Equilibrium asset prices and savings of heterogeneous agents in the presence of incomplete markets and portfolio constraints

We study the quantitative properties of a dynamic general equilibrium model in which agents face both idiosyncratic and aggregate income risk, state-dependent borrowing constraints that bind in some but not all periods and markets are incomplete. Optimal individual consumption-savings plans and equilibrium asset prices are computed under various assumptions about income uncertainty. Then we investigate whether our general equilibrium model with incomplete markets replicates two empirical observations: the high correlation between individual consumption and individual income, and the equity premium puzzle. We find that, when the driving processes are calibrated according to the data from wage income in different sectors of the US economy, the results move in the direction of explaining these observations, but the model falls short of explaining the observed correlations quantitatively. If the incomes of agents are assumed independent of each other, the observations can be explained quantitatively.

Competing engines of growth: Innovation and standardization

We study a dynamic general equilibrium model where innovation takes theform of the introduction of new goods whose production requires skilled workers.Innovation is followed by a costly process of standardization, whereby these newgoods are adapted to be produced using unskilled labor. Our framework highlightsa number of novel results. First, standardization is both an engine of growth anda potential barrier to it. As a result, growth is an inverse U-shaped function ofthe standardization rate (and of competition). Second, we characterize the growthand welfare maximizing speed of standardization. We show how optimal protection of intellectual property rights affecting the cost of standardization vary withthe skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that, depending on how competition between innovatingand standardizing firms is modelled and on parameter values, a new type of multiplicity of equilibria may arise. Finally, we study the implications of our model forthe skill-premium and we illustrate novel reasons for linking North-South trade tointellectual property rights protection.

Corporate finance and the monetary transmission mechanism

This paper analyzes the transmission mechanisms of monetarypolicy in a general equilibrium model of securities marketsand banking with asymmetric information. Banks' optimal asset/liability policy is such that in equilibrium capital adequacy constraints are always binding. Asymmetric information about banks' net worth adds a cost to outside equity capital, which limits the extent to which banks can relax their capital constraint. In this context monetarypolicy does not affect bank lending through changes in bank liquidity. Rather, it has the effect of changing theaggregate composition of financing by firms. The model also produces multiple equilibria, one of which displays all the features of a "credit crunch". Thus, monetary policy can also have large effects when it induces a shift from one equilibrium to the other.

Aggregate consequences of limited contract enforceability

We study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts. Because of enforceability problems, contracts are constrained efficient. We show that limited enforceability amplifies the impact of technological innovations on aggregate output. More generally, we show that lower enforceability of contracts will be associated with greater aggregate volatility. A key assumption for this result is that defaulting entrepreneurs are not excluded from the market.

Trade, markup heterogeneity and misallocations

We argue that the procompetitive effect of international trade may bring about significant welfare costs that have not been recognized. We formulate a stylized general equilibrium model with a continuum of imperfectly competitive industries to show that, under plausible conditions, a trade-induced increase in competition can actually amplify monopoly distortions. This happens because trade, while lowering the average level of market power, may increase its cross-sectoral dispersion. Using data on US industries, we document a dramatic increase in the dispersion of market power overtime. We also show evidence thattrade might be responsible for it and provide some quantifications of the induced welfare cost. Our results suggest that, to avoid some unpleasant effects of globalization, trade integration should be accompanied by procompetitive reforms (i.e., deregulation) in the nontraded sectors.

The intra-generational redistributive effects of social security

This paper provides a quantitative evaluation of the intra--cohortredistributive elements of the United States social security system in thecontext of a computable general equilibrium model. I determine how thewell--being of individuals that differ across {\sl gender, race} and {\sl education}is affected by government social security policy. I find that females, whitesand non--college graduates stand less to gain (lose) from reductions(increases) in the size of social security than males, non--whites andcollege graduates, respectively. Differences in mortality risk and laborproductivity translate into differences in the magnitudes of capitalaccumulation and labor supply distortions, that are responsible for theobserved welfare difference between types. Results imply that the currentprogram is lifetime progressive across gender and education, yet lifetimeregressive across race.

Modelado de la merluza en su ecosistema con interacciones tróficas y forzantes ambientales

Se plantea la hipótesis de que la merluza requiere un manejo basado en el enfoque ecosistémico para su recuperación. El objetivo es realizar simulaciones con un modelo ecotrófico multiespecífico, con dos estadios de merluza, para entender las interacciones tróficas de la merluza con sus presas, competidores y depredadores. Las simulaciones con factores biológicos y ambientales, sugirieron que la reducción poblacional de la merluza se atribuye más a factores biológicos (relaciones tróficas y presión de pesca) que a factores ambientales. En general, las proyecciones de biomasa del modelo sugirieron que el stock de merluza a bajos niveles poblacionales presenta una limitada resiliencia.

Entrepreneurial risk, investment and innovation

In this paper I develop a general equilibrium model with risk averse entrepreneurialfirms and with public firms. The model predicts that an increase in uncertainty reducesthe propensity of entrepreneurial firms to innovate, while it does not affect thepropensity of public firms to innovate. Furthermore, it predicts that the negativeeffect of uncertainty on innovation is stronger for the less diversified entrepreneurialfirms, and is stronger in the absence of financing frictions in the economy. In thesecond part of the paper I test these predictions on a dataset of small and mediumItalian manufacturing firms.

Comment to "Weak instruments robust tests in GMM and the New Keynesian Phillips curve" by Frank Kleibergen and Sophocles Mavroeidis

I discuss the identifiability of a structural New Keynesian Phillips curve when it is embedded in a small scale dynamic stochastic general equilibrium model. Identification problems emerge because not all the structural parameters are recoverable from the semi-structural ones and because the objective functions I consider are poorly behaved. The solution and the moment mappings are responsible for the problems.

A positive theory of geographic mobility and social insurance

This paper presents a tractable dynamic general equilibrium model thatcan explain cross-country empirical regularities in geographical mobility,unemployment and labor market institutions. Rational agents vote overunemployment insurance (UI), taking the dynamic distortionary effects ofinsurance on the performance of the labor market into consideration.Agents with higher cost of moving, i.e., more attached to their currentlocation, prefer more generous UI. The key assumption is that an agent'sattachment to a location increases the longer she has resided there. UIreduces the incentive for labor mobility and increases, therefore, thefraction of attached agents and the political support for UI. The mainresult is that this self-reinforcing mechanism can give rise to multiplesteady-states-one 'European' steady-state featuring high unemployment,low geographical mobility and high unemployment insurance, and one'American' steady-state featuring low unemployment, high mobility andlow unemployment insurance.

MRI monitoring of focal cerebral ischemia in peroxisome proliferator-activated receptor (PPAR)-deficient mice.

Peroxisome proliferator-activated receptors (PPARs) are a potential target for neuroprotection in focal ischemic stroke. These nuclear receptors have major effects in lipid metabolism, but they are also involved in inflammatory processes. Three PPAR isotypes have been identified: alpha, beta (or delta) and gamma. The development of PPAR transgenic mice offers a promising tool for prospective therapeutic studies. This study used MRI to assess the role of PPARalpha and PPARbeta in the development of stroke. Permanent middle cerebral artery occlusion induced focal ischemia in wild-type, PPARalpha-null mice and PPARbeta-null mice. T(2)-weighted MRI was performed with a 7 T MRI scan on day 0, 1, 3, 7 and 14 to monitor lesion growth in the various genotypes. General Linear Model statistical analysis found a significant difference in lesion volume between wild-type and PPAR-null mice for both alpha and beta isotypes. These data validate high-resolution MRI for monitoring cerebral ischemic lesions, and confirm the neuroprotective role of PPARalpha and PPARbeta in the brain.

Metastability and front propagation in the first-order optical Fréedericksz transition

A general dynamical model for the first-order optical Fréedericksz transition incorporating spatial transverse inhomogeneities and hydrodynamic effects is discussed in the framework of a time-dependent Ginzburg-Landau model. The motion of an interface between two coexisting states with different director orientations is considered. A uniformly translating front solution of the dynamical equations for the motion of that interface is described.

Biological monitoring of chemical exposure : toxicokinetic differences due to age and sex

Human biomonitoring is a widely used method in the assessment of occupational exposure to chemical substances and recommended biological limits are published periodically for interpretation and decision-making. However, it is increasingly recognized that a large variability is associated with biological monitoring, making interpretation less efficient than assumed. In order to improve the applicability of biological monitoring, specific factors responsible for this variability should be identified and their contribution quantified. Among these factors, age and sex are easily identifiable, and present knowledge about pharmaceutical chemicals suggests that they play an important role on the toxicokinetics of occupational chemical agents, and therefore on the biological monitoring results.The aim of the present research project was to assess the influence of age and sex on biological indicators corresponding to organic solvents. This has been done experimentally and by toxicokinetic computer simulation. Another purpose was to explore the effect of selected CYP2E1 polymorphisms on the toxicokinetic profile.Age differences were identified by numerical simulations using a general toxicokinetic model from a previous study which was applied to 14 chemicals, representing 21 specific biological entities, with, among others, toluene, phenol, lead and mercury. These models were runn with the modified parameters, indicating in some cases important differences due to age. The expected changes are mostly of the order of 10-20 %, but differences up to 50 % were observed in some cases. These differences appear to depend on the chemical and on the biological entity considered.Sex differences were quantified by controlled human exposures, which were carried out in a 12 m3 exposure chamber for three organic solvents separately: methyl ethyl ketone, 1-methoxy-2-propanol and 1,1,1-trichloroethane. The human volunteer groups were composed 12 of ten young men and fifteen young women, the latter subdivided into those with and without hormonal contraceptive. They were exposed during six hours at rest and at half of the threshold limit value. The kinetics of the parent compounds (organic volatiles) and their metabolite(s) were followed in blood, urine and expired air over time. Analyses of the solvent and their metabolites were performed by using headspace gas chromatography, CYP2E1 genotypes by using PCR-based RFLP methods. Experimental data were used to calibrate the toxicokinetic models developed for the three solvents. The results obtained for the different biomarkers of exposure mainly showed an effect on the urinary levels of several biomarkers among women due to the use of hormonal contraceptive, with an increase of about 50 % in the metabolism rate. The results also showed a difference due to the genotype CYP2E1*6, when exposed to methyl ethyl ketone, with a tendency to increase CYP2E1 activity when volunteers were carriers of the mutant allele. Simulations showed that it is possible to use simple toxicokinetic tools in order to predict internal exposure when exposed to organic solvents. Our study suggests that not only physiological differences but also exogenous sex hormones could influence CYP2E1 enzyme activity. The variability among the urinary biological indicators levels gives evidence of an interindividual susceptibility, an aspect that should have its place in the approaches for setting limits of occupational exposure.

Essays in equilibrium asset pricing

Introduction This dissertation consists of three essays in equilibrium asset pricing. The first chapter studies the asset pricing implications of a general equilibrium model in which real investment is reversible at a cost. Firms face higher costs in contracting than in expanding their capital stock and decide to invest when their productive capital is scarce relative to the overall capital of the economy. Positive shocks to the capital of the firm increase the size of the firm and reduce the value of growth options. As a result, the firm is burdened with more unproductive capital and its value lowers with respect to the accumulated capital. The optimal consumption policy alters the optimal allocation of resources and affects firm's value, generating mean-reverting dynamics for the M/B ratios. The model (1) captures convergence of price-to-book ratios -negative for growth stocks and positive for value stocks - (firm migration), (2) generates deviations from the classic CAPM in line with the cross-sectional variation in expected stock returns and (3) generates a non-monotone relationship between Tobin's q and conditional volatility consistent with the empirical evidence. The second chapter proposes a standard portfolio-choice problem with transaction costs and mean reversion in expected returns. In the presence of transactions costs, no matter how small, arbitrage activity does not necessarily render equal all riskless rates of return. When two such rates follow stochastic processes, it is not optimal immediately to arbitrage out any discrepancy that arises between them. The reason is that immediate arbitrage would induce a definite expenditure of transactions costs whereas, without arbitrage intervention, there exists some, perhaps sufficient, probability that these two interest rates will come back together without any costs having been incurred. Hence, one can surmise that at equilibrium the financial market will permit the coexistence of two riskless rates that are not equal to each other. For analogous reasons, randomly fluctuating expected rates of return on risky assets will be allowed to differ even after correction for risk, leading to important violations of the Capital Asset Pricing Model. The combination of randomness in expected rates of return and proportional transactions costs is a serious blow to existing frictionless pricing models. Finally, in the last chapter I propose a two-countries two-goods general equilibrium economy with uncertainty about the fundamentals' growth rates to study the joint behavior of equity volatilities and correlation at the business cycle frequency. I assume that dividend growth rates jump from one state to other, while countries' switches are possibly correlated. The model is solved in closed-form and the analytical expressions for stock prices are reported. When calibrated to the empirical data of United States and United Kingdom, the results show that, given the existing degree of synchronization across these business cycles, the model captures quite well the historical patterns of stock return volatilities. Moreover, I can explain the time behavior of the correlation, but exclusively under the assumption of a global business cycle.

French Swiss physicians' attitude toward palliative sedation: Influence of prognosis and type of suffering.

OBJECTIVE: Palliative sedation is a last resort medical act aimed at relieving intolerable suffering induced by intractable symptoms in patients at the end-of-life. This act is generally accepted as being medically indicated under certain circumstances. A controversy remains in the literature as to its ethical validity. There is a certain vagueness in the literature regarding the legitimacy of palliative sedation in cases of non-physical refractory symptoms, especially "existential suffering." This pilot study aims to measure the influence of two independent variables (short/long prognosis and physical/existential suffering) on the physicians' attitudes toward palliative sedation (dependent variable). METHODS: We used a 2 × 2 experimental design as described by Blondeau et al. Four clinical vignettes were developed (vignette 1: short prognosis/existential suffering; vignette 2: long prognosis/existential suffering; vignette 3: short prognosis/physical suffering; vignette 4: long prognosis/physical suffering). Each vignette presented a terminally ill patient with a summary description of his physical and psychological condition, medication, and family situation. The respondents' attitude towards sedation was assessed with a six-point Likert scale. A total of 240 vignettes were sent to selected Swiss physicians. RESULTS: 74 vignettes were completed (36%). The means scores for attitudes were 2.62 ± 2.06 (v1), 1.88 ± 1.54 (v2), 4.54 ± 1.67 (v3), and 4.75 ± 1.71 (v4). General linear model analyses indicated that only the type of suffering had a significant impact on the attitude towards sedation (F = 33.92, df = 1, p = 0.000). Significance of the results: The French Swiss physicians' attitude toward palliative sedation is more favorable in case of physical suffering than in existential suffering. These results are in line with those found in the study of Blondeau et al. with Canadian physicians and will be discussed in light of the arguments given by physicians to explain their decisions.