/pdf/convex-analysisnoer-san-nojin-zhan-nituite-5dl2rbmoyr.pdf

Convex Analysisの二,三の進展について

Experiments, ethnography, and introspection provide evidence economic agents do not act to maximize their narrowly defined self interest. Expanding the domain of preferences to include the utility of others provides a coherent way to extend rational choice theory.There are two approaches for including extended or social preferences in strategic models. One posits that agents have extended preferences, but maintains the conventional assumption that these preferences are stable. Prominent examples of this approach permit agents to exhibit concern for status, inequality, and social welfare. The other approach permits the strategic context to determine the nature of individual preferences. Context-dependent preferences can capture the possibility that agents are motivated in part by reciprocity. They may sacrifice personal consumption in order to lower the utility of unkind agents or to raise the utility of kind agents.This paper surveys the evidence in favor of social preferences and describes the implications of the leading theoretical models of extended preferences. It presents behavioral assumptions that characterize different types of social preferences. It investigates the extent to which social preferences may arise as the limit of evolutionary processes. It discusses the relationship between norms of reciprocity and social preferences in repeated interactions.

/pdf/interdependent-preferences-and-reciprocity-1trz2f6q4w.pdf

Interdependent preferences and reciprocity

We explore the impact of reduced transaction costs on risk sharing by estimating the effects of a mobile money innovation on consumption. In our panel sample, adoption of the innovation increased from 43 to 70 percent. We find that, while shocks reduce consumption by 7 percent for nonusers, the consumption of user households is unaffected. The mechanisms underlying these consumption effects are increases in remittances received and the diversity of senders. We report robustness checks supporting these results and use the four-fold expansion of the mobile money agent network as a source of exogenous variation in access to the innovation. (JEL E42, G22, O16, O17, Z13) In developing countries, informal networks provide an important means by which individuals and households share risk, though the insurance they provide is often incomplete. Economists have proposed a number of reasons for this incompleteness, including information asymmetries, which manifest in problems of moral hazard, and limited commitment, both of which induce positive correlations between realized income and consumption. In this article we emphasize a complementary source of incompleteness: transaction costs—literally, the costs of transferring resources between individuals. We test the impact of transaction costs on risk sharing by analyzing data from a large panel household survey that we designed and administered in Kenya over a three-year period to capture the expansion of “mobile money.” This financial innovation has allowed individuals to transfer purchasing power by simple short messaging service ( SMS) technology and has dramatically reduced the cost of sending money across large distances. Mobile money is a recent innovation in developing economies—one of the first and most successful examples to date is Kenya’s “M-PESA.” 1 In just four years after its

https://www.uh.edu/%7Ebsorense/risk_sharing_and_transactions_costs.pdf

Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution

Unemployment: macroeconomic performance and the labour market

We review different empirical approaches that researchers have taken to estimate how consumption responds to income changes. We critically evaluate the empirical evidence on the sensitivity of consumption to predicted income changes, distinguishing between the traditional excess sensitivity tests, and the effect of predicted income increases and income declines. We also review studies that attempt to estimate the marginal propensity to consume out of income shocks, distinguishing between three different approaches: identifying episodes in which income changes unexpectedly, relying on the covariance restrictions that the theory imposes on the joint behavior of consumption and income growth, and combining realizations and expectations of income or consumption in surveys where data on subjective expectations are available.

/pdf/the-consumption-response-to-income-changes-33ddf9s9ir.pdf

The Consumption Response to Income Changes

A Welfare-to-Work (WTW) program is a mix of government expenditures on various labor market policies targeted to the unemployed (e.g., unemployment insurance, job search monitoring, social assistance, wage subsidies). This paper provides a dynamic principal-agent framework suitable for analyzing chief features of an optimal WTW program such as the sequence and duration of the different policies, the dynamic pattern of payments along the unemployment spell, and the emergence of taxes/subsidies upon re-employment. The optimal program endogenously generates an absorbing policy of last resort ("social assistance") characterized by a constant lifetime payment and no active participation by the agent. Human capital depreciation is a necessary condition for policy transitions to be part of an optimal WTW program. The typical sequence of policies is quite simple: the program starts with standard unemployment insurance, then switches into monitored search and, finally, into social assistance. The optimal benefits are decreasing during unemployment insurance and constant during both job search monitoring and social assistance. Whereas taxes (subsidies) can be either increasing or decreasing with duration during unemployment insurance, they must decrease (increase) during a phase of job search monitoring. In a calibration exercise, we use our model to analyze quantitatively the features of the optimal program for the U.S. economy. With respect to the existing U.S. system, the optimal WTW scheme delivers sizeable welfare gains to unskilled workers because the incentives to search for a job can be retained even while delivering more insurance, and using costly monitoring less intensively.

Optimal Welfare-to-Work Programs

We study testable implications for the dynamics of consumption and income of models in which first-best allocations are not achieved because of a moral hazard problem with hidden saving. We show that in this environment, agents typically achieve more insurance than that obtained under self-insurance with a single asset. Consumption allocations exhibit "excess smoothness," as found and defined by Campbell and Deaton (1989). We argue that excess smoothness, in this context, is equivalent to a violation of the intertemporal budget constraint considered in a Bewley economy (with a single asset). We also show parameterizations of our model in which we can obtain a closed-form solution for the efficient insurance contract and where the excess smoothness parameter has a structural interpretation in terms of the severity of the moral hazard problem. We present tests of excess smoothness, applied to U.K. microdata and constructed using techniques proposed by Hansen, Roberds, and Sargent (1991) to test the intertemporal budget constraint. Our theoretical model leads us to interpret them as tests of the market structure faced by economic agents. We also construct a test based on the dynamics of the cross-sectional variances of consumption and income that is, in a precise sense, complementary to that based on Hansen, Roberds, and Sargent (1991) and that allows us to estimate the same structural parameter. The results we report are consistent with the implications of the model and are internally coherent.

/pdf/risk-sharing-in-private-information-models-with-asset-5f2k7z1gg3.pdf

Risk Sharing in Private Information Models with Asset Accumulation: Explaining the Excess Smoothness of Consumption

This paper studies the effect of human capital depreciation and duration dependence
on the design of an optimal unemployment insurance (UI) scheme. Our results
partially confirm those obtained in most previous studies: benefits should decrease with
unemployment duration. The optimal program also generates two main novel features,
which are not present in stationary models. First, if human capital depreciates rapidly
enough during unemployment, UI transfers are bounded below by a minimal “assistance”
level that arises endogenously in the efficient program. Second, we study the
optimality of imposing a history contingent wage tax after reemployment. Our numerical
simulations based on the Spanish and US economies show that the wage tax
should decrease with the length of worker’s previous unemployment spell, and become
a wage subsidy for long-term unemployed workers. As a by-product of our study, we develop
a systematic approach suitable for studying recursively a wide range of dynamic
moral-hazard problems, and other models with similar characteristics.

/pdf/optimal-unemployment-insurance-with-human-capital-2tqmmz6wfl.pdf

Optimal Unemployment Insurance, with Human Capital Depreciation, and Duration Dependence.

A Welfare-to-Work (WTW) program is a mix of government expenditures on various labour market policies targeted to the unemployed (e.g. unemployment insurance (M), job search monitoring (M), social assistance (SA), wage subsidies). This paper provides a dynamic principal-agent framework suitable for analysing chief features of an optimal WTW program, such as the sequence and duration of the different policies, the dynamic pattern of payments along the unemployment spell, and the emergence of taxes/subsidies upon re-employment. The optimal program endogenously generates an absorbing policy of last resort ("social assistance") characterized by a constant lifetime payment and no active participation by the agent. Human capital depreciation is a necessary condition for policy transitions to be part of an optimal WTW program. The typical sequence of policies is quite simple: the program starts with standard UI, then switches into monitored search and, finally, into SA. The optimal benefits are decreasing during unemployment insurance and constant during both JM and SA. Whereas taxes (subsidies) can be either increasing or decreasing with duration during UI, they must decrease (increase) during a phase of JM. In a calibration exercise, we use our model to analyse quantitatively the features of the optimal program for the U.S. economy. With respect to the existing U.S. system, the optimal WTW scheme delivers sizeable welfare gains to unskilled workers because the incentives to search for a job can be retained even while delivering more insurance and using costly monitoring less intensively.

/pdf/optimal-welfare-to-work-programs-2tydr4b31g.pdf

Nicola Pavoni

Papers

Optimal Welfare-to-Work Programs

Risk Sharing in Private Information Models with Asset Accumulation: Explaining the Excess Smoothness of Consumption

Optimal Unemployment Insurance, with Human Capital Depreciation, and Duration Dependence.

Optimal Welfare-to-Work Programs

On optimal unemployment compensation