14 resultados para Intuitive Aspect
em Scottish Institute for Research in Economics (SIRE) (SIRE), United Kingdom
Resumo:
We present an envelope theorem for establishing first-order conditions in decision problems involving continuous and discrete choices. Our theorem accommodates general dynamic programming problems, even with unbounded marginal utilities. And, unlike classical envelope theorems that focus only on differentiating value functions, we accommodate other endogenous functions such as default probabilities and interest rates. Our main technical ingredient is how we establish the differentiability of a function at a point: we sandwich the function between two differentiable functions from above and below. Our theory is widely applicable. In unsecured credit models, neither interest rates nor continuation values are globally differentiable. Nevertheless, we establish an Euler equation involving marginal prices and values. In adjustment cost models, we show that first-order conditions apply universally, even if optimal policies are not (S,s). Finally, we incorporate indivisible choices into a classic dynamic insurance analysis.
Resumo:
The Scottish National Party led Scottish Government has identified household poverty as a key focus for its anti-poverty strategy. The government’s ‘Solidarity Target’ seeks to both increase wealth and increase the share of total income gained by these three deciles. The ability to demonstrate the advantages of policy divergence within Scotland, relative to the other parts of the United Kingdom, is central to the Government’s aim of gaining support for increased powers for the devolved government. This paper seeks to provide evidence on one aspect of the government’s anti- poverty strategy; the degree to which Scotland differs from the rest of the UK over levels of entrenched poverty. The paper demonstrates that not only does Scotland have greater entrenched poverty but that the changes in mobility since the 1990s have impacted on Scotland to a lesser degree than the rest of the UK.
Resumo:
That financial matters did not constrain industrial takeoff in the UK is generally accepted in the historical literature; in contrast, contemporary empirical analyses have found evidence that financial development can be a causal determinant of economic growth. We look to reconcile these findings by concentrating on a particular aspect of industrialising UK where inefficiencies in finance could have had bite: The finance of physical infrastructures. We document the historical record and develop the importance of spatial disaggregation and spillovers in both technological and financial development. We develop a simple model that captures the nature of infrastructure finance within a theory of endogenous growth where financial costs are endogenous. We argue that the conception of the finance-growth nexus as a largely static, aggregative phenomenon misses out a good deal of complexity and we relate that complexity to a number of implications for regulation of both financial systems and the emergence of infrastructures
Resumo:
We consider entry of additional firms into the market for a single commodity in which both sellers and buyers are permitted to interact strategically. We show that the market is quasi-competitive, in that the inclusion of an additional seller lowers the price and increases the volume of trade, as expected. However, whilst buyers benefit from this change under reasonable conditions on preferences, we cannot conclude that sellers are always made worse off in the face of more intense competition, contrary to the conventional wisdom. We characterize the conditions under which entry by new sellers may raise the equilibrium profit of existing sellers, which will depend in an intuitive way on the elasticity of a strategic analog of demand and the market share of existing sellers, and encompass completely standard economic environments.
Resumo:
We develop methods for Bayesian inference in vector error correction models which are subject to a variety of switches in regime (e.g. Markov switches in regime or structural breaks). An important aspect of our approach is that we allow both the cointegrating vectors and the number of cointegrating relationships to change when the regime changes. We show how Bayesian model averaging or model selection methods can be used to deal with the high-dimensional model space that results. Our methods are used in an empirical study of the Fisher effect.
Resumo:
We develop methods for Bayesian inference in vector error correction models which are subject to a variety of switches in regime (e.g. Markov switches in regime or structural breaks). An important aspect of our approach is that we allow both the cointegrating vectors and the number of cointegrating relationships to change when the regime changes. We show how Bayesian model averaging or model selection methods can be used to deal with the high-dimensional model space that results. Our methods are used in an empirical study of the Fisher e ffect.
Resumo:
We reformulate neoclassical consumer choice by focusing on lambda, the marginal utility of money. As the opportunity cost of current expenditure, lambda is approximated by the slope of the indirect utility function of the continuation. We argue that lambda can largely supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.
Resumo:
One aspect of the case for policy support for renewable energy developments is the wider economic benefits that are expected to be generated. Within Scotland, as with other regions of the UK, there is a focus on encouraging domestically‐based renewable technologies. In this paper, we use a regional computable general equilibrium framework to model the impact on the Scottish economy of expenditures relating to marine energy installations. The results illustrate the potential for (considerable) ‘legacy’ effects after expenditures cease. In identifying the specific sectoral expenditures with the largest impact on (lifetime) regional employment, this approach offers important policy guidance.
Resumo:
One aspect of the case for policy support for renewable energy developments is the wider economic benefits that are expected to be generated. Within Scotland, as with other regions of the UK, there is a focus on encouraging domestically‐based renewable technologies. In this paper, we use a regional computable general equilibrium framework to model the impact on the Scottish economy of expenditures relating to marine energy installations. The results illustrate the potential for (considerable) ‘legacy’ effects after expenditures cease. In identifying the specific sectoral expenditures with the largest impact on (lifetime) regional employment, this approach offers important policy guidance.
Resumo:
This paper proposes a model of choice that does not assume completeness of the decision maker’s preferences. The model explains in a natural way, and within a unified framework of choice when preference-incomparable options are present, four behavioural phenomena: the attraction effect, choice deferral, the strengthening of the attraction effect when deferral is per-missible, and status quo bias. The key element in the proposed decision rule is that an individual chooses an alternative from a menu if it is worse than no other alternative in that menu and is also better than at least one. Utility-maximising behaviour is included as a special case when preferences are complete. The relevance of the partial dominance idea underlying the proposed choice procedure is illustrated with an intuitive generalisation of weakly dominated strategies and their iterated deletion in games with vector payoffs.
Resumo:
During the past four decades both between and within group wage inequality increased significantly in the US. I provide a microfounded justification for this pattern, by introducing private employer learning in a model of signaling with credit constraints. In particular, I show that when financial constraints relax, talented individuals can acquire education and leave the uneducated pool, this decreases unskilled inexperienced wages and boosts wage inequality. This explanation is consistent with US data from 1970 to 1997, indicating that the rise of the skill and the experience premium coincides with a fall in unskilled-inexperienced wages, while at the same time skilled or experienced wages do not change much. The model accounts for: (i) the increase in the skill premium despite the growing supply of skills; (ii) the understudied aspect of rising inequality related to the increase in the experience premium; (iii) the sharp growth of the skill premium for inexperienced workers and its moderate expansion for the experienced ones; (iv) the puzzling coexistence of increasing experience premium within the group of unskilled workers and its stable pattern among the skilled ones. The results hold under various robustness checks and provide some interesting policy implications about the potential conflict between inequality of opportunity and substantial economic inequality, as well as the role of minimum wage policy in determining the equilibrium wage inequality.
Resumo:
We derive a rational model of separable consumer choice which can also serve as a behavioral model. The central construct is [lambda] , the marginal utility of money, derived from the consumer's rest-of-life problem. We present a robust approximation of [lambda], and show how to incorporate liquidity constraints, indivisibilities and adaptation to a changing environment. We fi nd connections with numerous historical and recent constructs, both behavioral and neoclassical, and draw contrasts with standard partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive description of consumer choice.
Resumo:
The UK government introduced the Renewable Obligation (RO), a system of tradable quotas, to encourage the installation of renewable electricity capacity. Each unit of generation from renewables created a renewable obligation certificate (ROC). Electricity generators must either; earn ROCs through their own production, purchase ROCs in the market or pay the buy-out price to comply with the quota set by the RO. A unique aspect of this regulation is that all entities holding ROCs receive a share of the buy-out fund (the sum of all compliance purchases using the buy-out price). This set-up ensures that the difference between the market price for ROCs and the buy-out price should equal the expected share of the buy-out fund, as regulated entities arbitrage these two compliance options. The expected share of the buy-out fund depends on whether enough renewable generation is available to meet the quota. This analysis tests whether variables associated with renewable generation or electricity demand are correlated with, and thus can help predict, the price of ROCs.
Resumo:
I put forward a concise and intuitive formula for the calculation of the valuation for a good in the presence of the expectation that further, related, goods will soon become available. This valuation is tractable in the sense that it does not require the explicit resolution of the consumerís life-time problem.