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Articles 2041 - 2070 of 2768
Full-Text Articles in Social and Behavioral Sciences
Stability Comparisons Of Estimators, Donald W.K. Andrews
Stability Comparisons Of Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
A property of estimators called stability is investigated in this paper. The stability of an estimator is a measure of the magnitude of the affect of any single observation in the sample on the realized value of the estimator. High stability often is desirable for robustness against misspecification and against highly variable observations. Stabilities are determined and compared for a wide variety of estimators and econometric models. Estimators considered include: least squares, maximum likelihood (including both LIML and FIML), instrumental variables, M-, and multi-stage estimators such as tow and three stage least squares, Zellner’s feasible Aikten estimator of the multivariate …
Price And Advertising Signals Of Product Quality, Paul R. Milgrom, John Roberts
Price And Advertising Signals Of Product Quality, Paul R. Milgrom, John Roberts
Cowles Foundation Discussion Papers
We present a signalling model, based on ideas of Phillip Nelson, in which both the introductory price and the level of directly “uninformative” advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good. Repeat purchases play a crucial role in our model.
Estimated Trade-Offs Between Unemployment And Inflation, Ray C. Fair
Estimated Trade-Offs Between Unemployment And Inflation, Ray C. Fair
Cowles Foundation Discussion Papers
No abstract provided.
Job Discrimination, Market Forces And The Invisibility Hypothesis, Paul R. Milgrom, Sharon Oster
Job Discrimination, Market Forces And The Invisibility Hypothesis, Paul R. Milgrom, Sharon Oster
Cowles Foundation Discussion Papers
The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not easily discovered by potential new employers, but that promotion enhances visibility and alleviates this problem. Then, at a competitive labor market equilibrium, firms profit by hiding talented disadvantaged workers in low level jobs. Consequently, those workers are paid less on average and promoted less often than others with the same education and ability. As a result of the inefficient and discriminatory wage and promotion policies, disadvantaged workers experience lower returns to investments in human capital than other workers.
Job Discrimination, Market Forces And The Invisibility Hypothesis, Paul R. Milgrom, Sharon Oster
Job Discrimination, Market Forces And The Invisibility Hypothesis, Paul R. Milgrom, Sharon Oster
Cowles Foundation Discussion Papers
The Invisibility Hypothesis holds that the job skills of disadvantaged workers are not easily observed by potential new employers, but that promotion enhances visibility and alleviates this problem. Then, at a competitive labor market equilibrium, disadvantaged workers will be paid less on average and promoted less often than other workers with the same education and ability, even if their employers are unprejudiced and know their workers’ abilities. As a result of the discriminatory wage and promotion policies, disadvantaged workers will experience lower returns to investments in human capital than other workers. An affirmative action program that eliminates discrimination and brings …
Stability Comparisons Of Estimators, Donald W.K. Andrews
Stability Comparisons Of Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper investigates a property of estimators called stability. The stability exponent of an estimator is defined to be a measure of the effect of any single observation in the sample on the realized value of the estimator. High stability is often desirable for robustness against misspecification and against highly variable observations. Stability exponents are determined and compared for a wide variety of estimators and econometric models. They are found to depend on the maximal moment exponent (i.e., the number of finite moments) of the estimator’s influence curve. Since it is possible often to construct estimators with specified influence curves, …
Stability Comparisons Of Estimators, Donald W.K. Andrews
Stability Comparisons Of Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper investigates a property of estimators called stability. The stability exponent of an estimator is defined to be a measure of the effect of any single observation in the sample on the realized value of the estimator. High stability is often desirable for robustness against misspecification and against highly variable observations. Stability exponents are determined and compared for a wide variety of estimators and econometric models. They are found to depend on the maximal moment exponent (i.e., the number of finite moments) of the estimator’s influence curve. Since it is possible often to construct estimators with specified influence curves, …
A Comparison Of The Michigan And Fair Models: Further Results, Ray C. Fair, Lewis S. Alexander
A Comparison Of The Michigan And Fair Models: Further Results, Ray C. Fair, Lewis S. Alexander
Cowles Foundation Discussion Papers
This paper examines the equation-by-equation accuracy of the Michigan and Fair model using the method in Fair (1980). Emphasis is placed on examining the possible misspecification of the equations. In an earlier study, Fair and Alexander (1984), we used the method to examine the accuracy of the complete models. In the present study we are interested in the accuracy of the individual equations when considered in isolation from the rest of the model.
A General Equilibrium Expression Of The Paradox Of Thrift, Christophe Chamley
A General Equilibrium Expression Of The Paradox Of Thrift, Christophe Chamley
Cowles Foundation Discussion Papers
A model is presented which is derived from some observations of Keynes on the nature of capital. The allocation of investment is analyzed in two economies with random demand shocks which are identical except for the types of markets. In the first, the combination of an asset and forward markets realizes the complete set of markets. In the second, the forward markets are replaced by spot markets. Consumers and entrepreneurs are rational and markets clear. A clear definition of the paradox of thrift is proposed and its existence is proven. The substitution of spot markets for forward markets generates fluctuations …
Optimal Spending And Money Holdings In The Presence Of Liquidity Constraints And Random Income Fluctuations, Richard H. Clarida
Optimal Spending And Money Holdings In The Presence Of Liquidity Constraints And Random Income Fluctuations, Richard H. Clarida
Cowles Foundation Discussion Papers
We examine the optimal spending behavior and money holdings of a risk averse individual who faces liquidity constraints and random fluctuations in his money income. Because of a cash-in-advance constraint, the individual has a well-defined transactions requirement for money balances. In addition, because money income is uncertain and money is — by assumption — the only available store of value, the risk averse individual also holds money balances as an inventory which can be drawn down in periods of unexpectedly low earnings. We establish the strict monotonicity properties of optimal expenditure and money demand decisions and show that the average …
Consumption, Liquidity Constraints And Asset Accumulation In The Presence Of Random Income Fluctuations, Richard H. Clarida
Consumption, Liquidity Constraints And Asset Accumulation In The Presence Of Random Income Fluctuations, Richard H. Clarida
Cowles Foundation Discussion Papers
Recent empirical research, Flavin (1981), Hagashi (1982), has rejected the certainty-equivalent formulation of permanent income hypothesis, Hall (1978). These findings are often attributed to households’ inability to borrow completely against expected future labor income. This paper is a theoretical investigation of optimal consumption behavior under risk aversion, random income fluctuations, and borrowing restrictions. Our principle objective is to establish the existence and to investigate the properties of the stationary probability distribution which characterizes the asymptotic behavior of consumption under these conditions.
The Cooperative Form, The Value And The Allocation Of Joint Costs And Benefits, Martin Shubik
The Cooperative Form, The Value And The Allocation Of Joint Costs And Benefits, Martin Shubik
Cowles Foundation Discussion Papers
No abstract provided.
A Comparison Of The Michigan And Fair Models, Ray C. Fair, Lewis S. Alexander
A Comparison Of The Michigan And Fair Models, Ray C. Fair, Lewis S. Alexander
Cowles Foundation Discussion Papers
No abstract provided.
Optimal Taxation Of Capital Income In Economies With Identical Private And Social Discount Rates, Christophe Chamley
Optimal Taxation Of Capital Income In Economies With Identical Private And Social Discount Rates, Christophe Chamley
Cowles Foundation Discussion Papers
The optimal capital income tax is analyzed in the framework of intertemporal efficient taxation. The relation between the zero tax in the long-run and the equality between private and social discount rates is emphasized. The properties of the dynamic second best path described for a specific example (convergence to a steady state and values of the capital income tax in the transition). The case where wealth is a specific utility argument is also considered.
Conditional Projection By Means Of Kalman Filtering, Richard H. Clarida, Diane Coyle
Conditional Projection By Means Of Kalman Filtering, Richard H. Clarida, Diane Coyle
Cowles Foundation Discussion Papers
We establish that the recursive, state-space methods of Kalman filtering and smoothing can be used to implement the Doan, Litterman, and Sims (1983) approach to econometric forecast and policy evaluation. Compared with the methods outlined in Doan, Litterman, and Sims, the Kalman algorithms are more easily programmed and modified to incorporate different linear constraints, avoid cumbersome matrix inversions, and provide estimates of the full variance-covariance matrix of the constrained projection errors which can be used directly, under standard normality assumptions, to test statistically the likelihood and internal consistency of the forecast under study.
On The Stochastic Steady-State Behavior Of Optimal Asset Accumulation In The Presence Of Random Wage Fluctuations And Incomplete Markets, Richard H. Clarida
On The Stochastic Steady-State Behavior Of Optimal Asset Accumulation In The Presence Of Random Wage Fluctuations And Incomplete Markets, Richard H. Clarida
Cowles Foundation Discussion Papers
We establish rigorously the existence and properties of the stationary probability distribution which characterizes the accumulation of non-contingent financial claims by a risk averse individual who confronts random wage fluctuations and incomplete insurance markets. We show that there exists a unique, almost-everyhwere continuous stationary cumulative distribution function which characterizes the accumulation of non-contingent financial claims in a stochastic steady-state. This distribution is shown to possess a single mass point coinciding with the non-negative, finite borrowing limit faced by the individual. We establish that the stationary distribution which characterizes the asset accumulation of low time preference individuals is at least as …
A Note On Biology, Time And The Golden Rule, Martin Shubik
A Note On Biology, Time And The Golden Rule, Martin Shubik
Cowles Foundation Discussion Papers
No abstract provided.
A Zero-One Result For The Least Squares Estimator, Donald W.K. Andrews
A Zero-One Result For The Least Squares Estimator, Donald W.K. Andrews
Cowles Foundation Discussion Papers
The least squares estimator for the linear regression model is shown to converge to the true parameter vector either with probability one or with probability zero under weak conditions on the dependent random variable and regressor variables. No additional conditions are placed on the errors. The dependent and regressor variables are assumed to be weakly dependent — in particular, to be strong mixing. The regressors may be fixed or random and must exhibit a certain degree of independent variability. No further assumptions are needed. The model considered allows the number of regressors to increase without bound as the sample size …
Current Account, Exchange Rate, And Monetary Dynamics In A Stochastic Equilibrium Model, Richard H. Clarida
Current Account, Exchange Rate, And Monetary Dynamics In A Stochastic Equilibrium Model, Richard H. Clarida
Cowles Foundation Discussion Papers
We construct a simple stochastic open-economy macro-economic model from the decision rules of rational optimizing agents, solving explicitly for the relationship between the model’s deep parameters, and the variance-covariance matrix of equilibrium returns on domestic and foreign assets. We use the model to study the dynamic relationship between exchange rate changes and current account flows in response to domestic monetary shocks, to establish the conditions under which exchange rate depreciations accompany current account deficits, and to investigate the link between time preference, risk aversion, and the dynamic exchange rate and current account response to monetary disturbances. The model generates current …
Robust Estimation Of Location In A Gaussian Parametric Model: Ii, Donald W.K. Andrews
Robust Estimation Of Location In A Gaussian Parametric Model: Ii, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper extends the results of Andrews (1984) which considers the problem of robust estimation of location in a model with stationary strong mixing Gaussian parametric distributions. Three neighbourhood systems are considered, each of which contains the Hellinger neighbourhoods used in Andrews (1984). Optimal robust estimators for this dependent random variable model are found to be bounded influence estimators with optimal psi functions which are very nearly of Huber shape. These estimators are quite robust against different “amounts” of dependence, and against lack of dependence. To generate the optimal estimators a minimax asymptotic risk criterion is used, where minimaxing is …
The Behavior Of U.S. Short-Term Interest Rates Since October 1979, Richard H. Clarida, Benjamin M. Friedman
The Behavior Of U.S. Short-Term Interest Rates Since October 1979, Richard H. Clarida, Benjamin M. Friedman
Cowles Foundation Discussion Papers
Short-term interest rates in the United States have been “too high” since October 1979 in the sense that both unconditional and conditional forecasts, based on an estimated vector autoregression model summarizing the prior experience, underpredict short-term interest rates during this period. Although a non-structural model cannot directly answer the question of why this has been so, comparisons of alternative conditional forecasts point to the post-October 1979 relationship between the growth of real income and the growth of real money balances as closely connected to the level and pattern of short-term interest rates. This finding is consistent with the authors’ macroeconomic …
Excess Labor And The Business Cycle, Ray C. Fair
Excess Labor And The Business Cycle, Ray C. Fair
Cowles Foundation Discussion Papers
No abstract provided.
Effects Of Expected Future Government Deficits On Current Economic Activity, Ray C. Fair
Effects Of Expected Future Government Deficits On Current Economic Activity, Ray C. Fair
Cowles Foundation Discussion Papers
No abstract provided.
Insurance, Flexibility And Non-Contingent Trades, Russell Cooper
Insurance, Flexibility And Non-Contingent Trades, Russell Cooper
Cowles Foundation Discussion Papers
This paper considers non-contingent trades through either forward markets or simple contracts. The point of the inquiry is to understand the costs and benefits of trades of this nature. We focus on the tradeoff between insurance (a benefit) and the loss of flexibility in decisions (a cost) as determining properties of trading in forward markets. This tradeoff is also used to explore contract length.
Net Present Value Maximization And Imperfections In The Loan Market: A Note, Cynthia Van Hulle
Net Present Value Maximization And Imperfections In The Loan Market: A Note, Cynthia Van Hulle
Cowles Foundation Discussion Papers
There seems to be some confusion in the literature whether or not imperfections in the lending-borrowing market, and in particular, differences in lending and borrowing rates, would destroy shareholder unanimity. The purpose of this note is to show that imperfections in this market are not really relevant to stockholder agreement concerning the optimality of the net present value rule. To do this, the paper uses a new criterion guaranteeing unanimity and which basically only requires that investors are sufficiently competitive, i.e., spanning or the notion of firm competition recently proposed by L. Makowiski [9] generally turn out to be unnecessary …
Monopoly Provision Of Product Quality With Uninformed Buyers, Russell Cooper, Thomas W. Ross
Monopoly Provision Of Product Quality With Uninformed Buyers, Russell Cooper, Thomas W. Ross
Cowles Foundation Discussion Papers
This essay is concerned with a monopolist’s incentives to provide a high quality goods when some of its customers cannot observe quality prior to purchase. We show that if all buyers have the same tastes for quality, the monopolist will not try to take advantage of the poorly informed. When tastes differ, however, some quality randomization may become profitable as a means to loosen binding self-selection constraints. The profitability of randomization is shown to depend upon the relative degrees of risk aversion of the buyers and on the convexity of the firm’s cost of quality function. We view our results …
On A Variable Dimension Algorithm For The Linear Complementarity Problem, Ludo Van Der Heyden
On A Variable Dimension Algorithm For The Linear Complementarity Problem, Ludo Van Der Heyden
Cowles Foundation Discussion Papers
In an earlier paper we presented a variable dimension algorithm for solving the linear complementarity problem (LCP). We now extend the class of LCP’s that can be solved by this algorithm to include LCP’s with copositive plus coefficient matrices. The extension, inspired by Lemke [1965], is obtained by introducing an artificial dimension and by applying the variable dimension algorithm to the enlarged LCP.
Fiscal And Monetary Policy In A General Equilibrium Model, Truman F. Bewley
Fiscal And Monetary Policy In A General Equilibrium Model, Truman F. Bewley
Cowles Foundation Discussion Papers
No abstract provided.
Dominance And Shareholder Unanimity: A New Approach, Cynthia Van Hulle
Dominance And Shareholder Unanimity: A New Approach, Cynthia Van Hulle
Cowles Foundation Discussion Papers
No abstract provided.
Stochastic Equilibrium And Turnpike Property: The Discounted Case, Ramon Marimon
Stochastic Equilibrium And Turnpike Property: The Discounted Case, Ramon Marimon
Cowles Foundation Discussion Papers
The existence of the modified golden rule and the turnpike property are proved for a multi-sector stochastic growth model. The (exogenous) stochastic environment is represented by a stationary stochastic process that influences preferences, technology and resources. A social planner maximizes the expected sum of discounted utilities. The conditions required in order to obtain these results, are the natural strengthening of the stability conditions of the deterministic case. As in the deterministic case, the discount factor must be close to one in order to guarantee the almost sure (and in the mean) convergence of optimal interior programs. It is proved that …