Pecuniary Externality through Credit Constraints: Two Examples without Uncertainty

This paper is a contribution to the growing literature on constrained inefficiencies in economies with financial frictions. The purpose is to present two simple examples, inspired by the stochastic models in Gersbach-Rochet (2012) and Lorenzoni (2008), of deterministic environments in which such inefficiencies arise through credit constraints. Common to both examples is a pecuniary externality, which operates through an asset price. In the second example, a simple transfer between two groups of agents can bring about a Pareto improvement. In a first best economy, there are no pecuniary externalities because marginal productivities are equalised. But when agents face credit constraints, there is a wedge between their marginal productivities and those of the non-credit-constrained agents. The wedge is the source of the pecuniary externality: economies with these kinds of imperfections in credit markets are not second-best efficient. This is akin to the constrained inefficiency of an economy with incomplete markets, as in Geanakoplos and Polemarchakis (1986).

Liquidity, moral hazard and bank crises

Bank crises, by interrupting liquidity provision, have been viewed as resulting in welfare losses. In a model of banking with moral hazard, we show that second best bank contracts that improve on autarky ex ante require costly crises to occur with positive probability at the interim stage. When bank payoffs are partially appropriable, either directly via imposition of fines or indirectly by the use of bank equity as a collateral, we argue that an appropriately designed ex-ante regime of policy intervention involving conditional monitoring can prevent bank crises.

Government information transparency

This paper studies a model of announcements by a privately informed government about the future state of the economic activity in an economy subject to recurrent shocks and with distortions due to income taxation. Although transparent communication would ex ante be desirable, we find that even a benevolent government may ex-post be non-informative, in an attempt to countervail the tax distortion with a "second best" compensating distortion in information. This result provides a rationale for independent national statistical offices, committed to truthful communication. We also find that whether inequality in income distribution favors or harms government transparency depends on labor supply elasticity.

La Gestió europea de les ajudes d’estat durant la recent crisi financera i la seva adequació al sistema comunitari de defensa de la competencia

En un context de crisi, els Estats es troben en un trade-off entre “relaxar” el sistema de control d’ajudes d’Estat per reduir l’impacte de la recessió, o mantenir-lo i evitar així distorsions competitives. Es tracta d’un cas especial de trade-off entre el curt i el llarg termini. La present recerca investiga com la política europea ha gestionat la demanda d’ajudes públiques durant la recent crisi financera. Es diferencia entre “llei” i “procediment”, i es determina que mentre la primera s’ha adaptat al nou context de crisi per donar cabuda a mesures de rescat, una sèrie d’evidències suggereixen que el segon s’ha “relaxat”, i que pot haver estat una estratègia second best per reduir el risc moral associat als rescats i una estratègia necessària per a mantenir el propi sistema de control d’ajudes d’Estat

Merging the hypothetical extraction method and the classical multiplier approach: a hybrid possibility for identifying key distributive sectors

The two main alternative methods used to identify key sectors within the input-output approach, the Classical Multiplier method (CMM) and the Hypothetical Extraction method (HEM), are formally and empirically compared in this paper. Our findings indicate that the main distinction between the two approaches stems from the role of the internal effects. These internal effects are quantified under the CMM while under the HEM only external impacts are considered. In our comparison, we find, however that CMM backward measures are more influenced by within-block effects than the proposed forward indices under this approach. The conclusions of this comparison allow us to develop a hybrid proposal that combines these two existing approaches. This hybrid model has the advantage of making it possible to distinguish and disaggregate external effects from those that a purely internal. This proposal has also an additional interest in terms of policy implications. Indeed, the hybrid approach may provide useful information for the design of ''second best'' stimulus policies that aim at a more balanced perspective between overall economy-wide impacts and their sectoral distribution.

Caution, children crossing: Heterogeneity of victim's cost of care and negligence rule

The paper deals with a bilateral accident situation in which victims haveheterogeneous costs of care. With perfect information,efficient care bythe injurer raises with the victim's cost. When the injurer cannot observeat all the victim's type, and this fact can be verified by Courts, first-bestcannot be implemented with the use of a negligence rule based on thefirst-best levels of care. Second-best leads the injurer to intermediate care,and the two types of victims to choose the best response to it. This second-bestsolution can be easily implemented by a negligence rule with second-best as duecare. We explore imperfect observation of the victim's type, characterizing theoptimal solution and examining the different legal alternatives when Courts cannotverify the injurers' statements. Counterintuitively, we show that there is nodifference at all between the use by Courts of a rule of complete trust and arule of complete distrust towards the injurers' statements. We then relate thefindings of the model to existing rules and doctrines in Common Law and Civil Lawlegal systems.

Optimal negligence rule under limited liability

We study the standard economic model of unilateral accidents, in its simplest form, assumingthat the injurers have limited assets.We identify a second-best optimal rule that selects as duecare the minimum of first-best care, and a level of care that takes into account the wealth ofthe injurer. We show that such a rule in fact maximizes the precautionary effort by a potentialinjurer. The idea is counterintuitive: Being softer on an injurer, in terms of the required level ofcare, actually improves the incentives to take care when he is potentially insolvent. We extendthe basic result to an entire population of potentially insolvent injurers, and find that the optimalgeneral standards of care do depend on wealth, and distribution of income. We also show theconditions for the result that higher income levels in a given society call for higher levels of carefor accidents.

Research joint ventures and optimal R&D policy with asymmetric information

When to allow Research Joint Ventures (RJVs) or not is an importantinstrument in the development of an optimal R&D policy. Theregulator, however, is unlikely to know all the relevant informationto regulate R&D optimally. The extent to which there existappropriability problems between the firms is one such variable thatis private information to the firms in the industry. In a duopolysetting we analyze the characteristics of a second-best R&D policywhere the government can either allow RJVs or not and give lump-sumsubsidies to the parties involved. The second-best R&D policy withoutsubsidies will either block some welfare improving RJVs or allow somewelfare reducing ones. With lump-sum subsidies, the second-best policytrades off the expected subsidy cost with allowing welfare decreasingRJVs or blocking welfare increasing ones.

Diabetes risk scores and death: predictability and practicability in two different populations.

The aim was to examine the capacity of commonly used type 2 diabetes mellitus (T2DM) risk scores to predict overall mortality. The US-based NHANES III (n = 3138; 982 deaths) and the Swiss-based CoLaus study (n = 3946; 191 deaths) were used. The predictive value of eight T2DM risk scores regarding overall mortality was tested. The Griffin score, based on few self-reported parameters, presented the best (NHANES III) and second best (CoLaus) predictive capacity. Generally, the predictive capacity of scores based on clinical (anthropometrics, lifestyle, history) and biological (blood parameters) data was not better than of scores based solely on clinical self-reported data. T2DM scores can be validly used to predict mortality risk in general populations without diabetes. Comparison with other scores could further show whether such scores also suit as a screening tool for quick overall health risk assessment.

Epäpuhtaudet sinkin uutossa

Työssä tutkittiin metalli- ja anioniepäpuhtauksien myötäuuttautumista sinkin mukana di(2-etyyliheksyyli)fosforihappoalla (D2EHPA). Laboratoriokokeissa selvitettiin pH:n vaikutusta metalliepäpuhtauksien uuttautumiseen pH-alueella -O, l... 3 sekä pesujen vaikutusta sinkillä ladatun orgaanisen faasin metallipitoisuuksiin. Kokeita tehtiin sekä synteettisillä että autenttisilla prosessiliuoksilla. Anionikokeissa tutkittiin raudan ja sinkin vaikutusta kloridin ja fluoridin uuttautumiseen. Synteettisillä liuoksilla tehdyissä kokeissa tutkittiin kadmiumin, koboltin, nikkelin, kuparin sekä antimonin uuttautumista sinkkisulfaattiliuoksesta. Kokeissa havaittiin D2EHPA:n uuttavan sinkkiä selvästi em. metalleja paremmin. Sinkki uuttautui sulfaattiliuoksesta lähes täydellisesti tasapaino-pH:n ollessa yli 2,3. Sinkin jälkeen muista metalleista uuttautui eniten kadmium ja järjestyksessä sitten kupari, koboltti ja nikkeli. Epäpuhtausmetallien myötäuuttautumista lisääntyi uuton tasapaino-pH:n kasvaessa ja väheni sinkkilatauksen kasvaessa. Kahdella peräkkäisellä pesuaskeleella, joissa ensimmäinen pesuliuos sisälsi 5 g/L rikkihappoa ja toinen sekä 15 g/L rikkihappoa että 5 g/L sinkkiä saatiin kaikkien epäpuhtausmetallien pitoisuudet jäämään alle 3 mg/L. Antimonin uuttokokeissa huomattiin antimonin uuttautuvan täydellisesti D2EHPA:lla pH:sta riippumatta pH-alueella0...3. Prosessiliuoksilla tehdyissä kokeissa todettiin D2EHPA:n pystyvän tehokkaasti erottamaan sinkin magnesiumista ßzn,Mg ˜107 ja kadmiumista ßzn,cd ˜106. Havaittiin myös, että mitä suurempi sinkki- ja rautalataus orgaanisessa faasissa on sitä vähemmän magnesiumia ja kadmiumia uuttautuu. Ensimmäisessä pesussa saatiin sekä kadmiumin että magnesiumin pitoisuudet putoamaan keskimäärin 0,1 mg/L eli 30 alkuperäisestä pitoisuudesta. Toisella pesuaskeleella ei enää ollut vaikutusta kadmiumin ja magnesiumin pitoisuuksiin orgaanisessa faasissa. Kokeissa havaittiin myös, että D2EHPA:n latausasteen ylittäessä 0,7 alkaa sinkki-D2EHPA-kompleksit polymeroitua ja faasit eivät enää selkeytyneet helposti. Anionikokeissa huomattiin, ettei D2EHPA uuttanut kloridi tai fluoridi sinkin tai raudan mukana. D2EHPA:n havaittiin myös itsessään sisältävän hieman kloridia.

General Equilibrium Analysis. A Century after Walras

2010 marks the hundredth anniversary of the death of Léon Walras, the brilliant originator and first formaliser of general equilibrium theory - one of the pillars of modern economic theory. In advancing much derided practical solutions Walras also displayed more concern for the problems of living in a second best world than is common in modern pure theories of the invisible hand, efficient market hypothesis, DSGE macroeconomics or the thinking of some contemporary free market admirers all based on general equilibrium theory. This book brings contributions from the likes of Kenneth Arrow, Alan Kirman, Richard Posner, Amartya Sen and Robert Solow to share their thoughts and reflections on the theoretical heritage of Léon Walras. Some authors reminisce on the part they played in the development of modern general economics theory; others reflect on the crucial part played by general equilibrium in the development of macroeconomics, microeconomics, growth theory, welfare economics and the theory of justice; others still complain about the wrong path economic theory took under the influence of post 1945 developments in general equilibrium theory.

Financial performance of segments in the intelligent home network

The goal of this study is to examine the intelligent home business network in order to determine which part of the network has the best financial abilities to produce new business models and products/services by using financial statement analysis. A group of 377 studied limited companies is divided into four examined segments based on their offering in producing intelligent homes. The segments are customer service providers, system integrators, subsystem suppliers and component suppliers. Eight different key figures are calculated from each of the companies to get a comprehensive view of their financial performances, after which each of the segments is studied statistically to determine the performances of the whole segments. The actual performance differences between the segments are calculated by using the multi-criteria decision analysis method in which the performances of the key figures are graded and each key figure is weighted according to its importance for the goal of the study. The results of this analysis showed that subsystem suppliers have the best financial performance. Second best are system integrators, third are customer service providers and fourth component suppliers. None of the segments were strikingly poor, but even component suppliers were rather reasonable in their performance; so, it can be said that no part of the intelligent home business network has remarkably inadequate financial abilities to develop new business models and products/services.

Adaptation of "Niagara Rosada" grape must to winemaking by partial cluster dehydration

This study aimed to verify the influence of partial dehydration of "Niagara Rosada" grape clusters in physicochemical quality of the pre- fermentation must. In Brazil, during the winemaking process it is common to need to adjust the grape must when the physicochemical characteristics of the raw material are insufficient to produce wines in accordance with the Brazilian legislation for classification of beverages, which establishes the minimum alcohol content of 8.6 % for the beverage to be considered wine. Therefore, given that the reduction in the water content of grape berries allows the concentration of chemical compounds present in its composition, especially the concentration of total soluble solids, we proceeded with the treatments that were formed by the combination of two temperatures (T1-37.1ºC and T2-22.9 ºC) two air speeds (S1: 1.79 m s-1 and S2: 3.21 m s-1) and a control (T0) that has not gone through the dehydration treatment. Analysis of pH, Total Titratable Acidity (TTA) were performed in mEq L-1, Total Soluble Solids (TSS) in ºBrix, water content on a dry basis and Concentration of Phenolic Compounds (CPC) in mg of gallic acid per 100g of must. The average comparison test identified statistically significant modifications for the adaptation of must for winemaking purposes, having the treatment with 22.9 ºC and air speed of 1.79 m s-1 shown the largest increase in the concentration of total soluble solids, followed by the second best result for concentration of phenolic compounds.

Young Registered Nurses’ Intent to Leave the Profession in Finland - A Mixed-Method Study

The purpose of this study was to examine and expand understanding concerning young Finnish registered nurses (RN) with an intention to leave the profession and the related variables, specifically when that intention has emerged before the age of 30. The overall goal of the study was to develop a conceptual model in relation to young RNs’ intention to leave the profession. Suggestions for policymakers, nurse leaders and nurse managers are presented for how to retain more young RNs in the nursing workforce. Suggestions for future nursing research are also provided. Phase I consists of two sequential integrative literature reviews of 75 empirical articles concerning nurses’ intention to leave the profession. In phase II, data had been collected as part of the Nurses’ Early Exit (NEXT) study, using the BQ-12 structured postal questionnaire. A total of 147 young RNs participated in the study. The data were analysed with statistical methods. In phase III, firstly, an in-depth interpretive case study was conducted in order to understand how young RNs explain and make sense of their intention to leave the profession. The data in this study consisted of longitudinal career stories by three young RNs. The data was analysed by using narrative holistic-content and thematic methods. Secondly, a total of 15 young RNs were interviewed in order to explore in-depth their experiences concerning organizational turnover and their intent to leave the profession. The data was analysed using conventional content analysis. Based on earlier research, empirical research on the young RNs intention to leave the profession is scarce. Nurses’ intention to leave the profession has mainly been studied with quantitative descriptive studies, conducted with survey questionnaires. Furthermore, the quality of previous studies varies considerably. Moreover, nurses’ intention to leave the profession seems to be driven by a number of variables. According to the survey study, 26% of young RNs had often considered giving up nursing completely and starting a different kind of job during the course of the previous year. Many different variables were associated with an intention to leave the profession (e.g. personal burnout, job dissatisfaction). According to the in-depth inquiries, poor nursing practice environments and a nursing career as a ‘second-best’ or serendipitous career choice were themes associated with young RNs’ intention to leave the profession. In summary, young RNs intention to leave the profession is a complex phenomenon with multiple associated variables. These findings suggest that policymakers, nurse leaders and nurse managers should enable improvements in nursing practice environments in order to retain more young RNs. These improvements can include, for example, adequate staffing levels, balanced nursing workloads, measures to reduce work-related stress as well as possibilities for advancement and development. Young RNs’ requirements to provide high-quality and ethical nursing care must be recognized in society and health-care organizations. Moreover, sufficient mentoring and orientation programmes should be provided for all graduate RNs. Future research is needed into whether the motive for choosing a nursing career affects the length of the tenure in the profession. Both quantitative and in-depth research is needed for the comprehensive development of nursing-turnover research.

Welfare criteria from choice: the sequential solution

We study the problem of deriving a complete welfare ordering from a choice function. Under the sequential solution, the best alternative is the alternative chosen from the universal set; the second best is the one chosen when the best alternative is removed; and so on. We show that this is the only completion of Bernheim and Rangel's (2009) welfare relation that satisfies two natural axioms: neutrality, which ensures that the names of the alternatives are welfare-irrelevant; and persistence, which stipulates that every choice function between two welfare-identical choice functions must exhibit the same welfare ordering.