Showing papers by "Pompeu Fabra University published in 1997"

Was prometheus unbound by chance? Risk diversification and growth

Abstract: This paper offers a theory of development that links the degree of market incompleteness to capital accumulation and growth. At early stages of development, the presence projects limits the degree of risk spreading (diversification) that the economy can achieve. The desire to avoid highly risky investments slows down capital accumulation, and the inability to diversify idiosyncratic risk introduces a large amount of uncertainty in the growth process. The typical development pattern will consist of a lengthy period of “primitive accumulation” with highly variable output, followed by takeoff and financial deepening and, finally, steady growth. “Lucky” countries will spend relatively less time in the primitive accumulation stage and develop faster. Although all agents are price takers and there are no technological spillovers, the decentralized equilibrium is inefficient because individuals do not take into account their impact on others' diversification opportunities. We also show that our results generalize to economies with international capital flows.

Musical Sound Modeling with Sinusoids plus Noise

Abstract: When generating musical sound on a digital computer, it is important to have a good model whose parameters provide a rich source of meaningful sound transformations. Three basic model types are in prevalent use today for musical sound generation: instrument models, spectrum models, and abstract models. Instrument models attempt to parametrize a sound at its source, such as a violin, clarinet, or vocal tract. Spectrum models attempt to parametrize a sound at the basilar membrane of the ear, discarding whatever information the ear seems to discard in the spectrum. Abstract models, such as FM, attempt to provide musically useful parameters in an abstract formula.

Unemployment vs. mismatch of talents: Reconsidering unemployment benefits

Abstract: We develop an equilibrium search-matching model with risk-neutral agents and two-sided ex-ante heterogeneity. Unemployment insurance has the standard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple model are consistent with the contrasting performance of the labor market in Europe and US in terms of unemployment, productivity growth and wage inequality. To show this, we construct two fictitious economies with calibrated parameters which only differ by the degree of unemployment insurance and assume that they are hit by a common technological shock which enhances the importance of mismatch. This shock reduces the proportion of jobs which workers regards as acceptable in the economy with unemployment insurance (Europe). As a result, unemployment doubles in this economy. In the laissez-faire economy (US), unemployment remains constant, but wage inequality increases more and productivity grows less due to larger mismatch. The model can be used to address a number of normative issues.

Recurrent Hyperinflations and Learning

Abstract: This paper uses a model of boundedly rational learning to account for the observations of recurrent hyperinflations in the last decade. We study a standard monetary model where the fully rational expectations assumption is replaced by a formal definition of quasi-rational learning. The model under learning is able to match remarkably well some crucial stylized facts observed during the recurrent hyperinflations experienced by several countries in the 80's. We argue that, despite being a small departure from rational expectations, quasi-rational learning does not preclude falsifiability of the model and it does not violate reasonable rationality requirements.

The Economics of Split-Ticket Voting in Representative Democracies

Abstract: In US elections, voters often vote for candidates from different parties for president and Congress Voters also express dissatisfaction with the performance of Congress as a whole and satisfaction with their own representative The authors develop a model of split-ticket voting in which government spending is financed by uniform taxes The benefits from this spending are concentrated While the model generates split-ticket voting, overall spending is too high only if the president's powers are limited Overall spending is too high in a parliamentary system The authors' model can be used as the basis of an argument for term limits Copyright 1997 by American Economic Association

On the robustness of behaviour in experimental ‘beauty contest’ games*

Abstract: We report and compare results from several different versions of an experimental interactive guessing game first studied by Nagel (1995), which we refer to as the ‘beauty contest’ game following Keynes (1936). In these games, groups of subjects are repeatedly asked to simultaneously guess a real number in the interval [0, 100] that they believe will be closest to 1/2 times either the median, mean, or maximum of all numbers chosen. We also use our experimental data to test a simple model of adaptive learning behaviour.

The minimax distortion redundancy in empirical quantizer design

Abstract: We obtain minimax lower and upper bounds for the expected distortion redundancy of empirically designed vector quantizers. We show that the mean-squared distortion of a vector quantizer designed from n independent and identically distributed (i.i.d.) data points using any design algorithm is at least /spl Omega/(n/sup -1/2/) away from the optimal distortion for some distribution on a bounded subset of /spl Rscr//sup d/. Together with existing upper bounds this result shows that the minimax distortion redundancy for empirical quantizer design, as a function of the size of the training data, is asymptotically on the order of n/sup -1/2/. We also derive a new upper bound for the performance of the empirically optimal quantizer.

Migrants' Savings, Purchasing Power Parity, and the Optimal Duration of Migration

Abstract: If some of the returns to migration accrue from returnmigration, the optimal duration of migration may be shorter thanthe feasible duration of migration. We develop a model that providesand highlights conditions under which return migration takesplace even though a reversal of the inter-country wage differentialdoes not occur. In particular, we consider the higher purchasingpower of savings (generated from work abroad) at home than abroadas a motive for return migration. Inter alia, our model producesa negative relationship between the optimal duration of migrationand the purchasing power differential and in some (but not all)cases, a negative relationship between the optimal duration ofmigration and the wage abroad. In addition, and contrary to ourprior anticipation, our utility maximization analysis suggeststhat East-West migration will tend to be temporary while inter-EuropeanCommunity (or intra-West European) migration will likely be permanent.

Strategic Behaviour and Price Discovery

Abstract: The paper analyses the effects of strategic behaviour by an insider in a price discovery process, akin to an information tatonnement, in the presence of a competitive informed sector. Such processes are used in the pre-opening period of continuous trading systems in several exchanges. It is found that the insider manipulates the market using a contrarian strategy in order to neutralize the effect of the trades of competitive informed agents. Furthermore, consistent with the empirical evidence available, we find that information revelation accelerates close to the opening; that the market price does not converge to the fundamental value no matter how many rounds the tatonnement has; and that the expected trading volume displays a U-shaped pattern. We also find that a market with a larger competitive sector (smaller insider) has an improved informational efficiency and an increased trading volume. The insider provides a public good (reducing the informativeness of the price) for the competitive informed sector.

Is the person trade-off a valid method for allocating health care resources

Abstract: SUMMARY The Person Trade-Off (PTO) is a methodology aimed at measuring the social value of health states. It is claimed that other methods measure individual utility and are less appropriate for taking resource allocation decisions. However, few studies have been conducted to test the apparent superiority of the method for this particular kind of decision. We present a pilot study to this end. The study is based on the results of interviewing 30 undergraduate students in economics. We compare two well known techniques, the Standard Gamble and the Visual Analogue Scale, with the PTO. The criterion against which the performance of the methods is assessed is the directly obtained preference about how to establish priorities among hypothetical patients waiting for treatment. Apparently the PTO performed better than the others. We also compare three different frames for the PTO. One of them seems to predict people’s preferences. © 1997 by John Wiley & Sons, Ltd.

Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits

Abstract: We develop an equilibrium search-matching model with risk-neutral agents and two-sided ex-ante heterogeneity. Unemployment insurance has the standard effect of reducing employment but also helps workers to get a suitable job. The predictions of our simple model are consistent with the contrasting performance of the labor market in Europe and U.S. in terms of unemployment, productivity growth and wage inequality. To show this, we construct two fictitious economies with calibrated parameters which only differ by the degree of unemployment insurance and assume that they are hit by a common technological shock which enhances the importance of mismatch. This shock reduces the proportion of jobs which workers regard as acceptable in the economy with unemployment insurance (Europe). As a result, unemployment doubles in this economy. In the laissez-faire economy (U.S.), unemployment remains constant, but wage inequality increases more and productivity grows less due to larger mismatch. The model can be used to address a number of normative issues.

Concentration and public policies in the broadcasting industry: the future of television

Abstract: Tv regulation Concentration and public policies in the broadcasting industry New technologies are deeply transforming the broadcasting industry. What we have seen so far is only the beginning of a long story. Inevitably, industry regulations must adapt, which means that a wide‐ranging rethink of current practices is required. In order to assess the likely evolution of the industry, this article decomposes it into a number of components, from conception of programmes to their broadcasting, including distribution, storage and licensing. Contrary to popular expectations, the analysis suggests that the current high degree of concentration will, if anything, increase. The policy implication is that regulation, so far driven by now obsolete technological constraints, should increasingly emphasize promoting competition. — Massimo Motta and Michele Polo

On the Power of Real Turing Machines over Binary Inputs

Abstract: In this paper, we study the computational power of real Turing machines over binary inputs. Our main result is that the class of binary sets that can be decided by real Turing machines in parallel polynomial time is exactly the class PSPACE/poly.

Negativity Effect and the Emergence of Ideologies

Abstract: `Negativity effect' refers to the psychological phenomenon that people tend to attach greater weight to negative information than to equally extreme and equally likely positive information in a variety of information-processing tasks. Numerous studies of impression formation have found that negative information is weighted more heavily than positive information as impressions of others are formed. There is empirical evidence in political science that shows the importance of the negativity effect in the information processing of the voters. This effect can explain the observed decrease in popularity of a president the longer he is in office. We construct a dynamic model of political competition, incorporating the negativity effect in the decision rule of the voters and allowing their preferences to change over time, according to the past performance of the candidates while in office. Our model may explain the emergence of ideologies out of the competition for votes of myopic candidates freely choosing poli...

Do Interregional Transfers Improve the Economic Performance of Poor Regions? The Case of Spain

Abstract: The 17 regional governments of Spain receive grants from both the central government and the European Union. The grants are generally redistributive and are intended to stimulate economic activity in the poorer regions. We evaluate the effectiveness of the grants by comparing the economic performance of the regions before and after the implementation of the grant programs using a differences-in-differences approach. We find that these policies have not been effective at stimulating private investment or improving the overall economies of the poorer regions.

Optimal Unemployment Insurance

Abstract: This paper considers the design of an optimal unemployment insurance system. The problem is modeled as a repeated principal-agent problem involving a risk-averse agent--the unemployed worker--and a risk-neutral principal, which cannot monitor the agent's search effort. The optimal long-term contract subject to the associated incentive constraints is characterized. This contract involves a replacement ratio that decreases throughout the unemployment spell and a wage tax after reemployment that, under some mild regularity conditions, increases with the length of the unemployment spell. Some numerical results are presented that suggest that the gains from switching to this optimal unemployment insurance scheme could be quite large. The performance of this optimal contract is also compared to alternative liquidity provision mechanisms.

[Normalization of cognitive and functional assessment instruments for dementia (NORMACODEM) (I): objectives, content and population].

Abstract: UNLABELLED To adequately evaluate patients with 4 neuropsychological deficits a project for norming cognitive and functional instruments that assess dementia (NORMACODEM) was designed. Four hundred fifty-one subjects in three groups: 254 controls, 86 patients with minor memory/cognitive deficits without dementia (DWD) and 111 patients with probable Alzheimer-type dementia (ATD) according to the NINCDS/ADRDA criteria. Mini-Mental State Examination (MMSE), Alzheimer's Disease Assessment Scale (ADAS), Abbreviated Barcelona Test (ABT), Global Dementia Staging (GDS), Functional Assessment Staging (FAST), Clinical Dementia Rating (CDR), Rapid Disability Rating Scale-2 (RDRS-2), Blessed Dementia Rating Scale (BDRS), Interview for Deterioration in Daily life in Dementia (IDDD), Geriatric Evaluation by Relatives Rating Instrument (GERRI), Geriatric Depression Scale (GDS), Zung Self-Rating Anxiety Scale (ZSRAS). Descriptive statistics and analysis of variance. The characteristics of the sample were as follows. CONTROLS 99 men, 155 women. Mean (SD) age: 64.6 (10.9) years. Mean (SD) educational level: 9.1 (4.9) years. DWD: 42 men, 44 women. Mean (SD) age: 65.8 (8.7) years. Men (SD) educational level: 8.4 (4.4) years. ATD: 48 mean, 63 women. Mean (SD) age: 68.3 (8.0) years. Mean (SD) educational level: 6.2 (4.3) years. The ATD patients were significantly older than the controls. Mean educational level was significantly lower in the ATD group than in the other two.

Credit constraints in general equilibrium: experimental results*

Abstract: Our work attempts to investigate the influence of credit tightness orexpansion on activity and relative prices in a multimarket set-up. We report on somedouble- auction, two-market experiments where subjects had to satisfy an inequalityinvolving the use of credit. The experiments display two regimes, characterizedby high and low credit availability. The critical value of credit at the commonboundary of the two regimes has a compelling interpretation as the maximal credituse at the Arrow-Debreu equilibrium of the abstract economy naturally associatedto our experimental environment. Our main results are that changes in theavailability of credit: (a): have minor and unsystematic effects on quantitiesand relative prices in the high-credit regime, (b): have substantial effects, bothon quantities and relative prices, in the low-credit regime.

Social security and retirement in Spain

Abstract: We describe the historical evolution of the Spanish Social Security system and its current organization. Our attention concentrates on the main public pension scheme for private employees in the manufacturing and service sector (RGSS) which covers by far the largest majority of Spanish workers. After describing the way in which pension and retirement decisions are regulated by this system we try to compute the incentives to early retirement it provides to different kinds of individuals. We show that the Spanish SS legislation generates strong incentives to retire early and that Spanish workers tend to do so. (EXCERPT)