1,723 results for Working or discussion paper

  • Equilibrium Quality Choices with Generalized Smooth Cost Function

    Aoki, Reiko (2001)

    Working or discussion paper
    The University of Auckland Library

    We show that the effect of credible quality commitment on quality choice with Bertrand and Cournot competition in the product market for quadratic cost of quality function (Aoki (2000)) holds for more general cost functions. Specifically, we compare the quality choices with sequential and simultaneous quality choices when cost of quality q is kq n where k is a positive constant and n is any integer greater than 2. The first mover will always choose to produce higher quality, even when cost of quality increases very rapidly (n is large). All previously identifies qualitative comparisons between Bertrand and Cournot competition also extend to the generalized cost function.

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  • What Drives the Cross-Country Growth and Inequality Correlation?

    Bandyopadhyay, Debasis; Basu, Parantap (2002)

    Working or discussion paper
    The University of Auckland Library

    We present a neo-classical model that explores the determinants of growth-inequality correlation and attempts to reconcile the seemingly conflicting evidence on the nature of growth-inequality relationship. The initial distribution of human capital determines the long run income distribution and the growth rate by influencing the occupational choice of the agents. The steady state proportion of adults that innovates and updates human capital is path-dependent. The output elasticity of skilled-labor, barriers to knowledge spillovers, and the degree of redistribution determine the range of steady state equilibria. From a calibration experiment we report that a combination of a skill-intensive technology, low barriers to knowledge spillovers, and a high degree of redistribution characterize the group of countries with a positive growth-inequality relationship. A negative relationship arises in the group with the opposite characteristics.

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  • The Mortensen Rule and Efficient Coordination Unemployment

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

    Working or discussion paper
    The University of Auckland Library

    We study the implementation of constrained-efficient allocations in labour markets where a basic coordination problem leads to an equilibrium matching function. We argue that these allocations can be achieved in equilibrium if wages are determined by ex post bidding. This holds true even in finite sized markets where the equilibrium matching function has decreasing returns to scale where the Hosios rule does not apply to both with and without heterogeneity. This wage determination mechanism is similar to the one proposed by Mortensen (1982) in a different setting.

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  • A LAD Regression Under Non-Standard Conditions

    Rogers, Alan (1997)

    Working or discussion paper
    The University of Auckland Library

    Most work on the asymptotic properties of least absolute deviations (LAD) estimators makes use of the assumption that the common distribution of the disturbances has a density which is finite and positive at zero. We consider the implications of weakening this assumption in a regression setting. We see that the results obtained are similar in flavor to those obtained in a least squares context when the disturbance variance is allowed to be infinite: both the shape of the limiting distribution and the rate of convergence to it is affected in reasonably simple and intuitive ways. As well as conventional regression models we outline results for some simple autoregressive models which may have a unit root and/or infinite error variance.

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  • Forecasting Volatility:Evidence from the German Stock Market

    Bluhm, Hagen; Yu, Jun (2001)

    Working or discussion paper
    The University of Auckland Library

    In this paper we compare two basic approaches to forecast volatility in the German stock market. The first approach uses various univariate time series techniques while the second approach makes use of volatility implied in option prices. The time series models include the historical mean model, the exponentially weighted moving average (EWMA) model, four ARCH-type models and a stochastic volatility (SV) model. Based on the utilization of volatility forecasts in option pricing and Value-at-Risk (VaR), various forecast horizons and forecast error measurements are used to assess the ability of volatility forecasts. We show that the model rankings are sensitive to the error measurements as well as the forecast horizons. The result indicates that it is difficult to state which method is the clear winner. However, when option pricing is the primary interest, the SV model and implied volatility should be used. On the other hand, when VaR is the objective, the ARCH-type models are useful. Furthermore, a trading strategy suggests that the time series models are not better than the implied volatility in predicting volatility.

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  • Agency Theory Meets Social Capital: The Failure of the 1984-91 New Zealand Economic Revolution

    Hazledine, Tim (2000)

    Working or discussion paper
    The University of Auckland Library

    The failure of the New Zealand Economic Revolution of 1984-91 to generate improved economic performance is puzzling and important, since the reforms enacted then have often been cited as a 'textbook' example of how to liberalise an economy, and since the preconditions for success (such as good government, secure property rights and stable capitalist institutions) were all in place, in contrast to the economies of the former Soviet bloc. This paper first documents the extent of failure, and then attempts to explain it theoretically. This is the story: The reform program can be seen as a massive application (or mis-application) of Principal/Agent Theory. The Principal is the small group of economic revolutionaries. The Agents are the people of NZ. The Principal_s sole object is economic efficiency. The Agents enjoy the fruits of efficiency, but also emjoy other things ('slack'), which conflict with efficient behaviour. The Principal introduces policies (deregulation, liberalisation, commercialisation) which raise the opportunity cost of non- efficient behaviour in both private and public sectors. Unfortunately, the Principal has the 'wrong model' of how the economy functions. Slack does not just enter Agents' utility functions, it is also an input into production, where it appears as 'Forbearance' _ the flow variable associated with the stock concept known as Social Capital (the ability of agents to achieve mutually beneficial outcomes through trusting and trustworthy behaviour). Thus, the Reforms actually reduced economic efficiency, for two reasons (1) they forced noncooperative behaviour on agents, and (2) they incurred direct costs of monitoring and enforcement to bring agents' behaviour into line with the principal's objectives. And the total welfare costs exceed the loss of economic efficiency (GDP), since disproportionately more utility-enhancing slack, or forbearance is wiped out. The prediction of increased resources devoted to transaction cost activities, in particular management, is tested in a comparison of New Zealand and Australia (which did not go through such a radical reform process). The data do indeed show a substantial increase in the number of managers in NZ, relative to Australia.

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  • Compulsory Licensing of Technology and the Essential Facilities Doctrine

    Aoki, Reiko; Small, John (2002)

    Working or discussion paper
    The University of Auckland Library

    We look at compulsory licensing of intellectual property as remedy for anti-competitive practice. We identify aspects of intellectual property that warrants a different remedy from those using general definitions and remedies for essential facility. Based on the analysis, we present a characterisation of optimal compulsory licensing for a simple market.

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  • How Financial Development Caused Economic Growth in the APEC: Financial Integration with FDI OR Privatisation without FDI

    Bandyopadhyay, Debasis (2004)

    Working or discussion paper
    The University of Auckland Library

    Politicians fashionably argue in favour of financial development to promote economic growth following the seminal study of King and Levine (1993a, 1993b). Financial development, however, could come through alternative channels that are sometimes not compatible in small open economics. A relatively popular channel promotes privatisation of domestic financial intermediaries but with restrictions on foreign ownership. The other competing channel works through foreign direct investment (FDI) requiring foreign ownership of national assets. Until the last decade of globalisation, from sixties through early nineties, in many APEC countries and especially in the East Asia, privatisation of national banks went hand in hand with a regime of financial repressions. Under that regime governments kept the domestic interest rate above the world rate by imposing barriers against FDI. Recent trend in globalisation creates a political tension between those who welcome and the others who oppose FDI. This paper evaluates the relative contribution of those two alternative channels of financial development to economic growth. The model of analysis builds on King and Levine (1993b) but restricts its attention to small open economies of the APEC. Contrary to the previous findings, privatisation of domestic financial sector alone turns out to have a negative impact on the growth of efficiency measured by the growth of total factor productivity. This discrepancy could possibly be rationalised by a special characteristic of the APEC sample where a negative effect on efficiency came from the regimes of financial repression that blocked FDI. Financial integration led by FDI does bring the prospect of lower economic growth due to increased business fluctuations especially for the small open economies. Nevertheless, it is surprising to find that a significant improvement in efficiency and growth came to the APEC nations through the international channel with the flow of FDI. Consequently, barriers to globalisation out of a purely the nationalist concerns may be ill fated even for small open economies.

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  • Asymmetric Information and R&D Competition

    Kao, Tina (2002)

    Working or discussion paper
    The University of Auckland Library

    This paper analyses R&D competition among firms with incomplete information. In a stochastic R&D game, firms possess private information regarding their R&D progress. They can only observe the rival's R&D investments, but not its actual R&D position, R&D investments thus carry both investment and signalling effects. In this two-period model. there are two possible regimes for the second period game: the complete information regime and the signalling regime. In the signalling regime. in order to credibly convey to the rival its first period research success, the first mover has to over-invest. Both firms have higher profits in the complete information regime. The game is in the signalling regime if the difference b€tween monopoly and duopoly profit is sufficiently large and if the possibility of leapfrogging is high. For some parameter ranges, the choice of the information regime is endogenous.

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  • Do Topics Diffuse from Core to Periphery Journals?

    Bandyopadhyay, Debasis; Yu, Jun (1999)

    Working or discussion paper
    The University of Auckland Library

    We examine the interests among competing topics of macroeconomics by tracing publication frequencies of these topics as recorded in the EconLit database over the period from 1969 through 1996. We find some evidence in the data that the interests on a topic in the core journals relative to the periphery journals decreases as the topic gets old. We, however, find that an increasing interest on a topic in the periphery journals Granger causes an increase in interest on the same topic in the core journals but not vice versa. The evidence, therefore, suggests that the topics do not gradually diffuse from the core journals to the periphery journals. Nevertheless, we find that one could economize their literature search by focusing on that smaller set of core journals.

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  • Gender Differences in Trust and Reciprocity

    Chaudhuri, Ananish; Gangadharan, Lata (2003)

    Working or discussion paper
    The University of Auckland Library

    We use the investment game introduced by Berg, Dickhaut and McCabe (1995) to explore gender differences in trust and reciprocity. In doing so we replicate and extend the results first reported by Croson and Buchan (1999). We find that men exhibit greater trust than women do while women show higher levels of reciprocity. Trusting behavior is driven strongly by expectations of reciprocation. We posit that the lower levels of trust exhibited by women may be attributed to a higher degree of risk aversion.

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  • Two-way Interconnection with Partial Consumer Participation

    Schiff, Aaron (2001)

    Working or discussion paper
    The University of Auckland Library

    This paper incorporates partial consumer participation in a model of competition between telecommunications networks with two-way interconnection. It is shown, in contrast to the results of similar models with full participation, that the firms' equilibrium profits depend on the level of a reciprocal access charge under two-part retail pricing. Under some simplifying assumptions, it is shown that firms prefer the access charge be set equal to the marginal cost of termination, which coincides with the social optimum. Without these additional assumptions the model is analytically complex and simulation results are presented that suggest firms prefer the access charge to be less than marginal cost, while the socially optimal access charge may be above or below cost depending on the differentiation of the firms.

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  • Does Enviromental Regulation Stimulate Innovative Responses? Evidence from U.S. Manufacturing

    Ratnayake, Ravi (1999)

    Working or discussion paper
    The University of Auckland Library

    A wide spread concern can be witnessed among businessmen, policy makers and academics about the role of environmental regulations on innovative responses. In this study, we examine whether these regulations enhance or hinder R&D expenditure using the data for eight major U.S industries for the period 1982 to 1992. We find no strong evidence to support the view that environmental regulations proxied by abatements costs have any significant impact on the pollution abatement technology.

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  • Parental Income and the Choice of Participation in University, Polytechnic or

    Maani, Sholeh (2005)

    Working or discussion paper
    The University of Auckland Library

    This paper examines the link between parental income during adolescent years and higher education choices of the offspring at age 18. This study is the first to use a recent longitudinal data set from New Zealand (Christchurch health and development Surveys, CHDS), in the higher education context. The paper examines the impact of family income and other resources throughout adolescent years on later decisions to participate in higher education and the choice of type of tertiary education at age 18. A binary choice model of participation in education, and a multinomial choice model of the broader set of choices faced at age 18, of employment, university, or polytechnic participation are estimated. Among the features of the study are that it incorporates a number of variables, from birth to age 18, which allow us to control further than most earlier studies for ability heterogeneity, academic performance in secondary school, in addition to parental resources (e.g., childhood IQ, nationally comparable high school academic performance, peer effects, family size and family financial information over time). The results highlight useful features of intergenerational participation in higher education, and the effect of parental income on university education, in particular.

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  • Private and Public Returns to Investments in Secondary and Higher Education in NZ over time: 1981- 1996

    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. tertiary education in the 1981-1991 period, and a stabilisation of results for males and a relative decline in the returns for females since 1991.

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  • The Shaping of Research Agendas in International Economic Organizations: Illustrations from the World Bank, IMF and OECD

    Endres, Anthony; Fleming, G.A. (2002)

    Working or discussion paper
    The University of Auckland Library

    We investigate the determinants, development, character and distinctiveness of research programmes in international economic organisations (IEOs). In the twentieth century, IEOs emerged as another domain - in addition to government, business and academia - in which economists demonstrated the value of their intellectual constructs. What were the forces shaping economic thought in IEOs? How does the incorporation of new ideas in IEO research affect policy prescriptions emanating from IEOs? We offer illustrations from the IMF, OECD, and World Bank drawn from work in the late 1960s to the early 1980s. We view the subject matter as a variant of Schumpeterian 'political economy' rather than pure analytical economics. Economic research in IEOs enabled economists to assume positions as critical intellectual actors in IEO policy formation. Key determinants of economic thought in IEOs included the rationale for the existence of a particular organisation as expressed in formal charters or constitutions; contemporary ideas disseminated from academic economic analysis, and pressures applied by member governments to research and advise on specific policy questions either as events or operational functions demanded. We consider the World Bank as a purveyor of development strategies, in particular the concept of 'structural adjustment' in the 1980s; the self-styled monetary approach to the balance of payments prosecuted at the IMF from the 1960s to the 1980s, and the OECD policy line on economic policy reform in developed industrialised countries in the late 1970s. IEO research agendas were predominantly aimed at problems resulting from international economic interdependencies. We conclude that, for an IEO, international political economy was more likely to sway national policymakers if it employed a discourse - together with carefully chosen metaphors - turning on operational imperatives and articulating ruling policy concepts framed as part of eclectic, applicable models. We find little support for the public choice view of IEO research (and researchers) as involving bureaucratic and research budget maximization and strict research independence. Economic thought in IEOs is demand -driven though not completely demand- determined.

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  • Jacknifing Bond Option Prices

    Yu, Jun; Phillips, Peter (2002)

    Working or discussion paper
    The University of Auckland Library

    In continuous time specifications, the prices of interest rate derivative securities depend crucially on the mean reversion parameter of the associated interest rate diffusion equation. This parameter is well known to be subject to estimation bias when standard methods like maximum likelihood (ML) are used. The estimation bias can be substantial even in very large samples and it translates into a bias in pricing bond options and other derivative securities that is important in practical work. The present paper proposes a very general method of bias reduction for pricing bond options that is based on Quenouille's (1956) jackknife. We show how the method can be applied directly to the options price itself as well as the coefficients in continuous time models. The method is implemented and evaluated here in the Cox, Ingersoll and Ross (1985) model, although it has much wider applicability. A Monte Carlo study shows that the proposed procedure achieves substantial bias reductions in pricing bond options with only mild increases in variance that do not compromise the overall gains in mean squared error. Our findings indicate that bias correction in estimation of the drift can be more important in pricing bond options than correct specification of the diffusion. Thus, even if ML or approximate ML can be used to estimate more complicated models, it still appears to be of equal or greater importance to correct for the effects on pricing bond options of bias in the estimation of the drift. An empirical application to U.S. interest rates highlights the differences between bond and option prices implied by the jackknife procedure and those implied by the standard approach. These differences are large and suggest that bias reduction in pricing options is important in practical applications.

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  • MCMC Methods for Estimating Stochastic Volatility Models with Liverage Effects: Comments on Jacquier, Polson and Rossi (2002)

    Yu, Jun (2002)

    Working or discussion paper
    The University of Auckland Library

    In this note we represent the well known discrete time stochastic volatility (SV) model with a leverage effect and the SV model of Jacquier, Polson and Rossi (JPR) (2002) using Gaussian nonlinear state space forms with uncorrelated measurement and transition errors. With the new representations, we show that the JPR specification does not necessarily lead to a leverage effect and hence is not theoretically justified. Empirical comparisons of these two models via Bayesian MCMC methods reveal that JPR's specification is not supported by actual data either. Simulation experiments are conducted to study the sampling properties of the Bayes estimator for the conventionally specified model.

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  • On The Relation Among Some Definitions Of Strategic Stability

    Hillas, John; Jansen, Mathijis; Potters, Jos (2001)

    Working or discussion paper
    The University of Auckland Library

    In this paper we examine a number of different definitions of strategic stability and the relations among them. In particular, we show that the stability requirement given by Hillas (1990) is weaker than the requirements involved in the various definitions of stability in Mertens' reformulation of stability (Mertens 1989, 1991). To this end, we introduce a new de nition of stability and show that it is equivalent to (a variant of) the definition given by Hillas (1990). We also use the equivalence of our new de nition with the definition of Hillas to provide correct proofs of some of the results that were originally claimed (and incorrectly \proved") in Hillas (1990).

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  • Achieving an efficient equilibrium when simultaneously bidding on multiple, divisible-item auctions

    Beltran, Fernando; Roggendorf, Matthias (2006)

    Working or discussion paper
    The University of Auckland Library

    We investigate equilibrium properties of a bidding strategy in a situation in which bidders attempt to purchase a given amount of a divisible resource by bidding on multiple auctions. A possible application area for such a scenario is the next-generation of wireless networks, in which multiple, competing network providers sell bandwidth each using an auction to allocate their resources. A bidder may aggregate shares of the resource obtained from some of the auctions, and needs to coordinate his bids to maximise the utility derived from each auction. In order to deal with aggregation and coordination of bids, we introduce the notion of an aggregated market, which is an artificial construct by each bidder that allows him to distribute his demand among the auctions. Furthermore, the aggregate market helps to understand convergence of the bidding process occurring at each individual auction. We show that by using an incentive-compatible, efficient mechanism at each single auction bidders have incentives to truthfully reveal their demand to the aggregated market.

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