The Permanent Income Hypothesis: A Test on Czech Privatisation

Since the late eighties, economists have been regarding the transition from command to market economies in Central and Eastern Europe with intense interest. In addition to studying the transition per se, they have begun using the region as a testing ground on which to investigate the validity of certain classic economic propositions. In his research, comprising three articles written in English and totalling 40 pages, Mr. Hanousek uses the so-called "Czech national experiment" (voucher privatisation scheme) to test the permanent income hypothesis (PIH). He took as his inspiration Kreinin's recommendation: "Since data concerning the behaviour of windfall income recipients is relatively scanty, and since such data can constitute an important test of the permanent income hypothesis, it is of interest to bring to bear on the hypothesis whatever information is available". Mr. Hanousek argues that, since the transfer of property to Czech citizens from 1992 to 1994 through the voucher scheme was not anticipated, it can be regarded as windfall income. The average size of the windfall was more than three month's salary and over 60 percent of the Czech population received this unexpected income. Furthermore, there are other reasons for conducting such an analysis in the Czech Republic. Firstly, the privatisation process took place quickly. Secondly, both the economy and consumer behaviour have been very stable. Thirdly, out of a total population of 10 million Czech citizens, an astonishing 6 million, that is, virtually every household, participated in the scheme. Thus Czech voucher privatisation provides a sample for testing the PIH almost equivalent to a full population, thus avoiding problems with the distribution of windfalls. Compare this, for instance with the fact that only 4% of the Israeli urban population received personal restitution from Germany, while the number of veterans who received the National Service Life Insurance Dividends amounted to less than 9% of the US population and were concentrated in certain age groups. But to begin with, Mr. Hanousek considers the question of whether the public percieves the transfer from the state to individual as an increase in net wealth. It can be argued that the state is only divesting itself of assets that would otherwise provide a future source of transfers. According to this argument, assigning these assets to individuals creates an offsetting change in the present value of potential future transfers so that individuals are no better off after the transfer. Mr. Hanousek disagrees with this approach. He points out that a change in the ownership of inefficient state-owned enterprises should lead to higher efficiency, which alone increases the value of enterprises and creates a windfall increase in citizens' portfolios. More importantly, the state and individuals had very different preferences during the transition. Despite government propaganda, it is doubtful that citizens of former communist countries viewed government-owned enterprises as being operated in the citizens' best interest. Moreover, it is unlikely that the public fully comprehended the sophisticated links between the state budget, state-owned enterprises, and transfers to individuals. Finally, the transfers were not equal across the population. Mr. Hanousek conducted a survey on 1263 individuals, dividing them into four monthly earnings categories. After determining whether the respondent had participated in the voucher process, he asked those who had how much of what they received from voucher privatisation had been (a) spent on goods and services, (b) invested elsewhere, (c) transferred to newly emerging pension funds, (d) given to a family member, and (e) retained in their original form as an investment. Both the mean and the variance of the windfall rise with income. He obtained similar results with respect to education, where the mean (median) windfall for those with a basic school education was 13,600 Czech Crowns (CZK), a figure that increased to 15,000 CZK for those with a high school education without exams, 19,900 CZK for high school graduates with exams, and 24,600 CZK for university graduates. Mr. Hanousek concludes that it can be argued that higher income (and better educated) groups allocated their vouchers or timed the disposition of their shares better. He turns next to an analysis of how respondents reported using their windfalls. The key result is that only a relatively small number of individuals reported spending on goods. Overall, the results provide strong support for the permanent income hypothesis, the only apparent deviation being the fact that both men and women aged 26 to 35 apparently consume more than they should if the windfall were annuitised. This finding is still fully consistent with the PIH, however, if this group is at a stage in their life-cycle where, without the windfall, they would be borrowing to finance consumption associated with family formation etc. Indeed, the PIH predicts that individuals who would otherwise borrow to finance consumption would consume the windfall up to the level equal to the annuitised fraction of the increase in lifetime income plus the full amount of the previously planned borrowing for consumption. Greater consumption would then be financed, not from investing the windfall, but from avoidance of future repayment obligations for debts that would have been incurred without the windfall.

Value Choice of Russia in the Reform Process: The Sociological Aspect

The transition in Central and Eastern Europe since the late 1980s has provided a testing ground for classic propositions. This project looked at the impact of privatisation on private consumption, using the Czech experiment of voucher privatisation to test the permanent income hypothesis. This form of privatisation moved state assets to individuals and represented an unexpected windfall gain for participants in the scheme. Whether the windfall was consumed or saved offers a clear test of the permanent income hypothesis. Of a total population of 10 million, 6 million Czechs, i.e. virtually every household, participated in the scheme,. In a January 1996 survey, 1263 individuals were interviewed , 75% of whom had taken part. The data obtained suggests that only a small quantity of transferred assets were cashed in and spent on consumption, providing support for the permanent income hypothesis. The fraction of the windfall consumed grows with age, as would be predicted from the lower life expectancy of older consumers. The most interesting deviation was for people aged 26 to 35, who apparently consumed more that they would if the windfall were annuitised. As these people are at the stage in their lives when they would otherwise be borrowing to cover consumption related to establishing a family, etc., this is however consistent with the permanent income hypothesis, which predicts that individuals who would otherwise borrow money would use the windfall to avoid doing so.

Language, Thought, Relativism, Nationalism: An Interdisciplinary Study

Ms. Neumer and her team began their project with a critical analysis of the various theories of the relationship between language and thought. Their aim was to develop a theoretical position concerning the issue of universalism versus relativism. This issue is closely bound up with one of the main questions of the history of East and Central Europe, namely, the question of the nation, and the possibility of mutual understanding between national cultures. The team attempted to avoid falling into an all-too-common trap, that of allowing a political perspective to obscure the central theoretical issues. In a project whose outcome totalled over 1000 pages of manuscript in German, English and Hungarian, they touched on cognitive psychological, linguistic, semiotic, socio-semiotic, and other such themes. Their experience has convinced them of the fruitful heuristic possibilities of the interaction of scientific and philosophical approaches in this area of research. A preliminary analysis of the history of philosophy and inquiries into conceptual fields revealed that, in order to reach strong relativist conclusions concerning the unity of thought and language, it is required to take as a point of departure the widest possible sense of these concepts. But in fact, such an option ends up refuting itself: pursuing the premises to their final conclusion one arrives at the restriction of relativism. The team outlined a theory of the understanding of the Other which, borrowing from analytical as well as continental-hermeneutic trends, does not underestimate, on the one hand, the difficulties of understanding between various forms of life, cultures, and languages, but, on the other hand, can provide an alternative solution to the theory of incommensurabiltiy. Within the boundary of this problematic the team studied the problems of translatability, the acquisition of the mother and foreign languages, and natural or cultural determinacy of kind terms. The team regards its most original contribution to be the association of the problem of relativism-universalism and the language-thought relation with contemporary investigations into the question of orality, literacy, and secondary orality. Their conclusion was that, although certain connections can be revealed both between forms of communication and the thesis of the unity of language and thought, and between periods in the history of communication and the predominance of relativistic or universalistic tendencies, forms of communication do not unequivocally determine the answers to these questions.

What Makes Science Hard for Newcomers?

Part I What makes science hard for newcomers? 1) The background (briefly) of my research - (why the math anxiety model doesn’t fit) 2) The Tier analysis (a visual) – message: there are many types of science learners in your class than simply younger versions of yourself 3) Three approaches (bio, chem, physics) but only one Nature 4) The (different) vocabularies of the three Sciences 5) How mathematics is variously used in Science Part II Rules and rules-driven assignments- lQ vs OQ1) How to incorporate creativity into assignments and tests? 2) Tests- borrowing “thought questions" from other fields (If Columbus hadn't discovered the new World, when and under whose law would it have been discovered?) 3) Grading practices (partial credit, post-exam credit for finding and explaining nontrivial errors 4) Icing on the cake – applications, examples of science/engineering from Tuesdays NY Times Part III Making Change at the Departmental Level 1) Taking control of at least some portion of the curriculum 2) Varying style of presentation 3) Taking control of at least some portion of the exams 4) GRADING pros and cons of grading on a curve 5) Updating labs and lab reporting.

A Simple Accounting-based Valuation Model for the Debt Tax Shield

This paper describes a simple way to integrate the debt tax shield into an accounting-based valuation model. The market value of equity is determined by forecasting residual operating income, which is calculated by charging operating income for the operating assets at a required return that accounts for the tax benefit that comes from borrowing to raise cash for the operations. The model assumes that the firm maintains a deterministic financial leverage ratio, which tends to converge quickly to typical steady-state levels over time. From a practical point of view, this characteristic is of particular help, because it allows a continuing value calculation at the end of a short forecast period.

A Global Trend towards Democratic Convergence? A Lijphartian Analysis of Advanced Democracies.

The article offers a systematic analysis of the comparative trajectory of international democratic change. In particular, it focuses on the resulting convergence or divergence of political systems, borrowing from the literatures on institutional change and policy convergence. To this end, political-institutional data in line with Arend Lijphart’s (1999, 2012) empirical theory of democracy for 24 developed democracies between 1945 and 2010 are analyzed. Heteroscedastic multilevel models allow for directly modeling the development of the variance of types of democracy over time, revealing information about convergence, and adding substantial explanations. The findings indicate that there has been a trend away from extreme types of democracy in single cases, but no unconditional trend of convergence can be observed. However, there are conditional processes of convergence. In particular, economic globalization and the domestic veto structure interactively influence democratic convergence.

Identification of cryptic Anopheles mosquito species by molecular protein profiling.

Vector control is the mainstay of malaria control programmes. Successful vector control profoundly relies on accurate information on the target mosquito populations in order to choose the most appropriate intervention for a given mosquito species and to monitor its impact. An impediment to identify mosquito species is the existence of morphologically identical sibling species that play different roles in the transmission of pathogens and parasites. Currently PCR diagnostics are used to distinguish between sibling species. PCR based methods are, however, expensive, time-consuming and their development requires a priori DNA sequence information. Here, we evaluated an inexpensive molecular proteomics approach for Anopheles species: matrix assisted laser desorption/ionization time-of-flight mass spectrometry (MALDI-TOF MS). MALDI-TOF MS is a well developed protein profiling tool for the identification of microorganisms but so far has received little attention as a diagnostic tool in entomology. We measured MS spectra from specimens of 32 laboratory colonies and 2 field populations representing 12 Anopheles species including the A. gambiae species complex. An important step in the study was the advancement and implementation of a bioinformatics approach improving the resolution over previously applied cluster analysis. Borrowing tools for linear discriminant analysis from genomics, MALDI-TOF MS accurately identified taxonomically closely related mosquito species, including the separation between the M and S molecular forms of A. gambiae sensu stricto. The approach also classifies specimens from different laboratory colonies; hence proving also very promising for its use in colony authentication as part of quality assurance in laboratory studies. While being exceptionally accurate and robust, MALDI-TOF MS has several advantages over other typing methods, including simple sample preparation and short processing time. As the method does not require DNA sequence information, data can also be reviewed at any later stage for diagnostic or functional patterns without the need for re-designing and re-processing biological material.

Influencing the European Union from Outside. Switzerland, the European Water Framework Directive, and Micropollution Regulation in the Rhine River Basin

This paper sheds light on an unusual political influence mechanism, i.e. the influence of a non-EU member state on agendas and policies at the level of the EU and EU members states. Borrowing both from the literatures on policy diffusion as well as on the influence of small member states in EU decision-making, we argue that such an influence is fostered by both structural and agency-related factors. We illustrate this potential influence with a case study on the regulation of micropollutants in waterbodies. Adopting a mixed-method approach, we show that the upstream location of Switzerland, its integration into transnational networks as well as joint water basin institutions provides the country with structural opportunities to diffuse policy innovation to the EU’s policy agenda and member states’ policies. In addition, agency-related factors matter as the EU or member states can point to Switzerland as a successful example or pioneer, especially since the Swiss policy is in line with an overall EU strategy on reducing negative impacts of chemicals on humans and the environment.

The Economic Case for Fiscal Federalism in Scotland

In this paper we consider the case for assigning tax revenues to Scotland, by which we mean that taxes levied on Scottish tax bases should be returned to the Scottish budget. The budget, however, would continue to be supplemented by transfers from the Westminster budget. This arrangement differs from the current situation whereby public spending is largely financed by a bloc grant from Westminster. Our suggestion falls short of full fiscal federalism for Scotland . meaning that Scotland had control over choice of tax base and of tax rates, and fiscal transfers from Westminster would be minimal. We use propositions drawn from the theory of fiscal federalism to argue for a smaller vertical imbalance between taxes retained in Scotland and public spending in Scotland. A closer matching of spending with taxes would better signal to beneficiaries the true costs of public spending in terms of taxes raised. It would also create more complete incentives for politicians to provide public goods and services in quantities and at qualities that voters are actually willing to pay for. Under the current bloc grant system, the marginal tax cost of spending does not enter into political agents. calculations as spending is out of a fixed total budget. Moreover, the Scottish electorate is hindered in signaling its desire for local public goods and services since the size of the total budget is determined by a rigid formula set by Westminster. At the present time we reject proposals for full fiscal federalism because in sharply reducing vertical imbalance in the Scottish budget, it is likely to worsen horizontal balance between Scotland and the other UK regions. Horizontal balance occurs where similarly situated regions enjoy the same per capita level of public goods and services at the same per capita tax cost. The complete removal of the bloc grant under full fiscal federalism would remove the mechanism that currently promotes horizontal equity in the UK. Variability in own-source tax revenues creates other problems with full fiscal federalism. Taxes derived from North Sea oil would constitute a large proportion of Scottish taxes, but these are known to be volatile in the face of variable oil prices and the pound-dollar exchange rate. At the present time variability in oil tax revenue is absorbed by Westminster. Scotland is insulated through the bloc grant. This risk sharing mechanism would be lost with full fiscal federalism. It is true that Scotland could turn to financial markets to tide itself over oil tax revenue downturns, but as a much smaller and less diversified financial entity than the UK as a whole it would probably have to borrow on less favorable terms than can Westminster. Scotland would have to bear this extra cost itself. Also, with full fiscal federalism it is difficult to see how the Scottish budget could be used as a macroeconomic stabilizer. At present, tax revenue downturns in Scotland - together with the steady bloc grant - are absorbed through an increase in vertical imbalance. This acts as an automatic stabilizer for the Scottish economy. No such mechanism would exist under full fiscal federalism. The borrowing alternative would still exist but on the less favorable terms - as with borrowing to finance oil tax shortfalls.

Asset Pricing with Heterogeneous Agents, Incomplete Markets and Trading Constraints

The consumption capital asset pricing model is the standard economic model used to capture stock market behavior. However, empirical tests have pointed out to its inability to account quantitatively for the high average rate of return and volatility of stocks over time for plausible parameter values. Recent research has suggested that the consumption of stockholders is more strongly correlated with the performance of the stock market than the consumption of non-stockholders. We model two types of agents, non-stockholders with standard preferences and stock holders with preferences that incorporate elements of the prospect theory developed by Kahneman and Tversky (1979). In addition to consumption, stockholders consider fluctuations in their financial wealth explicitly when making decisions. Data from the Panel Study of Income Dynamics are used to calibrate the labor income processes of the two types of agents. Each agent faces idiosyncratic shocks to his labor income as well as aggregate shocks to the per-share dividend but markets are incomplete and agents cannot hedge consumption risks completely. In addition, consumers face both borrowing and short-sale constraints. Our results show that in equilibrium, agents hold different portfolios. Our model is able to generate a time-varying risk premium of about 5.5% while maintaining a low risk free rate, thus suggesting a plausible explanation for the equity premium puzzle reported by Mehra and Prescott (1985).

BAYESIAN STATISTICAL METHODS IN GENE-ENVIRONMENT AND GENE-GENE INTERACTION STUDIES

Complex diseases such as cancer result from multiple genetic changes and environmental exposures. Due to the rapid development of genotyping and sequencing technologies, we are now able to more accurately assess causal effects of many genetic and environmental factors. Genome-wide association studies have been able to localize many causal genetic variants predisposing to certain diseases. However, these studies only explain a small portion of variations in the heritability of diseases. More advanced statistical models are urgently needed to identify and characterize some additional genetic and environmental factors and their interactions, which will enable us to better understand the causes of complex diseases. In the past decade, thanks to the increasing computational capabilities and novel statistical developments, Bayesian methods have been widely applied in the genetics/genomics researches and demonstrating superiority over some regular approaches in certain research areas. Gene-environment and gene-gene interaction studies are among the areas where Bayesian methods may fully exert its functionalities and advantages. This dissertation focuses on developing new Bayesian statistical methods for data analysis with complex gene-environment and gene-gene interactions, as well as extending some existing methods for gene-environment interactions to other related areas. It includes three sections: (1) Deriving the Bayesian variable selection framework for the hierarchical gene-environment and gene-gene interactions; (2) Developing the Bayesian Natural and Orthogonal Interaction (NOIA) models for gene-environment interactions; and (3) extending the applications of two Bayesian statistical methods which were developed for gene-environment interaction studies, to other related types of studies such as adaptive borrowing historical data. We propose a Bayesian hierarchical mixture model framework that allows us to investigate the genetic and environmental effects, gene by gene interactions (epistasis) and gene by environment interactions in the same model. It is well known that, in many practical situations, there exists a natural hierarchical structure between the main effects and interactions in the linear model. Here we propose a model that incorporates this hierarchical structure into the Bayesian mixture model, such that the irrelevant interaction effects can be removed more efficiently, resulting in more robust, parsimonious and powerful models. We evaluate both of the 'strong hierarchical' and 'weak hierarchical' models, which specify that both or one of the main effects between interacting factors must be present for the interactions to be included in the model. The extensive simulation results show that the proposed strong and weak hierarchical mixture models control the proportion of false positive discoveries and yield a powerful approach to identify the predisposing main effects and interactions in the studies with complex gene-environment and gene-gene interactions. We also compare these two models with the 'independent' model that does not impose this hierarchical constraint and observe their superior performances in most of the considered situations. The proposed models are implemented in the real data analysis of gene and environment interactions in the cases of lung cancer and cutaneous melanoma case-control studies. The Bayesian statistical models enjoy the properties of being allowed to incorporate useful prior information in the modeling process. Moreover, the Bayesian mixture model outperforms the multivariate logistic model in terms of the performances on the parameter estimation and variable selection in most cases. Our proposed models hold the hierarchical constraints, that further improve the Bayesian mixture model by reducing the proportion of false positive findings among the identified interactions and successfully identifying the reported associations. This is practically appealing for the study of investigating the causal factors from a moderate number of candidate genetic and environmental factors along with a relatively large number of interactions. The natural and orthogonal interaction (NOIA) models of genetic effects have previously been developed to provide an analysis framework, by which the estimates of effects for a quantitative trait are statistically orthogonal regardless of the existence of Hardy-Weinberg Equilibrium (HWE) within loci. Ma et al. (2012) recently developed a NOIA model for the gene-environment interaction studies and have shown the advantages of using the model for detecting the true main effects and interactions, compared with the usual functional model. In this project, we propose a novel Bayesian statistical model that combines the Bayesian hierarchical mixture model with the NOIA statistical model and the usual functional model. The proposed Bayesian NOIA model demonstrates more power at detecting the non-null effects with higher marginal posterior probabilities. Also, we review two Bayesian statistical models (Bayesian empirical shrinkage-type estimator and Bayesian model averaging), which were developed for the gene-environment interaction studies. Inspired by these Bayesian models, we develop two novel statistical methods that are able to handle the related problems such as borrowing data from historical studies. The proposed methods are analogous to the methods for the gene-environment interactions on behalf of the success on balancing the statistical efficiency and bias in a unified model. By extensive simulation studies, we compare the operating characteristics of the proposed models with the existing models including the hierarchical meta-analysis model. The results show that the proposed approaches adaptively borrow the historical data in a data-driven way. These novel models may have a broad range of statistical applications in both of genetic/genomic and clinical studies.

El Mercosur profesional : Políticas públicas para la integración regional

Teniendo en cuenta determinadas pistas de investigación abiertas en el marco de nuestra tesis de doctorado, nos proponemos abordar el estado de avance de aquellas políticas que facilitarían la posibilidad de ejercer la profesión en algún otro país miembro del Mercosur. Centraremos el análisis en el proceso de implementación de la Decisión del Consejo Mercado Común del Mercosur sobre ejercicio profesional temporario (cmc N° 25/2003). Esta decisión permite el ejercicio profesional en otro país miembro sobre la base de propuestas elaboradas desde asociaciones profesionales del bloque. Tomando prestadas herramientas del análisis de políticas públicas, así como del modelo de las ?Tres I?, abordaremos la implementación de la decisión buscando operacionalizar las tres dimensiones clave: los intereses, las instituciones y las ideas

El Mercosur profesional : Políticas públicas para la integración regional

Teniendo en cuenta determinadas pistas de investigación abiertas en el marco de nuestra tesis de doctorado, nos proponemos abordar el estado de avance de aquellas políticas que facilitarían la posibilidad de ejercer la profesión en algún otro país miembro del Mercosur. Centraremos el análisis en el proceso de implementación de la Decisión del Consejo Mercado Común del Mercosur sobre ejercicio profesional temporario (cmc N° 25/2003). Esta decisión permite el ejercicio profesional en otro país miembro sobre la base de propuestas elaboradas desde asociaciones profesionales del bloque. Tomando prestadas herramientas del análisis de políticas públicas, así como del modelo de las ?Tres I?, abordaremos la implementación de la decisión buscando operacionalizar las tres dimensiones clave: los intereses, las instituciones y las ideas

El Mercosur profesional : Políticas públicas para la integración regional

Teniendo en cuenta determinadas pistas de investigación abiertas en el marco de nuestra tesis de doctorado, nos proponemos abordar el estado de avance de aquellas políticas que facilitarían la posibilidad de ejercer la profesión en algún otro país miembro del Mercosur. Centraremos el análisis en el proceso de implementación de la Decisión del Consejo Mercado Común del Mercosur sobre ejercicio profesional temporario (cmc N° 25/2003). Esta decisión permite el ejercicio profesional en otro país miembro sobre la base de propuestas elaboradas desde asociaciones profesionales del bloque. Tomando prestadas herramientas del análisis de políticas públicas, así como del modelo de las ?Tres I?, abordaremos la implementación de la decisión buscando operacionalizar las tres dimensiones clave: los intereses, las instituciones y las ideas

Post-decentralization regional economies and actors -- putting the capacity of Local governments to the test

Decentralization in Indonesia was introduced institutionally in 2001, with a democratization drive promoted by international donors and by the intention of the new government to clear away the centralistic image of Soeharto. Decentralization has had some effects on regional economies and on local government administration. Compared to the period before decentralization, the share of gross regional domestic product and local government finance has increased in Java, though investment and bank borrowing have expanded to the outer islands. In qualitative aspects, decentralization has transferred not only administrative authority but also many new vested interests from the center to regions. Local governments have become more extensive economic actors in regional economies. Regional economic actors now compete actively for such vested interests and have missed the opportunity to create market-friendly regional economies. The government sector should not be a mere rent-seeking economic actor, but should play a role as a facilitator promoting private sector activities in regional economies.