Electricity was born at the dawn of the last century. Households were inundated with a ood of new consumer durables. What was the impact of this consumer durable goods revolution? It is argued here that the consumer goods revolution was conducive to liberating women from the home. To analyze this hypothesis, a Beckerian model of household production is developed. Households must decide whether or not to adopt the new technologies, and whether a married woman should work. Can such a model help to explain the rise in married female labor-force participation that occurred in the last century? Yes.
We derive the quantitative implications of growth theory for U.S. corporate equity plus net debt over the period 1960–2001. There were large secular movements in corporate equity values relative to GDP, with dramatic declines in the 1970's and dramatic increases starting in the 1980's and continuing throughout the 1990's. During the same period, there was little change in the capital—output ratio or earnings share of output. We ask specifically whether the theory accounts for these observations. We find that it does, with the critical factor being changes in the U.S. tax and regulatory system. We find that the theory also accounts for the even larger movements in U.K. equity values relative to GDP in this period.
We propose the parametric Dynamic Seemingly Unrelated Regression (DSUR) estimator for simultaneous estimation of multiple cointegrating regressions. DSUR is efficient when the equilibrium errors are correlated across equations and is applicable for panel cointegration estimation in environments where the cross section is small relative to the available time series. We study the asymptotic and small sample properties of the DSUR estimator for both heterogeneous and homogeneous cointegrating vectors. We then apply the method to analyse two long-standing problems in international economics. Our first application revisits the estimation of long-run correlations between national investment and national saving. Our second application revisits the question of whether the forward exchange rate is an unbiased predictor of the future spot rate.
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This paper presents a theory of the market provision of broadcasting and uses it to address the nature of market failure in the industry. Equilibrium advertising levels may be too low or too high, depending on the nuisance cost to viewers, the substitutability of programmes, and the expected benefits to advertisers from contacting viewers. The equilibrium amount of programming may also be below or above the socially optimal level. Perhaps surprisingly, the ability to price programming may reduce social surplus, while monopoly ownership may increase it.
We study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non-durable goods are consumed and the durable good is lumpy, At the microeconomic level, the timing of durable goods purchases supplies some insulation for nondurable consumption over the cycle. At the macroeconomic level, the timing decisions tend to amplify and propagate wealth and income shocks. Our model also allows for endogenous price determination. When the price of the durable changes due to inflexibility of workers between sectors, the effect of adverse shocks is even stronger and longer.
The Ellsberg paradox demonstrates that people's beliefs over uncertain events might not be representable by subjective probability. We show that if a risk averse decision maker, who has a well defined Bayesian prior, perceives an Ellsberg type decision problem as possibly composed of a bundle of several positively correlated problems, she will be uncertainty averse. We generalize this argument and derive sufficient conditions for uncertainty aversion.
Self-regulation is a feature of a number of professions. For example, in the U.S. the government delegates aspects of financial market regulation to self-regulatory organizations (SROs) like the New York Stock Exchange and the National Association of Securities Dealers. We analyse one regulatory task of an SRO, enforcing antifraud rules so agents will not cheat customers. Specifically, we model contracting/enforcement as a two-tier problem. An SRO chooses its enforcement policy: the likelihood that an agent is investigated for fraud and a penalty schedule. Given an enforcement policy, agents compete by offering contracts that maximize customers' expected utility. We assume that the SRO's objective is to maximize the welfare of its members, the agents. We show that the SRO chooses a more lax enforcement policy—meaning less frequent investigations—than what customers would choose. A general conclusion is that control of the enforcement policy governing contracts confers substantial market power to a group of otherwise competitive agents. We also investigate government oversight of the self-regulatory process. The threat of government enforcement leads to more enforcement by the SRO, just enough to pre-empt any government enforcement.
Economic theories in time series contexts usually have implications on and only on the conditional mean dynamics of underlying economic variables. We propose a new class of specification tests for time series conditional mean models, where the dimension of the conditioning information set may be infinite. Both linear and nonlinear conditional mean specifications are covered. The tests can detect a wide range of model misspecifications in mean while being robust to conditional heteroscedasticity and higher order time-varying moments of unknown form. They check a large number of lags, but naturally discount higher order lags, which is consistent with the stylized fact that economic behaviours are more affected by the recent past events than by the remote past events. No specific estimation method is required, and the tests have the appealing "nuisance parameter free" property that parameter estimation uncertainty has no impact on the limit distribution of the tests. A simulation study shows that it is important to take into account the impact of conditional heteroscedasticity; failure to do so will cause overrejection of a correct conditional mean model. In a horse race competition on testing linearity in mean, our tests have omnibus and robust power against a variety of alternatives relative to some existing tests. In an application, we find that after removing significant but possibly spurious autocorrelations due to nonsynchronous trading, there still exists significant predictable nonlinearity in mean for S&P 500 and NASDAQ daily returns. Copyright 2005, Wiley-Blackwell.
Standard equilibrium models are unable to replicate the average return on equity and the risk-free rate during 1889-1978, the well-known asset returns puzzle. The present paper, motivated by the excess of outliers in the data, proposes a normal-scale mixture stochastic process for output that is compatible with leptokurtosis. Using formal likelihood-based methods, it is shown that observed asset returns are compatible with posterior distributions implied by the model. Copyright 2005, Wiley-Blackwell.