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The Impact of Iodine Deficiency Eradication on Schooling: Evidence from the Introduction of Iodized Salt in Switzerland
Get PDFThis paper examines the impact of salt iodization in Switzerland in the 1920s and
1930s on schooling outcomes. Iodine deficiency in utero causes mental retardation, and correcting the deficiency is expected to increase the productivity of a population by increasing its cognitive ability. The exogenous increase in cognitive ability brought about by the iodization program is also useful in the context of disentangling the effects of innate ability and education in later-life outcomes. I identify the impact of iodization
in three ways: first, in a differences-in-differences framework, I exploit geographic
variation in iodine deficiency, as well as the fact that the nationwide campaign to
decrease iodine deficiency began in 1922. Second, I use spatial and temporal variation
in the introduction of iodized salt across Swiss cantons, and examine whether the level
of iodized salt sales at the time of one’s birth affected one’s educational attainment.
Third, I employ a fuzzy regression discontinuity design and use jumps in sales of iodized salt across Swiss cantons to identify the effect of iodization, by comparing outcomes
for those born right before and right after these sudden changes in the treatment
environment. These approaches indicate that the eradication of iodine deficiency in
previously deficient areas increased the schooling of the population significantly. The
effects are larger for females than for males, which is consistent with medical evidence showing that women are more likely to be affected by iodine deficiency disorders than men
Endogenous Price Flexibility and Optimal Monetary Policy
Get PDFMuch of the literature on optimal monetary policy uses models in which the
degree of nominal price flexibility is exogenous. There are, however, good
reasons to suppose that the degree of price flexibility adjusts endogenously to
changes in monetary conditions. This paper extends the standard New
Keynesian model to incorporate an endogenous degree of price flexibility. The model shows that endogenising the degree of price flexibility tends to shift optimal
monetary policy towards complete inflation stabilisation, even when shocks take the
form of cost-push disturbances. This contrasts with the standard result obtained in models with exogenous price flexibility, which show that optimal monetary policy
should allow some degree of inflation volatility in order to stabilise the welfarerelevant
output gap
The disadvantage of winning an election
Get PDFThis paper analyzes the problem that an incumbent faces during the legislature when deciding how to react to popular initiatives or policy proposals coming from different sources. We argue that this potential source of electoral disadvantage that the incumbent obtains after being elected can jeopardize the reelection possibilities of the
incumbent. We analyze the decision of the incumbent when facing reelection and we characterize the conditions under which the advantages that the incumbent obtains can overcome the disadvantages.
Finally, we use the results of this analysis to discuss some implications
of the use of mechanisms of direct democracy like referenda and popular assemblies on electoral competition
A Salience Theory of Choice Errors
Get PDFWe study a psychologically based foundation for choice errors. The decision maker applies a preference ranking after forming a 'consideration set' prior to choosing an alternative. Membership of the consideration set is determined both by the alternative specific salience and by the rationality of the agent (his general propensity to consider all alternatives). The model turns out to include a logit formulation
as a special case. In general, it has a rich set of implications both for exogenous
parameters and for a situation in which alternatives can a¤ect their own salience
(salience games). Such implications are relevant to assess the link between 'revealed' preferences and 'true' preferences: for example, less rational agents may paradoxically express their preference through choice more truthfully than more rational agents
Equilibrium Exchange Rate Determination and Multiple Structural Changes
Get PDFThe large appreciation and depreciation of the US dollar in the 1980s stimulated
an important debate on the usefulness of unit root tests in the presence of structural
breaks. In this paper, we propose a simple model to describe the evolution of the
real exchange rate. We then propose a more general smooth transition (STR) function
than has hitherto been employed, which is able to capture structural changes along the
(long-run) equilibrium path, and show that this is consistent with our economic model.
Our framework allows for a gradual adjustment between regimes and allows for under- and/or over-valued exchange rate adjustments. Using monthly and quarterly data for up to twenty OECD countries, we apply our methodology to investigate the univariate time series properties of CPI-based real exchange rates with both the U.S. dollar and German mark as the numeraire currencies. The empirical results show that, for more than half of the quarterly series, the evidence in favour of the stationarity of the real exchange rate was clearer in the sub-sample period post-1980
The regional electricity generation mix in Scotland: A portfolio selection approach
Get PDFStandalone 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
“Policy Scepticism” and the Impact of Scottish Higher Education Institutions (HEIs) on their Host Region: Accounting for Regional Budget Constraints under Devolution
Get PDFA “policy scepticism” has emerged that challenges the results of conventional regional HEI impact analyses. Its denial of the importance of the expenditure impacts of HEIs appears to be based on a belief in either a binding regional resource constraint or a regional public sector
budget constraint. In this paper we provide a systematic critique of this policy scepticism.
However, while rejecting the extreme form of policy scepticism, we argue that it is crucial to recognise the importance of the public-sector expenditure constraints that are binding under devolution. We show how conventional impact analyses can be augmented to accommodate regional public sector budget constraints. While our results suggest that conventional impact
studies overestimate the expenditure impacts of HEIs, they also demonstrate that the policy scepticism that treats these expenditure effects as irrelevant neglects some key aspects of HEIs,
in particular their export intensity
The Timing of Asset Trade and Optimal Policy in Dynamic Open Economies
Get PDFUsing a standard open economy DSGE model, it is shown that the timing of asset trade
relative to policy decisions has a potentially important impact on the welfare evaluation of monetary policy at the individual country level. If asset trade in the initial period takes place before
the announcement of policy, a national policymaker can choose a policy rule which reduces the work effort of households in the policymaker’s country in the knowledge that consumption is fully insured by optimally chosen international portfolio positions. But if asset trade takes place
after the policy announcement, this insurance is absent and households in the policymaker’s country bear the full consumption consequences of the chosen policy rule. The welfare incentives faced by
national policymakers are very different between the two cases. Numerical examples confirm that asset market timing has a significant impact on the optimal policy rule
Finance and Balanced Growth
Get PDFThe Uzawa (1961) theorem applied to finance and growthsuggests that a long-run positive correlation between financial
efficiency and depth is only present when variations in the extent of access to financial services are considered. Improvements in financial efficiency can lead to new capital augmenting technologies along the balanced path, but only improvements in financial efficiency directed
towards labor can change the rate of growth in the long-run. These findings suggest ways to understand some of the more nuanced
relationships between finance and growth observed in the data and point in a number of directions for future research
An HEI-Disaggregated Input-Output Table for Wales
Get PDFThis paper describes how the education sector of the Welsh Input-Output tables is disaggregated to identify a separate sector for each of Wales’s twelve Higher Education Institutions (HEIs). The process draws on accounting and survey data to accurately determine the incomes and expenditures of each institution. In particular we emphasise determining the HEIs incomes source of origin to inform their treatment, as endogenous or exogenous, in subsequent analyses. The HEI-disaggregated Input-Output table provides a useful descriptive snapshot of the Welsh economy and the role of HEIs within it for a particular year, 2006. The table can be used to derive multipliers and conduct various impact studies of each institution or the sector as a whole. The table is furthermore useful to calibrate other multi-sectoral, HEI-disaggregated models of regional economies, including Social Accounting Matrix (SAM) and computable general equilibrium (CGE) models