors: Yadav, Anirudh Abstract: The true nature of inflation dynamics is an ongoing matter of debate and investigation in modern macroeconomics. That such attention is devoted to the dynamics of inflation is due to its importance, not only for understanding the nature of business cycles, but also for determining the appropriate path for monetary policy. Modern models of inflation are typically derived from the seminal contributions of Calvo (1983) and Taylor (1980) which imply a purely forward-looking New Keynesian Phillips curve (NKPC) where inflation depends on its future expectation and the level of real marginal costs. Despite its theoretical elegance, the purely forward-looking incarnation of the NKPC has been shown to perform poorly against the data. The empirical shortcomings of the NKPC are generally attributed to its inability to replicate the innate persistence which is present in inflation (see, for example: Fuhrer and Moore, 1995). In order to enhance the degree of persistence within the model several authors have proposed somewhat ad-hoc rationales for the inclusion of lagged inflation terms in the NKPC (see, for example: Gali and Gertler, 1999 and Christiano, Eichenbaum and Evans, 2005). While these `hybrid Phillips curves' do indeed improve the fit of the model, their questionable microfoundations are an obvious source of criticism. This thesis attempts to ascertain the extent to which inflation dynamics in Australia can be explained by the NKPC without having to rely on arbitrary backward-looking terms that have limited structural meaning. In particular, this analysis considers whether an adapted version of Cogley and Sbordone's (2008) extended model of timevarying trend inflation is suffcient to explain inflation persistence in Australia without the need for a backward-looking term in the NKPC.

2011-12-07T00:00:00Z Lilley, Andrew http://hdl.handle.net/2123/7943 2012-05-01T17:09:41Z 2011-12-07T00:00:00Z

Title: Impure Altruism and the Volunteering Puzzle Authors: Lilley, Andrew Abstract: There have been few attempts to model the behavioural microfoundations of charitable giving, particularly with regard to the choice between giving money and volunteering. An hour of a volunteer’s time is usually of a lower worth to the charity than a donation of their hourly market wage. However the aggregate levels of donations of money and time are approximately equal in value– a fact long regarded by economists as the “volunteering puzzle”. To provide a solution to this puzzle, this thesis proposes a theoretical model of pure and impure altruism and confirms its predictions with an experiment. Donors are shown to derive a “warm glow” from volunteering which is greater than the warm glow from monetary donations. The thesis also develops a novel measure to estimate the cost and scale of impure altruism. Approximately two thirds of the utility derived from charitable donations is from impure motivations, and the remaining third is pure. Consistent with this finding, the experiment shows that priming the pure motivations in donors reduces the overall provisioning of charity.

2011-12-07T00:00:00Z Baharlou, Kusha http://hdl.handle.net/2123/7942 2012-05-01T17:09:40Z 2011-12-07T00:00:00Z

Title: The Right Carrot for an Unruly Jungle Authors: Baharlou, Kusha Abstract: This thesis examines the U.S. Department of Justice leniency program setup involving both corporate and individual leniency. Specifically, the interaction between corporate and individual leniency programs in concurrent operation, the design of optimal leniency program structure to elicit corporate leniency applications and the behaviour of economic agents subject to such programs comprise the primary directions of this thesis. In addressing corporate malfeasance under the option to apply for leniency, the intra-firm interplay of agents is modeled as a dynamic game of incomplete information. The principle findings are that if agents are symmetric in their access to leniency the concurrent operation of corporate and individual leniency programs is suboptimal as the presence of the individual leniency program detracts from corporate leniency applications due to a reallocation of incentives to report. On the other hand, under asymmetric access it is in fact optimal to utilise both leniency programs concurrently as there is no distortion in incentives to report but rather a threat effect in motion. Agent access to these leniency programs is imperative in determining the success of the combinatory policy structure.

2011-12-07T00:00:00Z Bakhtiar, Fayzan http://hdl.handle.net/2123/7941 2012-05-01T17:09:39Z 2011-12-07T00:00:00Z

Title: More lottery tickets than milk and no money in the bank Authors: Bakhtiar, Fayzan Abstract: A significant proportion of US households have insufficient savings to cope with even moderate consumption shocks that can result in substantial externalities. At the same time, the most financially fragile households have the highest level of lottery expenditure as a proportion of income. A product which exploits the demand for lottery tickets, a prize-linked savings account, could ‘nudge’ at-risk households to save more. Prize-linked savings accounts offer individuals a savings product with principal-security and the chance to win a lottery-type jackpot. Using an online experiment, this thesis finds that the introduction of prize-linked savings accounts significantly increases the total level of savings, and reduces lottery expenditures and current consumption. The results imply that the introduction of prize-linked savings is a plausible policy option to nudge savings in the right direction, and improve welfare.

2011-12-07T00:00:00Z Fisher, Hayley http://hdl.handle.net/2123/7884 2012-05-01T17:09:54Z 2011-09-01T00:00:00Z

Title: Marriage penalties, marriage, and cohabitation Authors: Fisher, Hayley Abstract: I examine the effect of marriage penalties in the US income tax system on marital status. I construct a simulated instrument that exploits variation in the tax code over time and between US states to deal with potential endogeneity between the marriage penalty a couple faces and their marital status. I find that a $1000 increase in the marriage penalty faced reduces the probability of marriage by 1.7 percentage points, an effect four times larger than previously estimated. Those in the lowest education groups respond by as much as 2.7 percentage points, with the average response declining as education increases.

2011-09-01T00:00:00Z Bel, Roland Smirnov, Vladimir Wait, Andrew http://hdl.handle.net/2123/7871 2012-05-01T17:09:48Z 2011-11-01T00:00:00Z

Title: A Swarm of Innovators: Information, Leadership and Innovation Authors: Bel, Roland; Smirnov, Vladimir; Wait, Andrew Abstract: We study the interplay between innovation, communication in an organization and leadership. Although a firm requires both strong leadership and sufficient communication in order to innovate, we posit that frequent communication – particularly amongst strong leaders and in larger firms – can lead to disagreement and innovation breakdown. Using a survey of 3000 French firms we find that, on their own, firm size, regular communication and result-oriented leadership are all positively associated with innovation. However, there is a negative relationship between successful innovation and: (i) frequent communication in larger firms; and (ii) frequent communication with result-oriented leadership.

2011-11-01T00:00:00Z Matros, Alexander Smirnov, Vladimir http://hdl.handle.net/2123/7867 2012-10-31T21:26:40Z 2011-10-01T00:00:00Z

Title: Treasure game Authors: Matros, Alexander; Smirnov, Vladimir Abstract: A prize is located at an unknown point on an island. In each period, each of n players searches a subset of the as yet unsearched portion of the island. If one player alone finds the prize he wins it and the game ends. Players have a per-period discount factor and a search cost proportional to area searched. Efficient symmetric Markov perfect equilibria are characterized when search is observable. Equilibria for n ≥ 2 exhibit two types of inefficiency: a tragedy of the commons (for small islands) and free riding (for large islands). For n ≥ 3, equilibrium properties are non-monotonic: players may be better off searching larger islands, and larger islands may take less time to search. When search is unobservable and players are sufficiently impatient, multi-player search can be efficient. The model is very general: applications include R&D races, team production, and extraction of exhaustible resources.

2011-10-01T00:00:00Z Mai, Maxim Smirnov, Vladimir Wait, Andrew http://hdl.handle.net/2123/7862 2012-08-24T00:22:10Z 2011-10-01T00:00:00Z

Title: Ownership, access and sequential investment Authors: Mai, Maxim; Smirnov, Vladimir; Wait, Andrew Abstract: We extend the property-rights framework to allow for: a separation of the ownership rights of access and veto; and sequential investment. Parties investing first (ex ante) do so before contracting is possible. Parties that invest second (ex post) can contract on (at least some) of their investment costs. Along with this cost-sharing effect, the incentive to invest is affected by a strategic effect generated by sequential investment. Together these effects can overturn some of the predictions of the property-rights literature. For example, the most inclusive ownership structure might not be optimal, even if all investments are complementary.

2011-10-01T00:00:00Z Cheung, Stephen L. Palan, Stefan http://hdl.handle.net/2123/7778 2012-08-24T00:28:23Z 2011-09-01T00:00:00Z

Title: Two heads are less bubbly than one: Team decision-making in an experimental asset market Authors: Cheung, Stephen L.; Palan, Stefan Abstract: In the world of mutual funds management, responsibility for investment decisions is increasingly entrusted to small teams instead of individuals. Yet the effect of team decision-making in a market environment has never been studied in a controlled experiment. In this paper, we investigate the effect of team decision-making in an asset market experiment that has long been known to reliably generate price bubbles and crashes in markets populated by individuals. We find that this tendency is substantially reduced when each decision-making unit is instead a team of two. This holds across a broad spectrum of measures of the severity of mispricing, both under a continuous double-auction institution and in a call market. The result is not driven by reduced turnover due to time required for deliberation by teams, and continues to hold even when subjects are experienced. Our result also holds not only when our teams treatments are compared to the ‘narrow’ baseline provided by the corresponding individuals treatments, but also when compared more broadly to the results of the large body of previous research on markets of this kind.

2011-09-01T00:00:00Z Eo, Yunjong Morley, James http://hdl.handle.net/2123/7761 2013-04-05T17:52:35Z 2011-08-01T00:00:00Z

Title: Likelihood-Based Confidence Sets for the Timing of Structural Breaks Authors: Eo, Yunjong; Morley, James Abstract: We propose the use of likelihood-based confidence sets for the timing of structural breaks in parameters from time series regression models. The confidence sets are valid for the broad setting of a system of multivariate linear regression equations under fairly general assumptions about the error and regressors and allowing for multiple breaks in mean and variance parameters. In our asymptotic analysis, we determine the critical values for a likelihood ratio test of a break date and the expected length of a likelihood-based confidence set constructed by inverting the likelihood ratio test. Notably, the likelihood-based confidence set is considerably shorter than for other methods employed in the literature. Monte Carlo analysis confirms better performance than other methods in terms of length and coverage accuracy in finite samples, including when the magnitude of breaks is small. An application to postwar U.S. real GDP and consumption leads to a much tighter 95% confidence set for the timing of the "Great Moderation" in the mid-1980s than previously found. Furthermore, when taking cointegration between output and consumption into account, confidence sets for structural break dates are even more precise and suggest a sudden "productivity growth slowdown" in the early 1970s and an additional large, abrupt decline in long-run growth in the mid-1990s.

2011-08-01T00:00:00Z Barnes, Michelle L. Gumbau-Brisa, Fabià Lie, Denny Olivei, Giovanni P. http://hdl.handle.net/2123/7708 2012-08-24T00:24:25Z 2011-06-01T00:00:00Z

Title: Estimation of Forward-Looking Relationships in Closed Form: An Application to the New Keynesian Phillips Curve Authors: Barnes, Michelle L.; Gumbau-Brisa, Fabià; Lie, Denny; Olivei, Giovanni P. Abstract: We illustrate the importance of placing model-consistent restrictions on expectations in the estimation of forward-looking Euler equations. In two-stage limited-information settings where first-stage estimates are used to proxy for expectations, parameter estimates can differ substantially, depending on whether these restrictions are imposed or not. This is shown in an application to the New Keynesian Phillips Curve (NKPC), first in a Monte Carlo exercise, and then on actual data. The closed-form (CF) estimates require by construction that expectations of inflation be model-consistent at all points in time, while the difference-equation (DE) estimates impose no model discipline on expectations. Between those two polar extremes there is a wide range of alternative DE specifications, based on the same dynamic relationship, that explicitly impose model restrictions on expectations for a finite number of periods. In our application, these last estimates quickly converge to the CF estimates, and illustrate that the DE estimates in Cogley and Sbordone (2008) are not robust to imposing modest model requirements on expectations. In particular, our estimates show that the NKPC is not purely forward-looking, and thus that time-varying trend inflation is insufficient to explain inflation persistence.

2011-06-01T00:00:00Z Gumbau-Brisa, Fabià Lie, Denny Olivei, Giovanni P. http://hdl.handle.net/2123/7707 2012-08-24T00:23:16Z 2011-06-01T00:00:00Z

Title: A Response to Cogley and Sbordone’s Comment on "Closed-Form Estimates of the New Keynesian Phillips Curve with Time-Varying Trend Inflation" Authors: Gumbau-Brisa, Fabià; Lie, Denny; Olivei, Giovanni P. Abstract: In their 2010 comment (which we refer to as CS10), Cogley and Sbordone argue that: (i) our estimates are not entirely closed form, and hence are arbitrary; (ii) we cannot guarantee that our estimates are valid, while their estimates (Cogley and Sbordone 2008, henceforth CS08) always are; and (iii) the estimates in CS08, in terms of goodness of fit, are just as good as other, much different estimates in our paper. We show in this reply that the exact closed-form estimates are virtually the same as the "quasi" closed-form estimates. Our estimates are consistent with the implicit assumptions underlying the first-stage VAR used to form expectations, while the estimates in CS08 are not. As a result, the estimates in CS08 point towards model misspecification. We also rebut the goodness of fit comparisons in CS10, and provide a more credible exercise that illustrates that our estimates outperform CS08's estimates.

2011-06-01T00:00:00Z Wright, Donald J. http://hdl.handle.net/2123/7706 2012-05-01T17:09:49Z 2002-04-01T00:00:00Z

Title: The Risk and Incentives Trade-off in the Presence of Heterogeneous Managers Authors: Wright, Donald J. Abstract: Agency theory predicts a negative relationship between risk and incentives, yet recent empirical evidence has not consistently found such a relationship. In fact, some researchers have found a positive relationship. By introducing competition for heterogeneous managers, who differ in their degrees of risk aversion, into a standard agency model, this paper demonstrates that a negative or positive relationship is theoretically possible. Which arises depends on the relative risk aversion parameters of the managers and the absolute and relative riskiness of the environments.

2002-04-01T00:00:00Z Wright, Donald J. http://hdl.handle.net/2123/7705 2012-08-24T00:24:57Z 2011-03-01T00:00:00Z

Title: Medical Malpractice and Physician Liability Under a Negligence Rule Authors: Wright, Donald J. Abstract: A model of costly medical malpractice claims, based on Bayes Rule, is developed to examine the effects of physicians being liable for actual damage under a negligence rule. This model is consistent with empirical evidence concerning the pattern of claims. It is shown that compensating actual damage does not provide physicians with appropriate incentives to spend the second best optimal amount of time with patients or to treat the second best optimal number of patients. As a result, too much medical malpractice occurs relative to the second best social optimum.

2011-03-01T00:00:00Z White, Graham http://hdl.handle.net/2123/7700 2012-08-24T00:25:29Z 2011-02-01T00:00:00Z

Title: DEGREES OF COMPETITION, THE RATE OF RETURN AND GROWTH FROM A CLASSICAL/SRAFFIAN PERSPECTIVE Authors: White, Graham Abstract: The purpose of the paper is a clarification of the concept of competition from a classical/ Sraffian perspective; including an elucidation of how a classical/Sraffian approach might go about defining the degree of competition. This in turn allows for a sharper contrast between the Sraffian view of competition and mainstream views. The starting point for the analysis is the work of Clifton which interprets the classical/Sraffian view of competition as more general than that of orthodoxy: one which can encompass competition between production units in a given industry as something constrained by more dominant forms of competition such as that between production units across industries for shares of the corporate surplus. Following on from the work of both Clifton and Semmler, and starting from the assumption that multi-divisional corporation is the relevant “firm”, and that the corporate target rate of return is the relevant rate of profit, the question arises as to what determines the latter. And this question has received very little attention outside the more traditional post-Keynesian literature on pricing. The paper explores what is probably the most serious attempt within this literature - in the work of Eichner - to explain the target rate, in terms the desired growth rate of the corporation. This proposition has some interesting implications for a Sraffian approach, not least because it allows a link running from the expected growth of the economy to the target rate and thus the rate of profit. This in turn requires a discussion of the consistency of such a link with the Sraffian critique of the Cambridge growth equation. As well, a link between the target rate of return and the desired corporate growth rate link also has implications for the mechanics by which sectoral profit rates converge and thus for the classical/Sraffian literature on cross-dual dynamics.

2011-02-01T00:00:00Z Barrett, Garry F. Brzozowski, Matthew http://hdl.handle.net/2123/7697 2012-05-01T17:09:47Z 2010-09-01T00:00:00Z

Title: Involuntary Retirement and the Resolution of the Retirement-Consumption Puzzle: Evidence from Australia Authors: Barrett, Garry F.; Brzozowski, Matthew Abstract: A substantial body of international research has shown that household expenditure on food and non-durables significantly decreases at the time of retirement - a finding that is inconsistent with the standard life-cycle model of consumption if retirement is an anticipated event. This fall in expenditure has become known as the `retirement-consumption puzzle.' We analyze rich Australian panel data to assess the Australian evidence on the puzzle. We find strong evidence of a fall in expenditures on groceries, food consumed at home and outside meals with retirement. The observed decline in expenditure is explained by a subset of households experiencing an unanticipated wealth shock, such as a major health event or long-term job loss, at the time of retirement. This finding is corroborated by an analysis of alternative measures of household well-being, including indicators of financial hardship, and self-reported financial and life satisfaction. For the majority of households retirement is anticipated and there is no decline in economic welfare at retirement. However, for an important minority, retirement is `involuntary' and these households experience a marked decline across all indicators of economic well-being.

2010-09-01T00:00:00Z Cooper, Peter http://hdl.handle.net/2123/7657 2013-01-24T05:44:00Z 2006-04-01T00:00:00Z

Title: Competition, Learning and Persistence in the Effects of Unmeritocratic Hiring Decisions Authors: Cooper, Peter Abstract: Sometimes wide disparities in workers’ earnings are defended as simply the meritocratic outcome of a competitive process. While inequalities due to discrimination or luck are admitted as temporary possibilities, it is frequently argued that competition and the profit motive will eliminate them in the longer term. In the present paper, this position is challenged. A model is developed to demonstrate that hiring errors can have persistent effects on individual workers’ earnings under conditions of capitalist competition. Hiring errors give the beneficiaries opportunities to learn and improve in their new jobs, raising the possibility that their initial advantages can become locked in. The model shows how fundamental features of the capitalist system (competition, the profit motive, the free labour exchange) can reinforce, and not always eliminate, these early advantages. While the emphasis is on random error, the same factors will play a comparable role in perpetuating the effects of discriminatory hiring decisions.

2006-04-01T00:00:00Z Chakrabarty, Debajyoti Katayama, Hajime Maslen, Hanna http://hdl.handle.net/2123/7656 2013-01-24T05:44:33Z 2006-03-01T00:00:00Z

Title: Why do the Rich Save More? A Theory and Australian Evidence Authors: Chakrabarty, Debajyoti; Katayama, Hajime; Maslen, Hanna Abstract: We provide a theory to explain the existence of inequality in an economy where agents have identical preferences and have access to the same production technology. Agents consume a “utility” good and a “health” good which determines their subjective discount factor. Depending on initial distribution of capital the economy gets separated into different permanent-income groups. This leads to a testable hypothesis: “The rich save a larger proportion of their permanent income”. We test this implication for the savings behaviour in Australia. We show that even after controlling for life-cycle characteristics permanent income and savings are positively correlated. An improvement in the health leads to a positive effect on savings behaviour.

2006-03-01T00:00:00Z Chakraborty, Chandana Dutta, Dilip http://hdl.handle.net/2123/7655 2012-06-04T07:24:44Z 2002-06-01T00:00:00Z

Title: Indian Software Industry: Growth Patterns, Constraints and Government Initiatives Authors: Chakraborty, Chandana; Dutta, Dilip Abstract: Based on a survey of software-related companied in the major cities of India, this paper provides an analytical framework for examining the organization and size of the Indian software industry. With regard to organization, the extent of foreign participation in the industry and the degree of concentration in the industry have been looked at closely. The size of the industry, on the other hand, has been discussed in the context of the relative significance of its domestic market and export market. Export significance has further been evaluated by taking account of its qualitative composition. Given the current size and organizational structure of the industry, its future outlook together with the opportunities and challenges has also been briefly outlined. Finally, an attention has been drawn to India's recent strategic national policy and initiatives for strengthening its position in the software-driven information technology sector in the world.

2002-06-01T00:00:00Z Ji, Philip Inyeob http://hdl.handle.net/2123/7654 2012-05-01T17:10:30Z 2003-11-01T00:00:00Z

Title: Real Interest Rate Equalisation: Some Evidence from East Asian Economies Authors: Ji, Philip Inyeob Abstract: There has been on-going interest in testing the real interest rate equalisation (RIE) proposition in the International Finance literature. Previous studies produce mixed results for the RIE proposition. This paper examines empirically the linkage of real interest rates of the East Asian economies using the cointegration regression technique. We find that there was an increase in the financial linkages in the East Asia during the 1990s, which is consistent with previous studies, and that the real interest rates in East Asia are cointegrated leaving the suspicion that there may be only one common stochastic trend driving them., although the RIE hypothesis is rejected. However, unlike previous studies, the financial linkages in major Asian economies are found to be weaker than among all the East Asian economies.

2003-11-01T00:00:00Z Chakrabarty, Debajyoti http://hdl.handle.net/2123/7653 2012-05-01T17:10:32Z 2003-07-01T00:00:00Z

Title: Growth and Business Cycles with Imperfect Credit Markets Authors: Chakrabarty, Debajyoti Abstract: We study the process of growth and business cycles in an open economy which has access to international financial markets. The financial market imperfection originates from costly state verification and a positive probability of default on loans. The degree of credit market imperfection is endogenously derived. The results show that developed economies are able to borrow on easier terms than emerging countries. The credit market imperfection may cause some economies to fall into a development trap if the initial endowment of capital is too low. The financial market frictions also generate interesting business cycle dynamics. Financial market imperfections help in replicating the empirical fact that output growth shows positive autocorrelation at short horizons. The model also predicts that a poorer economy will experience a more severe and persistent e.ect on investment and output due to an exogenous shock.

2003-07-01T00:00:00Z