Credit rationing and crowding out during the Industrial Revolution: Evidence from Hoare's Bank, 1702-1862

Crowding-out during the British Industrial Revolution has long been one of the leadingexplanations for slow growth during the Industrial Revolution, but little empirical evidence exists to support it. We argue that examinations of interest rates are fundamentally misguided, and that the eighteenth- and early nineteenth-century private loan market balanced through quantity rationing. Using a unique set of observations on lending volume at a London goldsmith bank, Hoare s, we document the impact of wartime financing on private credit markets. We conclude that there is considerable evidence that government borrowing, especially during wartime, crowded out private credit.

Factor prices and productivity growth during the British Industrial Revolution

This paper presents new estimates of total factor productivity growth in Britain for the period1770 1860. We use the dual technique and argue that the estimates we derive from factorprices are of similar quality to quantity-based calculations. Our results provide further evidence,calculated on the basis of an independent set of sources, that productivity growth duringthe British Industrial Revolution was relatively slow. The Crafts Harley view of theIndustrial Revolution is thus reinforced. Our preferred estimates suggest a modest accelerationafter 1800.

A dynamic choice model of hybrid behavior in the attribute-space

This paper presents a dynamic choice model in the attributespace considering rational consumers that discount the future. In lightof the evidence of several state-dependence patterns, the model isfurther extended by considering a utility function that allows for thedifferent types of behavior described in the literature: pure inertia,pure variety seeking and hybrid. The model presents a stationaryconsumption pattern that can be inertial, where the consumer only buysone product, or a variety-seeking one, where the consumer buys severalproducts simultane-ously. Under the inverted-U marginal utilityassumption, the consumer behaves inertial among the existing brands forseveral periods, and eventually, once the stationary levels areapproached, the consumer turns to a variety-seeking behavior. An empiricalanalysis is run using a scanner database for fabric softener andsignificant evidence of hybrid behavior for most attributes is found,which supports the functional form considered in the theory.

Endogenous Stackelberg leadership

We consider a linear quantity setting duopoly game and analyzewhich of the players will commit when both players have the possibility todo so. To that end, we study a 2-stage game in which each player caneither commit to a quantity in stage 1 or wait till stage 2. We show thatcommitting is more risky for the high cost firm and that, consequently,risk dominance considerations, as in Harsanyi and Selten (1988), allowthe conclusion that only the low cost firm will choose to commit.Hence, the low cost firm will emerge as the endogenous Stackelberg leader.

Immigration and the survival of the welfare state

This paper analyzes the political sustainability of the welfare state in a model where immigration policy is also endogenous. In the model, the skills of the native population are affected by immigration and skill accumulation. Moreover, immigrants affect future policies, once they gain the right to vote. The main finding is that the long-run survival of redistributive policies is linked to an immigration policy specifying both skill and quantity restrictions. In particular, in steady state the unskilled majority admits a limited inflow of unskilled immigrants in order to offset growth in the fraction of skilled voters and maintain a high degree of income redistribution.Interestingly, equilibrium immigration policy shifts from unrestricted skilled immigration,when the country is skill-scarce, to restricted unskilled immigration, as the fraction of native skilled workers increases. The analysis also suggests a new set of variables that may help explain international differences in immigration restrictions.

On the receiver pays principle

This paper extends the theory of network competition betweentelecommunications operators by allowing receivers to derive a surplusfrom receiving calls (call externality) and to affect the volume ofcommunications by hanging up (receiver sovereignty). We investigate theextent to which receiver charges can lead to an internalization of thecalling externality. When the receiver charge and the termination(access) charge are both regulated, there exists an e±cient equilibrium.Effciency requires a termination discount. When reception charges aremarket determined, it is optimal for each operator to set the prices foremission and reception at their off-net costs. For an appropriately chosentermination charge, the symmetric equilibrium is again effcient. Lastly,we show that network-based price discrimination creates strong incentivesfor connectivity breakdowns, even between equal networks.

Risk management under a two-factor model of the term structure of interest rates

This paper presents several applications to interest rate risk managementbased on a two-factor continuous-time model of the term structure of interestrates previously presented in Moreno (1996). This model assumes that defaultfree discount bond prices are determined by the time to maturity and twofactors, the long-term interest rate and the spread (difference between thelong-term rate and the short-term (instantaneous) riskless rate). Several newmeasures of ``generalized duration" are presented and applied in differentsituations in order to manage market risk and yield curve risk. By means ofthese measures, we are able to compute the hedging ratios that allows us toimmunize a bond portfolio by means of options on bonds. Focusing on thehedging problem, it is shown that these new measures allow us to immunize abond portfolio against changes (parallel and/or in the slope) in the yieldcurve. Finally, a proposal of solution of the limitations of conventionalduration by means of these new measures is presented and illustratednumerically.

Drug innovation, prices and health

This article tries to reconcile economic-industrial policy with health policy when dealing with biomedical innovation and welfare state sustainability. Better health accounts for an increasingly large proportion of welfare improvements. Explanation is given to the welfare losses coming from the fact than industrial and health policy tend to ignore each other. Drug s prices reflecting their relative relative effectiveness send the right signal to the industry rewarding innovation with impact on quantity and quality of life- and to the buyers of health care services.The level of drug s public reimbursement indicates the social willingness to pay of the different national health systems, not only by means of inclusion, or rejection, in the basket of services covered, but especially establishing the proportion of the price that is going to be financed publicly.Reference pricing for therapeutic equivalents as the upper limit of the social willingness to pay- and two-tiered co-payments for users (avoidable and inversely related with the incremental effectiveness of de drug) are deemed appropriate for those countries concerned at the same time with increasing their productivity and maintaining its welfare state. Profits drive R&D but not its location. There is no intrinsic contradiction between high productivity and a consolidated National Health Service (welfare state) as the European Nordic Countries are telling us every day.

Timing of seasonal sales

We present a model of timing of seasonal sales where stores chooseseveral designs at the beginning of the season without knowingwich one, if any, will be fashionable. Fashionable designs have achance to fetch high prices in fashion markets while non-fashionableones must be sold in a discount market. In the beginning of theseason, stores charge high prices in the hope of capturing theirfashion market. As the end of the season approaches with goods stillon the shelves, stores adjust downward their expectations that theyare carrying a fashionable design, and may have sales to capture thediscount market. Having a greater number of designs induces a storeto put one of them on sales earlier to test the market. Moreover,price competition in the discount market induces stores to startsales earlier because of a greater perceived first-mover advantage incapturing the discount market. More competition, perhaps due todecreases in the cost of product innovation, makes sales occur evenearlier. These results are consistent with the observation that thetrend toward earlier sales since mid-1970's coincides with increasingproduct varieties in fashion good markets and increasing storecompetition.

The impact of generic reference pricing interventions in the statin market

The objective of this study was to evaluate the intended and unintended impact on pharmaceutical use and sales of three public financing reforms applied to the prescription of statins: a Spanish generic reference pricing (RP) system for lovastatin and simvastatin, and two competing policies introduced by the Andalusian Public Health Service (APHS) for all statins, first a maximum consumer price (MCP) and then a so called quality prescribing incentive for general practitioners (MCP plus PI).This study is designed as an observational, retrospective, interrupted time series analysis with comparison series (APHS and the rest of Spain) of 46 monthly drug use and sales ratios from January 2001 to October 2004 for each active ingredient in the group of statins.RP has been effective at reducing the volume of sales growth of the off-patent statins, yet its overall impact on sales of all statins has been relatively modest. The quantity and volume of sales impact heavily depends on regulatory RP details such as when the system is introduced, how often it is updated, and how the reference price is calculated.

Failure to collude in the presence of asymmetric information

In this paper, we design the optimal contract when two agents can collude under asymmetric information. They have correlated types, produce complementary inputs and are protected by limited liability. Therefore, a joint manipulation of reports allows them to internalize informational and productive externalities. We show that by taking advantage of the transaction costs created by asymmetric information, even though they collude, the principal can achieve the outcome without collusion regardless of the sign and the degree of correlation. In particular, the principal can implement a non-monotonic quantity schedule in a collusion-proof way while this is impossible if collusion occurs under complete information.

Improving small area estimation by combining surveys: new perspectives in regional statistics

A national survey designed for estimating a specific population quantity is sometimes used for estimation of this quantity also for a small area, such as a province. Budget constraints do not allow a greater sample size for the small area, and so other means of improving estimation have to be devised. We investigate such methods and assess them by a Monte Carlo study. We explore how a complementary survey can be exploited in small area estimation. We use the context of the Spanish Labour Force Survey (EPA) and the Barometer in Spain for our study.

A two-mean reverting-factor model of the term structure of interest rates

This paper presents a two--factor model of the term structure ofinterest rates. We assume that default free discount bond prices aredetermined by the time to maturity and two factors, the long--term interestrate and the spread (difference between the long--term rate and theshort--term (instantaneous) riskless rate). Assuming that both factorsfollow a joint Ornstein--Uhlenbeck process, a general bond pricing equationis derived. We obtain a closed--form expression for bond prices andexamine its implications for the term structure of interest rates. We alsoderive a closed--form solution for interest rate derivatives prices. Thisexpression is applied to price European options on discount bonds andmore complex types of options. Finally, empirical evidence of the model'sperformance is presented.

A search theory of money and commerce with Neoclassical production

This paper advances a highly tractable model with search theoretic foundations for money and neoclassical growth. In the model, manufacturingand commerce are distinct and separate activities. In manufacturing,goods are efficiently produced combining capital and labor. In commerce,goods are exchanged in bilateral meetings. The model is applied to studythe effects of inßation on capital accumulation and welfare. With realisticparameters, inflation has large negative effects on welfare even though itraises capital and output. In contrast, with cash-in-advance, a deviceinformally motivated with bilateral trading, inflation depresses capitaland output and has a negligible effect on welfare.

Solving a concrete sleepers production scheduling by genetic algorithms

PRECON S.A is a manufacturing company dedicated to produce prefabricatedconcrete parts to several industries as rail transportation andagricultural industries.Recently, PRECON signed a contract with RENFE,the Spanish Nnational Rail Transportation Company to manufacturepre-stressed concrete sleepers for siding of the new railways of the highspeed train AVE. The scheduling problem associated with the manufacturingprocess of the sleepers is very complex since it involves severalconstraints and objectives. The constraints are related with productioncapacity, the quantity of available moulds, satisfying demand and otheroperational constraints. The two main objectives are related withmaximizing the usage of the manufacturing resources and minimizing themoulds movements. We developed a deterministic crowding genetic algorithmfor this multiobjective problem. The algorithm has proved to be a powerfuland flexible tool to solve the large-scale instance of this complex realscheduling problem.