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Several experimental studies observed substantial violations of transitivity in decisions between risky lotteries over monetary outcomes. The goal of our experiment is to test whether these violations also affect the evaluation of health states. A particular feature of our experimental design is that it takes into account the possible role of decision errors in generating violations of transitivity. Since we find neither substantial nor systematic deviations from transitive choice behaviour, we can conclude that previously reported violations do not seem to bias health utility measurement.
In this paper we investigate the link between entrepreneurship and financial constraints. We develop a dynamic partial equilibrium model of an individual utility maximization that predicts that the person is more likely to start her business when financial constraints are eased. We test this hypothesis using German Socio-Economic Panel data covering the periods 2000{2002 and measure release from financial constraints by windfall gains. The estimates confirm that the individual has higher propensity to start her business when she gets windfall gains. Furthermore, there are stronger effects for persons that have sufficient, but not very high levels of income and abilities.
I propose an econometric model that improves upon existing methods of estimating the natural rate of unemployment (NAIRU) by using information contained in the trend of productivity growth. My approach enhances the recently proposed model of Staiger, Stock and Watson (1997) in several respects. Statistically speaking, the method substantially shrinks the width of the 95% confidence interval, performs better in an out-of-sample inflation forecasting exercise, and is more robust to alternative statistical assumptions. In economic terms, the productivity-augmented model generates a more realistic time profile of the NAIRU, and implies estimates of the Phillips curve slope and the sacrifice ratio that are more in line with conventional wisdom. I also test whether the natural rate is correlated with the level or with the change of the produ...
In the year 2000, the German government passed the most ambitious tax reform in postwar German history aiming at a significant tax relief for households. An important aim of this tax reform was to improve work incentives and, thereby, foster employment. Drawing on data of the German Socio Economic Panel (SOEP), we analyze the work incentive and employment effects of this reform on the basis of a behavioral microsimulation model. We find that the significant reduction of marginal tax rates implied by the tax reform results in a substantial increase in labor supply, a slight reduction of market wages and an increase in employment of about 130 thousand people (full-time equivalents).
We use a sample of 18 countries to study what variables have a significant impact on an indi-vidual?s decision to start a new business and classification and regression trees for an accurate interpretation of the data. Our results support existing literature suggesting the existence of strong country effects. In addition, we find strong evidence that perceptual variables, such as one?s belief about her own skills and ability and about the risk involved in the venture, have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that entrepreneurs evaluate their businesses by taking an ?inside view? of their situation, overestimate their likelihood of success, and, as a result, rely signifi-cantly on perceptions rather than on objective expectations of success.
The paper explores dynamics of inflation in Ukraine in the period of relative macroeconomic stability. The analysis of interrelationship between inflation, money growth, wage growth, and a proxy for devaluation expectations is based on impulse responses and variance decomposition of a vector autoregression model. We find that changes in devaluation expectations appear to be the most important factor driving price development, while money supply growth has negligible impact on inflation. In addition, our results evidence of high degree of inflation inertia in the economy, which may reflect the specific institutional settings of Ukrainian economy.
Using an experimental design, we compare two alternative approaches to dependent interviewing (proactive and reactive) with traditional independent interviewing on a module of questions about sources of income. We believe this to be the first large-scale quantitative comparison of proactive and reactive dependent interviewing. The three approaches to questioning are compared in terms of their impact on under-reporting of income sources and related bivariate statistics. The study design also enables identification of the characteristics of respondents whose responses are sensitive to the mode of interviewing. We conclude that under-reporting can be significantly greater with independent interviewing than with either form of dependent interviewing, especially for income sources that are relatively common or relatively easy to forget. We ...
Reliable information on small and medium sized enterprises (SMEs) is rare and costly for financial intermediaries. To compensate for this, relationship banking is often considered as the appropriate lending technique in the case of SMEs. In this paper we offer a theoretical model to analyze the pricing behavior of banks in a Bertrand competition framework with monitoring costs. We show that the lack of reliable information leads to comparably high interest rates even if a long-term relationship between borrower and bank exists. The paper offers a theoretical explanation why SME managers consider external finance as a major constraint to their business. (101 words)
We analyse consent patterns and consent bias in the context of a large general household survey, the ?Improving survey measurement of income and employment? (ISMIE) survey, also addressing issues that arise when there are multiple consent questions. Using a multivariate probit regression model for four binary outcomes with two incidental truncations, we show that there are biases in consent to data linkage with benefit and tax credit administrative records held by the Department for Work and Pensions, and with wage and employment data held by employers, and also in respondents? willingness and ability to supply their National Insurance Number. The biases differ according to the question considered, however. We also show that modelling consent questions independently rather than jointly may lead to misleading inferences about consent bi...
The paper analyzes the network structure of international trade. Adapting a network approach developed in the physical sciences, we propose that international trade functions like a scale-free network. For each commodity group we calculate a characteristic parameter which reflects the structure of its trading network. We then insert this variable into an expanded gravity model to explore the effect of the network structure on the value of bilateral trade. The estimation suggests that, inter alia, globalization has reduced the value of trade per product group.
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