A bayesian spatial individual effects probit model of the 2010 UK general election

The Conservative Party emerged from the 2010 United Kingdom General Election as the largest single party, but their support was not geographically uniform. In this paper, we estimate a hierarchical Bayesian spatial probit model that tests for the presence of regional voting effects. This model allows for the estimation of individual region-specic effects on the probability of Conservative Party success, incorporating information on the spatial relationships between the regions of the mainland United Kingdom. After controlling for a range of important covariates, we find that these spatial relationships are significant and that our individual region-specic effects estimates provide additional evidence of North-South variations in Conservative Party support.

Obesity and smoking: can we catch two birds with one tax?

The debate on tobacco and fat taxes often treats smoking and eating as independent behaviors. However, the available evidence shows that they are interdependent, which implies that policies against smoking or obesity may have larger scope than expected. To address this issue, we propose a dynamic rational model where eating and smoking are simultaneous choices that jointly affect body weight and addiction to smoking. Focusing on direct and cross-price effects, we compare tobacco taxes and food taxes and we show that a single policy tool can reduce both smoking and body weight. In particular, food taxes can be more effective than tobacco taxes at simultaneously fighting obesity and smoking.

Intergenerational Mobility and the Informative Content of Surnames

We propose a new methodology for measuring intergenerational mobility in economic wellbeing. Our method is based on the joint distribution of surnames and economic outcomes. It circumvents the need for intergenerational panel data, a long-standing stumbling block for understanding mobility. A single cross-sectional dataset is su cient. Our main idea is simple. If `inheritance' is important for economic outcomes, then rare surnames should predict economic outcomes in the cross-section. This is because rare surnames are indicative of familial linkages. Of course, if the number of rare surnames is small, this won't work. But rare surnames are abundant in the highly-skewed nature of surname distributions from most Western societies. We develop a model that articulates this idea and shows that the more important is inheritance, the more informative will be surnames. This result is robust to a variety of di erent assumptions about fertility and mating. We apply our method using the 2001 census from Catalonia, a large region of Spain. We use educational attainment as a proxy for overall economic well-being. Our main nding is that mobility has decreased among the di erent generations of the 20th century. A complementary analysis based on sibling correlations con rms our results and provides a robustness check on our method. Our model and our data allow us to examine one possible explanation for the observed decrease in mobility. We nd that the degree of assortative mating has increased over time. Overall, we argue that our method has promise because it can tap the vast mines of census data that are available in a heretofore unexploited manner.

A Simple Characterization of Dynamic Completeness in Continuous Time

This paper investigates dynamic completeness of financial markets in which the underlying risk process is a multi-dimensional Brownian motion and the risky securities dividends geometric Brownian motions. A sufficient condition, that the instantaneous dispersion matrix of the relative dividends is non-degenerate, was established recently in the literature for single-commodity, pure-exchange economies with many heterogenous agents, under the assumption that the intermediate flows of all dividends, utilities, and endowments are analytic functions. For the current setting, a different mathematical argument in which analyticity is not needed shows that a slightly weaker condition suffices for general pricing kernels. That is, dynamic completeness obtains irrespectively of preferences, endowments, and other structural elements (such as whether or not the budget constraints include only pure exchange, whether or not the time horizon is finite with lump-sum dividends available on the terminal date, etc.)

Empirical testing of genuine savings as an indicator of weak sustainability: a three-country analysis of long run trends

Genuine Savings has emerged as a widely-used indicator of sustainable development. In this paper, we use long-term data stretching back to 1870 to undertake empirical tests of the relationship between Genuine Savings (GS) and future well-being for three countries: Britain, the USA and Germany. Our tests are based on an underlying theoretical relationship between GS and changes in the present value of future consumption. Based on both single country and panel results, we find evidence supporting the existence of a cointegrating (long run equilibrium) relationship between GS and future well-being, and fail to reject the basic theoretical result on the relationship between these two macroeconomic variables. This provides some support for the GS measure of weak sustainability. We also show the effects of modelling shocks, such as World War Two and the Great Depression.

Overtime Working and Contract Efficiency

We present a wage-hours contract designed to minimize costly turnover given investments in specific training combined with firm and worker information asymmetries. It may be optimal for the parties to work ‘long hours’ remunerated at premium rates for guaranteed overtime hours. Based on British plant and machine operatives, we test three predictions. First, trained workers with longer tenure are more likely to work overtime. Second, hourly overtime pay exceeds the value of marginal product while the basic hourly wage is less than the value of marginal product. Third, the basic hourly wage is negatively related to the overtime premium.

Ecological-economic modelling of interactions between wild and commercial bees and pesticide use

The decline in extent of wild pollinators in recent years has been partly associated with changing farm practices and in particular with increase of pesticide use. In this paper we combine ecological modelling with economic analysis of a single farm output under the assumption that both pollination and pest control are essential inputs. We show that the drive to increase farm output can lead to a local decline in the wild bee population. Commercial bees are often considered an alternative to wild pollinators, but we show that their introduction can lead to further decline and finally local extinction of wild bees. The transitions between different outcomes are characterised by threshold behaviour and are potentially difficult to predict and detect in advance. Small changes in economic (input prices) and ecological (wild bees carrying capacity and effect of pesticides on bees) can move the economic-ecological system beyond the extinction threshold. We also show that increasing the pesticide price or decreasing the commercial bee price might lead to reestablishment of wild bees following their local extinction. Thus, we demonstrate the importance of combining ecological modelling with economics to study the provision of ecosystem services and to inform sustainable management of ecosystem service providers.

An Empirical Examination of the R&D Boundaries of the Firm - A Problem-Solving Perspective

We consider, both theoretically and empirically, how different organization modes are aligned to govern the efficient solving of technological problems. The data set is a sample from the Chinese consumer electronics industry. Following mainly the problem solving perspective (PSP) within the knowledge based view (KBV), we develop and test several PSP and KBV hypotheses, in conjunction with competing transaction cost economics (TCE) alternatives, in an examination of the determinants of the R&D organization mode. The results show that a firm’s existing knowledge base is the single most important explanatory variable. Problem complexity and decomposability are also found to be important, consistent with the theoretical predictions of the PSP, but it is suggested that these two dimensions need to be treated as separate variables. TCE hypotheses also receive some support, but the estimation results seem more supportive of the PSP and the KBV than the TCE.

Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model

This paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the Euro-Dollar permanent equilibrium exchange rates (PEER) for the period 1975Q1 to 2008Q4. The results show that for most of the sample period, the Euro-Dollar exchange rate closely followed the values implied by the PEER. The only significant deviations from the PEER occurred in the years immediately before and after the introduction of the single European currency. The forecasting exercise shows that incorporating economic fundamentals provides a better long-run exchange rate forecasting performance than a random walk process.

Legal Uncertainty, Competition Law Enforcement Procedures and Optimal Penalties

In this paper we make three contributions to the literature on optimal Competition Law enforcement procedures. The first (which is of general interest beyond competition policy) is to clarify the concept of “legal uncertainty”, relating it to ideas in the literature on Law and Economics, but formalising the concept through various information structures which specify the probability that each firm attaches – at the time it takes an action – to the possibility of its being deemed anti-competitive were it to be investigated by a Competition Authority. We show that the existence of Type I and Type II decision errors by competition authorities is neither necessary nor sufficient for the existence of legal uncertainty, and that information structures with legal uncertainty can generate higher welfare than information structures with legal certainty – a result echoing a similar finding obtained in a completely different context and under different assumptions in earlier Law and Economics literature (Kaplow and Shavell, 1992). Our second contribution is to revisit and significantly generalise the analysis in our previous paper, Katsoulacos and Ulph (2009), involving a welfare comparison of Per Se and Effects- Based legal standards. In that analysis we considered just a single information structure under an Effects-Based standard and also penalties were exogenously fixed. Here we allow for (a) different information structures under an Effects-Based standard and (b) endogenous penalties. We obtain two main results: (i) considering all information structures a Per Se standard is never better than an Effects-Based standard; (ii) optimal penalties may be higher when there is legal uncertainty than when there is no legal uncertainty.

Integer Programming on Domains Containing Inseparable Ordered Paris

Using the integer programming approach introduced by Sethuraman, Teo, and Vohra (2003), we extend the analysis of the preference domains containing an inseparable ordered pair, initiated by Kalai and Ritz (1978). We show that these domains admit not only Arrovian social welfare functions \without ties," but also Arrovian social welfare functions \with ties," since they satisfy the strictly decomposability condition introduced by Busetto, Codognato, and Tonin (2012). Moreover, we go further in the comparison between Kalai and Ritz (1978)'s inseparability and Arrow (1963)'s single-peak restrictions, showing that the former condition is more \respectable," in the sense of Muller and Satterthwaite (1985).

Out of sight, out of mind? Educational outcomes of children with parents working abroad.

Impact of parental emigration on educational outcomes of children is theoretically ambiguous. Using novel data I collected on migration experience and its timing, family background and school performance of lower secondary pupils in Poland, I analyse the question empirically. Migration is mostly temporary in nature, with one parent engaging in employment abroad. As many as 63% of migrant parents have vocational qualifications, 29% graduated from high school, 4% have no qualifications and the remaining 4% graduated from university. Almost 18% of children are affected by parental migration. Perhaps surprisingly, estimates suggest that parental employment abroad has a positive immediate impact on a pupil’s grade. Parental education appears pivotal; children of high school graduates benefit most. Longer term effects appear more negative, however, suggesting that a prolonged migration significantly lowers a child’s grade. Interestingly, siblings’ foreign experiences exert a large, positive impact on pupils’ grades.

Partial Knowledge Restrictions on theTwo-Stage Threshold Model of Choice

In the context of the two-stage threshold model of decision making, with the agent’s choices determined by the interaction Of three “structural variables,” we study the restrictions on behavior that arise when one or more variables are xogenously known. Our results supply necessary and sufficient conditions for consistency with the model for all possible states of partial Knowledge, and for both single- and multivalued choice functions.

English as a Global Language

How far has English already spread? How much further can we expect it to go? In response to the first question, this chapter tries to identify the areas of life where English already serves as a lingua franca in the world (more or less) and those where the language faces sharp competition and does not threaten to marginalize the other major languages. The former areas of life are international safety, the internal business of international organizations, internal communication within the international news industry, international sports and science. The latter areas are the press, television, the internet, publishing and international trade. As to the second question, about the future prospects of English, the chapter argues that the advance of English will depend heavily on the motives to learn the other major languages in the world as well. Based on the empirical evidence, the same model applies to the incentives to learn English and these other languages. On the important topic of welfare, the cultural market is the single one where it is arguable that the progress of English has gone too far. English dominance in the song, the cinema and the best-seller is indeed extraordinary and difficult to reconcile with the evidence popular attachments to home languages, which is otherwise strong and apparent.

Multiple Objectives in Monetary Policy: A de Facto Analysis for ‘Advanced’ Countries

A statistical methodology is developed by which realised outcomes can be used to identify, for calendar years between 1974 and 2012, when policy makers in ‘advanced’ economies have successfully pursued single objectives of different kinds, or multiple objectives. A simple criterion is then used to distinguish between multiple objectives pure and simple and multiple objectives subject to a price stability constraint. The overall and individual country results which this methodology produces seem broadly plausible. Unconditional and conditional analyses of the inflation and growth associated with different types of objectives reveal that multiple objectives subject to a price stability constraint are associated with roughly as good economic performance as the single objective of inflation. A proposal is then made as to how the remit of an inflation-targeting central bank could be adjusted to allow it to pursue other objectives in extremis without losing the credibility effects associated with inflation targeting.