Measuring time-varying economic fears with consumption-based stochastic discount factors

This paper analyzes empirically the volatility of consumption-based stochastic discount factors as a measure of implicit economic fears by studying its relationship with future economic and stock market cycles. Time-varying economic fears seem to be well captured by the volatility of stochastic discount factors. In particular, the volatility of recursive utility-based stochastic discount factor with contemporaneous growth explains between 9 and 34 percent of future changes in industrial production at short and long horizons respectively. They also explain ex-ante uncertainty and risk aversion. However, future stock market cycles are better explained by a similar stochastic discount factor with long-run consumption growth. This specification of the stochastic discount factor presents higher volatility and lower pricing errors than the specification with contemporaneous consumption growth.

Evaluating Spanish pension expenditure under alternativa reform scenario

In this paper we evaluate the quantitative impact that a number ofalternative reform scenarios may have on the total expenditure for publicpensions in Spain. Our quantitative findings can be summarized in twosentences. For all the reforms considered, the financial impact of themechanical effect (change in benefits) is order of magnitudes larger thanthe behavioral impact or change in behavior. For the two Spanish reforms,we find once again that their effect on the outstanding liability of theSpanish Social Security System is essentially negligible: neither themechanical nor the behavioral effects amount to much for the 1997 reform,and amount to very little for the 2002 amendment.

A dynamic choice model of hybrid behavior in the attribute-space

This paper presents a dynamic choice model in the attributespace considering rational consumers that discount the future. In lightof the evidence of several state-dependence patterns, the model isfurther extended by considering a utility function that allows for thedifferent types of behavior described in the literature: pure inertia,pure variety seeking and hybrid. The model presents a stationaryconsumption pattern that can be inertial, where the consumer only buysone product, or a variety-seeking one, where the consumer buys severalproducts simultane-ously. Under the inverted-U marginal utilityassumption, the consumer behaves inertial among the existing brands forseveral periods, and eventually, once the stationary levels areapproached, the consumer turns to a variety-seeking behavior. An empiricalanalysis is run using a scanner database for fabric softener andsignificant evidence of hybrid behavior for most attributes is found,which supports the functional form considered in the theory.

A multilevel analysis on the determinants of regional health care expenditure. A note

We apply a multilevel hierarchical model to explore whether anaggregation fallacy exists in estimating the income elasticity of healthexpenditure by ignoring the regional composition of national healthexpenditure figures. We use data for 110 regions in eight OECD countriesin 1997: Australia, Canada, France, Germany, Italy, Spain, Sweden andUnited Kingdom. In doing this we have tried to identify two sources ofrandom variation: within countries and between-countries. Our resultsshow that: 1- Variability between countries amounts to (SD) 0.5433, andjust 13% of that can be attributed to income elasticity and the remaining87% to autonomous health expenditure; 2- Within countries, variabilityamounts to (SD) 1.0249; and 3- The intra-class correlation is 0.5300. Weconclude that we have to take into account the degree of fiscaldecentralisation within countries in estimating income elasticity ofhealth expenditure. Two reasons lie behind this: a) where there isdecentralisation to the regions, policies aimed at emulating diversitytend to increase national health care expenditure; and b) without fiscaldecentralisation, central monitoring of finance tends to reduce regionaldiversity and therefore decrease national health expenditure.

General preferences for consumption goods in the random matching model of commodity money

This paper generalizes the original random matching model of money byKiyotaki and Wright (1989) (KW) in two aspects: first, the economy ischaracterized by an arbitrary distribution of agents who specialize in producing aparticular consumption good; and second, these agents have preferences suchthat they want to consume any good with some probability. The resultsdepend crucially on the size of the fraction of producers of each goodand the probability with which different agents want to consume eachgood. KW and other related models are shown to be parameterizations ofthis more general one.

Inequality over the business cycle: Estimating income risk using micro-data on consumption

We use CEX repeated cross-section data on consumption and income, to evaluate the nature of increased income inequality in the 1980s and 90s. We decompose unexpected changes in family income into transitory and permanent, and idiosyncratic and aggregate components, and estimate the contribution of each component to total inequality. The model we use is a linearized incomplete markets model, enriched to incorporate risk-sharing while maintaining tractability. Our estimates suggest that taking risk sharing into account is important for the model fit; that the increase in inequality in the 1980s was mainly permanent; and that inequality is driven almost entirely by idiosyncratic income risk. In addition we find no evidence for cyclical behavior of consumption risk, casting doubt on Constantinides and Duffie s (1995) explanation for the equity premium puzzle.

Heterogeneous life-cycle profiles, income risk and consumption inequality

Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to decompose idiosyncratic changes in income into predictable life-cycle changes, transitory and permanent shocks and estimate the contribution of each to total inequality. Our model fits the joint evolution of consumption and income inequality well and delivers two main results. First, we find that permanent changes in income explain all of the increase in inequality in the 1980s and 90s. Second, we reconcile this finding with the fact that consumption inequality did not increase much over this period. Our results support the view that many permanent changes in income are predictable for consumers, even if they look unpredictable to the econometrician, consistent withmodels of heterogeneous income profiles.

Modern energy consumption and economic modernisation in Latin America and the Caribbean between 1890 and 1925

In the absence of comparable macroeconomic indicators for most of the Latin Americaneconomies before the 1930s, the apparent consumption of energy is used in this paper as a proxyof the degree of modernisation of Latin America and the Caribbean. This paper presents anestimate of the apparent consumption per head of modern energies (coal, petroleum andhydroelectricity) for 30 countries of Latin American and the Caribbean for 1890 to 1925,multiplying the number of countries for which energy consumption estimates were previouslyavailable. As a result, the paper provides the basis for a quantitative comparative analysis ofmodernisation performance beyond the few countries for which historical national accounts areavailable in Latin America.

Sources and propagation of international cycles: Common shocks or transmission?

This paper studies the generation and transmission of international cycles in a multi-country model with production and consumption interdependencies. Two sources of disturbance are considered and three channels of propagation are compared. In the short run the contemporaneous correlation of disturbances determines the main features of the transmission. In the medium run production interdependencies account for the transmission of technology shocks and consumption interdependencies account for the transmission of government shocks. Technology disturbances, which are mildly correlated across countries, are more successful than government expenditure disturbances in reproducing actual data. The model also accounts for the low cross country consumption correlations observed in the data.

Gestão Integrada dos Recursos Hídricos da Ilha do Maio (Cabo Verde): o Contributo das Águas Subterrâneas

Cabo Verde é constituído por 10 ilhas, sendo a ilha do Maio a mais antiga do arquipélago, com uma área de 269 km2, tendo como comprimento máximo 24100 m, uma largura máxima de 16300 m e uma população total de 6740 habitantes. No que concerne à geomorfologia e geologia, a ilha é considerada plana e é composta por formações eruptivas e sedimentares, sendo as formações sedimentares dominantes na ilha. Apresenta as formações mais antigas de Cabo Verde, de idade jurássica e cretácica. No entanto, não apresenta as formações eruptivas mais recentes como as restantes ilhas. A ilha do Maio enquadra-se num clima do tipo árido e semiárido, com uma temperatura média de 24.5 ºC e uma precipitação anual de 125.4 mm. Estimativas efectuadas com base no modelo do balanço hídrico sequencial diário mostram que cerca de 7% da precipitação corresponde a escoamento superficial e 14.1% a escoamento subterrâneo. Pela aplicação deste modelo e do método do balanço químico do ião cloreto, os recursos hídricos subterrâneos renováveis anualmente na ilha do Maio estão, em ano médio, compreendidos entre 3.44 x 106 m3 e 4.76 x 106 m3.por sua vez, o escoamento total é estimado em 7.8 x 106 m3 anuais, o que equivale a cerca de 21 400 m3/dia. O escoamento subterrâneo na ilha do Maio faz-se globalmente de um modo centrífugo a partir das elevações do maciço central. O gradiente hidráulico assume valores entre 0.05% e 2.9%, sendo que o valor mais baixo ocorre no sector norte da ilha, o que favorece o fenómeno de intrusão salina. Relativamente à qualidade da água, verifica-se que as amostras recolhidas correspondem a águas muito mineralizadas, com valores de condutividade eléctrica compreendidos entre 832 μS/cm e 7730 μS/cm. Por sua vez, os valores de TDS estão compreendidos entre 705.8 mg/L e 4210.4 mg/L. Nestas condições, as águas subterrâneas analisadas podem ser consideradas águas salobras. A fácies hidroquímica dominante é a cloretada sódica, sendo que grande parte das amostras pode ser considerada cloretada-bicarbonatada sódica. Admitindo que a amostragem efectuada tem significado estatístico, poderá dizer-se que, a nível físico-químico, cerca de 20% das águas subterrâneas são próprias para o consumo humano. No que respeita à utilização da água para rega, as águas analisadas apresentam baixo a alto perigo de alcalinização do solo e alto a muito alto perigo de salinização. Em síntese, pode concluir-se que, não obstante o carácter árido da ilha do Maio, a mesma apresenta um potencial de recursos hídricos não negligenciável, eventualmente suficiente para suprir as necessidades hídricas da população. No entanto, o estudo desenvolvido mostra a necessidade de implementar medidas susceptíveis de proporcionarem um aproveitamento sustentado dos recursos hídricos, no quadro da gestão integrada dos recursos hídricos da ilha do Maio.

A influência do consumo de álcool no insucesso escolar dos alunos do ensino secundário de São Vicente - Cabo Verde

O álcool é a substância mais consumida pelos adolescentes e jovens, e a idade do início e o padrão de consumo têm sido uma das preocupações, particularmente, dos sectores da saúde e da educação. Este consumo está associado a um conjunto de consequências negativas para a vida do adolescente, entre as quais a dificuldade de aprendizagem e o baixo rendimento escolar. Portanto, a prevenção do consumo de álcool nas escolas, constitui uma via consensual para tentar controlar o problema. Esta dissertação tem como objectivo conhecer o padrão de consumo de álcool dos alunos do ensino secundário em São Vicente (Cabo Verde) e estudar a sua relação com o insucesso escolar. Aplicámos um questionário anónimo a uma amostra de 500 alunos, com idade entre 12 e 21 anos, das 5 escolas secundárias públicas da ilha. Após uma análise exploratória dos dados e uma análise univariada verificou-se que o consumo de álcool podia estar relacionado com o insucesso escolar. Neste sentido, construímos modelos de regressão logística para estudar tal relação. Os resultados evidenciam que o primeiro contacto com o álcool ocorre numa idade precoce e o padrão de consumo, genericamente, varia em função da faixa etária e do género. Entretanto, independentemente do género e da faixa etária, o consumo ocorre fundamentalmente aos fins – de – semana e na companhia dos amigos. Após o controlo dos factores de confusão, o consumo de álcool permaneceu como um factor de risco para o insucesso escolar e verificámos que a probabilidade de um aluno ter insucesso escolar aumenta com a frequência de consumo. Os resultados do estudo alertam para a necessidade de uma intervenção de toda a comunidade educativa e dos sectores da saúde no sentido de implementar medidas que visem o combate ao consumo de álcool entre os alunos, e adolescentes de uma forma geral.

Cannabis use as a means of socialization?: new consumption patterns among heavy users

Purpose: After tobacco and alcohol, cannabis is the most used substance among adolescents in Switzerland. Our aim is to assess whether cannabis use has become an ordinary means of socialization. We hypothesize that cannabis consumption has become a normative, although still illegal, behavior. Methods: As part of a larger qualitative study aimed at assessing new ways [patterns] of cannabis consumption, 16 daily cannabis consumers (11 males) and 2 former heavy consumers (both females), aged 15 to 20 years, participated in interviews and focus groups. Data were transcribed verbatim and analyzed using Atlas.ti qualitative analysis software. Results: Most consumers define the beginning of their consumption as a moment when they made new friends. They commonly use cannabis in group settings, which encourages the belief that all adolescents use cannabis. Thus, cannabis is mainly identified as an everyday social act. Joints are smoked like cigarettes: at all times of the day, during or after school or work with peers, often starting at lunch break, and mostly in public places. Friends offer a joint in a group setting, much like beer in a bar, as a means of making contact. Consumption invariably increases while socializing on vacation: "During vacation, we smoke up to 10-15 joints a day; at the end we're just dead." Additionally, in order to obtain cannabis, consumers have to be part of the right networks; they generally have several dealers to assure their supply, buy and sell themselves, or practice group-buying. As a result, all friends or acquaintances of consumers are themselves cannabis users. For instance, 4 boys, who say they are best friends, always smoke together and that, in order to quit, "All four of us should say to ourselves, 'Okay, now, let's all stop smoking'. That would be the only solution. . .but it would be impossible!" The 2 former consumers state that when they started using cannabis, "I found myself little by little in a vicious circle where I saw only people who also smoked". When they quit, they separated from their group of friends: "Either you make new friends who don't smoke or you smoke." Conclusions: Discussions with consumers demonstrate a normative facet of cannabis consumption as part of teenage socialization. Consequently, cannabis consumers develop a significant dependency since a majority of their friends use cannabis and their consumption involves most of their daily social life. Our study highlights the need for clear messages about the harmful aspects of using this substance while also suggesting that cessation efforts should include helping users separate from their consumption milieu. Sources of Support: Dept. of Public Health of the canton of Vaud.

Does it cost to be virtuous? The macroeconomic effects of fiscal constraints

We study whether and how fiscal restrictions alter the business cycle features of macrovariables for a sample of 48 US states. We also examine the typical transmission properties of fiscal disturbances and the implied fiscal rules of states with different fiscal restrictions. Fiscal constraints are characterized with a number of indicators. There are similarities in second moments of macrovariables and in the transmission properties of fiscal shocks across states with different fiscal constraints. The cyclical response of expenditure differs in size and sometimes in sign, but heterogeneity within groups makes point estimates statistically insignificant. Creative budget accounting is responsible for the pattern. Implications for the design of fiscal rules and the reform of the Stability and Growth Pact are discussed.

Pattern of attack of a galling insect reveals an unexpected preference-performance linkage on medium-sized resources

Pattern of attack of a galling insect reveals an unexpected preference-performance linkage on medium-sized resources. The Plant Vigor Hypothesis (PVH) predicts oviposition preference and higher offspring performance on longer and fast-growing shoots, and although several studies have tested its predictions, long-term studies concerning the patterns of host selection by galling species are still lacking. The PVH was tested in this study using Bauhinia brevipes (Fabaceae) as the host of a leaf gall midge, Asphondylia microcapillata (Diptera, Cecidomyiidae) during three consecutive years. Shoots were collected from the same 80 plants between 2001 and 2003 and shoot length, number of healthy and galled leaves, gall number, and mortality factors were recorded. Nearly 600 galls were found on the 5,800 shoots collected. Medium-sized shoots supported from 46 to 70% of all galls, with greater gall survival rate in 2002 and 2003. A decrease in parasitism rate coupled with an increase in gall predation lead to a constant similar gall survivorship rate in all years (x = 22.7%). Although gall abundance varied among years (122 in 2001, 114 in 2002 and 359 in 2003) preference for longer shoots was not observed because the percentage of galled shoots and galled leaves were higher on medium shoot length classes in all years. The observed distribution of gall abundance and galled shoots were always greater than the expected distribution on medium shoot length classes. These findings do not support the PVH, and show that A. microcapillata can maximize the female preference and larval performance on medium-sized shoots of B. brevipes.