Education, preferences for leisure, and the optimal income tax schedule

Recent advances in dynamic Mirrlees economies have incorporated the treatment of human capital investments as an important dimension of government policy. This paper adds to this literature by considering a two period economy where agents are di erentiated by their preferences for leisure and their productivity, both private information. The fact that productivity is only learnt later in an agent's life introduces uncertainty to agent's savings and human capital choices and makes optimal the use of multi-period tie-ins in the mechanism that characterizes the government policy. We show that optimal policies are often interim ine cient and that the introduction of these ine ciencies may take the form of marginal tax rates on labor income of varying sign and educational policies that include the discouragement of human capital acquisition. With regards to implementation, state-dependent linear taxes implement optimal savings, while human capital policies may require labor income taxes that depend directly on agents' schooling.

Income inequality in a job-search model with heterogeneous time preferences

This paper explores the use of an intertemporal job-search model in the investigation of within-cohort and between-cohort income inequality, the latter being generated by the heterogeneity of time preferences among cohorts of homogenous workers and the former by the cross-sectional turnover in the job market. It also offers an alternative explanation for the empirically-documented negative correlation between time preference and labor income. Under some speciÖc distributions regarding wage offers and time preferences, we show how the within-cohort and between-cohort Gini coe¢ cients of income distribution can be calculated, and how they vary as a function of the parameters of the model.

Local concavifiability of preferences and determinacy of equilibrium

In this paper we consider strictly convex monotone continuous complete preorderings on R+n that are locally representable by a concave utility function. By Alexandroff 's (1939) theorem, this function is twice dífferentiable almost everywhere. We show that if the bordered hessian determinant of a concave utility representation vanishes on a null set. Then demand is countably rectifiable, that is, except for a null set of bundles, it is a countable union of c1 manifolds. This property of consumer demand is enough to guarantee that the equilibrium prices of apure exchange economy will be locally unique, for almost every endowment. We give an example of an economy satisfying these conditions but not the Katzner (1968) - Debreu (1970, 1972) smoothness conditions.

Preferences, common knowledge and speculative trade

We study the proposition that if it is common knowledge that en allocation of assets is ex-ante pareto efficient, there is no further trade generated by new information. The key to this result is that the information partitions and other characteristics of the agents must be common knowledge and that contracts, or asset markets, must be complete. It does not depend on learning, on 'lemons' problems, nor on agreement regarding beliefs and the interpretation of information. The only requirement on preferences is state-additivity; in particular, traders need not be risk-averse. We also prove the converse result that "no-trade results" imply that traders' preferences can be represented by state-additive utility functions. We analyze why examples of other widely studied preferences (e.g., Schmeidler (1989)) allow "speculative" trade.

Beyond indifferent players: on the existence of prisoners dilemmas in games with amicable and adversarial preferences

Why don’t agents cooperate when they both stand to gain? This question ranks among the most fundamental in the social sciences. Explanations abound. Among the most compelling are various configurations of the prisoner’s dilemma (PD), or public goods problem. Payoffs in PD’s are specified in one of two ways: as primitive cardinal payoffs or as ordinal final utility. However, as final utility is objectively unobservable, only the primitive payoff games are ever observed. This paper explores mappings from primitive payoff to utility payoff games and demonstrates that though an observable game is a PD there are broad classes of utility functions for which there exists no associated utility PD. In particular we show that even small amounts of either altruism or enmity may disrupt the mapping from primitive payoff to utility PD. We then examine some implications of these results.

Homothetic preferences

This paper describes properties of upper semi-continuous homothetic preferences. First we give conditions for the existence of an upper semi-continuous representation which is homogeneous of degree one. Then we show that with the additional assumptions of monotonicity or strict convexity, the preference is continuous. Several counterexamples illustrate the tightness of the results.

Interim efficiency with MEU-preferences

Recently Kajii and (2008) proposed to characterize interim efficient allocations in an exchange economy under asymmetric information when uncertainty is represented by multiple posteriors. When agents have Bewley's incomplete preferences, Kajii and Ui (2008) proposed a necessary and sufficient condition on the set of posteriors. However, when agents have Gilboa--Schmeidler's MaxMin expected utility preferences, they only propose a sufficient condition. The objective of this paper is to complete Kajii and Ui's work by proposing a necessary and sufficient condition for interim efficiency for various models of ambiguity aversion and in particular MaxMin expected utility. Our proof is based on a direct application of some results proposed by Rigotti, Shannon and Stralecki (2008).

Phase transition of demand explained by the heterogeneity of consumers' intrinsic preferences

In 1991 Gary S. Becker presented A Note on Restaurant Pricing and Other Examples of Social In uences on Price explaining why many successful restaurants, plays, sporting events, and other activities do not raise their prices even with persistent excess demand. The main reason for this is due to the discontinuity of stable demands, which is explained in Becker's (1991) analysis. In the present paper we construct a discrete time stochastic model of socially interacting consumers deciding for one of two establishments. With this model we show that the discontinuity of stable demands, proposed by Gary S. Becker, depends crucially on an additional factor: the dispersion of the consumers' intrinsic preferences for the establishments.

Asymmetric preferences in investment decisions in the Brazilian financial market

The main objective of this article is to test the hypothesis that utility preferences that incorporate asymmetric reactions between gains and losses generate better results than the classic Von Neumann-Morgenstern utility functions in the Brazilian market. The asymmetric behavior can be computed through the introduction of a disappointment (or loss) aversion coefficient in the classical expected utility function, which increases the impact of losses against gains. The results generated by both traditional and loss aversion utility functions are compared with real data from the Brazilian market regarding stock market participation in the investment portfolio of pension funds and individual investors.

Essays on economics of marriage

A sociedade mudou nas últimas décadas abrindo a possibilidade para cientistas sociais estudarem essas mudanças e analisar os seus impactos na unidade familiar. Nesta tese pretendemos analisar como as decisões dos agentes com relação a decisão de casar e estudar pode estar conectado considerando que homens e mulheres têm preferências pelo casamento intragrupo. No modelo estudado encontramos que as preferências para o casamento intragrupo podem aumentar a proporção de homens e mulheres que decidem se casar e estudar. Mostramos também que empiricamente há um positive assortative mating entre pessoas com as mesmas características, tais como, educação, religião ou raça. Além disso, a probabilidade de casais casados na mesma religião aumenta a probabilidade dos casais estarem casados dentro do mesmo nível de escolaridade. Considerando as mudanças em como os casais se formam, a composição educacional e os retornos da educação que aconteceram no Brasil nos últimos anos, investiga-se os impactos dessas mudanças na desigualdade de renda dos casais. Calculamos cenários contrafactuais para o Coeficiente de Gini mantendo uma dessas três variáveis fixas em um determinado ano, comparando o contrafactual estimado com o Gini real. Se o casamento for formado aleatoriamente com relação à educação, o Coeficiente de Gini seria menor do que o real. Mantendo os retornos da educação fixos no ano de 2014 encontramos um Gini contrafactual menor do que o real.