Social Interactions and Subjective Well-Being: Evidence from Latin America

In this paper, we seek to examine the effect of comparisons and social capital on subjective well-being. Furthermore, we test if, through social influence and exposure, social capital is either an enhancer or appeaser of the comparison effect. Using the Latinobarómetro Survey (2007) we find that in contrast to most previous studies, the comparison effect on well-being is positive; that is, the better others perform, the happier the individual is. We also find that social capital is among the strongest correlates of individuals’ subjective well-being in Latin American countries. Furthermore, our findings suggest that social contacts may enhance the comparison effect on individual’s happiness, which is more intense for those who perform worse in their reference group.

Demand for Cultural Heritage

Prepared for the Handbook of the Economics of Cultural Heritage. Forthcoming in Edgard Elgar Publisher. Anna Mignosa and Ilde Rizzo (editors)

Methods for Measuring Aggregate Costs of Conflict

This paper reviews the methods for measuring the economic cost of conflict. Estimating the economic costs of conflict requires a counterfactual calculation, which makes this a very difficult task. Social researchers have resorted to different estimation methods depending on the particular effect in question. The method used in each case depends on the units being analyzed (firms, sectors, regions or countries), the outcome variable under study (aggregate output, market valuation of firms, market shares, etc.) and data availability (a single cross-section, time series or panel data). This paper reviews existing methods used in the literature to assess the economic impact of conflict: cost accounting, cross-section methods, time series methods, panel data methods, gravity models, event studies, natural experiments and comparative case studies. The paper ends with a discussion of cost estimates and directions for further research.

Discounting future pain: Effects on self-reported pain

Empirical results are presented showing that people who acknowledge pain anticipation when expecting an injury experience higher sensitivity to pain (GREP, Robinson et al., 2001). The positive correlation between sensitivity and anticipation is highly significant. However, no relationship is found between anticipation and pain endurance.

Prices and the Real Exchange Rate in Hong Kong: 1985-2006

This paper has been presented at the XIII Encuentros de Economía Aplicada, Sevilla, Spain, 2010.

Endogenous fisheries management in a stochastic model: Why do fishery agencies use TAC

The aim of this paper is to explain under which circumstances using TACs as instrument to manage a fishery along with fishing periods may be interesting from a regulatory point of view. In order to do this, the deterministic analysis of Homans and Wilen (1997)and Anderson (2000) is extended to a stochastic scenario where the resource cannot be measured accurately. The resulting endogenous stochastic model is numerically solved for finding the optimal control rules in the Iberian sardine stock. Three relevant conclusions can be highligted from simulations. First, the higher the uncertainty about the state of the stock is, the lower the probability of closing the fishery is. Second, the use of TACs as management instrument in fisheries already regulated with fishing periods leads to: i) An increase of the optimal season length and harvests, especially for medium and high number of licences, ii) An improvement of the biological and economic variables when the size of the fleet is large; and iii) Eliminate the extinction risk for the resource. And third, the regulator would rather select the number of licences and do not restrict the season length.

The role of the terms of trade in the trade channel of transmission of oil price shocks

This paper highlights the role of the terms of trade in the trade channel of propagation of oil price shocks both empirically and theoretically. Empirically, I show that oil price shocks have a large, persistent and statistically significant impact on the US terms of trade. Theoretically, I add oil in the model by Corsetti and Pesenti (2005) and analyse under what conditions the terms of trade plays a relevant role in the international transmission of oil price shocks. With nominal price rigidities and full exchange rate pass-through positive oil price shocks depreciate the currency of the oil importing country. The subsequent negative wealth effect adds to the recessive effect of the supply channel and may trongly reduce the consumption in the oil importing country economy. Without exchange rate pass-through oil shocks transmit to the economy only through the supply channel. The model suggests that a change in the exchange rate pass-through might contribute to explain the evidence of a weaker impact of oil price shocks on the macroeconomic activity in recent times.

Time discounting (delta) and pain anticipation: Experimental evidence

To be published in: Revista Internacional de Sociología (2011), Special Issue on Experimental and Behavioral Economics.

The Impact of Regulation on Pricing Behavior in the Spanish Electricity Market

In this paper we measure the impact of regulatory measures which affected the Spanish electricity wholesale market in the period 2002-2005. Our approach is based on the fact that regulation changes firms' incentives and therefore their market behavior. In the absence of any regulation firms would choose profit- maximizing prices on their residual demands so that the observed gap between optimal and actual prices provides a measure of the effect of regulation. Our results indicate that regulation has decreased wholesale prices considerably, but became less effective at the end of the sample period which explains the change of regulatory regime introduced in 2006.

Strategic Interaction and Conventions

The scope of the paper is the literature that employs coordination games to study social norms and conventions from the viewpoint of game theory and cognitive psychology. We claim that those two alternative approaches are complementary, as they provide different insights to explain how people converge to a unique system of self-fulfilling expectations in presence of multiple, equally viable, conventions. While game theory explains the emergence of conventions relying on efficiency and risk considerations, the psychological view is more concerned with frame and labeling effects. The interaction between these alternative (and, sometimes, competing) effects leads to the result that coordination failures may well occur and, even when coordination takes place, there is no guarantee that the convention eventually established will be the most efficient.

New Keynesian Model Features that Can Reproduce Lead, Lag and Persistence Patterns

This paper uses a new method for describing dynamic comovement and persistence in economic time series which builds on the contemporaneous forecast error method developed in den Haan (2000). This data description method is then used to address issues in New Keynesian model performance in two ways. First, well known data patterns, such as output and inflation leads and lags and inflation persistence, are decomposed into forecast horizon components to give a more complete description of the data patterns. These results show that the well known lead and lag patterns between output and inflation arise mostly in the medium term forecasts horizons. Second, the data summary method is used to investigate a rich New Keynesian model with many modeling features to see which of these features can reproduce lead, lag and persistence patterns seen in the data. Many studies have suggested that a backward looking component in the Phillips curve is needed to match the data, but our simulations show this is not necessary. We show that a simple general equilibrium model with persistent IS curve shocks and persistent supply shocks can reproduce the lead, lag and persistence patterns seen in the data.

Travellers' Types

This paper uses subjects’ self-reported justifications to explain discrepancies between observed heterogeneous behavior and the unique equilibrium prediction in a one-shot traveler’s dilemma experiment (TD). Principal components (PC) analysis suggests that iterative reasoning, aspiration levels, competitive behavior, attitudes towards risk and penalties and focal points may be behind different choices. Such reasons are coherent with same subjects’ behavior in other tests and experiments in which these particular issues are prominent. Overall, we identify types of subjects whose motivations are consistent across tasks.

Unraveling Public Good Games: The Role of Priors

This paper provides experimental evidence on how players predict end game effects in a linear public good game. Our regression analysis yields a measure of the relative importance of priors and signals on subjects\' beliefs on contributions and allow us to conclude that, firstly, the weight of the signal is relatively unimportant, while priors have a large weight and, secondly, priors are the same for all periods. Hence, subjects do not expect end game effects and there is very little updating of beliefs.

Adam Smith on labour and value: challenging the standard interpretation

This paper was presented at the Seminars of the Department of Foundations of Economic Analysis I, University of the Basque Country in September 2004.

On the Informational Role of Term Structure in the U.S. Monetary Policy Rule

This paper uses a structural approach based on the indirect inference principle to estimate a standard version of the new Keynesian monetary (NKM) model augmented with term structure using both revised and real-time data. The estimation results show that the term spread and policy inertia are both important determinants of the U.S. estimated monetary policy rule whereas the persistence of shocks plays a small but significant role when revised and real-time data of output and inflation are both considered. More importantly, the relative importance of term spread and persistent shocks in the policy rule and the shock transmission mechanism drastically change when it is taken into account that real-time data are not well behaved.