Integrability and the demand for monetary assets: an alternative approach to an old problem

This note provides necessary and su¢cient conditions for some speci…c multidimensional consumer’s surplus welfare measures to be well posed (path independent). We motivate the problem by investigating partial-equilibrium measures of the welfare costs of in‡ation. The results can also be used for checking path independence of alternative de…nitions of Divisia indexes of monetary services. Consumer theory classically approaches the integrability problem by considering compensated demands, homothetic preferences or quasi-linear utility functions. Here, instead, we consider demands of monetary assets generated from a shopping-time perspective. Paralleling the above mentioned procedure, of …nding special classes of utility functions that satisfy the integrability conditions, we try to infer what particular properties of the transacting technology could assure path independence of multidimensional welfare measures. We show that the integrability conditions are satis…ed if and only if the transacting technology is blockwise weakly separable. We use two examples to clarify the point.

Preços de etanol no Brasil : uma análise espacial

A introdução da tecnologia flex-fuel resultou em um expressivo aumento do consumo de etanol no Brasil, tornando-o principal concorrente da gasolina nos postos de combustíveis. Apesar disso, diferentemente da gasolina, a oferta de etanol sofre com a sazonalidade da safra de cana de açúcar, mostrando-se insuficiente para atender a demanda, incorrendo em altos preços nos períodos de entressafra. Além destes fatores, a expansão do uso de etanol como combustível enfrenta a ausência de políticas públicas claras que incentivem o mercado, assim como uma estrutura logística que permita o escoamento do produto a baixos custos. O presente trabalho buscou demonstrar como se comportam espacialmente os preços de etanol e gasolina no Brasil. Observou-se que os preços de etanol combustível ao consumidor foram menores quanto mais próximos das regiões produtoras e maiores conforme se distanciam, até se tornarem desvantajosos para o consumidor de alguns estados na medida em que a paridade de preços frente à gasolina supera o limite técnico de 70%. Observou-se também que a sazonalidade distinta das duas regiões produtoras do país define padrões sazonais de áreas que predominantemente consomem etanol ou gasolina, conforme a paridade de 70%. Este resultado indica que a necessidade de estoques e fluxos de produtos depende não apenas das condições logísticas, mas também da combinação da sazonalidade das regiões produtoras. Por fim, intencionou-se entender como e em que proporção os preços ao produtor do estado de São Paulo relacionam-se com os preços ao consumidor de outras regiões do país. Este estudo demonstrou que a velocidade de transmissão dos preços não está relacionada com a distância e que fatores logísticos e características específicas de cada mercado são os principais determinantes do comportamento dos preços ao consumidor em relação às alterações nos preços ao produtor do estado de São Paulo.

Three essays on local demand for public services

Local provision of public services has the positive effect of increasing the efficiency because each locality has its idiosyncrasies that determine a particular demand for public services. This dissertation addresses different aspects of the local demand for public goods and services and their relationship with political incentives. The text is divided in three essays. The first essay aims to test the existence of yardstick competition in education spending using panel data from Brazilian municipalities. The essay estimates two-regime spatial Durbin models with time and spatial fixed effects using maximum likelihood, where the regimes represent different electoral and educational accountability institutional settings. First, it is investigated whether the lame duck incumbents tend to engage in less strategic interaction as a result of the impossibility of reelection, which lowers the incentives for them to signal their type (good or bad) to the voters by mimicking their neighbors’ expenditures. Additionally, it is evaluated whether the lack of electorate support faced by the minority governments causes the incumbents to mimic the neighbors’ spending to a greater extent to increase their odds of reelection. Next, the essay estimates the effects of the institutional change introduced by the disclosure on April 2007 of the Basic Education Development Index (known as IDEB) and its goals on the strategic interaction at the municipality level. This institutional change potentially increased the incentives for incumbents to follow the national best practices in an attempt to signal their type to voters, thus reducing the importance of local information spillover. The same model is also tested using school inputs that are believed to improve students’ performance in place of education spending. The results show evidence for yardstick competition in education spending. Spatial auto-correlation is lower among the lame ducks and higher among the incumbents with minority support (a smaller vote margin). In addition, the institutional change introduced by the IDEB reduced the spatial interaction in education spending and input-setting, thus diminishing the importance of local information spillover. The second essay investigates the role played by the geographic distance between the poor and non-poor in the local demand for income redistribution. In particular, the study provides an empirical test of the geographically limited altruism model proposed in Pauly (1973), incorporating the possibility of participation costs associated with the provision of transfers (Van de Wale, 1998). First, the discussion is motivated by allowing for an “iceberg cost” of participation in the programs for the poor individuals in Pauly’s original model. Next, using data from the 2000 Brazilian Census and a panel of municipalities based on the National Household Sample Survey (PNAD) from 2001 to 2007, all the distance-related explanatory variables indicate that an increased proximity between poor and non-poor is associated with better targeting of the programs (demand for redistribution). For instance, a 1-hour increase in the time spent commuting by the poor reduces the targeting by 3.158 percentage points. This result is similar to that of Ashworth, Heyndels and Smolders (2002) but is definitely not due to the program leakages. To empirically disentangle participation costs and spatially restricted altruism effects, an additional test is conducted using unique panel data based on the 2004 and 2006 PNAD, which assess the number of benefits and the average benefit value received by beneficiaries. The estimates suggest that both cost and altruism play important roles in targeting determination in Brazil, and thus, in the determination of the demand for redistribution. Lastly, the results indicate that ‘size matters’; i.e., the budget for redistribution has a positive impact on targeting. The third essay aims to empirically test the validity of the median voter model for the Brazilian case. Information on municipalities are obtained from the Population Census and the Brazilian Supreme Electoral Court for the year 2000. First, the median voter demand for local public services is estimated. The bundles of services offered by reelection candidates are identified as the expenditures realized during incumbents’ first term in office. The assumption of perfect information of candidates concerning the median demand is relaxed and a weaker hypothesis, of rational expectation, is imposed. Thus, incumbents make mistakes about the median demand that are referred to as misperception errors. Thus, at a given point in time, incumbents can provide a bundle (given by the amount of expenditures per capita) that differs from median voter’s demand for public services by a multiplicative error term, which is included in the residuals of the demand equation. Next, it is estimated the impact of the module of this misperception error on the electoral performance of incumbents using a selection models. The result suggests that the median voter model is valid for the case of Brazilian municipalities.

Demand aggregation and credit risk effects in pooled procurement: evidence from the Brazilian public purchases of pharmaceuticals and medical supplies

Pooled procurement has an important role in reducing acquisition prices of goods. A pool of buyers, which aggregates demand for its members, increases bargaining power and allows suppliers to achieve economies of scale and scope in the production. Such aggregation demand e ect lowers prices paid for buyers. However, when a buyer with a good reputation for paying suppliers in a timely manner is joined in the pool by a buyer with bad reputation may have its price paid increased due to the credit risk e ect on prices. This will happen because prices paid in a pooled procurement should refect the (higher) average buyers' credit risk. Using a data set on Brazilian public purchases of pharmaceuticals and medical supplies, we nd evidence supporting both e ects. We show that the prices paid by public bodies in Brazil are lower when they buy through pooled procurement than individually. On the other hand, federal agencies (i.e. good buyers) pay higher prices for products when they are joined by state agencies (i.e. bad buyers) in a pool. Such evidence suggests that pooled procurement should be carefully designed to avoid that prices paid increase for its members.

Determinantes do fluxo de fundos de investimento no Brasil

Nesse trabalho, procuramos identificar fatores sistemáticos que expliquem uma variação significativa nos fluxos destinados às diversas categorias de fundos de investimento brasileiros, a partir de análises de uma amostra de dados agregados de captações e resgates nesses produtos. O estudo buscou avaliar a existência de padrões de comportamento comuns aos investidores de fundos locais através da análise da migração de fluxos entre as diversas classes de fundos. Foram inicialmente tratados os fatores não comportamentais conhecidos que impactam o fluxo dos fundos, a variável dependente. Esses fatores conhecidos foram apurados através de uma revisão dos trabalhos acadêmicos dos mercados internacional e local. Após esse tratamento foi aplicado o método de decomposição de valores singulares (SVD - Singular Value Decomposition), com o objetivo de avaliarmos os efeitos comportamentais agrupados dos investidores. A decomposição em valores singulares sugere como principais fatores comuns comportamentos de entrada e saída de fundos em massa e migrações entre as classes de fundos de menor e as de maior risco, o que Baker e Wurgler (2007) chamaram de demanda especulativa, e que, segundo esses e outros autores pesquisados, poderia ser interpretada como uma proxy do sentimento dos investidores. Guercio e Tkac (2002) e Edelen et al. (2010), encontraram em suas pesquisas evidências da diferença de comportamento entre investidores de atacado e de varejo, o que foi detectado para a classes de fundos de Renda Variável no caso do presente estudo sobre o mercado brasileiro. O entendimento das variações na tolerância a risco dos investidores de fundos de investimento pode auxiliar na oferta de produtos mais compatíveis com a demanda. Isso permitiria projetar captações para os produtos com base nas características dessa oferta, o que também desenvolvemos nessa pesquisa para o caso das categorias de fundos Multimercado e Renda variável, através de um modelo de espaço de estados com sazonalidade determinística e inicialização SVD. O modelo proposto nesse trabalho parece ter conseguido capturar, na amostra avaliada (2005-2008), um comportamento que se manteve fora da amostra (2009-2011), validando, ao menos na amostra considerada, a proposta de extração dos componentes principais agregados do comportamento dos investidores de fundos brasileiros.

Low expectations, low demand : when should the government intervene?

Este trabalho estuda o impacto de diferentes políticas que procuram mitigar falhas de coordenação em um ambiente macroeconômico. Abordamos questões relativas ao timing dos estímulos econômicos. Quando o governo deveria começar a incentivar a economia? Deveria gastar mais para prevenir crises ou para tirar a economia da recessão quando os fundamentos estão melhorando? Como o estímulo deve alterar a complementaridade estratégica? Para responder a estas perguntas, construímos um modelo macroeconômico dinâmico com concorrência monopolística e decisões de investimento sequenciais. Aplicando resultados da literatura teórica de jogos dinâmicos com fricções, selecionamos um único equilíbrio neste modelo, nos dando um instrumental tratável para a análise de políticas. Nossos resultados sugerem que o governo não deveria viesar incentivos nem para a prevenção de crises nem para resgatar a economia quando esta já está em crise.

Estimation of random coefficients logit demand models: an application to the Brazilian fixed income fund market

Estimation of demand and supply in differentiated products markets is a central issue in Empirical Industrial Organization and has been used to study the effects of taxes, merges, introduction of new goods, market power, among others. Logit and Random Coefficients Logit are examples of demand models used to study these effects. For the supply side it is generally supposed a Nash equilibrium in prices. This work presents a detailed discussion of these models of demand and supply as well as the procedure for estimation. Lastly, is made an application to the Brazilian fixed income fund market.

The access to demand

In this paper I argue that, in developing countries, sufficient aggregate demand is not enough to motivate investment and achieve full employment. Besides, according to the Keynesian developmental macroeconomics under construction, competent business enterprises must have access to that demand –access which is denied to most of them because developing countries face the tendency to the cyclical and chronic overvaluation of the exchange rate

Predicting Amazon Deforestation through the deterninants of demand for agricultural land

This paper develops a model of deforestation pressure in the Amazon. It is based on the determinants of demand for agricultural land, i.e. the interactions between population dynamics, urbanization and the growth of local markets, land prices, and government spending and policies. The mo deI is estimated using data from the period 1970 - 1985, and predictions for the period 1985 - 2010 are made under explicit assumptions about the underlying factors of deforestation. The predictions indicate that economic growth in the Amazon is likely to continue at high rates even if the federal government abandons its aggressive development policy. Deforestation will be much smaller if they do, though, since the active development policies tend to promote wasteful use of land.

Demand- side resistance to creative destruction in schumpeterian growth theory

The Schumpelerian model of endogeno~s growlh is generalized with lhe introduction of stochastic resislance. by agenls other Ihan producers. to lhe innovations which drive growth. This causes a queue to be formcd of innovations, alrcady discovered, bUI waiting to be adopled~ A slationary stochastic equilibrium (SSE) is obtained when the queue is stable~ It is shown that in the SSE, such resistance will always reduce lhe average growth iate hut it may increa~e wclfare in certain silualions. In an example, Ihis is when innovatiuns are small anti monopoly power great. The cont1icl hetween this welfare motive for resistance and those of rent-seeking innovalors.may well explain why growth rates differ.

Demand-pull stagflation

This paper explores the possibility of stagflation emanating exc1usively from monetaJy sbocks, without concurrent supply shocks or shifts in potential output. This arises in connection with a tight money paradox. in the context of a fiscal theory of the price leveI. The paper exhibits perfect foresight equilibria with output and inflation fluctuating in opposite direetions as a consequence of small monetary shocks, and also following changes in monetaJy policy regime that launch the economy into hyperinflation or that produce dramatic stabilization of already high inflation. For that purpose, an analytically convenient dynamic general equilibrium macro model is deve10ped wbere nominal rigidities are represented by a cross between staggered two-period contracts and state dependent price adjustment in the presence of menu costs.

Demand and supply: price elasticities and corporate performance in the UK

This paper investigates the relationship between consumer demand and corporate performance in several consumer industries in the UK, using two independent datasets. It uses data on consumer expenditures and the retail price index to estimate Almost Ideal Demand Systems on micro-data and compute timevarying price elasticities of demand for disaggregated commodity groups. Then, it matches the product definitions to the Standard Industry Classification and uses the estimated elasticities to investigate the impact of consumer behaviour on firm-level profitability equations. The time-varying household characteristics are ideal instruments for the demand effects in the firms' supply equation. The paper concludes that demand elasticities have a significant and tangible impact on the profitability of UK firms and that this impact can shed some light on the relationship between market structure and economic performance.

Phase transition of demand explained by the heterogeneity of consumers' intrinsic preferences

In 1991 Gary S. Becker presented A Note on Restaurant Pricing and Other Examples of Social In uences on Price explaining why many successful restaurants, plays, sporting events, and other activities do not raise their prices even with persistent excess demand. The main reason for this is due to the discontinuity of stable demands, which is explained in Becker's (1991) analysis. In the present paper we construct a discrete time stochastic model of socially interacting consumers deciding for one of two establishments. With this model we show that the discontinuity of stable demands, proposed by Gary S. Becker, depends crucially on an additional factor: the dispersion of the consumers' intrinsic preferences for the establishments.