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The Warwick Economics Research Paper Series
(TWERPS)

ABSTRACTS

The following are abstracts of Warwick Economics Research Papers. For
details of how to obtain copies click here. Abstracts do not appear for all
papers; more will be added over time.

WORKING PAPER NO 658
Parents' Current Income, Long-Term Characteristics and Children's
Education: Evidence from the 1970 British Cohort Study
Massimiliano Bratti
This paper investigates the effect of parents’ current income and
long-term family characteristics on individuals’ highest educational
qualification obtained by age 26 using UK data from the 1970 British
Cohort Study. The issues of the possible sample selection bias produced
by the not completely random omission of current family income
and that of its potential endogeneity are addressed, using a hot-deck
multiple imputation procedure and including an indicator of child ability,
respectively. I find evidence that current family income has a statistically
significant positive impact on children’s education, although
it is one of negligible magnitude. Long-term family characteristics are
far more important
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WORKING PAPER NO 657
Schooling Effects on Subsequent University Performance: Evidence for
the UK University Population
Robin Naylor and Jeremy Smith
From a unique data-set identifying the school attended prior to university
for a full cohort of UK university students, we examine the determinants
of final degree classification. We exploit the detailed school-level
information and focus on the influence of school characteristics, such as
school type, on subsequent performance of students at university. We
estimate that, on average, a male (female) graduate who attended an
Independent school is 6.5 (5.4) percentage points less likely to obtain a
`good' degree than is a student who attended an LEA (that is,
state-sector) school, ceteris paribus. We also find considerable
variation around this average figure across different Independent schools.
We find that, for males, the variation in the probability of attaining a
`good' degree across schools can largely be explained by the level of
school fees.
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WORKING PAPER NO 656
Consumption Patterns Over Pay Periods
Clare Kelly and Gauthier Lanot
This paper establishes a theoretical framework to characterise the optimal
behaviour of individuals who receive income periodically but make
consumption decisions on a more frequent basis. The model incorporates
price uncertainty and imperfect credit markets. The simulated
numerical solution to this model shows that weekly consumption functions
are ordered such that the functions within the payment period are highest
in the first and the last week of the payment cycle for all wealth levels.
Using weekly expenditure data from the FES, we estimate the coefficient
of relative risk aversion (point estimates are between 1.2 and 7) and the
extent of measurement error in the data (which accounts for
approximately 60% of the variance in thedata).
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WORKING PAPER NO 655
Fast Food- the early years: Geography and the growth of a chain-store
in the UK*
Joanne Sault, Otto Toivanen and Michael Waterson
We examine the development of UK outlets of a major fast food chain,
from inauguration in 1974 until 1990, after which industry structure
changed somewhat. The chain effectively introduced the counter-service
burger concept. Locational spread across local authority district markets is
explained by the characteristics of the areas where the outlets are sited.
Of special interest is the effect of scale economies, measured by outlet
numbers in neighboring districts. Both first and second entry are
examined. We find that the hazard of first entry is positively influenced
by market size and population density and negatively by distance from
company headquarters.
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WORKING PAPER NO 654
Testing for Cointegration Rank Using Bayes Factors
Katsuhiro Sugita
This paper proposes Bayesian methods for estimating the cointegration
rank using Bayes factors. We consider natural conjugate priors for
computing Bayes factors. First, we estimate the cointegrating vectors for
each possible rank. Then, we compute the Bayes factors for each rank
against 0 rank. Monte Carlo simulations show that using Bayes factor
with conjugate priors produces fairly good results. We apply the method
to demand for money in the US.
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WORKING PAPER NO 653
The Propertiers of Some Goodness-of Fit Tests
Gianna Boero, Jeremy Smith, and Kenneth F. Wallis
The properties of Pearson’s goodness-of-fit test, as used in density
forecast evaluation, income distribution analysis and elsewhere, are
analysed. The components-of-chi-squared or “Pearson analog” tests of
Anderson (1994) are shown to be less generally applicable than was
originally claimed. For the case of equiprobable classes, where the
general components tests remain valid, a Monte Carlo study shows that
tests directed towards skewness and kurtosis may have low power, due
to differences between the class boundaries and the intersection points of
the distributions being compared. The power of individual component
tests can be increased by the use of nonequiprobable classes
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WORKING PAPER NO 652
Why Are Trade Agreements Regional?
Ben Zissimos
This paper argues that free trade agreements (FTAs) are regional because,
in their absence, optimal tariffs are higher against (close)regional partners
than (distant) countries outside the region. Optimal tarffs shift rents from
foreign firms to domestic citizens. Lower transport costs imply higher
rents and therefore higher tarffs. So regional FTAs have a higher pay-off
than non-regional FTAs. Therefore, only regional FTAs may yield positive
gains when sponsoring a FTA is costly. To analyze equilibrium, standard
theory of non-cooperative networks is extended to allow for asymmetric
players. Naive best response dynamics show that ‘trade blocks can be
stepping blocks’ for free trade.
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WORKING PAPER NO 651
Smooth Particle Filters for Likelihood Evaluation and Maximisation
Michael K. Pitt
In this paper,a method is introduced for approximating the likelihood for
the unknown parameters of a state space model.The approximation
converges to the true likelihood as the simulation size goes to infinity. In
addition,the approximating likelihood is continuous as a function of the
unknown parameters under rather general conditions.The approach
advocated is fast, robust and avoids many of the pitfalls associated with
current techniques based upon importance sampling.We assess the
performance of the method by considering a linear state space model,
comparing the results with the Kalman filter, which delivers the true
likelihood. We also apply the method to a non-Gaussian state space mo
del, the Stochastic Volatility model, finding that the approach is efficient
and effective. Applications to continuous time finance models are also
considered. A result is established which allows the likelihood to be
estimated quickly and efficiently using the output from the general
auxilary particle filter.
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WORKING PAPER NO 650
On the Size and Structure of Group cooperation
Matthew Haag and Roger Lagunoff
This paper examines characteristics of cooperative behavior in a
repeated, n-person, continuous action generalization of a Prisoner’s
Dilemma game. When time preferences are heterogeneous and bounded
away from one, how “much” cooperation can be achieved by an ongoing
group? How does group cooperation vary with the group’s size and
structure? For an arbitrary distribution of discount factors, we
characterize the maximal average co-operation (MAC) likelihood of this
game. The MAC likelihood is the highest average level of cooperation,
over all stationary subgame perfect equilibrium paths, that the group can
achieve. The MAC likelihood is shown to be increasing in monotone
shifts, and decreasing in mean preserving spreads, of the distribution of
discount factors. The latter suggests that more heterogeneous groups are
less cooperative on average. Finally, we establish weak conditions under
which the MAC likelihood exhibits increasing returns to scale when
discounting is heterogeneous. That is, larger groups are more cooperative,
on average, than smaller ones. By contrast, when the group has a
common discount factor, the MAC likelihood is invariant to group size.
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WORKING PAPER NO 649
Pay Cuts and Morale: a Test of Downward Nominal Rigitity
Jennifer C. Smith
This paper tests the "morale" theory of downward nominal wage rigidity.
This theory relies on workers disliking nominal pay cuts: cuts should make
workers less happy. We investigate this using panel data on individual
employees' pay and satisfaction. We confirm that nominal cuts do make
workers less happy than if their pay had not fallen. But we find no
difference in the effect on happiness of cuts and pay freezes. This
represents important information about the nature of wage rigidity in
practice and the applicability of the morale theory. The morale theory may
be able to explain generalised downward wage rigidity, but apparently fails
to explain downward nominal rigidity.
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WORKING PAPER NO 648
Power Indices as an Aid to Institutional Design: The Generalised
Apportionment Problem
A priori voting power analysis can be useful in helping to design a weighted
voting system that has certain intended properties. Power indices can help
determine how many weighted votes each member should be allocated and
what the decision rule should be. These choices can be made in the light of
a requirement that there be a given distribution of power and/or a desired
division of powers between individual members and the collective
institution. This paper focuses on the former problem: choosing the
weights given that the power indices and the decision rule are fixed
exogenously
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WORKING PAPER NO 647
Optimum Currency Area Theory: An Approach for Thinking about
Monetary Integration
Roman Horvath and Lubos Komarek
The optimum currency area (OCA) theory tries to answer an almost
prohibitively difficult question: what is the optimal number of currencies to
be used in one region. The difficulty of the question leads to a low
operational precision of OCA theory. Therefore, we argue that the OCA
theory is a framework for discussion about monetary integration. We
summarize theoretical issues from the classical contributions to the OCA
literature in the 1960s to the modern “endogenous view”. A short survey
of empirical studies on the OCA theory in the connection with the EMU
and the Czech Republic is presented. Finally, we calculate OCA-indexes
for the Czech Republic, EU, Germany and Portugal. The index predicts
exchange rates variability from the view of traditional OCA criteria and
asseses benefit-cost ratio of implementing common currency for a pair of
the countries. We compare the structural similarity of the Czech Republic
and Portugal to the German economy and find that the Czech economy is
closer. The results are reversed when the EU economy is considered as a
benchmark country.
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WORKING PAPER NO 646
Theoretical and Empirical Analysis of the Debt-Adjusted Real Exchange
Rate in Selected Transition Economies During 1994-2001
This paper aims to enrich the debate on the overvaluation/undervaluation
of the Czech koruna and the currencies of other selected transition
economies by applying the concept of the debt-adjusted real exchange rate
(DARER), thereby offering monetary policy makers another indicator for
more responsive management of this important economic variable. The
motivation for constructing DARER is the fact that many transition
economies finance their long-term current account deficits with capital
flows, which often leads to real overvaluation of their currencies. DARER
can signal to the authorities that the real exchange rate is becoming
unsustainable in the medium term and that if this signal is ignored, a
currency crisis may ensue. The paper is in seven parts. The first three
parts contain the theoretical underpinning of the concept. Part four defines
newly proposed indicators of exchange rate overvaluation. Part five
contains empirical DARER results for the Czech Republic. Part six and
annex 1 to this work contain empirical DARER results for selected
transition countries, including a brief description of those countries’
exchange rate histories. The final part examines the possibilities and
limitations of the DARER concept in practice. The primary aim of this part,
however, is to explain the information content of the real exchange rate as
a very good warning signal of potential currency crisis.
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WORKING PAPER NO 645
The Use of Coleman's Power Indices to Inform the Choice of Voting
Rule with Reference to the IMF Governing Body and the EU Council of
Ministers
In his well known 1971 paper the mathematical sociologist James S.
Coleman, proposed three measures of voting power: (1) "the power of a
collectivity to act", (2) "the power to prevent action" and (3) "the power to
initiate action". (1) is a measure of the overall decisiveness of a voting
body taking into account its size, decision rule and the weights of its
members, while (2) and (3) are separate indices of the power of individual
members, in being able to block or achieve decisions. These measures
seem to have been little used for a variety of reasons, although the paper
itself is widely cited. First, much of the power indices literature has
focused on normalised indices which gives no role to (1) and means that
(2) and (3) are identical. Second, Coleman's coalition model is different
from that of Shapley and Shubik which has sometimes tended to dominate
in discussions of voting power. Third, (2) and (3) are indistinguishable
when the decision quota is a simple majority, the distinction becoming
important in other voting situations. In this paper I propose that these
indices, which are based on a fundamentally different notion of power
than that assumed by game-theoretic approaches, have a useful role in
aiding a better understanding of collective institutions in which decisions
are taken by voting. I use them to illustrate different aspects of the design
of a weighted voting system such as the governing body of the IMF or
World Bank, or the system of QMV in the European Council.
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WORKING PAPER NO 644
Computation of Power Indices
Dennis Leech
Power indices are a useful tool for studying voting systems in which
different members have different numbers of votes. Many international
organisations are organised in this way in order to accommodate
differences in size of countries, including the system of QMV in the
European Union Council of Ministers. A power index is a measure of power
based on the idea that a member’s power is his ability to swing a decision
by changing the way his vote is cast.
This paper addresses the problem of the computation of the two most
widely used power indices, the so-called classical power indices, the
Banzhaf index (and also the related Coleman indices) and the
Shapley-Shubik index. It discusses the various methods that have been
proposed in the literature: Direct Enumeration, Monte Carlo Simulation,
Generating Functions, Multilinear Extensions Approximation, the Modified
MLE Approximation Method. The advantages and disadvantages of the
algorithms are discussed including computational complexity. It also
describes methods for so called “oceanic games”.
The paper also discusses the so-called “inverse problem” of finding what
the weights should be given the desired power indices. The method is
potentially useful as providing a basis for designing a voting system with a
given desired distribution of power among the members, for example, to
reflect differences in population or financial contributions. Examples are
given from the International Monetary Fund, shareholder voting and the
European Union Council.
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WORKING PAPER NO 643
From Drought to Flood: Environmental Constrints and the Policial
Economy of Civic Virtue
Francesco L Galassi
The paper models co-operative engagement under varying environmental
constraints giving rise to different forms of collective action problems,
specifically focussing on water management in pre-industrial societies. I
show that societies where water availability is strongly seasonal develop no
mechanism to encourage society-wide co-operative behaviour because the
benefits of water storage are fully excludable. With pre-industrial
technology water storage is a pure club good, and optimal club size can be
shown to be very small under credible parameter values, converging to 1 in
some cases (private good). The social consequences of the environmental
constraint include strongly circumscribed co-operation and rent seeking. In
contrast, areas where water management involved flood control and
irrigation develop society-wide institutions based on self-sustaining
co-operative engagement assisted by external policing. The model thus
offers an explanation of varying levels of "civic virtue" in different areas.
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WORKING PAPER NO 642
Do Countries Compete over Corporate Tax Rates?
Michael P Devereux, Ben Lockwood and Michela Redoano
This paper tests whether OECD countries compete with each other over
corporate taxes in order to attract investment. We develop two models:
with firm mobility, countries compete only over the statutory tax rate or
the effective average tax rate, while with capital mobility, countries
compete only over the effective marginal tax rate. We estimate the
parameters of reaction functions using data from 21 countries between
1983 and 1999. Wefind evidence that countries compete over all three
measures, but particularly over the statutory tax rate and the effective
average tax rate. This is consistent with a belief amongst governments
that location choices by multinationalfirms are discrete. We alsofind
evidence of concave reaction functions, consistent with the model outlined
in the paper.
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WORKING PAPER NO 641
Advances in the Theory of Large Cooperative Games and Application to
Club Theory: The Side Payments Case
Alexander Kovalenkov and Myrna Wooders
In a series of papers (Kovalenkov and Wooders 2001a, Games and
Economic Behavior, 2001b, Mathematics of Operations Research, and
1997, Journal of Economic Theory to appear), the authors have developed
the framework of parameterized collections of games and also that of
parameterized collections of economies with clubs. These papers apply to
collections of games with nontransferable utility and similarly to economies
with clubs and general preferences. The game theoretic framework
encompasses the earlier `pregame' framework (cf., Wooders 1994b
Econometrica) and also earlier models of economies with clubs and with
possibly multiple memberships in clubs (cf. Shubik and Wooders 1982). In
this paper, we consider the special case of games with side payments and
illustrate the application of our more general results in this special, and
much simpler but still important, framework. The motivation for this line
of research is developed and application to environmental problems is
discussed.
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WORKING PAPER NO 640
Dynamic Club Formation with Coordination
Tone Arnold and Myrna Wooders
We present a dynamic model of jurisdiction formation in a society of
identical people. The process is described by a Markov chain that is
defined by myopic optimization on the part of the players. We show that
the process will converge to a Nash equilibrium club structure. Next, we
allow for coordination between members of the same club,i.e. club
members can form coalitions for one period and deviate jointly. We define
a Nash club equilibrium (NCE) as a strategy configuration that is immune
to such coalitional deviations. We show that, if one exists, this modified
process will converge to a NCE configuration with probability one. Finally,
we deal with the case where a NCE fails to exist due to indivisibility
problems. When the population size is not an integer multiple of the
optimal club size, there will be left over players who prevent the process
from settling down. We define the concept of an approximate Nash club
equilibrium (ANCE), which means that all but k players are playing a Nash
club equilibrium, where k is defined by the minimal number of left over
players. We show that the modified process converges to an ergodic set of
states each of which is ANCE
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WORKING PAPER NO 639
Competitive Pricing in Socially Networked Economies
Nizar Allouch and Myrna Wooders
In the context of a socially networked economy, this paper demon-strates
an Edgeworth equivalence between the set of competitive allocations and
the core. Each participant in the economy may have multiple links with
other participants and the equilibrium network may be as large as the
entire set of participants. A clique is a group of people who are all
connected with each other. Large cliques, possibly as large as the entire
population, are permitted; this is important since we wish to include in our
analysis large, world-wide organizations such as workers in multi-national
firms and members of world-wide environmental organizations, for
example, as well as small cliques, such as two-person partnerships. A
special case of our model is equivalent to a club economy where clubs may
be large and individuals may belong to multiple clubs. The features of our
model that cliques within a networked economy may be as large as the
entire population and individuals may belong to multiple cliques thus allow
us to extend the extant decentralisation literature on competitive pricing
in economies with clubs and multiple memberships (where club sizes are
uniformly bounded, independent of the size of the economy).
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WORKING PAPER NO 638
The Effects of Entry in Bilateral Oligopoly
Robin Naylor
We show that a firm’s profits under Cournot oligopoly can be increasing in
the number of firms in the industry if wages are determined by
(decentralised) bargaining in unionized bilateral oligopoly. The intuition for
the result is that increased product market competition following an
increase in the number of firms is mirrored by increased labor market
rivalry which induces (profit-enhancing) wage moderation. Whether the
product or labor market effect dominates depends both on the extent of
union bargaining power and on the nature of union preferences. A corollary
of the results derived is that if the upstream agents are firms rather than
labor unions, then profits are always decreasing in the number of firms, as
in the standard Cournot model. We also show that if bargaining is
centralized then there is no wage moderation effect and wages are the
same independent of the number of firms, as in the standard model with
exogenous factor costs.
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WORKING PAPER NO 637
Arbitrage, Equilibrium and Nonsatiation
Nizar Allouch, Cuong Le Van and Frank H Page Jr
In his seminal paper on arbitrage and competitive equilibrium in
unbounded exchange economies, Werner (Econometrica, 1987)proved the
existence of a competitive equilibrium, under a price no-arbitrage
condition, without assuming either local or global nonsatiation. Werner's
existence result contrasts sharply with classical existence results for
bounded exchange economies which require, at minimum, global
nonsatiation at rational allocations. Why do un-bounded exchange
economies admit existence without local or global nonsatiation? This
question is the focus of our paper. We make two main contributions to the
theory of arbitrage and competitive equilibrium. First, we show that, in
general, in unbounded exchange economies (for example, asset exchange
economies allowing short sales), even if some agents' preferences are
satiated, the absence of arbitrage is sufficient for the existence of
competitive equilibria, as long as each agent who is satiated has a
nonempty set of useful net trades - that is, as long as agents' preferences
satisfy weak nonsatiation. Second, we provide a new approach to proving
existence in unbounded exchange economies. The key step in our new
approach is to transform the original economy to an economy satisfying
global nonsatiation such that all equilibria of the transformed economy are
equilibria of the original economy. What our approach makes clear is that
it is precisely the condition of weak nonsatiation - a condition
considerably weaker than local or global nonsatiation - that makes possible
this transformation. Moreover, as we show via examples, without weak
nonsatiation, existence fails.
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WORKING PAPER NO 636
Social Conformity and Equilibrium in Pure Strategies in Games with
Many Players
Myrna Wooders, Edward Cartwright and Reinhard Selten
We introduce a framework of noncooperative pregames, in which players
are characterized by their attributes, and demonstrate that for all games
with sufficiently many players, there exist approximate (e )Nash equilibria
in pure strategies. In fact, every mixed strategy equilibrium can be
used to construct an e-equilibrium in pure strategies, an ‘e -purification’
result. Our main result is a social conformity theorem. Interpret a set of
players, all with attributes in some convex subset of attribute space and all
playing the same strategy, as a society. Observe that the number of
societies may be as large as the number of players. Our social conformity
result dictates that, given e > 0, there is an integer L, depending on e but
not on the number of players, such that any suffciently large game has an e
-equilibrium in pure strategies that induces a partition of the player set
into fewer than L societies.
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WORKING PAPER NO 635
Information and Command
Mark Harrison
Information adds value to transactions in three ways: it supports
reputations, permits customisation, and provides yardsticks. In the Soviet
economy such information was frequently not produced; if produced, it was
often concealed; whether concealed or not, it was often of poor quality. In
short, the Soviet command system forced economic growth on the basis of
a relatively low–value information stock. This may help explain aspects of
Soviet postwar economic growth and slowdown, the collapse of the
command system, and the persistence of low output after the collapse.
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WORKING PAPER NO 634
Approximate Cores of Games and Economies with Clubs
Alexander Kovalenkov and Myrna Holtz Wooders
We introduce the framework of parameterized collections of games with
and without sidepayments and provide three nonemptiness of approximate
core theorems. The parameters bound (a) the number of approximate
types of players and the size of the approximation and (b) the size of
nearly effective groups of players and their distance
from exact effectiveness. Our theorems are based on a new notion of
partition-balanced profiles and approximately partition-balanced profiles.
The results are applied to a new model of an economy with clubs. In
contrast to the extant literature, our approach allows both widespread
externalities and uniform results.
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WORKING PAPER NO 633
Consolidation, Market Power and Cost Economies in the Banking
Industry: Empirical Evidence from Argentina
Maria Eugenia Delfino
The Argentine banking industry has experienced increasing consolidation
during the last decade. On the one hand, it can be argued that this has
resulted from cost economies, perhaps associated with technical change.
But on the other, it can also be argued that increased concentration in this
industry may allow the exploitation of market power in the input (deposits)
and output (loans) markets. These issues are addressed in this study using
bank-level data for Argentine retail banks over the period 1993-2000 to
estimate a cost-function based model incorporating deposits- and
loans-market pricing behaviour. The results provide evidence of market
power exploitation in both the markets for loans and deposits but also the
presence of significant cost economies. The findings further show an
increase in consumers’ surplus and banks’ profits over the period possibly
associated to the exploitation of cost economies and technical change
which may have counteracted the effect of market power.
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WORKING PAPER NO 632
Incentives to Corporate Governance Activism
Dennis Leech
This paper considers the incentives faced by investors (financial
institutions) to become actively involved in the direction of their
under-performing portfolio companies as proposed by recent policy reports
on corporate governance. It proposes a metric by which to measure the
returns to activism in terms of the size of holding, measures of risk and
return to the company, the degree of under performance and the level of
commission received by fiduciary fund managers. By comparing this with
costs of activism it proposes a method by which 'significant shareholdings'
may be estimated. A significant shareholding is the level above which a
shareholding in a company may be said to have private incentives to
activism. This approach is applied to two groups of companies listed on
the London Stock Exchange, the top 250 and a ten percent random sample.
The results indicate that there are very strong incentives for shareholders
to be activist participants in corporate governance among the top 250
companies while there is much more diversity among the smaller
companies. Results differ considerably between those where the
shareholder is an own-account investor and a fund manager.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 631
The Cournot-Bertrand Profit Differential: A Reversal Result in a
Differentiated Duopoly with Wage Bargaining
Monica Correa Lopez and Robin A. Naylor
This paper compares Cournot and Bertrand equilibria in a downstream
differentiated duopoly in which the input price (wage) paid by each
downstream firm is the outcome of a strategic bargain with its upstream
supplier (labour union). We show that the standard result that Cournot
equilibrium profits exceed those under Bertrand competition - when the
differentiated duopoly game is played in imperfect substitutes - is
reversible. Whether equilibrium profits are higher under Cournot or
Bertrand competition is shown to depend upon the nature of the upstream
agents’ preferences, on the distribution of bargaining power over the input
price and on the degree of product market differentiation. We find that
the standard result holds unless unions are both powerful and place
considerable weight on the wage argument in their utility function. One
implication of this is that if the upstream agents are profit-maximising
firms, then the standard result will obtain.
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WORKING PAPER NO 630
The Impact of the Introduction of the UK Minimum Wage on the
Employment Probabilities of Low Wage Workers
Mark B. Stewart
This paper uses longitudinal data from three contrasting datasets (matched
Labour Force Surveys, the British Household Panel Survey and matched
New Earnings Surveys) to estimate the impact of the introduction of the
UK minimum wage (in April 1999) on the probability of subsequent
employment among those whose wages would have needed to be raised
to comply with the minimum. A difference-in-differences estimator is
used, based on position in the wage distribution. No significant adverse
employment effects are found for any of the four demographic groups
considered (adult and youth, men and women) or in any of the three
datasets used.
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WORKING PAPER NO 629
Cost Monotonicity, Consistency and Minimum Cost Spanning
Tree Games
Bhaskar Dutta and Anirban Kar
We propose a new cost allocation rule for minimum cost spanning tree
games. The new rule is a core selection and also satisfies cost
monotonicity. We also give characterization theorems for the new rule as
well as the much-studied Bird allocation. We show that the principal
difference between these two rules is in terms of their consistency
properties
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WORKING PAPER NO 628
Equilibrium Agenda Formation
Bhaskar Dutta, Matthew O. Jackson and Michel Le Breton
We develop a definition of equilibrium for agenda formation in
general voting settings. The definition is independent of any protocol.
We show that the set of equilibrium outcomes for any Pareto efficient
voting rule is uniquely determined. We also show that for such voting
rules, if preferences are strict then the set of equilibrium outcomes
coincides with that of the outcomes generated by considering all full
agendas for voting by successive elimination and show that the set
of equilibrium outcomes corresponds with the Banks set. We also
examine the implications in several other settings.
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WORKING PAPER NO 627
Firms' Strategies for Reducing the Effectiveness of Consumer Price
Search
Normal J. Ireland
This paper considers a simple model of competition based on some buyers
making price comparisons between two suppliers. The difficulties of
making appropriate comparisons are made greater by exclusive dealer
agreements and restrictions, and by suppliers trading under more than one
name. It is argued that suppliers will set prices using mixed strategies,
and that prices become less competitive as price comparisons become
more difficult. The implications for competition policy are considered in
the light of recent judgements of the UK’s Office of Fair Trading and the
European Court of Justice.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 626
Corporate Governance and the Public Interest
J. Robert Branston, Keith Cowling and Roger Sugden
A theory of the firm based on strategic decision-making highlights
governance as a central issue. Preferences vary over strategy but not all
interests are currently being represented, resulting in a failure to govern in
the public interest. As solutions, we consider the design of
company law and also more immediate ways forward, focusing on
regulation and democratically controlled public agencies, but stressing the
fundamental significance of active, effective citizens. Throughout, the
arguments are illustrated using examples from various countries and
industries, including education, information technology, football and public
utilities in Europe and the US.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 625
The Problem of Regional "Hollowing Out" in Japan:
Lessons for Regional Industrial Policy
Keith Cowling and Philip R. Tomlinson
This paper considers the problems of "hollowing out" using a Case Study of
Japan's machinery sector. In doing so, it explores the roots of the present
crisis by focusing upon the role played by Japan's large transnational
corporations. This is important because these corporations are the "central
actors" within the Japanese economy and they control a significant
proportion of Japanese manufacturing. It is their strategic decisions -
those that determine the level and location of investment, employment
and output - which ultimately shape the development path for Japanese
industry (see Cowling and Sugden, 1994, 1998). In recent years, Japan’s
large transnationals have become engaged in the process of elite
globalisation, pursuing their own interests at the expense of domestic
Japanese industry. This is a fundamental insight that is crucial for
designing appropriate policy responses to arrest Japan's current industrial
decline. It is argued that the lessons from Japan's experience might guide
policy-makers in other regions, such as Wisconsin, who are concerned with
future industrial development, the effects of globalisation and problems of
"hollowing out".
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 624
Re-Visiting the Roots of Japan's Structural Decline:
The Role of the Japanese Corporation
Keith Cowling and Philip R. Tomlinson
For a long period in the twentieth century, the development of the
Japanese corporation appeared congruent with the development of the
Japanese economy. The growth maximising behaviour of the Japanese
corporation and the preference for internal growth over acquisitions (see
Odagiri, 1992) appeared to suit the long-term ambitions of Japan. Now,
that formerly clear connexion between the ambitions of corporate Japan
and the Japanese public interest is no longer so clear. Increasingly, the
global ambitions of the corporation appear as an impediment to Japan's
development. By favouring the development of large-scale transnational
corporations, Japanese industrial policy-making appears to have contained
a fundamental flaw. Japan is now dominated by large-scale organisations
that are controlled by a corporate elite. It is unlikely that their strategic
decisions will correspond with the wider public interest, which raises the
possibility that Japan is now afflicted with "strategic failure". Other
examples from around the world suggest that Japan is not unique in this
respect. Alternative ways forward are suggested.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 623
A Note on Two Notions of Arbitrage
Nizar Allouch
Since Hart's [5] and Werner's [10] seminal papers, several conditions have
been proposed to show the existence of equilibrium in an asset exchange
economy with short-selling. In this note, we discuss the relationship
between two no-arbitrage conditions. The first condition is the assumption
that the individually rational utility set U is compact, as considered by
Dana, Le Van and Magnien [1]. The second is inconsequential arbitrage,
introduced by Page, Wooders and Monteiro [9]. The main result of this
comparison is to show that the inconsequential arbitrage condition is
stronger than the assumption that U is compact.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 622
Tax Competition Reconsidered
Myrna H Wooders, Ben Zissimos and Amrita Dhillon
In a classic model of tax competition, we show that the level of public good
provision and taxation in a Nash equilibrium can be efficient or inefficient
with either too much, or too little public good provision. The key is
whether there exists a unilateral incentive to deviate from the efficient
state and, if so, whether this entails raising or lowering taxes. A priori,
there is no reason to suppose the incentive is in either one direction or the
other. In addition, we demonstrate conditions ensuring existence of an
asymmetric Nash equilibrium with efficient public good provision. As in
prior literature, local amenities enhance capital’s productivity. Prior
literature, however, focuses on under-provision of public goods.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 621
Networks and Farsighted Stability
Frank H PageJr, Myrna H. Wooders and Samir Kamat
The main contribution of this paper is to provide a framework in which the
notion of farsighed stability for games, introduced by Chwe (1994) can be
applied to directed networks. Then, using Chwe's basic result on the
nonemptiness of farsightedly stable sets for games, we show that for any
given collection of directed networks and any given collection of rules
governing network formation, there exists a farsightedly stable directed
network.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 620
Female Competition, Evolution and the Battle of the Sexes
Myrna Wooders and Hugo van den Berg
As female primates carry and nurse the fetus, it naturally falls on them to
rear the offspring. On the assumption that males are at least equally adept
at obtaining food, it follows that they generate a surplus which they might
either share with females or consume themselves. This choice lies at the
heart of an evolutionary battle of the sexes. If females suceed in obtaining
a large share of the surplus, there is little scope for size dimorphism
between males and females; otherwise males can use the surplus to
sustain larger and stronger bodies, which are advantageous in sexual
competition with other males. Besides competing with males, females may
compete with each other. Moreover, dependency may coincide with
sexiness and such dependency can persist. This paper examines these
ideas in a game-theoretic setting.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 619
Can Indonesia Gain from Log Export Barriers?
May Arunanondchai
We use a simple model of sequential duopoly to examine the effect of
different industrial structures on firms' output decision and profit shares in
the international market for raw and processed tropical timber products.
The model provides insights that can be applied to the Indonesian logging
and plywood industry: shedding light on the appropriate policy responses.

Whether optimal trade policy in each industry involves a tax or subsidy
depends on the ownership structure and on the comparative profit margins
from upstream and downstream exports. Log barriers may improve
welfare even if the downstream sector is inefficient. When the industry is
vertically separated, this is true regardless of the comparative profit
margins. However, when the industry is vertically integrated (which is the
case of Indonesia), this is only true when the downstream sector is more
profitable at the margin.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 618
Factors Affecting the Probability of First-year Medical Student Dropout
in the UK: A logistic analysis for the entry cohorts of 1980-1992
Wiji Arulampalam, Robin Naylor and Jeremy Smith

Objectives: To assess the extent to which various factors influence the
probability that an individual medical student will drop out of medical
school during their first year of study, focussing on the influence both of
prior qualifications, such as A-level subjects taken and scores attained,
and of type of school and family background.

Results: The probability that a student will drop out of medical school
during their first year of study is influenced significantly both by the
subjects studied at A-level and by the scores achieved. Among students
who took Biology, Chemistry and Physics at A-level, each extra grade
achieved reduces the probability of dropping out by about one-third of a
percentage point. There is an additional effect for students with the
maximum A-level score of 30 points in their best 3 A-levels (that is, three
grade As): such a student is almost one percentage point less likely to drop
out of medical school, ceteris paribus, compared to a student with 28
points. Furthermore, this estimated effect of A-level performance on
dropout behaviour is very similar for each of the 13 cohorts. In general,
indicators of both the social class and the previous school background of
the student are largely insignificant, with the exception that students with
a parent who is a medical doctor are significantly less likely to drop out.
There are significant differences by gender, with males more likely to drop
out. There is also evidence of significant age effects, with a tendency for
the dropout probability to fall with age.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 617
What has been Happening to the Quality of Workers' Lives in Britain
Jonathan Gardner and Andrew J. Oswald

This paper studies workers’ lives in modern Britain. It uses longitudinal
data to examine stress and job satisfaction through the decade of the
1990s. The results are disturbing. On both measures, the wellbeing of
British public sector workers worsened sharply over the decade. The size of
the deterioration was between one half point and one full point on a
standard GHQ mental stress scale. This is remarkably large. Stress levels
among private sector employees also rose. Job satisfaction in the private
sector ran approximately flat through time. These findings may be of
interest to nations who are thinking of adopting the British government’s
policies towards the public sector, and to those who have conjectured that
working life is becoming more pressurised.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 616
Well-Being over Time in Britain and the USA
David G. Blanchflower and Andrew J Oswald

This paper estimates micro-econometric happiness equations for the
United States and Great Britain. Reported levels of wellbeing have
declined over the last quarter of a century in the US; life satisfaction has
run approximately flat through time in Britain. These findings are
consistent with the Easterlin hypothesis (1974, 1995). The happiness of
American blacks, however, has risen. Despite legislation on gender
discrimination, the well-being of women has declined. White women in the
US have been the biggest losers. Well-being equations have a stable
structure. Money buys happiness. People care also about relative income.
Wellbeing is U-shaped in age. The paper estimates the dollar values of
events like unemployment and divorce. They are large. A lasting marriage
(compared to widow-hood as a ‘natural’ experiment), for example, is
estimated to be worth $100,000 a year.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 615
The Macroeconomics of Happiness
Rafael di Tella, Robert J. MacCulloch and Andrew J Oswald

This paper shows that macroeconomic movements have strong effects on
the happiness of nations. First, we find that there are clear
microeconomic patterns in the psychological well-being levels of a quarter
of a million randomly sampled Europeans and Americans from the 1970's to
the 1990's. Happiness equations are monotonically increasing in income,
and have a similar structure in different countries. Second, movements in
reported well-being are correlated with changes in macroeconomic
variables such as Gross Domestic Product. This holds true after
controlling for the personal characteristics of respondents, country
fixed-effects, year dummies, and country-specific time trends. Third, the
paper establishes that recessions create psychic losses that extend beyond
the fall in GDP and rise in the number of people unemployed. These losses
are large. Fourth, the welfare state appears to be a compensating force:
higher unemployment benefits are associated with higher national
well-being.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 614
Demand for Money in the Transition Economy: The Case of the Czech
Republic 1993-2001
Lubos Komarek and Martin Melecky
In this paper we strive to present a somewhat internationalised view of
demand for money as applied to the Czech Republic. We extend the
traditional money demand function, consisting purely of domestic
variables, to include certain foreign determinants that probably affect the
demand for money in a small open transition economy. We do so in the
case of both narrow and broad money. For the purposes of generalisation
and robust estimates we employ several estimation techniques, namely the
Johansen procedure, ARDL, DOLS and ADL. We also consider the aspect of
the stability of such estimates. Finally, we analyse the possible effects on
prices and output of disequilibria on money market. We have found that a
liquidity gap probably has a significant influence on both prices and output.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 613
Currency Substituion in the Transition Economy: A Case of the Czech
Republic 1993-2001
Lubos Komarek and Martin Melecky
Currency substitution appears to be an important issue affecting the
design of monetary policy, especially in transition economies. Therefore,
this paper strives to analyze the particular relevance of a currency
substitution phenomenon for the Czech Republic is case. We initially
discuss various approaches and definitions of currency substitution that
found in the literature. Subsequently, we discuss the role of currency
substitution in small open economies in transition with some illustrations
relating to the Czech Republic - we distinguish and analyse a locally and
globally substituting currency from a substituted one and consequences of
euroization. The empirical part of this paper presents estimations of
modified Branson and Henderson portfolio model for the Czech Republic’s
case. This provides a multi-perspective approach to currency substitution
in a broad sense. Further, we attempt to intensify the robustness of our
estimation, applying several cointegration techniques. These are namely
the Johansen procedure, the ARDL, the DOLS and the ADL. Finally, we
discuss potential implications of currency and assets substitution according
to our estimates present in the Czech economy.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 612
Profit-Sharing, Bertrand Competition and Monopoly Unions: A Note
Amrita Dhillon and Emmanuel Petrakis
This paper studies a strategic aspect of profit-sharing in an oligopolistic
industry with a monopoly union. Whenever a uniform profit share exists in
the industry, we show that a union that values the per worker
remuneration positively, may have incentives to reduce industry
employment, decreasing thus total output and causing total profits to
increase. Thus, we show that profit-sharing may lead to higher profits for
such an industry even if productivity effects are absent.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 611
The Political Economy of a Soviet Military R&D Failure: Steam
Power for Aviation, 1932 to 1939
Mark Harrison

By studying a Soviet R&D failure, the prewar attempt to create a new
aeroengine technology based on the steam turbine, we find out more about
the motivations, strategies, and payoffs of principals and agents in the
Soviet command economy. Alternative approaches to the evaluation of
R&D failure are outlined. New archival documentation shows the scale and
scope of the Soviet R&D effort in this field. The allocation of R&D
resources resulted from agents’ horizontal interactions within a vertical
command hierarchy. Project funding was determined in a context of biased
information, adverse selection, and agents’ rent seeking. Funding was
rationed across projects and through time. Budget constraints on
individual projects were softened in the presence of sunk costs, but were
hardened periodically. There is no evidence that rents were intentionally
distributed through the Soviet military R&D system to win trust or reward
loyalty; the termination of aviation steam power R&D in 1939 despite
the sunk costs they represented was timely.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 610
The Battle of the Sexes over the Distribution of Male Surplus
Myrna Wooders and Hugo van den Berg

Female primates carry and nurse the fetus, and thus have the firrst
responsibility for rearing the offspring. Assuming males are at least equally
adept at obtaining food, males might either share surplus food with
females or consume the food themselves. The distribution of the surplus is
the subject of a battle of the sexes. If females succeed in obtaining a large
share of the surplus, then there is little size dimorphism between males
and females; otherwise males use the surplus themselves to become larger
and stronger, and to engage in sexual competition with other males.
Besides competing with males, females may compete with each other.
Dependency may coincide with sexual competitiveness (sexiness). This
paper introduces these ideas in a game theoretic setting and derives a
simple bound on the male ‘sexiness’ required for a nonsupportive strategy
to be worthwhile.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 609
Soviet Industry and the Red Army Under Stalin: A Military-Industrial
Complex?
Mark Harrison
The paper considers some of the views of the Stalin–era relationship
between Soviet industry and the Red Army that are current in the
literature, and disentangles some confusions of translation. The economic
weight of the defence sector in the economic system is summarised in
various aspects. The lessons of recent archival research are used as a
basis for analysing the army–industry relationship under Stalin as a
prisoners’ dilemma in which, despite the potential gains from mutual
cooperation, each party faced a strong incentive to cheat on the other. It
is concluded that the idea of a Soviet military–industrial complex is not
strictly applicable to the Stalin period, but there may be greater
justification for the Soviet Union after Stalin.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 608
Learning in elections and Voter Turnout Equilibria
Stefano DeMichelis and Amrita Dhillon
Both complete and incomplete game Theoretic Models of Voter Turnout
(Palfrey and Rosenthal, 1983,1985) have the problem of multiple equilib-
ria, some of which seem unreasonable. How can the counter intuitive high
turnout equilibria be explained? Palfrey and Rosenthal (1985) suggest
that the main reason is that strategic uncertainty istoo low in a com-
plete information model. We show that this is not the main problem with
these equilibria{ incomplete information may exacerbate the problem of
multiple equilibria. We propose a very intuitive criterion based on voter
learning to distinguish reasonable equilibria. This paper makes precise the
sense in which the high turnout equilibria in the Palfrey-Rosenthal model
are not robust. We show how the model can be used to qualitatively
explain several phenomena observed in reality.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 607
The Role of Consumers in Competition and Competion Policy
Michael Waterson
This paper develops the idea that consumers’ behaviour matters
significantly from the viewpoint of industry performance. This is examined
through some theoretical propositions, but then at greater length by means
of some case study examples. These examples demonstrate how, even in
potentially competitive industries, reluctance on the part of consumers to
search or to switch suppliers can lead to a sub-competitive outcome. The
significance of non-traditional competition policy remedies in changing the
outcome is drawn out.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 606
Plan, Siphoning, and Corruption in the Soviet Command Economy
Mark Harrison and Byung-Yeon Kim
This paper reconsiders Andrei Shleifer and Robert Vishny’s suggestion that
a socialist industry will always prefer to cut both price and output relative
to a market–clearing equilibrium in order to maximise bribe income. The
evidence from recent archival studies of the Soviet economy does not
support this conjecture. To understand the evidence we present an
analytical framework within which a plan–setter and an effort–setter
interact, subject to a hard resource constraint, to determine real output
and hidden inflation simultaneously. We find that managers who use
resources gained corruptly were enabled to produce more real output with
less hidden inflation and fulfil the plan more honestly as a result. We find
clear rationales for plan–setters to have tolerated corruption and siphoning
while maintaining plan tension, and we associate reduced plan tension in
the 1970s with the spread of disloyal behaviours.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 605
The Soviet Market for Inventions:
The Case of Jet propulsion 1932 to 1944
Mark Harrison
The paper outlines the problem of aviation jet propulsion in the interwar
period and World War II and analyses Soviet progress towards a
solution using newly available archival documentation. Soviet R&D
commitments were influenced by long–term security motivations and the
need to invest in local tacit knowledge. The scale and diversity of the
Soviet R&D effort is described. The allocation of resources resulted from
R&D agents’ horizontally organised market–like interactions within a
vertically organised command system. Financing decisions were made in a
context of asymmetric information, adverse selection, and opportunism.
Overall funding was rationed; budget constraints on individual projects
were soft, but were periodically hardened. In addition to decisions to
finance and refinance or terminate projects, takeovers and mergers took
place in a secondary asset market. There is evidence of rent–seeking
activity, but where rent–seeking was detected it was punished.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 604
Are Command Economies Unstable? Why did the Soviet Economy
Collapse?
Mark Harrison
The collapse of the Soviet economy at the end of the 1980s is ascribed to
command failure. The likely sources of command failure and economic
collapse in the Soviet case are analysed in terms of the payoffs to a
dictator who controls the level of coercion and producers who control the
level of effort. This approach is used to frame an analytical narrative of
the evolution of the Soviet system under Brezhnev and Gorbachev. The
paper is a nontechnical version of TWERPS no. 602.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 603
The USSR and Total War: Why didn't the Soviet Economy Collapse in
1942
Mark Harrison
The economic dimensions of the Soviet war effort are appraised. The
surprising fact is that the Soviet economy did not collapse in 1942. A
rational-choice model is developed to illustrate the economic conditions
under which a wartime collapse of the economy is rendered more and less
likely.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 602
Coercion, Compliance and the Collapse of the Soviet Economy
Mark Harrison
Are command systems that rest on coercion inherently unstable, and did
the Soviet economy collapse for this reason? Postwar evidence is
inconsistent with the hypothesis that the Soviet economy was unstable. If
it was not unstable, why did it collapse? A repeated game of coordination
between a dictator and producers shows that a high level of coercion may
yield a stable high–output equilibrium, that the command economy contains
a time–consistency problem for central planners, and that a transition to a
low state of coercion and performance in which everyone’s income falls
may be brought about by rising monitoring costs and the dictator’s loss of
reputation. The facts of the Soviet case are consistent with a collapse
triggered when the dictator threw in the towel.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 601
Evolution &Voting: How Nature Makes us Public Spirited
John P. Conley, Ali Toossi and Myrna Wooders
We reconsider the classic puzzle of why election turnouts are persistently
so high when formal analysis strongly suggests that rational agents
should not vote. If we assume that voters are not making systematic
mistakes,the most plausible explanation seems to be agents receive
benefits, from the act of voting itself. This is very close to assuming the
answer, however, and immediately begs the question of why agents feel a
warm glow from participating in the electoral process. In this paper, we
approach this question from an evolutionary standpoint. We show for a
range of situations that public-spirited agents have an evolutionary ad-
vantage ver those who are not as public-spirited. We also explore when
this kind of altruistic behavior is disadvantageous to agents. The details
depend on the costs of voting, the degree to which agents have different
preferences ver public policies and the ratio of various preference types in
the population, but we conclude that evolution may often be a force that
causes agents to internalize the benefits their actions confer on others
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 600
Government Collusion in Janeba's Model of Multijurisdictional Tax
Competition
Lloyd Barton
Eckhard Janeba (Dec 2000 “Tax Competition when Governments lack
Commitment” American Economic Review 90, 1508-19) has recently
suggested a novel approach to modelling the relationship between
governments and multinational firms. As part of ongoing research into
various aspects of multijurisdictional tax competition, this paper
investigates the possibility of allowing for collusion between governments
when setting tax rates in the model. The findings show that a
self-enforcing agreement is possible, with the beneficial effect of cutting
the firm’s excess profits, limiting investment in excess capacity, and
raising government revenue.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 599
My Word is My Bond: Reputation as Collateral in Nineteenth Century
English Provincial Banking
Francesco L. Galassi and Lucy A. Newton

There are few real-world economic transactions that do not involve an
element of trust, yet in textbook economics trust is not prominently
discussed. In that world, perfectly informed and computationally endowed
agents reach optimal, enforceable decisions in continuously harmonising
exchanges. Trust is therefore linked to deviations from the textbook ideal:
incomplete information, costly enforcement, and computational limitations
faced by agents. Trust can then be thought of as an algorithm, in other
words, a way of resolving uncertainty in a complex world. In this sense
trust may be seen as a form of expectation concerning the behaviour of
other agents whose actions and intentions cannot be (fully) observed. This
paper pursues this approach by “running the algorithm backwards” and
trying to establish what factors led a 19th century provincial English bank
to trust different loan applicants. Using a data-set of some 200 loan
decisions, and knowing the size of collateral (if any) requested, we develop
a method to estimate the probability that the bank attached to each
borrower’s promise to repay (i.e., the trust the bank had towards the
borrower), adjusting for stages in the business cycle. We then regress this
estimated probability on a variety of observable borrower characteristics.
We find that trust is not correlated with a priori expected variables, such
as borrower’s assets or frequency of interaction. This suggests that trust
was built up in other interactions, possibly through social or religious
networks, and that the banking relationship reflected information available
to bank directors other than what was purely pertinent to the borrowers’
economic conditions. This has strong implications for the allocation of
credit to industry in 19th century England.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 598
The Geometry of Arbitrage and the Existence of Competitive
Equilibrium
Nizar Allouch, Cuong le Van and Frank H. Page Jr

We present the basic geometry of arbitrage, and use this basic geometry
to shed new light on the relationships between various no-arbitrage
conditions found in the literature. For example, under very mild
conditions, we show that the no-arbitrage conditions of Hart (1974) and
Werner (1987) are equivalent and imply the compactness of the set of
utility possibilities. Moreover, we show that if agents' sets of useless net
trades are linerly independent, then the Hart-Werner conditions are
equivalent to the stronger conditon of no-unbounded-arbitrage due to Page
(1987) - and in turn, all are equivalent to compactness of the set of
rational allocations. We also consider the problem of existence of
equilibrium. We show, for example that under a uniformity condition on
preferneces weaker than Werner's Uniformity condition, the Hart-Werner
no-arbitrage conditions are sufficient for existence. With an additional
condition of weak no half-lines - a condition weaker than Werner's
no-half-lines condition - we show that the Hart-Werner conditions are both
necessary and sufficient for existence.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 597
A Hazard Model of the Probability of Medical School Dropout in the
United Kingdom
Wiji Arulampalam, Robin A. Naylor and Jeremy P. Smith

From individual-level longitudinal data for two entire cohorts of medical
students in UK universities, we analyse the probability that an individual
student will ‘drop out’ of medical school prior to the successful completion
of their studies. We examine the cohort of students enrolling for a medical
degree at the start of the academic years 1985 or 1986. We find evidence
that medical student completion is influenced by measures of academic
preparedness, sex, and age as well as by the characteristics of the medical
school itself. On the basis of our results, we also comment on the
construction of institutional performance indicators against the criterion of
student dropout.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 596
Real Exchange Rate Trends in Transitional Countries
Jan Frait and Lubos Komarek

The paper presents an analysis of the determinants of the real exchange
rate with emphasis on its long-term aspects and searching for the
equilibrium paths. It introduces the behavioural models of exchange rates
(especially the BEER and the NATREX), that are alternatives to the
often-used fundamental models of the FEER type. Authors constructed the
theoretical and econometric behavioural model, which could analyse the
medium-term and long-term dynamics of the real exchange rate. This
paper also introduces real exchange rate as an indicator of convergence for
transitional countries to EU countries and analyses the link between real
exchange rate and double speed economy or deindustrialisation,
respectively. This analysis is relevant almost for all transitional countries
now. The paper explains the appreciation trend of real exchange rates in
transitional economies. It is identifying the set of factors that let to
sustainable real appreciation of the Czech Koruna and also the set of
factors that possibly caused unsustainable real depreciation in the past.
There is also a set of arguments against any other rapid real appreciation
of the Czech Koruna. The paper also tried to fuel these arguments by an
econometric analysis, which used our behavioural model of the equilibrium
real exchange rate. It was shown that the Czech real exchange rate was
especially determined by real fundamental factors: productivity, terms of
trade and world interest rates and foreign direct investment.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 595
Construction of Stationary Time Series via the Giggs Sampler with
Application to Volatility Models
Michael K Pitt and Stephen G Walker

In this paper, we provide a method for modelling stationary time series.
We allow the family of marginal densities for the observations to be
specified. Our approach is to construct the model with a specified
marginal family and build the dependence structure around it. We show
that the resulting time series is linear with a simple autocorrelation
structure. In particular, we present an original application of the Gibbs
sampler. We illustrate our approach by fitting a model to time series
count data with a marginal Poisson-gamma density.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 594
Multiproduct Firms and Product Differentiation: a survey
Juan A. Manez and Michael Waterson

We start the survey by reviewing the implications of horizontal and vertical
product differentiation on market structure under the assumption of
single-product firms. Then, we analyse the main results of the
multi-product firm models, both when variants are assumed differentiated
in vertical attributes only and when varieants are assumed differentiated
in two dimensions (vertical and horizontal). Finally, we review the
empirical literature about the discrete-choice models of product
differention.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 593
Market Structure and Entry: Where's the Beef?
Otto Toivanen and Michael Waterson

We study the effects of market structure on entry using data from the UK
fast food (counter-service burger)industry over the years 1991-1995. Over
this period, the market can be characterized as a duopoly. We find that
market structure matters greatly: for both firms, rival presence increases
the probability of entry. We control for market specific time-invariant
unobservables and their correlation with existing outlets of both firms
through a variety of methods. Such unobservables generally play a minor
role. For both firms, variable profits per customer are increasing in the
number of own outlets, and decreasing in the number of rival outlets.
Structural form estimations show that the positive effect of rival presence
on the probability of entry is due to firm learning: rival presence increases
the estimate of the size of the market. The firms are differently affected
by demand variables and have different fixed costs of entry. These results
strongly suggest the presence of product differentiation, firm learning and
market power.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 592
Three Principles of Competitive Nonlinear Pricing
Frank H. Page Jr and Paulo K. Monteiro

We make three contributions to the theory of contracting under
asymmetric information. First , we establish a competitive analog to the
revelation principle which we call the implementation principle. This
principle provides a complete characterization of all incentive compatible,
indirect contracting mechanisms in terms of contract catalogs (or menus),
and allows us to conclude that in competitive contracting situations, firms
in choosing their contracting strategies can restrict attention, without loss
of generality, to contract catalogs. Second, we establish a competitive
taxation principle. This principle, a refinement of the implementation
principle, provides a complete characterization of all implementable
nonlinear pricing schedules in terms of product-price catalogs and allows us
to reduce any game played over nonlinear pricing schedules to a
strategically equivalent game played over product-price catalogs. Third,
applying the notion of payoff security (Reny (1999)) and the competitive
taxation principle, we demonstrate the existence of a Nash equilibrium for
the mixed extension of the nonlinear pricing game. Moreover, we identify
a large class of competitive nonlinear pricing games whose mixed
extensions satisfy payoff security.
This paper extends earlier work by the first author (see Page 1992, 1999)).

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 591
Bayesian Cointegration Analysis
Katsuhiro Sugita

This paper proposes Bayesian estimation of cointegrated VAR systems and
a simple method of estimating the cointegration rank using the Bayes
factors for the adjustment term. Monte Carlo experiments show that the
method proposed is more powerful in selecting the rank, especially with a
small sample size, than Johansen's LR test. This is due to the fact that
Bayesian analysis uses the exact distributions instead of relying on
asymptotic distribution theory. The method proposed here is relatively
easy to implement. Over-identifying restrictions on the cointegrating
vectors are also considered.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 590
Leadership Cartels in Industries with Differentiated Products
Pedro Posada

This article analyses cartels that act as a Stackelberg leader with respect
to a competitive fringe in industries supplying differentiated products. The
main objectives are to investigate how cartel stability changes with the
degree of differentiation and the cartel size, to predict endogenous cartels
and to carry out a welfare analysis. Both repeated and static games are
considered as well as industries competing in quantities and prices. The
results indicate that the degree of stability can be either an increasing,
decreasing or non-monotonic function of the degree of product
differentiation, depending on the cartel size, the industry size, the
competition type and the reaction of cartel loyal members to defection. An
endogenous cartel size is also predicted. Other significant results are:
some cartels can be sustained under simple static game Nash equilibrium,
some cartels may be socially desirable, not all cartels are beneficial for the
fringe members and a free riding problem does not necessarily emerge
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 589
Some First Results for Noncooperative Pregames:
Social Conformity and Equilibrium in Pure Strategies
Myrna Wooders, Reinhard Selten and Edward Cartwright

We introduce the framework of noncooperative pregames and
demonstrate that for all games with sufficiently many players, there exist
approximate (E) Nash equilibria in pure strategies. In fact, every mixed
strategy equilibrium can be used to construct an E-equilibrium in pure
strategies — ours is an 'E-purification’ result. Our main result is that there
exists an E-equilibrium in pure strategies with the property that most
players choose the same strategies as all other players with similar
attributes. More precisely, there is an integer L, depending on E but not on
the number of players, so that any sufficiently large society can be
partitioned into fewer than L groups, or cultures, consisting of similar
players, and all players in the same group play the same pure strategy. In
ongoing research, we are extending the model to cover a broader class of
situations, including incomplete information.

We would be grateful for any comments that might help us improve the
paper.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 588
Arbitrage and Equilibrium in Economies with Externalities
Cuong Le Van, Frank H. Page Jr. and Myrna H Wooders

We introduce consumption externalities into a general equilibrium model
with arbitrary consumption sets. To treat the problem of existence of
equilibrium, a condition of no unbounded arbitrage, extending the
condition of Page (1987) and Page and Wooders (1993, 1996) is defined.
It is proven that this condition is sufficient for the existence of an
equilibrium and both necessary and sufficient for compactness of the set
of rational allocations.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 587
Fair Reweighting of the Votes in the EU Council of Ministers and the
Choice of Majority Requirement for Qualified Majority Voting during
Successive Enlargements
Dennis Leech

This paper examines the system of Qualified Majority Voting, used by the
Council of Ministers of the European Union, from the perspective of
enlargement of the Union. It uses an approach based on power indices due
to Penrose, Banzhaf and Coleman to make two analyses: (1) the question
of the voting power of member countries from the point of view of
fairness, and (2) the question of how the majority quota required for QMV
should be determined. It studies two scenarios for change from 2005
onwards envisaged by the Nice Treaty: (1) no enlargement, the EU
comprising 15 member countries, and (2) full enlargement to 27 members
by the accession of all the present twelve candidates. The proposal is made
that fair weights be determined algorithmically as a technical or routine
matter as the membership changes. The analysis of how the quota affects
power shows the trade-offs that countries face between their blocking
power and the power of the Council to act. The main findings are: (1) that
the weights laid down in the Nice Treaty are close to being fair, the only
significant discrepancies being the under representation of Germany and
Romania, and the over representation of Spain and Poland; (2) the
majority quota required for a decision is set too high for the Council of
Ministers to be an effective decision making body.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 586
The Efficiency, Equity and Politics of Emission Permit Trading
Myrna Wooders and Ben Zissimos

This paper illustrates that an international permit trading system may hurt
relatively poor countries by making associated economic activities
unaffordable. A model is constructed in which the free market solution is
Pareto inefficient as a result of pollution. The introduction of tradable
permits allows pollution to be internalised, and brings about an increase in
the total social surplus. But when incomes vary, this may not lead to a
Pareto improvement; those in poor countries stop the polluting activity
because they cannot afford to do otherwise. Only those in relatively rich
countries are made better off. This may explain why poor countries are
reluctant to ratify the Kyoto Protocol, itself advocating a permit trading
scheme. The politico-economic implications of permit trading are also
examined. We show that the democratic requirements for ratification
impose a lower bound on pollution reduction that can be achieved through
a system of pollution permits with trade.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 585
Axiomatization of Ratio Equilibria in Public Good Economies
A. van den Nouweland, S. Tijs and M.H. Wooders

Using consistency properties, we characterize the cost-sharing scheme
arising from the ratio equilibrium concept for economies with public
goods. The characterization turns out to be surprisingly simple and
direct. In contrast to most axiomatic characterizations based on reduced
games and consistency properties, our characterization requires that in the
reduced game, the players take as given the proportions of the costs paid
by the members of the complementary player set, rather than their utility
levels.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 584

Does the Choice of University Matter? A Study of the Differences across
UK Universities in Life Sciences Students' Degree Performance
Massimiliano Bratti

This paper investigates differences across UK universities in 1993 life
sciences students’ degree performance using individual-level data from
the Universities’ Statistical Record (USR). Differences across universities
are analysed by specifying and estimating a subject-specific educational
production function. Even after including a wide range of controls
for the quality of students, significant differences emerge across
universities in students’ degree performance. We apply a two-stage
estimation procedure and find evidence that a large part of ‘university
effects’ cannot be explained by the kind of institutional inputs commonly
used in the literature on school quality. Finally, we compare the
unadjusted ranking of universities based on the proportion of ‘good’
(first and upper second class honours) degrees awarded with that based
on the estimated probability of a ‘good’ degree obtained from the
microeconometric model and find significant differences between the two
indicators of universities’ performance.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 583

Members' Voting Power in the Governance of the International
Monetary Fund
Dennis Leech

In general in an organisation whose system of governance involves
weighted voting, a member's weight in terms of the number of votes and
the formal power it represents differ. Power indices provide a means of
analysing this difference. The paper uses new algorithms for computing
power indices for large games. Three analyses are carried out: (1) the
distribution of Banzhaf voting power among members in 1999; the results
show that the United States has considerably more power over ordinary
decisions than its weight of 17% but that the use of special supermajorities
limits its power; (2) the effect of varying the majority requirement on the
power of the IMF to act and the powers of members to prevent and initiate
action (Coleman indices); the results show the effect of supermajorities
severely limits the power to act and therefore renders the voting system
ineffective in democratic terms, also the sovereignty of the United States
within the IMF is effectively limited to just the power of veto; (3) the
paper proposes the determination of the weights instrumentally by means
of an iterative algorithm to give the required power distribution; this
would be a useful procedure for determining appropriate changes in
weights consequent on changes to individual countries' quotas; this is
applied to the 1999 data. Policy recommendations are, first, that the IMF
use only simple majority voting, and discontinue using special
supermajorities, and, second, allocate voting weight instrumentally using
power indices.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 581

Is Comprehensive Education Really Free? A Case Study of the Effects of
Secondary School Admissions Policies on House Prices in One Local
Area.
Dennis Leech and Erick Campos

This paper reports on a study that tests the anecdotal hypothesis that
parents are willing to pay a premium to secure places for their children in
popular and oversubscribed comprehensive schools. Since many local
education authorities use admissions policies based on catchment areas
and places in popular schools are very hard to obtain from outside these
areas - but very easy from within them - parents have an incentive to
move house for the sake of their children's education. This would be
expected to be reflected in house prices. The study uses a cross sectional
sample based on two popular schools in one local education authority area,
Coventry. Differences in housing quality are dealt with by using the
technique of hedonic regression and differences in location by sample
selection within a block sample design. The sample was chosen from a
limited number of locations spanning different catchment areas in order to
reduce both observable and unobservable variability in nuisance effects
while maximising the variation in catchment areas. The results suggest
that there are strong school catchment area effects. For one of the two
popular schools we find a 20 percent premium and for the other a 16
percent premium on house prices ceteris paribus.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 580

Do Elections Always Motivate Incumbents?
Eric Le Borgne and Ben Lockwood

This paper studies a principal-agent model of the relationship between
office-holders and the electorate, where the office-holder is initially
uninformed about herability (following Holmström, 1999). If office-holder
effort and ability interact in the “production function” that determines
performance in office, then an office-holder has an incentive to
experiment, i.e. raise effort so that performance becomes a more
accurate signal of her ability. Elections reduce the experimentation effect,
and the reduction in this effect may more than o¤set the positive “career
concerns” effect of elections on effort. Moreover, when this occurs,
appointment of officials (random
selection from the citizenry and tenure) may Pareto-dominate elections.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 579

Computing Classical Power Indices For Large Finite Voting Games
Dennis Leech

Voting Power Indices enable the analysis of the distribution of power in a
legislature or voting body in which different members have different
numbers of votes. Although this approach to the measurement of power,
based on co-operative game theory, has been known for a long time its
empirical application has been to some extent limited, in part by the
difficulty of computing the indices when there are many players. This
paper presents new algorithms for computing the classical power indices,
those of
Shapley and Shubik (1954) and of Banzhaf (1963), which are essentially
modifications of approximation methods due to Owen, and have been
shown to work well in real applications. They are of most utility in
situations where both the number of players is large and their voting
weights are very non-uniform, some members having considerably larger
numbers of votes than others, where Owen's approximation methods are
least accurate. The suggestion is made that the availability of such
improved algorithms might stimulate further applied research in this field.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 578

'Reverse Hysteresis': R&D Investment with Stochastic Innovation
Helen Weeds

We consider optimal investment behavior for a firm facing both
technological and economic uncertainty, in the context of a research
project with unpredictable outcomes. The optimal investment strategy, in
the form of a pair of trigger points for investment and abandonment, is
derived. As in Dixit (1989), the investment trigger exceeds the Marshallian
investment point. However the abandonment trigger may exceed the
Marshallian exit point, in contrast to the Dixit result, giving rise to
‘reverse hysteresis.’ Thus the firm tends to abandon research rapidly as
profitability declines, at times despite the existence of positive expected
profits. The model also provides a unified framework encompassing two
existing models as limiting cases.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 577

Sleeping Patents and Computsory Licensing: An Options Analysis
Helen Weeds

Why should a firm wish to create a new technology that it will leave
unexploited for some time? Sleeping patents have long been perceived as
anticompetitive devices, used by dominant firms to block entry into their
market. In a real options framework with both economic and technological
uncertainty, we show that a sleeping patent may arise as the result of
optimal forward-looking behavior, in the absence of any anticompetitive
motive. We also consider the effect of possible measures to enforce the
development of sleeping patents and find that these are likely to harm
incentives for firms to engage in research.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 576

Strategic Delay in a Real Optimna Model of R&D Competition
Helen Weeds

This paper considers irreversible investment in competing research
projects with uncertain returns under a winner-takes-all patent system.
Uncertainty takes two distinct forms: the technological success of the
project is probabilistic, while the economic value of the patent to be won
evolves stochastically over time. According to the theory of real options
uncertainty generates an option value of delay, but with two competing
firms the fear of preemption would appear to undermine this approach. In
non-cooperative equilibrium two patterns of investment emerge depending
on parameter values. In a preemptive leader-follower equilibrium firms
invest sequentially and option values are reduced by competition. A
symmetric outcome may also occur, however, in which investment is more
delayed than the
single-firm counterpart. Comparing this with the optimal cooperative
investment pattern, investment is found to be more delayed when firms
act non-cooperatively, as each holds back from investing in the fear of
starting a patent race. Implications of the analysis for empirical and policy
issues in R&D are considered.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 575

Networks, Options and Preemption
Robin Mason and Helen Weeds

This paper examines the irreversible adoption of a technology whose
returns are uncertain, when there is an advantage to being the first
adopter, but a network advantage to adopting when others also do so. Two
patterns of adoption emerge: sequential, in which the leader aggressively
preempts its rival; and a more accommodating outcome in which the firms
adopt simultaneously. There are two main results. First, conditional on
adoption being sequential, the follower adopts at the incorrect point,
compared to the co-operative solution. The leader adopts at the
co-operative point when there is no preemption, and too early if there is
preemption. Secondly, there is insufficient simultaneous adoption in
equilibrium. The paper examines the effect of uncertainty, network effects
and preemption on these ineffciencies. Standard results do not always
hold. For example, the analysis raises
the unusual possibility that an increase in uncertainty may cause the first
mover to adopt the technology earlier.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 574

A Nonscale Growth Model with R&D and Human Capital
Accumulation
Maria-Joao Ribeiro

This paper aims to contribute to the new growth theory with a model in
which the engine of growth is human capital growth. Building on Romer's
[1990] model, two new functions are introduced: (1) a specification for
the production of new designs that assumes no externalities and no
inventions before time zero; and (2) A specification for the accumulation
of human capital technically similar to that in Lucas [1988]. As opposed
to Romer's model, the scale-effects prediction is eliminated because
technological growth does not depend on the number of researchers, but
instead on the rate of growth of human capital. Moreover, the model
introduced carries a new prediction: Growth depends positively on the
ratio of final-good workers to researchers.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 573

Buybacks of Domestic Debt in Public Debt Management
Silvia Marchesi

In the model a fiscal stabilisation is announced under asymmetry of
information between the government and the private investors. The
government could be of two types: a dry type and a wet type, according to
the amount of spending cuts it decides to make. Private investors may
thus lack confidence in the stabilisation program and interest rates would
be too high, reflecting this lack of credibility. A dry type which has to
finance new spending may want to signal its resolution (type) in order to
lower its interest costs and one way to do that would be to repurchase a
fraction of the outstanding debt. The wet type could also decide to buyback
some of its debt in order to pretend to be a dry type and to (possibly) lower
its interest payments. It is showed that a critical amount of buyback exists
such that the two types could be separated.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 572

The Dummies Guide' to Lottery Design
Ian Walker and Juliet Young

This paper outlines the issues relevant to the operation of lottery games.
We consider how such games should be designed, what a portfolio of
games might look like, how the operator should be regulated, how
spending on lottery games should be taxed, and what considerations are
relevant to the use of the revenue from such games.

Our research suggests that the lottery tickets sales depend positively on
the proportion of revenue returned as prizes (i.e the mean of the prize
distribution), the skewness in the prize distribution (e.g how much of the
prize money goes to the jackpot), and negatively on the variance in the
prize distribution. Thus good causes revenue might be higher if the game
were meaner (less of the stakes used as prize money), or if more of the
prize money was used for the jackpot, or if the variance in the expected
prizes were reduced. In practice, it is difficult to change one aspect of the
design of the prize distribution without having a counterveiling effect on
another aspect. Thus, it is difficult to make judgements about the merits of
alternative game designs without looking at all of the parameters being
proposed.

We find no empirical evidence to suggest that there is any merit in having
much of the take-out (the revenue that is not returned as prizes) dedicated
to good-causes, and no evidence that the nature of the operator might
make any difference.

The current “beauty contest” process of choosing an operator is fraught
with risk and we suggest that, subject to a probity
check, the license should be auctioned.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 571

Trade Bloc Formation Under Imperfect Competition
Paola Conconi

We examine the endogenous formation of trade blocs when markets are
characterized by imperfect competition and governments use import
tariffs and export subsidies to alter the strategic interactions between
oligopolistic firms. Using a simple model of intra-industry trade between
three ex-ante symmetric countries, we find that, while 'pure' customs
unions - entailing tariff cooperation only - are stepping stones towards
global free trade, 'impure' customs unions - involving the coordinated use
of both tariffs and subsidies - are stumbling blocs against it. Our analysis
suggests that an international ban on export subsidies could held to sustain
global free trade.
[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 570
Green and Producer Lobbies: Enemies or Allies?
Paola Conconi

In this paper we employ a common agency model to study the role of green
and producer lobbies in the determination of trade and environmental
policies. We focus on two large countries that are linked by trade flows
and transboundary pollution externalities. We show that the nature of the
relationship between lobbies and the relative efficiency of unilateral and
cooperative policy outcomes depend crucially on three factors: the type of
policy regime, whether governments act unilaterally or cooperatively, and
the extend of the 'pollution leakages'.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 569
The Assignment of Powers in Federal and Unitary States
Ben Lockwood

This paper studies a model where the power to set policy (a choice of
project) may be assigned to central or regional government via either a
federal or unitary referendum (constitutional rule, CR). The benefit of
central provision is an economy of scale, while the cost is political
inefficiency. The relationship between federal and unitary CRs is
characterized in the asymptotic case as the number of regions becomes
large, under the assumption that the median project benefit in any region
is a random draw from a fixed distribution, G. Under some symmetry
assumptions, the relationship depends only on the shape of G, not on how
willingnesses to pay are distributed within regions. The relationship to
Cremer and Palfrey's (1996) "principle of aggregation" is established.
Asymptotic results on the efficiency of the two CRs are also provided.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 568
"Are People Willing to Pay to Reduce Others' Incomes?
Daniel Zizzo and Andrew Oswald

This paper studies utility interdependence in the laboratory. We design an
experiment where subjects can reduce (“burn”) other subjects’ money.
Those who burn the money of others have to give up some of their own
cash. Despite this cost, and contrary to the assumptions of economics
textbooks, the majority of our subjects choose to destroy at least part of
others’ money holdings. We vary experimentally the amount that subjects
have to pay to reduce other people’s cash. The implied price elasticity of
burning is calculated; it is mostly less than unity. There is a strong
correlation between wealth, or rank, and the amounts by which subjects
are burnt. In making their decisions, many burners, especially
disadvantaged ones, seem to care about whether another person
‘deserves’ the money he has. Deservingness is not simply a matter of
relative payoff.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 567
"Tax Competition and Tax Co-Ordination Under Destination and Origin
Principles: A Synthesis
Ben Lockwood

This paper proposes a general framework for analysing commodity tax
competition under destination and origin principles, based on three
possible tax spillovers, the consumer price spillover, the producer
price/terms of trade spillover, and rent spillovers. A model is presented
which can be extended to accomodate all three spillovers. Using this
model, many of the results in the existing literature can be derived,
compared, and extended.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 566
"Renegotiation of Social Contracts by Majority Rule"
Dan Anderberg and Carlo Perroni

We consider renegotiation of social earnings insurance arrangements by
majority voting in an economy where ex-ante identical individuals make
unobservable private investments in education. We show that
voting-based renegotiation can result in a higher expected level of
investment in comparison to the case where social insurance is determined
by an appointed social planner. We also find that, with voting-based
renegotioation, the availability of costly ex-post information about private
investment can help overcome commitment problems. These findings call
into question the practice of using a representative-consumer approach
when modelling dynamic policy problems in large economies.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 565
"P-Star-Model Based Analysis of Inflation Dynamic in the Czech
Republic"
Jan Frait, Lobos Komarek and Lumir Kulhanek

The paper presents a version of the P* model of inflation dynamics for a
small open economy and applies it to the Czech economy time series from
the period of 1991-1999. The paper is organised as follows. Section 2
presents a brief discussion of the monetary policy indicators issue. Section
3 describes the logics of the P* model. Section 4 explains the extension of
the basic model to the case of a small open economy. Section 5 applies the
model to the Czech economy data and presents the estimates of the Czech
inflation dynamics determination.
The results of the estimates suggest that the dynamics of the Czech
inflation evolves in line with a P* model logic: the inflation in the current
period changes to close the price gap, i.e. the gap between actual and
equilibrium price level. The foreign component of the price gap seems to
be more important than domestic component which supports the
hypothesis that the equilibrium price level in the Czech Republic is to a
large extent determined by the monetary policy in the EU via the explicit or
implicit peg of the Czech currency exchange rate to EUR. The overall
results show that the inflation in the Czech Republic is primarily a
monetary phenomenon.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 564
"Shareholder Power and Corprate Governace"
Dennis Leech
The pattern of ownership and control of British industry is unusual
compared with most other countries in that ownership is relatively
dispersed. Typically the largest shareholder in any large listed company is
likely to own a voting minority of the shares. Majority ownership by a
single shareholder is unusual. It is not uncommon for the largest
shareholding to be under 20 percent and in many cases it is much less than
that. A broadly similar pattern is observed in the USA.
Two inferences about corporate governance are conventionally drawn from
this, following the early work of Berle and Means: (1) All but the very
largest shareholders are typically too small to have any real incentive to
participate in decision making; (2) All but the very largest shareholdings
are too small to have any real voting power. The question of voting power
is the focus of this paper. Conventional analyses use a rule of thumb of
20%, assuming shareholders to be fundamentally passive in relation to the
running of the company, whatever their style of investment management,
unless one of them is above this figure. The London Stock Exchange
defines a controlling holding to be one greater than 30 percent. Much
empirical work uses declarable stakes, which in the UK are those of 3
percent or more, and disregards anything smaller assuming it to be
powerless. In fact, however, a 1% stake in the 100th largest company
(Smiths Industries) is worth about £29million, which suggests its owner has
strong incentives to be active, and might wish to use his voting power.
Theoretical voting power of minority shareholding blocks is studied using
the game-theoretic idea of voting power indices. This is applied to a model
of ownership control based on the definition of control used by Berle and
Means in their classic study. The results give support for use of a 20
percent rule in many cases but not all. Also they support the idea that
many companies are potentially controlled by a block of a few large
shareholders working in concert.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 563
"An Empirical comparison of the performance of Classical Power
Indicies"
Dennis Leech
Power indices are general measures of the relative voting power of
individual members of a voting body. They are useful in helping understand
and design voting bodies particularly those which employ weighted voting,
in which different members having different numbers of votes. It is well
known that in such bodies a member's voting power, in the sense of their
capacity to affect the outcomes of votes called, rarely corresponds to the
actual number of votes allocated to him. Many voting bodies for which this
is an important consideration exist: examples include international
organisations (notably the World Bank, the IMF, the European Union), the
US presidential Electoral College and corporations in which votes are
proportionate to stockholdings.
Two classical power indices dominate the literature: the Shapley-Shubik
index and the Banzhaf index (also known by other names). Both are based
on the idea that a member's power depends on the relative number of
times they can change a coalition from losing to winning by joining it and
adding their vote. They may be defined in probabilistic terms as the
probability of being able to swing the result of a vote, where all possible
outcomes are taken as equiprobable. The indices differ however in the way
they count voting coalitions. In probabilistic terms they use different
coalition models and therefore differ in precisely what is meant by
equiprobable outcomes.
The indices have been used in a number of empirical applications but their
relative performance has remained an open question for many years, a
factor, which has hindered the wider acceptance of the approach.
Where both the indices have been used for the same case, they have often
given different results, sometimes substantially so, and theoretical studies
of their properties have not been conclusive. There is therefore a need for
comparative testing of their relative performance in practical contexts.
Very little work of this type has been done however for a number of
reasons: lack of independent indicators of power in actual voting bodies
with which to compare them, difficulties in obtaining consistent data on a
voting body over time with sufficient variation in the disposition of votes
among members of actual legislatures and the lack of independent criteria
against which the results of the indices may be judged. It has also been
hampered to some extent by lack of easily available algorithms for
computing the indices in large games.
This paper assesses the indices against a set of reasonable criteria in
terms of shareholder voting power and the control of the corporation in a
large cross section of British companies. Each company is a separate
voting body and there is much variation in the distribution of voting shares
among them. Moreover reasonable criteria exist against which to judge
the indices. New algorithms for the Shapley-Shubik and Banzhaf indices are
applied to detailed data on beneficial ownership of 444 large UK companies
without majority control. Because some of the data is missing, both finite
and oceanic games of shareholder voting are studied to overcome this
problem.
The results, judged against these criteria, are unfavorable to the
Shapley-Shubik index and suggest that the Banzhaf index much better
reflects the variations in the power of shareholders between companies as
the weights of shareholder blocks vary.

Keywords: Power indices; Shapley-Shubik index; Banzhaf index; oceanic
games; co-operative game theory.

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WORKING PAPER NO 562
"Asset Ownership and Investment Incentives Revisited"
David de Meza and Ben Lockwood

Previous work on the property rights theory of the firm suggests that in
the presence of outside options, asset ownership may demotivate
managers. This paper shows that this conclusion relies on the assumption
that a manager’s outside option only depends on her own investment. In
many cases, an asset owner has the opportunity to continue with a project
even if the team breaks up. The investments of non-owners may then be
devalued, but are typically not wholly lost to the owner. This weakens the
bargaining power of the non-owner. So, in the presence of cross effects,
outside options do not necessarily overturn the property of the original
Grossman-Hart-Moore model that an asset transfer may motivate the
gainer and demotivate the loser.

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WORKING PAPER NO 561
"Inconsequential Arbitrage"
Frank H Page Jr, Myrna H. Wooders and Paulo K.Monteiro

We introduce the concept of inconsequential arbitrage and, in the context
of a model allowing short-sales and half-lines in indifference surfaces, we
prove that inconsequential arbitrage is sufficient for existence of
equilibrium. With a slightly stronger condition of local nonsatiation than
required for existence of equilibrium and with a mild uniformity condition
on arbitrage opportunities, we show that the existence of a pareto-optimal
allocation implies inconsequential arbitrage, implying that inconsequential
arbitrage is necessary and sufficient for existence of an equilibrium. By
further strengthening our nonsatiation condition, we obtain a second
welfare theorem for exchange economies allowing short sales. To further
understand inconsequential arbitrage, we introduce the notion of
exhaustible arbitrage and we show that any inconsequential arbitrage is
exhaustible. We also compare inconsequential arbitrage to the conditions
limiting arbitrage of hart (1974) and Werner (1987), as well as to the
conditions recently introduced by Dan, Le Van, and Magnien (1999) and
Allouch (1999). For example, we show that the condition of Hart
(translated to a general equilibrium setting) and the condition of Werner
are equivalent. We then show that the Hart/Werner conditions imply
inconsequential arbitrage. To highlight the extent to which we extend
Hart and Werner, we construct an example of an exchange economy in
which inconsequential arbitrage holds (and is necessary and sufficient for
existence), while the Hart/Werner conditions do not hold. Finally, under
additional conditions on the model, we show that if agents' indifference
surfaces contain no half lines, then inconsequential arbitrage, the
Hart/Werner conditions, the Dana, Le Van, and Magnien condition, and
Allouch's conditions are all equivalent - and in turn, equivalent to the
existence of equilibrium.

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WORKING PAPER NO 560
"Commuting in Great Britain in the 1990s"
Andrew Benito and Andrew J. Oswald

The paper studies commuting in Great Britain in the 1990s. The average
one-way commute to work is now 38 minutes in London, 33 minutes in the
south-east, and 21 minutes in the rest of the country. There are three
other findings. First, commuting times are especially long among the
highly educated, among home-owners, and among those who work in large
plants and offices. In Britain, people with university degrees spend 50%
more time travelling to work than those with low qualifications. Private
renters do much less commuting than owner-occupiers. Second, there has
recently been a rise in commuting times in the south-east and the capital.
In our sample, full-time workers in London have lost 70 minutes per week
of leisure time to commuting during the course of the 1990s. By contrast,
outside the south-east of Britain, there has been no increase in commuting
over this decade. In the south-east, 30% of workers now take at least 45
minutes to get to work. In the rest of the country, only 10% do. Third,
after controlling for other factors and allowing for the endogeneity of the
wage rate, there is a ceteris paribus inverse relationship between
commuting hours and hourly pay.

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WORKING PAPER NO 559
"Housing Subisidies and Work Incentives in Great Britain"
Paul Bingley and Ian Walker

In Great Britain the move away from rented accommodation to owner
occupation is leaving behind a large group of households with low incomes,
wages and hours of work, and high housing costs, who are increasingly in
receipt of welfare transfers. The disparity along all of these dimensions
between renters and owner occupiers has continued to grow since the
1970’s.

The relationship between housing costs, wages and transfer programmes is
complex and yet plays an important part in determining the incentive to
work for individuals in low income or high housing cost households. While
it is true that many individuals who are in these categories are out of the
labour force (retired, sick and disabled), there are many who are not and
whose incentive to seek work, or to work harder if already in work, could
be modified by directly changing the rent levels they face or indirectly via
changes to the structure of programmes designed to subsidise housing for
the poor.

Here we estimate a static discrete choice labour supply model which allows
for housing benefit programme participation. We use samples of 42491
married women and 13340 unmarried women drawn from Great Britain
Family Resources Surveys 1994/5-97/8. We find that women are quite
responsive to labour supply incentives, housing benefit income has similar
incentive effects to earned income which suggests any "stigma" is small.
Our analysis is complemented by simulating housing benefit and direct rent
subsidy reforms.

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WORKING PAPER NO 558
"Issue Linkage and Issue Tie-in in Multilateral Negotiations"
Paola Conconi and Carlo Perroni

We describe a model of international, multidimensional policy coordination
where countries can enter into selective and separate agreements with
different partners along different policy dimensions. The model is used to
examine the implications of negotiation tie-in - the requirement that
agreements must span multiple dimensions of interaction - for the viability
of multilateral cooperation when countries are linked by international trade
flows and transboundary pollution. We show that, while in some cases
negotiation tie-in has either no effect or can make multilateral cooperation
more viable, in others a formal tie-in constraint
can make an otherwise viable joint multilateral agreement unstable.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 557
"Staggered Wages and Output Dynamics under Disinflation"
Guido Ascari and Neil Rankin

We study the output costs of a reduction in monetary growth in a dynamic
general equilibrium model with staggered wages. The money wage is fixed
for two periods, and is chosen according to intertemporal optimisation.
Agents have labour market monopoly power. We show that the introduction
of microfoundations helps to resolve the puzzle raised by directly
postulated models, namely that disinflation in staggered pricing models
causes a boom. In our model disinflation, whether unanticipated or
anticipated, unambiguously causes a slump.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 556
"Cartel Stability and Product Differentiaiton: How Much Do the Size of
the Cartel and the Size of the Industry Matter?"
Pedro Posada

This article analyses how the degree of product differentiation, the size of
the cartel and the size of the industry affect the stability of a cartel
formed by any number of firms in an industry of any size. The paper
considers a supergame-theoretic model to define stability. After a
non-loyal member leaves the cartel, two possible reactions by the
remaining members of the cartel are assumed. The first one is a trigger
strategy where the cartel dissolves after one member has left and the
second is one where the cartel keeps acting as a cartel with one member
less. The work also extends the analysis to investigate the stability of the
remaining cartel. The results indicate that the relation between the cartel
stability and the degree of differentiation of the products depends
considerably on the size of the cartel, the size of the industry and the
reaction of the loyal members of the cartel.

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WORKING PAPER NO 555
"Micro Evidence on Human Capital as the Engine of Growth"
Philip Trostel

This study examines a crucial assumption in much of the recent work on
endogenous growth, namely, constant returns to scale in the production of
human capital. A simple model is constructed to show that the returns to
scale in human capital production can be inferred from the relationship
between the wage rate and years of schooling. A large international micro
dataset is used to estimate this relationship. The empirical evidence is
decisive. There are decreasing returns to scale in human capital
production; that is, the micro-level evidence is not supportive of
endogenous growth driven by human capital accumulation.

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WORKING PAPER NO 554
"Education and Work"
Philip Trostel and Ian Walker

This paper examines the linkage between the incentives to work and to
invest in human capital through education. These incentives are shown to
be mutally reinforcing in a simple stylized model. This theoretical
predicton is investigated empirically using three large micro datasets
covering a broad set of countries. As one might expect, education and
work are strongly (positively) correlated. This correlation has important
implications for models of fiscal policy and economic growth. It also has
important implications for the estimation of labor supply and the rate of
return to education.

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WORKING PAPER NO 553
"Measuring Social Capital: Culture as an Explanation of Italy's Economic
Dualism"
Francesco Galassi and Stephen Pudney

The paper presents a quantitative test of the oft-repeated view that Italy’s
backward and poor South suffered from low “social capital”, a tendency to
defect from co-operative engagements. The problem with such assertions
is that they run the risk of taking as evidence in favour of the hypothesis
the very observations that need to be explained. The analysis carried out
in this work tries to break out of this impasse by analysing the conditions
under which it was ex ante welfare-improving for farmers in early 20th
century Italy to join an unlimited liability rural co-operative bank which
would give them access to cheaper credit but also exposed them to the risk
of their neighbours’ defection. These co-ops are a prime testing ground
for the cultural explanation in that they spread rapidly throughout Northern
Italy in the late 19th century, but never gained a similar popularity in the
South. I estimate the switching function for these co-ops in different parts
of the country to test whether Northern and Southern farmers faced
significantly different choice sets when making the decision to join.
Identical choice sets but differential responses would of course favour the
cultural explanation of the South’s backwardness. The results suggest that
for the same parameter values, the choice sets for North and South were
different, though whether this difference was large enough to explain the
full difference in responses is not completely clear.

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WORKING PAPER NO 552
"Output Risk in Tuscan Agriculture in the Late 19th and Early 20th
Centuries"
Francesco Galassi and Stephen Pudney

We analyse output risk in Italian agriculture over the period 1870-1914.
We use data on a set of 16 tenanted plots grouped into three farms
comprising a single large estate. We estimate the degree of risk
associated with each separate crop, with the portfolio of crops at the level
of the plot, the farm and the estate. We highlight two particular features:
the relatively high risk associated with tree crops (wine, oil and nuts); and
the substantial scope for the landlord to reduce risk through crop
diversification across plots. We discuss the implications of these for
tenure contract theory.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 551
"A Penny for your Thoughts: e-mail and the under-valuation of expert
time"
Chris Willmore

The cost incurred by the sender of an e-mail does not reflect the costs to
the recipient, leading to a larger number of messages being sent than is
optimal for the general welfare. As a solution, we suggest a per-message
e-mail tax on the sender similar to that proposed by Shiman (1996), with
the addition of a recipient-determined 'contact list'. The recipient derives
utility from messages sent by those on this list, and they are not to be
taxed when sending messages to the recipient. We recommend that the
tax revenue be divided between a regulating body and the e-mail
recipient's Internet service provider.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 550
"Gradualism and Irreversibility"
Ben Lockwood and Jonathan P. Thomas

This paper considers a class of two-player dynamic games in which each
player controls a one-dimensional variable which we interpret as a level of
cooperation. In the base model, there is an irreversibility constraint
stating that this variable can never be reduced, only increased. It
otherwise satisfies the usual discounted repeated game assumptions.
Under certain restrictions on the payoff function, which make the stage
game resemble a continuous version of the Prisoners’ Dilemma, we
characterize efficient symmetric equilibria, and show that cooperation
levels exhibit gradualism and converge, when payoffs are smooth, to a
level strictly below the one-shot efficient level: the irreversibility induces a
steady-state as well as a dynamic inefficiency. As players become very
patient, however, payoffs converge to (though never attain) the efficient
level. We also show that a related model in which an irreversibility arises
through players choosing an incremental variable, such as investment, can
be transformed into the base model with similar results. Applications to a
public goods sequential contribution model and a model of capacity
reduction in a declining industry are discussed. The analysis is extended to
incorporate partial reversibility, asymmetric equilibria, and sequential
moves.

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WORKING PAPER NO 549
"When are Plurality Rule Voting Games Dominance-Solvable?"
Amrita Dhillon and Ben Lockwood

This paper studies the dominance-solvability (by iterated deletion of
weakly dominated strategies) of plurality rule voting games. For K > 3
alternatives and n > 3 voters, we find sufficient conditions for the game to
be dominance-solvable (DS) and not to be DS. These conditions can be
stated in terms of only one statistic of the game, the largest proportion of
voters who agree on which alternative is worst in a sequence of subsets of
the original set of alternatives. When n is large, “almost all” games can be
classified as either DS or not DS. If the game is DS, a Condorcet Winner
always exists when n > 4, and the outcome is always the Condorcet Winner
when the electorate is sufficiently replicated

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 548
"Can Green Lobbies Replace a World Envorinmental Organization"
Paola Conconi

We employ a common agency model to examine how green lobbies affect
the determination of trade and environmental policy in two large countries
that are linked through trade flows and transboundary pollution. We show
that, when governments are not restricted in their ability to use trade
barriers, environmental lobbying always results in higher pollution taxes
relative to a no-lobbying scenario. Consequently, uncoordinated
environmental policies are closer to the effcient Pigouvian solution than
internationally coordinated policies. If, however, governments are bound
by international trade rules, green lobbies may bias environmental policies
downwards and environmental policy coordination is unambiguously
effciency-enhancing.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 547
"Useful government Spending, Direct Crowding-Out and Fiscal Policy
Interdependence"
Giovanni Ganelli

This paper introduces perfect substitutability between private and public
consumption in a dynamic, open economy with imperfect competition and
nominal rigidities. This implies a direct crowding-out effect that,
generalising to the two-country case some well-known properties of a
closed economy, tends to reduce consumption following both domestic and
foreign expansions. A less expected result is that sub-stitutability has a
positive effect on the short-run output spillover. We also show that, if we
modify the model to allow for home bias in government spending,
temporary fiscal expansions display a "quasi-neutrality" property.

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WORKING PAPER NO 546
"A Law of Scarcity for Games"
Alexander Kovalenkov and Myrna Holtz Wooders

The "law of scarcity" is that scarceness is rewarded; recall, for example,
the diamonds and water paradox. In this paper, furthering research
initiated in Kelso and Crawford (1982, Econometrica 50, 1483-1504) for
matching models, we demonstrate a law of scarcity for cores and
approximate cores of games.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 545
"Elections and Strategic Positioning Games"
Frank H Page, Jr and Myrna Holtz Wooders

We formalize the interplay between expected voting behavior and stragetic
positioning behavior of candidates as a common agency problem in which
the candidates (i.e. the principals) compete for voters (i.e. agents) via the
issues they choose and the positions they take. A political situation is
defined as a feasible combination of candidate positions and expected
political payoffs to the candidates. Taking this approach, we are led
naturally to a particular formalization of the candidates’ positioning game,
called a political situation game. Within the context of this game, we
define the notion of farsighted stability (introduced in an abstract setting
by Chwe (1994)) and apply Chwe’s result to obtain existence of farsightedly
stable outcomes. We compute the farsightedly stable sets for several
examples of political situations games, with outcomes that conform to
real-world observations.

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WORKING PAPER NO 544
"Time-Inconsistent Candidates vs. Time-Inconsistent Voters: Imperfect
Policy Commitment in Political Equilibrium"
Marco Pani and Carlo Perroni

This paper examines whether policy commitment mechanisms, when
available, will be used by the elected policymaker in a political-economy
equilibrium. We describe a two-period repeated voting model where
second-period outcomes depend on commitment choices made by an
elected policymaker in the first period, and where elected candidates may
choose to deviate from their preferred level of commitment, retaining
discretionary control of policy variables, in order to secure a favourable
second-period political outcome. The implications of different political
tenure systems for the candidates who are elected, the policy targets that
are selected, the degree of commitment to their implementation, and the
policies that are actually implemented in the model are examined.

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WORKING PAPER NO 542
"Adoption of an IMF Programme and Debt Rescheduling. An Empirical
Analysis"
Silvia Marchesi

Abstract
The existence of an empirical relationship between the adoption of an IMF
programme and the concession of a debt rescheduling by commercial and
official creditors is tested using a bivariate probit model. If countries who
have arrangements with the IMF are more likely than others to obtain a
rescheduling of their external debt we could conclude that the adoption of
an IMF programme could work as a sort of signal of a country’s “good
willingness”, which is thus rewarded with the debt relief. The results
confirm the existence of a significant effect of the adoption of an IMF
programme on the subsequent concession of a debt rescheduling by
creditors.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 540
"The Allocation of Carbon Permits within One Country: A General
Equilibrium Analysis of the United Kingdom"
T. Huw Edwards and John P. Hutton

As part of the Kyoto agreement on limiting carbon emissions, from 2008
onwards an international market in auctionable carbon permits will be
established. This raises the issue of whether trading should be simply
between governments or between companies, or in the latter case how
such permits should be allocated.

Our paper uses the British section of a CGE model of the European energy
sectors to evaluate the economics of various methods of allocating permits
within a country, as discussed in Lord Marshall’s recent report to the
British government. The option of allocation entirely by auction is similar
to the setting of a carbon tax, and the recycling of revenues to reduce or
offset other economic distortions could produce a potential net benefit to
incomes and employment. 'Grandfathering' some of the permits free to
large firms, according to their base year carbon emissions, would mean
loss of the benefits of recycling auction revenues. This might be
exacerbated if it created windfall profits repatriated by foreign
shareholders. The third major alternative is to review the allocation
regularly, awarding permits to all firms according to a ‘benchmark’
allocation, based on 'best practice' as estimated by outside experts. This
would be similar in practice to recycling the revenue as an output subsidy
to the industry, though it could be complicated to implement. Such a
system could allow much of the potential ‘double dividend’ to be realised,
though it might still be preferable to auction permits, with the revenues
used to offset taxes across a wider spread of industry.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 539
"Child Support Reform: Some Analysis of the 1999 White Paper"
Gillian Paul and Ian Walker

This paper uses a sample of lone mothers (and former lone mothers who
are now repartnered) drawn from the 1997 Family Resources Survey to
analyse the potential effects of reforming the UK system of Child Support.
The main deficiency of the data is that non-resident fathers cannot be
matched to the mothers in the data and this is overcome by exploiting
information from another dataset which gives the joint distribution of the
characteristics of separated parents. The effects of reforming the Child
Support system is simulated for the amount of maintenance liabilities, the
amount paid and the net incomes of households containing mothers with
care and households containing non-resident fathers. The likely effects of
the reform are simulated at various levels of compliance. The analysis
highlights the need for further research into the incentive effects of Child
Support on individual behaviour.

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WORKING PAPER NO 538
"A Further Extension of the KKMS Theorem"
Yakar Kannai and Myrna Holtz Wooders

Recently Reny and Wooders ([23]) showed that there is some point in the
intersection of sets in Shapley's ([24]) generalization of the
Knaster-Kuratowski-Mazurkiwicz Theorem with the property that the
collection of all sets containing that point is partnered as well as balanced.
In this paper we provide a further extension by showing that the collection
of all such sets can be chosen to be strictly balanced, implying the
Reny-Wooders result. Our proof is topological, based on the
Eilenberg-Montgomery fixed point Theorem. Reny and Wooders ([23]) also
show that if the collection of partnered points in the intersection is
countable, then at least one of them is minimally partnered. Applying
degree theory for correspondences, we show that if this collection is only
assumed to be zero dimensional (or if the set of partnered and strictly
balanced points is of dimension zero), then there is at least one strictly
balanced and minimally partnered point in the intersection. The approach
presented in this paper sheds a new geometric-topological light on the
Reny-Wooders results.

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WORKING PAPER NO 537
"An Explicit Bound on E For Nonemptimess of E-Cores of Games"
Alexander Kovalenkov and Myrna Holtz Wooders

We consider parameterized collections of games without side payments
and determine a bound on E so that all suffciently large games in the
collection have non-empty E-cores. Our result makes explicit the
relationship between the required size of E for non-emptiness of the
E-core, the parameters describing the collection of games, and the size of
the total player set. Given the parameters describing the collection, the
larger the game, the smaller the E that can bechosen.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 536
"Epsilon Cores of Games and Economies with Limited Side Payments"
Alexander Kovalenkov and Myrna Holtz Wooders

We introduce the concept of a parameterized collection of games with
limited side payments, ruling out large transfers of utility. Under the
assumption that the payoff set of the grand coalition is convex, we show
that a game with limited side payments has a nonempty E-core. Our main
result is that, when some degree of side-paymentness within
nearly-effective small groups is assumed, then all payoffs in the E-core
treat similar players similarly. A bound on the distance between E-core
payoffs of any two similar players is given in terms of the parameters
describing the game. These results add to the literature showing that
games with many players and small effective groups have the properties of
competitive markets.

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WORKING PAPER NO 535
"Approximate Cores of Games and Economies with Clubs
Alexander Kovalenkov and Myrna Holtz Wooders

We introduce the framework of parameterized collections of games and
provide three nonemptiness of approximate core theorems for arbitrary
games with and without sidepayments. The parameters bound (a) the
number of approximate types of players and the size of the approximation
and (b) the size of
nearly effective groups of players and their distance from exact
effectiveness. The theorems are based on a new notion of
partition-balanced profiles and approximately partition-balanced profiles.
The results are then applied to a new model of an economy with clubs. In
contrast to the extant literature, our
approach allows both widespread externalities and uniform results.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 534
"Economic Integration and Human Capital Investment"
Norman Ireland and Guido Merzoni

In this paper we seek to characterise a market for heterogeneous
managers created by heterogeneous firms and the decisions on investment
in both sector-specific and firm-specific human capital when those
decisions are made prior to the realisation of firms' profitability and the
degree of markets’ integration may vary. We consider the (Nash)
equilibrium and relate this to a first-best allocation. The rent-seeking
motives of managers and firms will generally make sector- and
firm-specific investment decisions not socially optimum, both with respect
to the number of investors and the level of each investment. The effect on
welfare of markets’ integration varies with the nature of the skills
considered. With more general, sector-specific, skills more integration, by
increasing the matching ability of the market, reduces the distortion
caused by rent-seeking, and increases social welfare. However, with more
specific skills the increased matching ability of a more integrated market,
by making managers more mobile, destroys some firm-specific human
capital and so reduces welfare.

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WORKING PAPER NO 533
"Investment Subsidies and Time Consistent Environmental Policy"
Lisandro Abrego and Carlo Perroni

'We describe a model of dynamic poluution abatement choices with
heterogeneous agents, where, due to the presence of a distributional
objective and to the absence of incentive-compatible compensation
mechanisms, the choice of a second-best level of emission taxation is
time-inconsistent. In this model, we investigate whether investment
subsidies can act as a substitute for policy commitment.'

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WORKING PAPER NO 532
"Low-Pay Transitions and Attrition Bias in Italy: An Analysis Using
Simulation Based Estimation"
Lorenzo Cappellari

'This paper analyses the extent to which existing econometric models of
low-pay transition probabilities in Italy are biased by the presence of
endogenous panel attrition. Non-random exits from the sample of wage
earners may result from both demand and supply side factors and this
could lead to under- or overestimation (respectively) of the extent of
low-wage persistence. The analysis is carried out by extending the
bivariate probit model used in Cappellari [1999] (where starting state and
transition probabilities are jointly modelled thus tackling the endogeneity
of the conditioning starting wage state) with a third equation which
controls for the non-randomness of panel attrition. The resulting trivariate
probit model with endogenous switching, whose evaluation is not feasible
within the routines customarily available in microeconometric packages, is
implemented by applying simulation estimation techniques. Results show
the ignorability of attrition in SHIW data, thus pointing towards the
robustness of the results previously obtained without controlling for
attrition.'

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WORKING PAPER NO 531
"Low-Wage Mobility in the Italian Market"
Lorenzo Cappellari

'This paper uses SHIW panel data for 1993 and 1995 to model individual
transition probabilities at the bottom of the Italian wage distribution. The
analysis is based on a bivariate probit model with endogenous switching
which allows tackling the initial conditions problem, i.e. the potential
endogeneity of the conditioning starting state. Results show the
appropriateness of such a choice: the correlation between state and
transition probabilities is significantly different from zero, while
overlooking endogeneity leads to overstatement of both size and
significance of coefficients in the transition equation. The paper shows
that while some factors such as education, sex and geographical location
have an effect on low-pay persistence, job related variables are more
effective in avoiding falls into low-pay from higher pay. It is also shown
how raw persistence involves a considerable share of true state
dependence, pointing towards the existence of low-pay stigma.'

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 530
"Heterogeneity and the Distribution of Wages"
V.Bhaskar and Ted To

A number of theories (search and efficiency wages) have been developed,
in part, to explain why identically able workers are often paid different
wages. However, when there is a minimum wage, they do not explain the
resulting "spike" in the wage distribution. Our model's predictions are
consistent with this evidence. We assume that workers are equally able
but have heterogeneous preferences for non-wage characteristics, while
employers have heterogeneous productivity characteristics. This results in
a model of labor market oligopsony where "inside" and "outside" forces
interact, producing wage dispersion as well as a spike at the minimum
wage.

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WORKING PAPER NO 529
"Minority Control: An Analysis of British Companies Using Voting Power
Indices"
Dennis Leech

'An exercise in the empirical use of voting power indices from cooperative
game theory to applied ownership data for large companies, this paper
contributes in two areas: (1) the analysis of company control based on
shareholding voting power, and (2) the empirical use of power indices and
understanding of the comparative properties of different indices. New
algorithms for calculating power indices, which quantify voting power in
weighted voting bodies like company meetings, are applied to detailed
data on beneficial ownership of 444 large UK companies without majority
control. The results show that the Banzhaf index is, and the Shapley-Shubik
index is not, useful for this analysis and a control classification of the
firms is obtained.'

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 528
"Identification and Estimation of a Labour Market Model for the
Tradeables Sector: The Greek Case"
Costas Milas and Jesus G. Otero

'This paper derives a theoretical labour market model for the tradeables
sector of a small open economy. Using Greek manufacturing data and
applying multivariate cointegrating techniques, two cointegrating vectors
are estimated based on the a priori restrictions provided by the theoretical
model; a labour demand and a real exchange rate equation, respectively.
The short-run estimates of the model suggest that labour decisions not
only depend upon past disequilibria in the labour market, but also on the
discrepancy between the real exchange rate and its implied long-run
equilibrium relationship, that is, the magnitude of the real exchange rate
misalignment.'

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WORKING PAPER NO 527
"Production Externalities and Two-Way Distortion in
Principal-Multi-Agent Problems"
Ben Lockwood

'This paper studies an otherwise standard principal-agent problem with
hidden information, but whether there are positive production
externalities between agents: the output of any agent depends positively
on the effort expended by the other agents. It is shown that the optimal
contract for the principal exhibits two-way distortion: the effort of any
agent is oversupplied (relative to the first-best) when his marginal cost
effort is low, and undersupplied his marginal cost of effort is high. This
pattern of distortion cannot otherwise arise in optimal single- or
multi-agent incentive contracts, unless there are countervailing incentives.
However, unlike the countervailing incentives case, the pattern of
distortion is robust to the precise form of the externality. '

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WORKING PAPER NO 526
"Time, Self-Selection and User Charges for Public Goods"
Dan Anderberg, Fredrik Andersson and Alessandro Balestrino

'Many public goods generate utility only when combined with time-input.
Important examples include road networks and publicly provided leisure
facilities. If it is possible to charge for the time spent using the public
good it is generally a second-best Pareto optimal policy to do so even in
the absence of congestion. An optimal linear user charge is analysed within
a standard optimum income-tax framework. Second-best public good
provision in the presence of a user charge is also characterized and factors
that influence the direction of optimal distortion of the public good supply
are identified.'

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WORKING PAPER NO 524
"Modelling the Behaviour of the Spot Prices of Various Types of Coffee"
By Jesus G. Otero and Costas Milas

'This paper investigates long-run relationships among the spot prices of
four coffee types. We find two cointegrating vectors: one between the
prices of Other Milds and Colombian coffee, and the other one between
Unwashed Arabicas and Robustas. Following Pesaran and Shin (1996),
persistence profile analysis of the two cointegrating vectors shows a rapid
adjustment towards their equilibrium value. This suggests that the four
coffee markets are highly related, and that discrepancies in the
equilibrium relationships are short-lived. Out of sample evaluation of the
model is reasonably good, except for two occasions of sharp price
increases following adverse weather conditions.'

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 523
"A Dynamic Macroeconometric Model For Short-Run Stabilisation in
India"
By Sushanta K. Mallick

'This paper presents a small macroeconometric model examining the
determinants of Indian trade and inflation to address the effects of a
reform policy package similar to those implemented in 1991. This is
different from previous studies along one important dimension that we
explicitly incorporate the non-stationarity of the data into our model and
estimation procedures, which suggest that the stationarity assumption
may be a source of misspecification in previous work. So the model has
been estimated using the data from 1950 to 1995 employing fully-modified
Phillips-Hansen Method of estimation to obtain the cointegrating relations
and short-run dynamic model. Policy simulations using dynamic simulations
method compare the dynamic responses to devaluation with the responses
to tight credit policy. It is shown that the trade balance effects of tight
credit policy are more enduring than those of devaluation. The simulations
demonstrate that the devaluation has actually worsened the trade balance
and hence devaluation is not an option in response to a negative trade
shock, whereas the reduction in domestic credit produces a desirable
improvement in the trade balance.'

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WORKING PAPER NO 522
"Business Cycles Asymmetries: Characterisation and Testing based on
Markov-Switching Autoregressions"
By Michael P. Clements and Hans-Martin Krolzig

'We propose testing for business cycle asymmetries in Markov-switching
autoregressive (MS-AR) models. We derive the parametric restrictions on
MS-AR models that rule out types of asymmetries such as deepness,
steepness, and sharpness, and set out a testing procedure based on Wald
statistics which have standard asymptotics. For a two-regime model, such
as that popularised by Hamilton (1989), we show that deepness implies
sharpness (and vice versa) while the process is always non-steep. We
illustrate with two and three-state MS models of US GNP growth, and with
models of US output and employment. Our findings are compared with
those obtained from standard non-parametric tests.'

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WORKING PAPER NO 521
"Maximum Sustainable Government Debt in the Overlapping
Generational Model"
By Neil Rankin and Barbara Roffia

'The theoretical determinants of maximum sustainable government debt
are investigated using Diamond’s overlapping-generations model. A level
of debt is defined to be ‘sustainable’ if a steady state with non-degenerate
values of economic variables exists. We show that a maximum sustainable
level of debt almost always exists. Most interestingly, it normally occurs at
a ‘catastrophe’ rather than a ‘degeneracy’, i.e. where variables such as
capital and consumption are in the interiors, rather than at the limits, of
their economically meaningful ranges. This means that if debt is increased
step by step, the economy may suddenly collapse without obvious warning.'

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WORKING PAPER NO 520
"A Note on the Estimated Coefficients in Random Effects Probit Models"
By Wiji Arulampalam

'This note points out to applied researchers what adjustments are needed
to the coefficient estimates in a random effects probit model in order to
make valid comparisons in terms of coefficient estimates and marginal
effects across different specifications. These adjustments are necessary
because of the normalisation that is used by standard software in order to
facilitate easy estimation of the random effects probit model.'

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 518
"Too Cool for School? A Theory of Countersignaling"
By Nick Feltovich, Rick Harbaugh and Ted To

'In sender-receiver games high-quality types can distinguish themselves
from low-quality types by sending a costly signal. Allowing for additional,
noisy information on sender types can radically alter sender behavior in
such games. We examine equilibria where meduim types seperate
themselves from low types by signaling, but high types then differentiate
themselves from medium types by not signaling or counter-signaling. High
types not only save the cost of signaling by relying on the additional
information to stochastically separate themselves from low types, but in
doing so they separate themselves from the signaling medium types.
Hence they may countersignal even when signaling is a productive activity.
To evaluate this theory we report on a two-cell experiment in which the
unique Nash-equilibrium of one cell involves countersignaling by high
types. Experimental results confirm that subjects can learn to
countersignal.'

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WORKING PAPER NO 516
"Forecasting with Difference-Stationary and Trend-Stationary Models'
By M. P. Clements and D. P. Hendry

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 515
"A Non-Normative Theory of Inflation and Central Bank Independence"
By Berthold Herrendorf and Manfred J. M. Neumann

We study monetary policy under different central bank constitutions when
the labor-market insiders set the nominal wage so that outsiders are
involuntarily unemployed. If the insiders are in the majority, the
representative insider will be the median voter. We show that an
independent central bank, if controlled by the median voter, does not
produce a systematic inflation bias, albeit equilibrium employment is too
low from a social welfare point of view. A dependent central bank, in
contrast, is forced by the government to collect seigniorage and to take
the government's re-election prospects into account. The predictions of our
theory are consistent with the evidence that central bank independence
decreases average inflation and inflation variability, but does not affect
employment variability.'

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 513
"Distributive Politics and the Benefits of Decentralisation"
By Ben Lockwood

This paper integrates the distributive politics literature with the literature
on decentralization by incorporating inter-regional project externalities
into a standard model of distributive policy. A key finding is that the
degree of uniformity (or "universalism") of the provision of regional
projects is endogenous, and depends on the strength of the externality.
The welfare benefits of decentralization, and the performance of
"constitutional rules" (such as majority voting) which may be used to
choose between decentralization and centralization, are then discussed in
this framework.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 512
"Tests of the Expectations Hypothesis and Policy Reaction to the Term
Spread: Some Comparative Evidence"
By Gianna Boero and Costanza Torricelli

The aim of this paper is to evaluate the impact of monetary policy in tests
of the Expectations Hypothesis of the term structure of interest rates. We
apply the model developed by McCallum (1994b), in which the Expectations
Hypothesis interacts with a policy reaction function and with a
time-varying term premium, to eight countries with different monetary
policy stances, within the period 1985 to 1995. The results suggest the
importance of the treatment of monetary policy in explaining the empirical
performance of the Expectations Hypothesis. Amongst other results, we
also find that the model performs better for some countries than others
depending upon the monetary policy stance adopted.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 511
"The Assignment of Powers in Federal and Unitary States"
By Ben Lockwood

This paper studies a model where the power to set policy (a choice of
project) may be assigned to central and regional government via either a
federal or unitary constitutional rule (CR). The benefit of central provision
is economies of scale, while the cost is political inefficiency. Using the
analytical tool of the net dissenting vote, the relationship between federal
and unitary CRs is characterized. Efficiency of CRs is also studied: the
federal CR need not be more efficient than the unitary CR when regions
are diverse in tastes.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 487
"Forecasting Seasonal UK Consumption"
By Michael P. Clements and Jeremy Smith

Periodic models for seasonal data allow the parameters of the model to
vary across the different seasons. This paper uses the components of UK
consumption to see whether the periodic autoregressive (PAR) model yields
more accurate forecasts than non-periodic models, such as the airline
model of Box and Jenkins, and autoregressive models that pre-test for
(seasonal) unit roots. We analyse possible explanations for the relatively
poor forecast performance of the periodic models that we find,
notwithstanding the apparent support such models receive from the data
in-sample.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 477
"Crime and Drugs"
By Chris Doyle and Jennifer Smith

We present a model which ties together rational drug consumption,
taxation, crime and other drug-related externalities. Drug control policy is
addressed using an optimal tax framework. Consumption, possession and
production of a drug may be prohibited, legalized or decriminalized. In all
regimes illicit production of a drug may take place and drug-related crime
occurs. We show that illicit drug production, the price elasticity of demand
for a drug, the addictive nature of a drug, the effectiveness of drug
enforcement strategies, and income distribution all influence optimal
(second best) policy. Prohibition is contrasted with decriminalization and
legalization, and where legalization yields a higher welfare than prohibition
we show that this can be associated with greater drug-related crime and
more drug addiction. The model is discussed in the context of US National
Drug Control Strategy.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 467
"Performance of Alternative Forecasting Methods for SETAR Models"
By Michael P. Clements and Jeremy Smith

We compare a number of methods that have been proposed in the
literature for obtaining h-step ahead minimum mean square error
forecasts for SETAR models. These forecasts are compared to those from
an AR model. The comparison of forecasting methods is made using Monte
Carlo simulation. The Monte Carlo method of calculating SETAR forecasts
is generally at least as good as that of the other methods we consider. An
exception is when the disturbances in the SETAR model come from a highly
asymmetric distribution, when a Bootstrap method is to be preferred.

An empirical application calculates multi-period forecasts from a SETAR
model of US GNP using a number of the forecasting methods. We find that
whether there are improvements in forecast performance relative to a
linear AR model depends on the historical epoch we select, and whether
forecasts are evaluated conditional on the regime the process was in at the
time the forecast was made.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 464
"A Monte Carlo Study of the Forecasting Performance of Empirical
SETAR Models"
By Michael P. Clements and Jeremy Smith

In this paper we investigate the multi-period forecast performance of a
number of empirical self-exciting threshold autoregressive (SETAR) models
that have been proposed in the literature for modelling exchange rates and
GNP, amongst other variables. We take each of the empirical SETAR
models in turn as the DGP to ensure that the 'non-linearity' characterises
the future, and compare the forecast performance of SETAR and linear
autoregressive models on a number of quantitative and qualitative
criteria. Our results indicate that non-linear models have an edge in
certain states of nature but not in others, and that this can be highlighted
by evaluating forecasts conditional upon the regime.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 455
"Bargaining Power and Local Labour Market Influences on Wage
Determination"
By Jennifer Smith

This paper uses a unique panel of data at the level of the bargaining group
to examine aspects of 'right-to-manage' models of wage determination.
Empirical measures of firms' and unions' bargaining power are identified
and found to be important influences on wage setting. The role of union
characteristics in wage determination is examined; results confirm their
importance and illuminate previous survey findings. Features of the local
labour market are shown to affect bargained wages over and above the
influence of aggregate factors.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

WORKING PAPER NO 454
"Saving, Investment and Real Interest Rates"
By Jennifer Smith

This paper investigates the determinants of real interest rates at world
and country level. The starting point is the idea that real interest rates
reflect the interaction of desired saving and planned investment, using the
framework developed by Barro and Sala-i-Martin (1990) and Barro (1992).
The paper updates previous results and extends the analysis to study long
real interest rates. We analyse which factors have been responsible for
real rate 'regime shifts' during 1959 to 1992. We examine the
determinants of interest rate differentials across ten major industrialised
countries and provide estimates of the extent of capital market
integration.

[TOP OF TWERPS ABSTRACTS] [LIST OF TWERPS]

Most of the following papers are not available on-line. However hard copies
can be obtained from Fiona Brown, Department of Economics, University of
Warwick, Coventry CV4 7AL.











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