A Note on Incomplete Markets

We adapt an elegant piece of reasoning by Balasko (1979) to the implete markets modelled by Duffie and Shafer (1985), and prove that on compact sets of such markets, the Lebesgue measure of economies with m equilibria is 0 (1/m).

An Analysis of Sample Attrition in Panel Data: The Michigan Panel Study of income Dynamics

By 1989 the Michigan Panel Study on Income Dynamics (PSID) had experimented approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership. We study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the estimates of regression coefficients for those variables. We provide a statistical framework for conducting tests for attrition bias that draws a sharp distinction between selection on unobservables and on observables and that shows that weighted least squares can generate consistent parameter estimates when selection is based on observables that are endogenous. Our empirical analysis shows that attrition is highly selective and is concentrated among lower socioeconomic status individuals. We also show that attrition is concentrated among those with more unstable earnings, marriage, and migration histories, holding fixed the level of those variables. Nevertheless, we find that the absolute magnitude of the selection is not large and it is moderated by regression-to-the-mean effects from attrition on transitory components. Consequently, despite the large amount of attrition, the PSID has remained roughly representative through 1989.

Baltimore's Camden Yards Ballparks

No abstract available.

The Capital-Asset-Pricing Model and Arbitrage Pricing Theory :  A Unification

No abstract available.

Impartiaility and Interpersonal Comparisons of Ordinal Well-Being

An analytical framework is proposed within which immpartiality is axiomatically defined. In conjuction with other familiar axioms, impartiality is shown to imply the existence of a representation of an observer's preference relation over social alternatives as a weighted sum of individual utilities. Moreover, the weight assigned to each individual utility is inversely proportional to the diameter of image of the set of social-alternative under the corresponding utility function. Consequently, the representation of the observer's preferences permits interpersonal comparisons of variations in ordinal well-being.

Non-Atomic Games on Loeb Spaces

In the setting of non-cooperative game theory, strategic negligibility of individual agents, or diffuseness of information, has been modelled as a non-atomic measure space, typically the unit interval endowed with Lebesgue measure. However, recent work has shown that with uncountable action sets, as for example the unit interval, there do not exist pure-strategy Nash equilibria in such non-atomic games. In this brief announcement, we show that there is a perfectly satisfactory existence theory for non-atomic games provided this non-atomicity is formulated on the basis of a particular class of measure spaces, hyperfinite Loeb spaces. We also emphasize other desirable properties of games on hyperfinite Loeb spaces, and present a synthetic treatment, embracing both large games as well as those with incomplete information.

The Decline of Welfare Benefits in the U.S.:  The Role of Wage Inequality

Welfare benefits in the U.S. have experiences a much-studies secular decline since the mid-1970s. We explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the market and the decline of real wages at the bottom of the distribution: we posit that voters prefer benefits which are tied to low-skilled wages. We test the hypothesis using a 1969-1992 panel of low-skilled wages. We test the hypothesis using a 1969-1992 panel of state-level data. An additional contribution of our analysis is the use of General Social Survey data on voter preferences for welfare which we combine with Current Population Survey data to determine the voter in each state who has the median preferred welfare benefit level. Our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits.

Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis

This paper argues that the typical household's saving is better described by a "buffer-stock" version than by the traditional version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model. Buffer-stock behavior emerges if consumers with important income uncertainty are sufficiently impatient. In the traditional model, consumption growth is determined solely by tastes; in contract, buffer-stock consumers set average consumption growth equal to average labor income growth, regardless of tastes. The model can explain three empirical puzzles: the "consumption/income parallel" of Carroll and Summers [1991]; the "consumption/income divergence" first documented in the 1930's; and the temporal stability of the household age/wealth profile despite the unpredictability of idiosyncratic wealth changes.

Remark on the Equilibrium Set of Pure Exchange Economies

We present a unified mathematical framework within which, among others, pure exchange economies with a finite set of agents, as well as those with a continuum of traders may be studied simultaneously. We prove that the reasoning presented by Balasko (1975) on the equilibrium set for finite economies generalizes very naturally to our setting. His results may therefore be recovered as a special case of those presented in this note.

Altruism, Economic Growth and Income Distribution

We consider an Overlapping-generations economy where the aggregative production process uses physical capital and human capital. The human capital level of each individual is determined by the direct investment in education and some random "ability". The parents' investment in the education of their offspring is motivated by altruism. We distinguish between two types of transfers: The investment of parents in the education of their offspring, which affects his/her future income, and the direct capital transfer (the 'bequest motive'). We show that the intensity of each type of altruism plays an important role on the equilibrium growth and the income distributions, but the results differ significantly. Comparing competitive equilibria from the same initial capital and human capital distributions we derive the following results: (a) When altruism is more 'education-inclined' then economic growth is higher and the intragenerational income distributions are more equal (less equal), in all periods, if the production function's elasticity of substitution is larger (smaller) than 1 (b) When altruism is more 'bequest-inclined' the growth rate is lower and the impact on the intragenerational distributions of income depends on the size of the elasticity of substitution.

Sex Segregation in U.S. Manufacturing

This paper studies interplant sex segregation in the U.S. manufacturing industry. The study differs from previous work in that we have detailed information on the characteristics of both workers and firms, and because we measure segregation in a new and better way. We report three main findings. First, there is a substantial amount of interplant sex segregation in the U.S. manufacturing industry, although segregation is far from complete. Second, we find that female managers tend to work in the same plants as female supervisees, even once we control for other plant characteristics. And finally, we find that interplant segregation can account for a substantial fraction of the male/female wage gap in the manufacturing industry, particularly among blue-collar workers.

Generic Properties of the Core and Equilibria of Pure Exchange Economies

We present a unified mathematical framework within which pure exchange economies with a finite set of agents, as well as those with a continuum of traders as mathematically modelled by Aumann (1964), can be analyzed simultaneously. We prove that the number of equilibrium price vectors of our economies are generically finite. Hence, for markets with a continuum of traders, the equilibrium allocations (which by the celebrated theorem of Aumann (1964) coincide with the core allocations) are finite for an open dense set of such markets. This presents a limiting case result that complements similar asymptotic theorems about cores of large economies that have been proved by Bewley (1973), and Dierker (1975). If we assume that the measure on the space of agents is one with a finite number of atoms of equal weight, our reasoning recovers the classical theorems proved about equilibria by Debreu (1970) for economies with a finite number of agents.

The Coase Conjecture in Continuous Time:  Imperfect Durability, Endogenous Durability, and Aftermarkets

No abstract available.

Competition and Car Longevity

No abstract available.

Nonlinearities and Nonstationarities in Stock Returns

This paper addresses the question of whether recent findings of nonlinearities qhave been contaminated by possible shifts in the distribution of the first differences of the logarithms of stock prices indexes. The paper develops a testing methodology that formally attempts to discriminate between the two types of rejections of the null of linearity. It is shown that structural shifts play an important role in the evolution of financial time series: linear processes with shifts in variance are able to replicate the behavior of the tests introduced in the paper, whereas stationary ARCH-type filters show little consistency with the data. Moreover, it is shown that ARCH models fitted to data generated by a simple one-break linear process exhibit levels of persistence similar to the ones usually reported for high-frequency applications. Key words: BDS test, Nonlinearity, Nonstationarity.