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The Effects of Experience on Preference Uncertainty: Theory and Empirics for Public and Quasi-Public Environmental Goods
Get PDFThis paper develop and estimates a model of demand estimation for environmental public goods which allows for consumers to learn about their preferences through consumption experiences. We develop a theoretical model of Bayesian updating, perform comparative statics over the model, and show how the theoretical model can be consistently incorporated into a reduced form econometric model. We then estimate the model using data collected for two environmental goods. We find that the predictions of the theoretical exercise that additional experience makes consumers more certain over their preferences in both mean and variance are supported in each case
An issue with own-rates: Keynes borrows from Sraffa , Sraffa criticises Keynes, and present-day commentators get hold of the wrong end of the stick
No full textScholars who in recent years have studied the Sraffa papers held in the Wren Library of
Trinity College, Cambridge, have concluded from Sraffa’s critical (but unpublished)
observations on Chapter 17 of Keynes’s General Theory that he rejected Keynes’s
central proposition that the rate of interest on money may come to ‘rule the roost’, thus
dragging the economy into recession. While Sraffa does indeed express dissatisfaction
with Chapter 17, the commentators have, we believe, misunderstood his concern: we
suggest that he was unhappy with the ‘own-rates’ terminology employed by Keynes
rather than with the substance of the theory developed in Chapter 17
Domestic Violence and Football in Glasgow: Are Reference Points Relevant?
Get PDFMuch research suggests that sporting events can trigger domestic violence with recent evidence suggesting that pre-match expectations (which can be interpreted as reference points) play an especially important role in this relationship. In particular, unexpectedly disappointing results have been associated with large increases in domestic violence. This paper contributes to this literature using a new data set containing every domestic violence incident in Glasgow over a period of more than eight years. We find that Old Firm matches, where Glasgow rivals Celtic and Rangers play, are associated with large increases in domestic violence (regardless
of the timing or the outcome of the match). Non-Old Firm matches tend to have little impact on domestic violence. Furthermore, we fi nd little evidence for the importance of reference points. Matches with disappointing
outcomes, relative to pre-match expectations, are found to be associated with unusual increases in domestic violence only in a very limited set of matches
Evaluating the usefulness of forecasts of relative growth
Get PDFForecasts of differences in growth between countries serve an important role in the justification of governments’ fiscal policy stances, but are not tested for their accuracy as part of the current range of forecast evaluation methods. This paper examines forecasted and outturn growth differentials between countries to identify if there is usefulness in forecasts of “relative” growth. Using OECD forecasts and outturn values for GDP growth for (combinations of) the G7 countries between 1984 and 2010, the paper finds that the OECD’s success in predicting the relative growth of G7 countries during this period is good. For each two-country combination results indicate that relative growth forecasts are less useful for countries which have smaller outturn growth differentials
Class-size Reduction Policies and the Quality of Entering Teachers
Get PDFState-wide class-size reduction (CSR) policies have typically failed to produce large achievement gains. One explanation is that the introduction of such policies forces schools to hire relatively low-quality teachers. This paper uses data from an anonymous state to explore whether teacher quality suff ered from the introduction of CSR. We find that it did, but not nearly enough to explain the small achievement effects of CSR. The combined fall in achievement due to hiring lower quality teachers and more inexperienced teachers is small relative to the unrealized gains. Furthermore, between-school diff erences in the quality of incoming teachers cannot explain the poor estimated CSR performance from previous quasi-experimental treatment-control comparisons
A Behavioural Model of Choice in the Presence of Decision Conflict
Get PDFThis paper proposes a model of choice that does not assume completeness of the decision maker’s preferences. The model explains in a natural way, and within a unified framework of choice when preference-incomparable options are present, four behavioural phenomena: the attraction effect, choice deferral, the strengthening of the attraction effect when deferral is per-missible, and status quo bias. The key element in the proposed decision rule is that an individual chooses an alternative from a menu if it is worse than no other alternative in that menu and is also better than at least one. Utility-maximising behaviour is included as a special case when preferences are complete. The relevance of the partial dominance idea underlying the proposed
choice procedure is illustrated with an intuitive generalisation of weakly dominated strategies and their iterated deletion in games with vector payoffs
Aid and Development: Issues and Reflections
Get PDFThe paper has three main sections. The first is a review of two particular
propositions which appear in Dambisa Moyo’s 2009 book Dead Aid which were not subjected to rigorous analysis in the reviews which appeared following its publication. The finding is that neither proposition survives serious scrutiny – that aid is responsible for most of sub-Saharan Africa’s economic woes and that the international bond market represents a viable alternative to foreign aid for the finance of development-oriented investment. The second questions some of the characteristics and uses of the World Bank’s Country Policy and Institutional Assessment (CPIA), particularly focussing on the use of an essentially ordinal measure in cardinal applications. The third subjects the UK Department for International Development’s Needs-Effectiveness Index to critical review, concluding that further consideration of its attributes is necessary
Development Accounting with Intermediate Goods
Get PDFDo intermediate goods help explain relative and aggregate productivity differences
across countries? Three observations suggest they do: (i) intermediates are relatively expensive in poor countries; (ii) goods industries demand intermediates more
intensively than service industries; (iii) goods industries are more prominent intermediate suppliers in poor countries. I build a standard multi-sector growth model accommodating these features to show that inefficient intermediate production strongly depresses aggregate labor productivity and increases the price ratio of final goods to services. Applying the model to data, low and high income countries in fact reveal similar relative efficiency levels between goods and services despite clear differences in relative sectoral labor productivity. Moreover, the main empirical exercise suggests that poorer countries are substantially less efficient at producing intermediate relative to final goods and services. Closing the cross-country efficiency gap in intermediate input production would strongly narrow the aggregate labor productivity difference across countries as well as turn final goods in poorer countries relatively cheap compared to services
Two Studies on the Interplay between Social Preferences and Individual Biological Features
Get PDFBiological features and social preferences have been studied separately as factors
influencing human strategic behaviour. We run two studies in order to explore the interplay
between these two sets of factors. In the first study, we investigate to what extent social
preferences may have some biological underpinnings. We use simple one-shot distribution
experiments to attribute subjects one out of four types of social preferences: Self-interested
(SI), Competitive (C), Inequality averse (IA) and Efficiency-seeking (ES). We then
investigate whether these four groups display differences in their levels of facial
Fluctuating Asymmetry (FA) and in proxies for exposure to testosterone during phoetal
development and puberty. We observe that development-related biological features and
social preferences are relatively independent. In the second study, we compare the relative
weight of these two set of factors by studying how they affect subjects’ behaviour in the
Ultimatum Game (UG). We find differences in offers made and rejection rates across the four social preference groups. The effect of social preferences is stronger than the effect of
biological features even though the latter is significant. We also report a novel link between
facial masculinity (a proxy for exposure to testosterone during puberty) and rejection rates
in the UG. Our results suggest that biological features influence behaviour both directly and through their relation with the type of social preferences that individuals hold
Co-movements in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model
Get PDFWe analyze and quantify co-movements in real effective exchange rates while considering
the regional location of countries. More specifically, using the dynamic hierarchical factor
model (Moench et al. (2011)), we decompose exchange rate movements into several latent
components; worldwide and two regional factors as well as country-specific elements. Then,
we provide evidence that the worldwide common factor is closely related to monetary policies
in large advanced countries while regional common factors tend to be captured by those in
the rest of the countries in a region. However, a substantial proportion of the variation in
the real exchange rates is reported to be country-specific; even in Europe country-specific
movements exceed worldwide and regional common factors