Knowledge that Transforms

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In a differential information economy with quasi–linear utilities, monetary transfers facilitate the fulfillment of incentive compatibility constraints: the associated ex ante core is generically nonempty. However, we exhibit a well–behaved exchange economy in which this core is empty, even if goods are allocated through random mechanisms.

We develop a new specification test for IV estimators adopting a particular second order approximation of Bekker. The new specification test compares the difference of the forward (conventional) 2SLS estimator of the coefficient of the right-hand side endogenous variable with the reverse 2SLS estimator of the same unknown parameter when the normalization is changed. Under the null hypothesis that conventional first order asymptotics provide a reliable guide to inference, the two estimates should be very similar. Our test sees whether the resulting difference in the two estimates satisfies the results of second order asymptotic theory. Essentially the same idea is applied to develop another new specification test using second-order unbiased estimators of the type first proposed by Nagar. If the forward and reverse Nagar-type estimators are not significantly different we recommend estimation by LIML, which we demonstrate is the optimal linear combination of the Nagar-type estimators (to second order). We also demonstrate the high degree of similarity for k-class estimators between the approach of Bekker and the Edgeworth expansion approach of Rothenberg. An empirical example and Monte Carlo evidence demonstrate the operation of the new specification test.

In this lecture, it is argued that Schumpeterian Growth Theory, in which growth is driven by a sequence of quality-improving innovations, can shed light on two important puzzles raised by the recent evolution of wage inequality in developed economies. The first puzzle concerns wage inequality between educational groups, which has substantially risen in the US and the UK during the past two decades following a sharp increase in the supply of educated labor. The second puzzle concerns wage inequality within educational groups, which accounts for a large fraction of the observed increase in wage inequality, although in contrast to between-group wage inequality it has mainly affected the temporary component of income.

Americanae nace como un proyecto conjunto que surge dentro de la Red Europea de Información y Documentación sobre América Latina (REDIAL), y que ha afrontado la Biblioteca de la Agencia Española de Cooperación Internacional para el Desarrollo (AECID). Esta nueva biblioteca virtual hace más accesibles los libros digitales de tema americanista a los investigadores y usuarios interesados de cualquier parte del mundo.

This paper uses “revealed probability trade-offs” to provide a natural foundation for probability weighting in the famous von Neumann and Morgenstern axiomatic set-up for expected utility. In particular, it shows that a rank-dependent preference functional is obtained in this set-up when the independence axiom is weakened to stochastic dominance and a probability trade-off consistency condition. In contrast with the existing axiomatizations of rank-dependent utility, the resulting axioms allow for complete flexibility regarding the outcome space. Consequently, a parameter-free test/elicitation of rank-dependent utility becomes possible. The probability-oriented approach of this paper also provides theoretical foundations for probabilistic attitudes towards risk. It is shown that the preference conditions that characterize the shape of the probability weighting function can be derived from simple probability trade-off conditions.

International audience

Egalement paru dans : Document de travail du LEA ; 00-02