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.

Mortality of HIV-1-infected patients in the first year of antiretroviral therapy: comparison between low-income and high-income countries

BACKGROUND: Highly active antiretroviral therapy (HAART) is being scaled up in developing countries. We compared baseline characteristics and outcomes during the first year of HAART between HIV-1-infected patients in low-income and high-income settings. METHODS: 18 HAART programmes in Africa, Asia, and South America (low-income settings) and 12 HIV cohort studies from Europe and North America (high-income settings) provided data for 4810 and 22,217, respectively, treatment-naive adult patients starting HAART. All patients from high-income settings and 2725 (57%) patients from low-income settings were actively followed-up and included in survival analyses. FINDINGS: Compared with high-income countries, patients starting HAART in low-income settings had lower CD4 cell counts (median 108 cells per muL vs 234 cells per muL), were more likely to be female (51%vs 25%), and more likely to start treatment with a non-nucleoside reverse transcriptase inhibitor (NNRTI) (70%vs 23%). At 6 months, the median number of CD4 cells gained (106 cells per muL vs 103 cells per muL) and the percentage of patients reaching HIV-1 RNA levels lower than 500 copies/mL (76%vs 77%) were similar. Mortality was higher in low-income settings (124 deaths during 2236 person-years of follow-up) than in high-income settings (414 deaths during 20,532 person-years). The adjusted hazard ratio (HR) of mortality comparing low-income with high-income settings fell from 4.3 (95% CI 1.6-11.8) during the first month to 1.5 (0.7-3.0) during months 7-12. The provision of treatment free of charge in low-income settings was associated with lower mortality (adjusted HR 0.23; 95% CI 0.08-0.61). INTERPRETATION: Patients starting HAART in resource-poor settings have increased mortality rates in the first months on therapy, compared with those in developed countries. Timely diagnosis and assessment of treatment eligibility, coupled with free provision of HAART, might reduce this excess mortality.

Tuberculosis after initiation of antiretroviral therapy in low-income and high-income countries

We examined the incidence of and risk factors for tuberculosis during the first year of highly active antiretroviral therapy in low-income (4540 patients) and high-income (22,217 patients) countries. Although incidence was much higher in low-income countries, the reduction in the incidence of tuberculosis associated with highly active antiretroviral therapy was similar: the rate ratio for months 7-12 versus months 1-3 was 0.48 (95% confidence interval, 0.36-0.64) in low-income countries and 0.36 (95% confidence interval, 0.26-0.50) in high-income countries. A low CD4 cell count at the start of therapy was the most important risk factor in both settings.

Discordant responses to potent antiretroviral treatment in previously naive HIV-1-infected adults initiating treatment in resource-constrained countries: the antiretroviral therapy in low-income countries (ART-LINC) collaboration

OBJECTIVES: To assess the frequency of and risk factors for discordant responses at 6 months on highly active antiretroviral therapy (HAART) in previously treatment-naive HIV patients from resource-limited countries. METHODS: The Antiretroviral Therapy in Low-Income Countries Collaboration is a network of clinics providing care and treatment to HIV-infected patients in Africa, Latin America, and Asia. Patients who initiated therapy between 1996 and 2004, were aged 16 years or older, and had a baseline CD4 cell count were included in this analysis. Responses were defined based on plasma viral load (PVL) and CD4 cell count at 6 months as complete virologic and immunologic (VR(+)IR(+)), virologic only (VR(+)IR(-)), immunologic only (VR(-)IR(+)), and nonresponse (VR(-)IR(-)). Multinomial logistic regression was used to assess the association between therapy responses and clinical and demographic variables. RESULTS: Of the 3111 patients eligible for analysis, 1914 had available information at 6 months of therapy: 1074 (56.1%) were VR(+)IR(+), 364 (19.0%) were VR(+)IR(-), 283 (14.8%) were (VR(-)IR(+)), and 193 (10.1%) were VR(-)IR(-). OF THE 3111 patients eligible for analysis, 1914 had available information at 6 months of therapy: 1074 (56.1%) were VRIR, 364 (19.0%) were VRIR, 283 (14.8%) were (VRIR), and 193 (10.1%) were VRIR. Compared with complete responders, virologic-only responders were older, had a higher baseline CD4 cell count, had a lower baseline PVL, and were more likely to have received a nonstandard HAART regimen; immunologic-only responders were younger, had a lower baseline CD4 cell count, had a higher baseline PVL, and were more likely to have received a protease inhibitor-based regimen. CONCLUSIONS: The frequency of and risk factors for discordant responses were comparable to those observed in developed countries. Longer follow-up is needed to assess the long-term impact of discordant responses on mortality in these resource-limited settings.

Price risk management in the copper market using commodity derivatives and options strategies

Metals price risk management is a key issue related to financial risk in metal markets because of uncertainty of commodity price fluctuation, exchange rate, interest rate changes and huge price risk either to metals’ producers or consumers. Thus, it has been taken into account by all participants in metal markets including metals’ producers, consumers, merchants, banks, investment funds, speculators, traders and so on. Managing price risk provides stable income for both metals’ producers and consumers, so it increases the chance that a firm will invest in attractive projects. The purpose of this research is to evaluate risk management strategies in the copper market. The main tools and strategies of price risk management are hedging and other derivatives such as futures contracts, swaps and options contracts. Hedging is a transaction designed to reduce or eliminate price risk. Derivatives are financial instruments, whose returns are derived from other financial instruments and they are commonly used for managing financial risks. Although derivatives have been around in some form for centuries, their growth has accelerated rapidly during the last 20 years. Nowadays, they are widely used by financial institutions, corporations, professional investors, and individuals. This project is focused on the over-the-counter (OTC) market and its products such as exotic options, particularly Asian options. The first part of the project is a description of basic derivatives and risk management strategies. In addition, this part discusses basic concepts of spot and futures (forward) markets, benefits and costs of risk management and risks and rewards of positions in the derivative markets. The second part considers valuations of commodity derivatives. In this part, the options pricing model DerivaGem is applied to Asian call and put options on London Metal Exchange (LME) copper because it is important to understand how Asian options are valued and to compare theoretical values of the options with their market observed values. Predicting future trends of copper prices is important and would be essential to manage market price risk successfully. Therefore, the third part is a discussion about econometric commodity models. Based on this literature review, the fourth part of the project reports the construction and testing of an econometric model designed to forecast the monthly average price of copper on the LME. More specifically, this part aims at showing how LME copper prices can be explained by means of a simultaneous equation structural model (two-stage least squares regression) connecting supply and demand variables. A simultaneous econometric model for the copper industry is built: {█(Q_t^D=e^((-5.0485))∙P_((t-1))^((-0.1868) )∙〖GDP〗_t^((1.7151) )∙e^((0.0158)∙〖IP〗_t ) @Q_t^S=e^((-3.0785))∙P_((t-1))^((0.5960))∙T_t^((0.1408))∙P_(OIL(t))^((-0.1559))∙〖USDI〗_t^((1.2432))∙〖LIBOR〗_((t-6))^((-0.0561))@Q_t^D=Q_t^S )┤ P_((t-1))^CU=e^((-2.5165))∙〖GDP〗_t^((2.1910))∙e^((0.0202)∙〖IP〗_t )∙T_t^((-0.1799))∙P_(OIL(t))^((0.1991))∙〖USDI〗_t^((-1.5881))∙〖LIBOR〗_((t-6))^((0.0717) Where, Q_t^D and Q_t^Sare world demand for and supply of copper at time t respectively. P(t-1) is the lagged price of copper, which is the focus of the analysis in this part. GDPt is world gross domestic product at time t, which represents aggregate economic activity. In addition, industrial production should be considered here, so the global industrial production growth that is noted as IPt is included in the model. Tt is the time variable, which is a useful proxy for technological change. A proxy variable for the cost of energy in producing copper is the price of oil at time t, which is noted as POIL(t ) . USDIt is the U.S. dollar index variable at time t, which is an important variable for explaining the copper supply and copper prices. At last, LIBOR(t-6) is the 6-month lagged 1-year London Inter bank offering rate of interest. Although, the model can be applicable for different base metals' industries, the omitted exogenous variables such as the price of substitute or a combined variable related to the price of substitutes have not been considered in this study. Based on this econometric model and using a Monte-Carlo simulation analysis, the probabilities that the monthly average copper prices in 2006 and 2007 will be greater than specific strike price of an option are defined. The final part evaluates risk management strategies including options strategies, metal swaps and simple options in relation to the simulation results. The basic options strategies such as bull spreads, bear spreads and butterfly spreads, which are created by using both call and put options in 2006 and 2007 are evaluated. Consequently, each risk management strategy in 2006 and 2007 is analyzed based on the day of data and the price prediction model. As a result, applications stemming from this project include valuing Asian options, developing a copper price prediction model, forecasting and planning, and decision making for price risk management in the copper market.

The impact of balsamo (Myroxylon balsamum L. Harms) on coffee yield and household income in El Balsamar, El Salvador

El Balsamar is a community that relies upon coffee trees intercropped with the balsamo tree (Myroxylon balsamum L. Harms) for a substantial portion of household income. The balsamo tree is valued for its resin which is used as medicine in the community and sold commercially. Farmers believe that the shade from the balsamo tree decreases coffee yield compared to the shade from non balsamo species. Thirty coffee farms were studied, each set up as a paired plot. When cover type was balsamo, coffee yield was more likely to decrease. Plots with higher basal area were more likely to be balsamo cover type. As basal area increased, coffee yield decreased. Although coffee yield is lower under balsamo cover type, farmers still continue to plant and manage coffee under this cover type. Farmers accept a lower coffee yield because balsamo resin provides an important income source. Farmers rely on the community cooperative to provide them work to support their households. The cooperative relies on the farmers to provide the labor needed to harvest coffee and extract balsamo resin.

Early loss of HIV-infected patients on potent antiretroviral therapy programmes in lower-income countries

OBJECTIVE: To analyse the early loss of patients to antiretroviral therapy (ART) programmes in resource-limited settings. METHODS: Using data on 5491 adult patients starting ART (median age 35 years, 46% female) in 15 treatment programmes in Africa, Asia and South America with (3) 12 months of follow-up, we investigated risk factors for no follow-up after treatment initiation, and loss to follow-up or death in the first 6 months. FINDINGS: Overall, 211 patients (3.8%) had no follow-up, 880 (16.0%) were lost to follow-up and 141 (2.6%) were known to have died in the first 6 months. The probability of no follow-up was higher in 2003-2004 than in 2000 or earlier (odds ratio, OR: 5.06; 95% confidence interval, CI: 1.28-20.0), as was loss to follow-up (hazard ratio, HR: 7.62; 95% CI: 4.55-12.8) but not recorded death (HR: 1.02; 95% CI: 0.44-2.36). Compared with a baseline CD4-cell count (3) 50 cells/microl, a count < 25 cells/microl was associated with a higher probability of no follow-up (OR: 2.49; 95% CI: 1.43-4.33), loss to follow-up (HR: 1.48; 95% CI: 1.23-1.77) and death (HR: 3.34; 95% CI: 2.10-5.30). Compared to free treatment, fee-for-service programmes were associated with a higher probability of no follow-up (OR: 3.71; 95% CI: 0.97-16.05) and higher mortality (HR: 4.64; 95% CI: 1.11-19.41). CONCLUSION: Early patient losses were increasingly common when programmes were scaled up and were associated with a fee for service and advanced immunodeficiency at baseline. Measures to maximize ART programme retention are required in resource-poor countries.

Long-term immunologic response to antiretroviral therapy in low-income countries: a collaborative analysis of prospective studies

BACKGROUND: Few data are available on the long-term immunologic response to antiretroviral therapy (ART) in resource-limited settings, where ART is being rapidly scaled up using a public health approach, with a limited repertoire of drugs. OBJECTIVES: To describe immunologic response to ART among ART patients in a network of cohorts from sub-Saharan Africa, Latin America, and Asia. STUDY POPULATION/METHODS: Treatment-naive patients aged 15 and older from 27 treatment programs were eligible. Multilevel, linear mixed models were used to assess associations between predictor variables and CD4 cell count trajectories following ART initiation. RESULTS: Of 29 175 patients initiating ART, 8933 (31%) were excluded due to insufficient follow-up time and early lost to follow-up or death. The remaining 19 967 patients contributed 39 200 person-years on ART and 71 067 CD4 cell count measurements. The median baseline CD4 cell count was 114 cells/microl, with 35% having less than 100 cells/microl. Substantial intersite variation in baseline CD4 cell count was observed (range 61-181 cells/microl). Women had higher median baseline CD4 cell counts than men (121 vs. 104 cells/microl). The median CD4 cell count increased from 114 cells/microl at ART initiation to 230 [interquartile range (IQR) 144-338] at 6 months, 263 (IQR 175-376) at 1 year, 336 (IQR 224-472) at 2 years, 372 (IQR 242-537) at 3 years, 377 (IQR 221-561) at 4 years, and 395 (IQR 240-592) at 5 years. In multivariable models, baseline CD4 cell count was the most important determinant of subsequent CD4 cell count trajectories. CONCLUSION: These data demonstrate robust and sustained CD4 response to ART among patients remaining on therapy. Public health and programmatic interventions leading to earlier HIV diagnosis and initiation of ART could substantially improve patient outcomes in resource-limited settings.

ELECTRICITY GENERATION MODELING AND PHOTOVOLTAIC FORECASTS IN CHINA

With the economic development of China, the demand for electricity generation is rapidly increasing. To explain electricity generation, we use gross GDP, the ratio of urban population to rural population, the average per capita income of urban residents, the electricity price for industry in Beijing, and the policy shift that took place in China. Ordinary least squares (OLS) is used to develop a model for the 1979-2009 period. During the process of designing the model, econometric methods are used to test and develop the model. The final model is used to forecast total electricity generation and assess the possible role of photovoltaic generation. Due to the high demand for resources and serious environmental problems, China is pushing to develop the photovoltaic industry. The system price of PV is falling; therefore, photovoltaics may be competitive in the future.

Income Insecurity and Youth Emancipation: A Theoretical Approach

n this paper, we propose a theoretical model to study the effect of income insecurity of parents and offspring on the child's residential choice. Parents are partially altruistic toward their children and will provide financial help to an independent child when her income is low relative to the parents'. We find that children of more altruistic parents are more likely to become independent. However, first-order stochastic dominance (FOSD) shifts in the distribution of the child's future income (or her parents') have ambiguous effects on the child's residential choice. Parental altruism is the very source of ambiguity in the results. If parents are selfish or the joint income distribution of parents and child places no mass on the region where transfers are provided, a FOSD shift in the distribution of the child's (parents') future income will reduce (raise) the child's current income threshold for independence.