91 results for Working or discussion paper, ResearchSpace@Auckland

  • Asymptotic Power Advantages of Long-Horizon Regressions

    Mark, Nelson; Sul, Donggyu (2002)

    Working or discussion paper
    The University of Auckland Library

    Local asymptotic power advantages are available for testing the hypothesis that the slope coefficient is zero in regressions of yt+k- yton xtfor k > 1, when { yt} ~ I(0) and {xt} ~ I(0). The advantages of these long-horizon regression tests accrue in empirically relevant regions of the admissible parameter space. In Monte Carlo experiments, small sample power advantages to long-horizon regression tests accrue in a region of the parameter space that is larger than that predicted by the asymptotic analysis.

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  • New Unit Root Asymptotics in the Presence of Deterministic Trends

    Phillips, Peter (1998)

    Working or discussion paper
    The University of Auckland Library

    Recent work by the author (1998) has shown that stochastic trends can be validly represented in empirical regressions in terms of deterministic functions of time. These representations offer an alternative mechanism for modelling stochastic trends. It is shown here that the alternate representations affect the asymptotics of all commonly used unit root tests in the presence of trends. In particular, the critical values of unit root tests diverge when the number of deterministic regressors K -+ rn as the sample size n + w. In such circumstances, use of conventional critical values based on fixed K will lead to rejection of the null of a unit root in favour of trend stationarity with probability one when the null is true. The results can be interpreted as saying that serious attempts to model trends by deterministic functions will always be successful and that these functions can validly represent stochastically trending data even when lagged variables are present in the regressor set, thereby undermining conventional unit root tests.

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  • What Do Uncertainty-Averse Decision-Makers Believe? A Note

    Ryan, Matthew (1999)

    Working or discussion paper
    The University of Auckland Library

    The aim of this note is to plug an important gap in our understanding of the epistemic foundations of uncertainty-averse behavior. For Choquet expected utility maximizers (Schmeidler (1989)), the beliefs which motivate uncertainty-averse choice are frequently identified using Dow and Werlang's (1994) notion of support for convex capacities. Building on the work of Morris (1997), we present a new, preference-based belief operator which is is shown to characterize such epistemic inferences. This makes their behavioral foundations transparent, and enables readier comparison with alternative epistemic models for such behavior.

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  • Discrete Fourier Transforms of Fractional Processes August

    Phillips, Peter (1999)

    Working or discussion paper
    The University of Auckland Library

    Discrete Fourier transforms (dft's) of fractional processes are studied and a exact representation of the dft is given in terms of the component data. The new representation gives the frequency domain form of the model for a fractional process, and is particularly useful in analyzing the asymptotic behavior of the dft and periodogram in the nonstationary case when the memory parameter d > 1/2. Various asymptotic approximations are suggested. It is shown that smoothed periodogram spectral estimates remain consistent for frequencies away from the origin in the nonstationary case provided the memory parameter d < 1. When d = 1, the spectral estimates are inconsistent and converge weakly to random variates. Applications of the theory to log periodogram regression and local Whittle estimation of the memory parameter are discussed and some modified versions of these procedures are suggested.

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  • Dynamic Seemingly Unrelated Cointegrating Regression

    Mark, Nelson; Ogaki, Masao; Sul, Donggyu (2003)

    Working or discussion paper
    The University of Auckland Library

    Multiple cointegrating regressions are frequently encountered in empirical work as, for example, in the analysis of panel data. When the equilibrium errors are correlated across equations, the seemingly unrelated regression estimation strategy can be applied to cointegrating regressions to obtain asymptotically efficient estimators. While non-parametric methods for seemingly unrelated cointegrating regressions have been proposed in the literature, in practice, specification of the estimation problem is not always straightforward. We propose Dynamic Seemingly Unrelated Regression (DSUR) estimators which can be made fully parametric and are computationally straightforward to use. We study the asymptotic and small sample properties of the DSUR estimators both for heterogeneous and homogenous cointegrating vectors. The estimation techniques are then applied to analyze two long-standing problems in international economics. Our first application revisits the issue of whether the forward exchange rate is an unbiased predictor of the future spot rate. Our second application revisits the problem of estimating long-run correlations between national investment and national saving.

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  • Cournot and Bertrand Competition with Vertical Quality Differentiation

    Aoki, Reiko (2001)

    Working or discussion paper
    The University of Auckland Library

    We consider a model of vertical quality differentiation. We show that in Coumot (quality setting) competition firm's profit is increasing in its own quality and decreasing in its rival's quality. This differs from the results for Bertrand (price setting) competition and conforms to some previously made assumptions concerning profit functions in a setting of vertical quality differentiation. However, even in this case, when an initial stage in which firms make as costly investment in quality is added, an asymmetric equilibrium results. This follows from the fact that in both types of competition, it is possible to improve profit by moving away (either by choosing higher or lower quality) from rival's quality. This paper is the same as manuscript dated 1988 of the same name.

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  • Industry Premium: What we Know and What The New Zealand Data Say

    Bandyopadhyay, Debasis (1999)

    Working or discussion paper
    The University of Auckland Library

    This paper critically reviews conventional explanations of why the individual income reflects an industry premium. It presents four facts about industry premiums in New Zealand to highlight the limitation of those explanations. In particular, it suggests that competitive theories that refer to unobservable characteristics or compensating wage differentials are too broad and non-competitive theories that rely on the efficiency wage hypothesis are too narrow to successfully explain what the New Zealand data reveal. Employees receive industry premium, but so do the self-employed, and do so more than the employees if uneducated; but the premium difference falls as the education level rises.

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  • A Dynamic Analysis of the Evolution of Conventions in a Public Goods Experiment with Intergenerational Advice

    Chaudhuri, Ananish; Maitra, Pushkar; Graziano, Sara (2003)

    Working or discussion paper
    The University of Auckland Library

    In this paper we analyse contributions to a public good within an inter-generational framework where at the end of each session one generation of subjects leave advice for the succeeding generation via free form messages. Such advice can be private (advice left by one player in generation t is given only to her immediate successor in generation t +1) or public (advice left by players of generation t is made available to all members of generation t +1). We estimate a panel regression model that enables us to understand the dynamics of the process better and to highlight the learning that occurs over time. Our estimation results show that contributions in any period depend crucially on contributions in the previous period and on the group average in the previous period - more specifically whether a subject's own contribution in the previous period fell above or below the group average. We find that in the public advice treatment when a subject's contribution fell below the group average in the previous period there is a tendency on the part of that subject to increase contributions in the next period.

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  • School Leaving, Labour Market and Tertiary Education Choices of Young Adults: An Economic Analysis Utilising The 1977-1995 Christchurch Health and Development Surveys

    Maani, Sholeh (2000)

    Working or discussion paper
    The University of Auckland Library

    Utilising evidence from a longitudinal data set of young adults in New Zealand, this study examines the determinants of school leaving and labour supply behaviour of young adults at ages 16 and 18. The data set employed (the Christchurch Health and Development Survey) includes a number of variables, from birth to age 18, not commonly available in economic data sets. The analysis uses binary choice models to examine the effect of ability factors and household economic constraints on the choice to remain at secondary school beyond post-compulsory levels at age 16. The study further uses binary and multinomial choice models to examine the determinants of participation in tertiary education, as opposed to engaging in labour supply, or unemployment at age 18. The study finally examines the determinants of the type of tertiary institution attended.

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  • Auction Beats Posted Prices in a Small Market

    Julien, Benoit; Kennes, John; King, Ian (2002)

    Working or discussion paper
    The University of Auckland Library

    In a model with two buyers and sellers we consider the choice of sales mechanism from three possibilities: posted prices, and auctions with and without reserve prices. With homogenous goods, sellers expected revenues are highest when both sellers auction with reserve prices 33% higher than if posting prices and 100% higher than if auctioning without reserve prices. When sellers can choose their mechanism before choosing prices, both sellers auction with a reserve price in the dominant strategy equilibrium. With heterogenous goods, the equilibrium with posted prices is inefficient (Montgomery (1991)) but the equilibria with both types of auctions are efficient.

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  • Economic Progress and Skill Obsolescene

    Kennedy, Peter; King, Ian (2000)

    Working or discussion paper
    The University of Auckland Library

    We construct an OLG model of skill vintages with complementarities to examine skill obsolescence when individuals can choose vintages. We find that the problem of excessive progress can exist only in the absence of coordination and transfers among those currently alive. However, too little progress can occur in equilibrium, even in the presence of coordination and transfers. Moreover, allowing coordination or transfers may reduce aggregate surplus. Equilibria with too little progress can take the form of either cycles or stagnation. The introduction of outside debt can eliminate the cyclical equilibrium, leading to a Paretoimproving increase in the rate of progress.

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  • Ideology, Asymmetric Information, and Campaign Contributions to Politicians

    Boyce, John (1998)

    Working or discussion paper
    The University of Auckland Library

    This paper considers a model of interest group competition to influence policy outcomes when politicians and some interest groups hold private information about the polic y preferences (ideology) of politicians. Politicians cannot credibly reveal their ideology to others because all politician types prefer more campaign contributions to fewer. However, informed interest groups do convey some information about politician_s type by their contributions. If an uninformed group is a friend (it prefers moving the given policy in the same direction as the informed group), the informed group will truthfully reveal whether or not the politician is receptive to contributions. However, if the uninformed group is an enemy (it prefers a policy movement in the opposite direction), with the same signal the informed group only partially reveals whether the politician is receptive to contributions from its enemies. Empirical evidence is presented that supports the hypothesis that political action committee contributions are informative as well as persuasive.

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  • The Maxim Criterion and Randomised Behaviour Reconsidered

    Ryan, Matthew (1999)

    Working or discussion paper
    The University of Auckland Library

    Mixed strategy equilibria are often regarded as unconvincing behavioral predictions (eg. Stahl (1988)). Furthermore, while many games possess mixed equilibria, explicit randomization is rare in practice. We argue that both problems arise because conventional game theory excludes maximin behavior. By considering a generalization of Nash equilibrium, we prove that there exist plausible equilibria for 2 x 2 games which involve randomized choice. Interestingly, the randomizing player always adopts a maximin strategy. Maximin behavior is therefore crucial to explaining randomization. We also prove that games with randomized equilibria are non-generic, hence unlikely to be observed in practice.

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  • Distribution of Human Capital and Economic Growth

    Bandyopadhyay, Debasis (1997)

    Working or discussion paper
    The University of Auckland Library

    This paper provides an empirically tractable model of economic growth where the distribution of human capital is central to understanding the key issues. Long run growth is possible only if the distribution of human capital belongs to a known class such that investment in education, the model's engine of growth, exceeds inter-generational depreciation of human capital. The model contributes to understanding of the puzzle of growth disparities among countries by exhibiting multiple steady states under alternative paradigms of growth. It provides a purely neoclassical model to explain why a lower income inequality may correspond to a higher rate of growth.

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  • Economic Growth and the Environment in High-Performing East Asian Countries: Lessons from South Korea

    Ratnayake, Ravi; Woo-Young, Kim (1999)

    Working or discussion paper
    The University of Auckland Library

    This paper examines the relationship between economic growth and environmental conditions in high performing Asian economies in the light of the South Korea's experience. We used Generalized Least Squares to regress thirteen indicators of environmental quality covering air pollution, water pollution, and industrial waste on GDP per capita and other explanatory variables. The results show that five out of the thirteen environmental quality indicators improve when per capita income increases while eight indicators show either a U-shape relationship or deterioration in environmental conditions with economic growth. Overall, the results support the claim that Korea's growth has been achieved at the cost of a reduction in some measures of environmental quality, perhaps due to delayed recognition of environmental problems associated with increased economic activities.

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  • Trust and Trustworthiness in a Sequential Bargaining Game

    Chaudhuri, Ananish; Khan, Sarah; Lakshmiratan, Aishwarya; Py, Anne-Laure; Shah, Lisa (2003)

    Working or discussion paper
    The University of Auckland Library

    We use a two-person extensive form bargaining game to examine individual's trusting and reciprocal behavior and how those relate to their scores on a trust survey. In keeping with prior research, we find that the 'self-interested' outcome is rejected by a majority of individuals. People who score high on the trust survey are both trusting and are also trustworthy, in that they reciprocate others' trust. But, people with low trust scores often exhibit trust but are not trustworthy. These 'inconsistent trusters' seem to be interested in exploiting the trust and trustworthiness of others in increasing their own payoff.

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  • Exact Gaussian Estimation of Continuous Time Models of The Term Structure of Interest Rates Rankings of Economics Departments in New Zealand

    Phillips, Peter; Yu, Jun (2000)

    Working or discussion paper
    The University of Auckland Library

    This paper proposes an exact Gaussian estimator for nonlinear continuous time models of the term structure of interest rates. The approach is based on a stopping time argument that produces a normalizing transformation facilitating the use of a Gaussian likelihood. A Monte Carlo study shows that the finite sample performance of the proposed procedure offers an improvement over the discrete approximation method proposed by Nowman (1997). An empirical application to U.S. and British interest rates is given.

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  • Procyclical Skill Retooling and Equilibrium

    King, Ian; Sweetman, Arthur (2002)

    Working or discussion paper
    The University of Auckland Library

    We argue that more workers choose to switch occupations in booms than in recessions. That is, skill retooling is procyclical. This view is consistent with Lucas and Prescott's (1974) equilibrium search model modified with aggregate shocks and unemployment insurance. Empirical support is found in a unique Canadian administrative data set that measures the annual flow of workers (from 1979-1993) who separate from their jobs to "return to school". This flow is strongly procyclical.

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  • On A New Measure of Human Capital and Its Impact on Gross Domestic Product

    Bandyopadhyay, Debasis; Lahiri, P; Yu, Feng (1999)

    Working or discussion paper
    The University of Auckland Library

    The general goal of this paper is first to develop an operationally simple measure of human v capital using the relative frequency histogram of the highest educational attainment and then to analyze the cross-country variations of the proposed measure. Visual inspection and the matrix of rank correlation coefficients show that relative frequency distributions of the highest educational attainment are similar for countries with similar Gross Domestic Products (GDP) level, but they are very different for countries whose GDP levels are quite different. Guided by intuition, we define a simple descriptive statistic, EER measured by the relative proportion of labor force with education beyond the secondary level to those with no formal education. This simple statistic turns out to extract the most essential information contained in the relative frequency histogram of the highest educational attainment to forecast future economic growth of a country. Consequently, we propose this statistic EER as a new measure of human capital. Non-parametric tests show that both the means and variances of the distribution of log (EER) for the high GDP countries are significantly higher than the corresponding means and variances for the low GDP countries. A chi-square test reveals that for the two groups of low and high GDP countries, the distributions of EER can be characterized by a unified class of gamma distributions with the same shape parameter but with very different scale parameters. Based on the data created by Barro and Lee (1993), we note that our new measure of human capital (i.e., EER) alone can explain cross-country variations in per capita GDP much better than the other growth models such as Solow (1956) and Mankiw, Romer, and Weil(1992). Those models include population growth rate and investment rate as covariates and the latter model use an additional covariate SCHOOL measured by the average secondary school enrollment rate or in addition to those two covariates. We explain the better performance of our model by noting that the statistic EER is significantly negatively correlated with population growth rate and positively correlated with investment rate and SCHOOL.

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  • Emissions Taxation in Durable Goods Oligopoly

    Goering, Gregory; Boyce, John (1998)

    Working or discussion paper
    The University of Auckland Library

    This paper examines the use of taxation to control external damage due to pollution when product durability is endogenously determined. A special form of the emissions function is also examined which is equivalent to an excise tax on output. The dynamic oligopoly model indicates that many conventional results in the durability and taxation literature need not hold when durability is endogenously determined. In particular, the analysis shows durability may not be independent of industry structure nor will firms minimize their manufacturing costs of providing service. In addition, the second-best tax on imperfectly competitive firms is not necessarily less than the tax on a competitive firm when firms choose their product_s durability.

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