Stochastic Search Variable Selection in Vector Error Correction Models with an Application to a Model of the UK Macroeconomy

This paper develops methods for Stochastic Search Variable Selection (currently popular with regression and Vector Autoregressive models) for Vector Error Correction models where there are many possible restrictions on the cointegration space. We show how this allows the researcher to begin with a single unrestricted model and either do model selection or model averaging in an automatic and computationally efficient manner. We apply our methods to a large UK macroeconomic model.

What Belongs Where? Variable Selection for Zero-Inflated Count Models with an Application to the Demand for Health Care

This paper develops stochastic search variable selection (SSVS) for zero-inflated count models which are commonly used in health economics. This allows for either model averaging or model selection in situations with many potential regressors. The proposed techniques are applied to a data set from Germany considering the demand for health care. A package for the free statistical software environment R is provided.

The regional electricity generation mix in Scotland: A portfolio selection approach

Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.

Baysian Model Averaging, Learning and Model Selection

Agents have two forecasting models, one consistent with the unique rational expectations equilibrium, another that assumes a time-varying parameter structure. When agents use Bayesian updating to choose between models in a self-referential system, we find that learning dynamics lead to selection of one of the two models. However, there are parameter regions for which the non-rational forecasting model is selected in the long-run. A key structural parameter governing outcomes measures the degree of expectations feedback in Muth's model of price determination.

Unionisation, International Integration and Selection

We study how unionisation affects competitive selection between heterogeneous firms when wage negotiations can occur at the rm or at the profit-centre level. With productivity specific wages, an increase in union power has: (i) a selection-softening; (ii) a counter-competitive; (iii) a wage-inequality; and (iv) a variety effect. In a two-country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit-centre bargaining, we show how trade liberalisation can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets).

Payoff levels, loss avoidance, and equilibrium selection in the Stag Hunt: an experimental study

Game theorists typically assume that changing a game’s payoff levels—by adding the same constant to, or subtracting it from, all payoffs—should not affect behavior. While this invariance is an implication of the theory when payoffs mirror expected utilities, it is an empirical question when the “payoffs” are actually money amounts. In particular, if individuals treat monetary gains and losses differently, then payoff–level changes may matter when they result in positive payoffs becoming negative, or vice versa. We report the results of a human–subjects experiment designed to test for two types of loss avoidance: certain–loss avoidance (avoiding a strategy leading to a sure loss, in favor of an alternative that might lead to a gain) and possible–loss avoidance (avoiding a strategy leading to a possible loss, in favor of an alternative that leads to a sure gain). Subjects in the experiment play three versions of Stag Hunt, which are identical up to the level of payoffs, under a variety of treatments. We find differences in behavior across the three versions of Stag Hunt; these differences are hard to detect in the first round of play, but grow over time. When significant, the differences we find are in the direction predicted by certain– and possible–loss avoidance. Our results carry implications for games with multiple equilibria, and for theories that attempt to select among equilibria in such games.

Trade Costs, International Competition and Selection: The Effects of Unionisation on Market Size

Within a two-country model of international trade in which heterogeneous firms face firm-specific unions, we study the effects of different forms of trade liberalisation on market structure and competitive selection in the presence of inter-country asymmetries in size and labour market institutions. For given levels of trade openness, an increase in a country’s relative unions’ strength reduces the average productivity of its domestic producers but increases that of its exporters. Whilst an unfavourable union power differential, by increasing wages, weakens a country’s firms’ competitive position, the higher wages reinforce standard market access mechanisms to give rise to aggregate income effects. When the initial levels of trade openness are sufficiently low, this ‘expansionary’ aggregate effect can attract industry in the country with stronger unions and also result in an increase in the extensive margin of exports. For sufficiently large inter-country differences in the bargaining power of unions, trade liberalization can then result in a pro-variety effect, with an increase in the total availability of varieties to consumers in both countries, regardless of there being inter-country differences in size.

Rationalising ‘Irrational’ Support for Political Violence

This paper provides a rationale for group support for political violence when violence does not provide a material benefi t. A theory of fairness is adopted to demonstrate that although group violence may not be the equilibrium of a material game it may be a fairness equilibrium in a game containing psychological payoffs. For this to happen the material stakes must be perceived as low and psychological payoffs are expressive. Although the material stakes are actually high, members of each group may choose expressively to support the use of violence because the probability of being decisive is low. The paper also considers the possibility of peace emerging as a fairness equilibrium. This can only happen if each group perceives the other as making some sacrifi ce in choosing peace.

Ghosts in contemporary African diasporic literature : re-visioning history, memory and identity

Starting from the observation that ghosts are strikingly recurrent and prominent figures in late-twentieth African diasporic literature, this dissertation proposes to account for this presence by exploring its various functions. It argues that, beyond the poetic function the ghost performs as metaphor, it also does cultural, theoretical and political work that is significant to the African diaspora in its dealings with issues of history, memory and identity. Toni Morrison's Beloved (1987) serves as a guide for introducing the many forms, qualities and significations of the ghost, which are then explored and analyzed in four chapters that look at Fred D'Aguiar's Feeding the Ghosts (1998), Gloria Naylor's Mama Day (1988), Paule Marshall's Praisesong for the Widow (1983) and a selection of novels, short stories and poetry by Michelle Cliff. Moving thematically through these texts, the discussion shifts from history through memory to identity as it examines how the ghost trope allows the writers to revisit sites of trauma; revise historical narratives that are constituted and perpetuated by exclusions and invisibilities; creatively and critically repossess a past marked by violence, dislocation and alienation and reclaim the diasporic culture it contributed to shaping; destabilize and deconstruct the hegemonic, normative categories and boundaries that delimit race or sexuality and envision other, less limited and limiting definitions of identity. These diverse and interrelated concerns are identified and theorized as participating in a project of "re-vision," a critical project that constitutes an epistemological as much as a political gesture. The author-based structure allows for a detailed analysis of the texts and highlights the distinctive shapes the ghost takes and the particular concerns it serves to address in each writer's literary and political project. However, using the ghost as a guide into these texts, taken collectively, also throws into relief new connections between them and sheds light on the complex ways in which the interplay of history, memory and identity positions them as products of and contributions to an African diasporic (literary) culture. If it insists on the cultural specificity of African diasporic ghosts, tracing its origins to African cultures and spiritualities, the argument also follows gothic studies' common view that ghosts in literary and cultural productions-like other related figures of the living dead-respond to particular conditions and anxieties. Considering the historical and political context in which the texts under study were produced, the dissertation makes connections between the ghosts in them and African diasporic people's disillusionment with the broken promises of the civil rights movement in the United States and of postcolonial independence in the Caribbean. It reads the texts' theoretical concerns and narrative qualities alongside the contestation of traditional historiography by black and postcolonial studies as well as the broader challenge to conventional notions such as truth, reality, meaning, power or identity by poststructuralism, postcolonialism or queer theory. Drawing on these various theoretical approaches and critical tools to elucidate the ghost's deconstructive power for African diasporic writers' concerns, this work ultimately offers a contribution to "speciality studies," which is currently emerging as a new field of scholarship in cultural theory.

Efficient Nash Equilibrium under Adverse Selection

This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz [28]. We propose a simple extension of the game-theoretic structure in Hellwig [14] under which Nash-type strategic interaction between the informed customers and the uninformed firms results always in a particular separating equilibrium. The equilibrium allocation is unique and Pareto-efficient in the interim sense subject to incentive-compatibility and individual rationality. In fact, it is the unique neutral optimum in the sense of Myerson [22].

Partner Selection into Policy Relevant Field Experiments

This study investigates the issue of self-selection of stakeholders into participation and collaboration in policy-relevant experiments. We document and test the implications of self-selection in the context of randomised policy experiment we conducted in primary schools in the UK. The main questions we ask are (1) is there evidence of selection on key observable characteristics likely to matter for the outcome of interest and (2) does selection matter for the estimates of treatment eff ects. The experimental work consists in testing the e ffects of an intervention aimed at encouraging children to make more healthy choices at lunch. We recruited schools through local authorities and randomised schools across two incentive treatments and a control group. We document the selection taking place both at the level of local authorities and at the school level. Overall we nd mild evidence of selection on key observables such as obesity levels and socio-economic characteristics. We find evidence of selection along indicators of involvement in healthy lifestyle programmes at the school level, but the magnitude is small. Moreover, We do not find signifi cant di erences in the treatment e ffects of the experiment between variables which, albeit to a mild degree, are correlated with selection into the experiment. To our knowledge, this is the rst study providing direct evidence on the magnitude of self-selection in fi eld experiments.

Measuring intergenerational earnings mobility in Spain: a selection-bias-free approach

This paper analyses intergenerational earnings mobility in Spain correcting for different selection biases. We address the co-residence selection problem by combining information from two samples and using the two-sample two-stage least square estimator. We find a small decrease in elasticity when we move to younger cohorts. Furthermore, we find a higher correlation in the case of daughters than in the case of sons; however, when we consider the employment selection in the case of daughters, by adopting a Heckman-type correction method, the diference between sons and daughters disappears. By decomposing the sources of earnings elasticity across generations, we find that the correlation between child's and father's occupation is the most important component. Finally, quantile regressions estimates show that the influence of the father's earnings is greater when we move to the lower tail of the offspring's earnings distribution, especially in the case of daughters' earnings.

Unionisation, International Integration and Selection

We study how unionisation affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit-centre level. With productivity specific wages, an increase in union power has: (i) a selection-softening; (ii) a counter-competitive; (iii) a wage-inequality; and (iv) a variety effect. In a two-country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit-centre bargaining, we show how trade liberalisation can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets).