1. Andrianova, S. and N. Melissas, "Corruption, Extortion and the Boundaries of the Law," Journal of Law Economics and Organization, 25 (2009): 442-471.
We consider a set-up in which a principal must decide whether or not to legalise a socially undesirable activity. The law is enforced by a monitor who may be bribed to conceal evidence of the offense and who may also engage in extortionary practices. The principal may legalise the activity even if it is a very harmful one. The principal may also declare the activity illegal knowing that the monitor will abuse the law to extract bribes out of innocent people. Our model offers a novel rationale for legalizing possession and consumption of drugs while continuing to prosecute drug dealers.
2. Benjamin, D., and F. Meza, "Total Factor Productivity and Labor Reallocation: The Case of the Korean 1997 Crisis," The B.E. Journal of Macroeconomics, 9 (2009): 1625.
In recent research on financial crises, large exogenous shocks to total factor productivity (TFP) are used as the driving force accounting for large output falls. TFP fell 3% after the Korean 1997 financial crisis. We find evidence that the large fall in TFP is mostly due to a sectoral reallocation of labor from the more productive manufacturing and construction sectors to the less productive wholesale trade sector, the public sector and agriculture. We construct a two-sector model that accounts for the labor reallocation. The model has a consumption sector and an investment sector. Firms face sector-specific working capital constraints, which we calibrate with data from financial statements. The rise in interest rates makes inputs more costly. The model accounts for 42% of the TFP fall. The model also accounts for 53% of the fall in GDP. It is broadly consistent with the post-crisis behavior of the Korean economy.
3. Dávila, J., J. Eeckhout, and C. Martinelli, "Bargaining., Over Public Goods," Journal of Public Economic Theory,11 (2009): 927-945.
In a simple public good economy, we propose a natural bargaining procedure, the equilibria of which converge to Lindahl allocations as the cost of bargaining vanishes. The procedure splits the decision over the allocation in a decision about personalized prices and a decision about output levels for the public good. Since this procedure does not assume price-taking behavior, it provides a strategic foundation for the personalized taxes inherent in the Lindahl solution to the public goods problem.
4. Domínguez, D., and A. Nicolo, "Envy-Free and Efficient Minimal Rights: Recursive No-Envy," The B.E. Journal of Theoretical Economics, 9 (2009):1-16.
In economics the main efficiency criterion is that of Pareto-optimality. For problems of distributing a social endowment a central notion of fairness is no-envy (each agent should receive a bundle at least as good, according to her own preferences, as any of the other agent's bundle). For most economies there are multiple allocations satisfying these two properties, which selects a single allocation which is Pareto-optimal and satisfies no-envy in two-agent exchange economies. There is no straightforward generalization of our procedure to more than two-agents.
5. Eryürük, G., A. Hall., and K. Jana, "Contemporaneous and Long-Run Canonical Correlations in the Linear IV Model: Implications for Instrument Selection," Economics Letters,105 (2009): 83-85.
In the normal linear simultaneous equations model, we demonstrate a close relationship between two recently proposed methods of instrument selection by presenting a fundamental relationship between the two sets of canonical correlations upon which the methods are based.
6. Eryürük, G., A. Hall., and K. Jana, "A Comparative Study of Three Data-Based Methods of Instrument Selection," Economics Letters, 105 (2009): 280-283.
We assess relative performance of three recently proposed instrument selection methods via a Monte Carlo study that investigates the finite sample behavior of the post-selection estimator of a simple linear IV model. Our results suggest that no one method dominates.
7. Escanciano, J.C., and I. Lobato, "An Automatic Portmanteau Test for Serial Correlation," Journal of Econometrics, 151(2009): 140-149.
This article introduces a data-driven Box-Pierce test for serial correlation. The proposed test is very attractive compared to the existing ones. In particular, implementation of this test is extremely simple for two reasons: first, the researcher does not need to specify the order of the autocorrelation tested, since the test automatically chooses this number; second, its asymptotic null distribution is chi-square with one degree of freedom, so there is no need of using a bootstrap procedure to estimate the critical values. In addition, the test is robust to the presence of conditional heteroskedasticity of unknown form. Finally, the proposed test presents higher power in simulations than the existing ones for models commonly employed in empirical finance.
8. Juárez, L., "Crowding Out of Private Support to the Elderly: Evidence from a Demogrant in Mexico," Journal of Public Economics, 93 (2009): 454-463.
To examine whether private support dampens or reinforces the impact of redistributive policies, this paper estimates the effect of an exogenous increase in the income of the elderly, caused by a recent demogrant in Mexico, on the amount of private transfers they receive. My instrumental variables strategy overcomes the endogeneity of income that typically contaminates estimates and, unlike related studies that use natural or policy experiments in reduced-form estimations, it yields evidence of a positive bias. This suggests that an unobservable characteristic is positively correlated both with income and private transfer receipt and that treating income as exogenous could lead to an underestimation of the crowding out effect. In contrast, my preferred estimates are negative, significant and not far from minus one, implying an almost complete crowding out. My findings suggest that private transfers could neutralize the changes in the public transfers for the elderly.
9. Martinelli, C., and S. Parker, "Deception and Misreporting in a Social Program," Journal of the European Economic Association, 7 (2009): 886-908.
We investigate empirically the extent of misreporting in a poverty-alleviation program in which self-reported information, followed by a household visit, is used to determine eligibility. In the model we propose and estimate, underreporting may be due to a deception motive, and overreporting to an embarrassment motive. We find that underreporting of goods and desirable home characteristics is widespread, and that overreporting is common with respect to goods linked to social status. Larger program benefits encourage underreporting and discourage overreporting. We also estimate the costs of lying and embarrassment for different goods, and show that the embarrassment cost for lacking a good is proportional to the percentage of households who own the good.
10. Servatka, M., and R. Vadovic, "Unequal outside options in the lost wallet game," Economics Bulletin, 29 (2009): 1-14.
Experimental evidence suggests the size of the foregone outside option of the first mover does not affect the behavior of the second mover in the lost wallet game. In this paper we experimentally compare the behavior of subjects when they face an outside option with unequal payoffs, i.e., the first mover gets 10 and the second mover gets 0, and when they face an outside option with equal payoffs, i.e., both get 5. Consistent with the most of the literature we do not find a significant difference in behavior of second movers.