Publications

Abstract This article analyzes the impacts of Environmental Tax Reform (ETR) when the government is constrained not to increase the public debt-to-output ratio. We consider an overlapping generations model with pollution. Public spending for pollution abatement are financed by tax revenues and public debt. We show that keeping constant the public debt-output ratio is not an obstacle to attain a double dividend, i.e. an increase of both (i) environmental quality and (ii) aggregate consumption. First, if the capital stock is low and the pollution abatement is large enough, a successful ETR consists in a rise of the environmental tax, compensated by a decrease of the income tax. Secondly, we show that the environmental tax revenues may help reduce the public debt-output ratio. We give conditions (on the initial level of the environmental tax and the debt-output ratio) such that an increase of the environmental tax, budget-balanced by a decrease of the debt-output ratio may also achieve a double dividend. We conclude that public debt crisis should not compromise ETR, instead, environmental tax revenues could be part of the solution. JEL: Q5, H23, H63 / KEY WORDS: Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model
Keywords Environmental Tax Reform, Debt, Public Emission Abatement, Double Dividend, Overlapping Generations Model
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Abstract We use tail expectiles to estimate alternative measures to the Value at Risk (VaR) and Marginal Expected Shortfall (MES), two instruments of risk protection of utmost importance in actuarial science and statistical finance. The concept of expectiles is a least squares analogue of quantiles. Both are M-quantiles as the minimizers of an asymmetric convex loss function, but expectiles are the only M-quantiles that are coherent risk measures. Moreover, expectiles define the only coherent risk measure that is also elicitable. The estimation of expectiles has not, however, received any attention yet from the perspective of extreme values. Two estimation methods are proposed here, either making use of quantiles or relying directly on least asymmetrically weighted squares. A main tool is to first estimate large values of expectile-based VaR and MES located within the range of the data, and then to extrapolate the obtained estimates to the very far tails. We establish the limit distributions of both of the resulting intermediate and extreme estimators. We show via a detailed simulation study the good performance of the procedures, and present concrete applications to medical insurance data and three large US investment banks.
Keywords Asymmetric squared loss, Heavy tails, Extreme values, Coherency, Value at Risk, Extrapolation, Marginal expected shortfall, Expected shortfall, Expectiles
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Abstract Considering two-parent households with children, this study investigates the behavioral responses of men and women to a cash transfer program in Uruguay – Asignaciones Familiares-Plan de Equidad (AFAM-PE). We examine its effect on labor market responses, marital dissolution, and the decision-making process regarding the use of money. The assignment mechanism to the AFAM-PE exogenously alters the distribution of non-labor income across applicant households by targeting the monetary transfer (usually) to the female spouse. Our identification strategy exploits both the female targeting and a discontinuity in eligibility for enrollment into the program. Based on a regression discontinuity design and on a follow-up survey matched with program’s administrative records, this study finds that the program has significant negative effects on the formality choice of women at the eligibility cut-off. These responses seem to be associated with a lower rate of moving from unregistered jobs to formality. We also find suggestive evidence that the program results in women taking greater (perceived) responsibility for decisions in specific spheres of household expenditures. This study, represents one of the first efforts to analyze the distributional effects of CCT programs on different couples members’ behavioral responses. It offers relevant considerations for the ongoing debate about the impacts of these kind of programs on women’s agency in developing countries, suggesting the need to discuss new designs for social assistance that reduce discouraging effects on formality.
Keywords Women’s decision-making, Labor market behavior, Intra-household allocations, Conditional cash transfer program
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Abstract In this article we extend the research on risk-based asset allocation strategies by exploring how using an SRI universe modifies properties of risk-based portfolios. We focus on four risk-based asset allocation strategies: the equally weighted, the most diversified portfolio, the minimum variance and the equal risk contribution. Using different estimators of the matrix of covariances, we apply these strategies to the EuroStoxx universe of stocks, the Advanced Sustainability Performance Index (ASPI) and the complement of the ASPI in the EuroStoxx universe from March 15, 2002 to May 1, 2012. We observe several impacts but one is particularly important in our mind. We observe that risk-based asset allocation strategies built on the entire universe, concentrate their solution on non-SRI stocks. Such risk-based portfolios are therefore under-weighted in socially responsible firms.
Keywords Turnover, Combinatorics, Alternative and risk-based strategies, Socially responsible investment, Theory of Computation, Diversification, Operation Research/Decision Theory, Performance, Robust covariances matrix
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Abstract This paper aims at clarifying the analytical conditions under which financial globalization originates welfare gains in a simple endogenous growth setting. We focus on an open-economy AK model in which the capital-deepening effect of financial globalization boosts growth in a in permanent but entails an entry cost in order to access international credit markets. We show that constrained borrowing triggers substantial welfare gains, even at small levels of international financial integration, provided that the autarkic growth rate is larger than the world interest rate. Such conditional welfare benefits boosted by stronger growth—long-run gain—arise in our preferred model without investment commitment and they range, relative to autarky, from about 2% in middle-income countries to about 13% in OECD-type countries under international financial integration. Sizeable benefits emerge despite the fact that consumption initially falls—short-run pain—which is, however, shown not to dwarf positive growth changes.
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Abstract Conventional wisdom says that the middle classes in many developed countries have recently suffered losses, in terms of both the share of the total population belonging to the middle class, and also their share in total income. Here, distribution-free methods are developed for inference on these shares, by means of deriving expressions for their asymptotic variances of sample estimates, and the covariance of the estimates. Asymptotic inference can be undertaken based on asymptotic normality. Bootstrap inference can be expected to be more reliable, and appropriate bootstrap procedures are proposed. As an illustration, samples of individual earnings drawn from Canadian census data are used to test various hypotheses about the middle-class shares, and confidence intervals for them are computed. It is found that, for the earlier censuses, sample sizes are large enough for asymptotic and bootstrap inference to be almost identical, but that, in the twenty-first century, the bootstrap fails on account of a strange phenomenon whereby many presumably different incomes in the data are rounded to one and the same value. Another difference between the centuries is the appearance of heavy right-hand tails in the income distributions of both men and women.
Keywords Middle class, Canada, Bootstrap
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Abstract In economics, rank-size regressions provide popular estimators of tail exponents of heavy-tailed distributions. We discuss the properties of this approach when the tail of the distribution is regularly varying rather than strictly Pareto. The estimator then over-estimates the true value in the leading parametric income models (so the upper income tail is less heavy than estimated), which leads to test size distortions and undermines inference. For practical work, we propose a sensitivity analysis based on regression diagnostics in order to assess the likely impact of the distortion. The methods are illustrated using data on top incomes in the UK.
Keywords Top incomes, Heavy tails, Rank size regression, Extreme value index, Regular variation
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Abstract Asymptotic and bootstrap inference methods for inequality indices are for the most part unreliable due to the complex empirical features of the underlying distributions. In this paper, we introduce a Fieller-type method for the Theil Index and assess its finite-sample properties by a Monte Carlo simulation study. The fact that almost all inequality indices can be written as a ratio of functions of moments and that a Fieller-type method does not suffer from weak identification as the denominator approaches zero, makes it an appealing alternative to the available inference methods. Our simulation results exhibit several cases where a Fieller-type method improves coverage. This occurs in particular when the Data Generating Process (DGP) follows a finite mixture of distributions, which reflects irregularities arising from low observations (close to zero) as opposed to large (right-tail) observations. Designs that forgo the interconnected effects of both boundaries provide possibly misleading finite-sample evidence. This suggests a useful prescription for simulation studies in this literature.
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Abstract Owing to recent concerns about the negative externalities of traditional fuel use on the environment and health, the issue of the household fuel transition in developing countries, from dirty fuels towards clean fuels, is receiving growing research attention. This paper provides an up-to-date survey of the economic literature on household fuel use in these countries. We first present the conceptual and theoretical frameworks. Then we discuss the empirical results that show the wide range of factors that drive the household fuel transition and can be understood better by linking them with theory.
Keywords Household decisions Fuel transition Energy consumption
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Abstract This paper illustrates the “Sen-Nussbaum-type” capability approach to the measurement of youth wellbeing using the newly developed Exploratory Structural Equation Modelling (ESEM). It offers insights into how the capability to achieve wellbeing can be measured in a conflict-affected and resource-constrained setting. The methodology is applied to nationally representative data taken from the Palestinian Family Survey. The population of interest is youth aged 15 to 29. Three capability dimensions are identified: health awareness, knowledge and living conditions. Results show an interrelation between capability dimensions. It is especially important to note the effect of knowledge capabilities on both health awareness and living conditions indicators. Results also confirm the importance of some (exogenous) factors such as the education of the household head in the conversion of capabilities into achievements. Capabilities are shown to be highest in the West Bank for both knowledge and living conditions compared to the Gaza Strip.
Keywords The occupied Palestinian territories, Developing countries, Wellbeing, Wealth, Knowledge, Health awareness, Exploratory structural equation model, Capability approach
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Abstract Background The contribution of income inequality to health inequality has been widely examined in developed countries. However, little evidence exists on the effect of health on income inequality in resource-constrained settings. Findings from previous studies have indicated several mechanisms through which health affects income inequality, with the labour market being an important channel. Given the different levels of development, there are reasons to believe that health might represent a greater constraint on earnings in low-income settings. The aim of this study was to examine the relation between income and health in the West Bank and Gaza Strip. Methods Data were extracted from the 2004 Household Health Expenditure Survey, which covered 4014 households. We applied a Shapley value approach to assess the contribution of health to income inequality. The analysis involved estimating and decomposing the relative Gini index. The contribution of each variable to income inequality was then computed as the average marginal effect, holding all other covariates at the mean. Findings Results indicated clear age-specific health-income gradients. This is particularly apparent in the working-age population. Results also indicated that chronically ill people live in households witht low income. The regression analyses showed a negative effect of the proportion of adults in the household with chronic illness on income. The lack of education and employment appear to have the highest negative effect on income. The decomposition analyses revealed that ill health contributes to income inequality, whereas such an effect is reduced when we controlled for employment status. Interpretation Our results suggested the presence of a ubiquitous relation between health and income. The contribution of health to income inequality depends on how it is distributed. Evidence supports a significant effect of ill health on income, which mainly operates through employment. Additionally, variation in exposure to health risks is a potentially important mechanism through which health might generate income inequality. Funding None. Contributors MA-Z contributed to the study design, data analysis, and the writing of the Abstract. MEW contributed with input for data analysis. MB contributed to data collection, data management, data interpretation, tables, and figures. All authors have seen and approved the final version of the Abstract for publication. Declaration of interests We declare no competing interests.
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Abstract Background Interest in the Senian capability framework as an alternative approach to wellbeing measurement has increased in recent decades. The aim of this study was to look at the extent to which an individual's capability to achieve wellbeing in one dimension is associated with his or her attempt to achieve wellbeing in another dimension in a fragile setting affected by conflict. Methods Capability is defined as the ability to achieve health, knowledge, and wealth and is measured as latent variables using a structural equation model. Health capability is identified by self-assessed health, mental health, lifestyle, and knowledge of sexually transmitted diseases. Knowledge capability is captured using school attendance, completion of compulsory education, and media access. Wealth capability is identified using indicators on utilities, asset ownership, and housing conditions. Estimation results are used to derive normalised capability scores with values close to 1 indicating high capabilities. A nationally representative sample of 4329 youth aged 15–29 years was drawn from the 2010 Palestinian Family Survey. Findings Interpretations are made in terms of standardised units, which measure the change in the explained variable due to a standard deviation's change in the explanatory variable. Achieving good health is associated with knowledge capability (0·125; p=0·098) and vice versa (0·462; p=0·004). Health capability is positively associated with wealth capability (0·109; p=0·021); however, the reverse is not the case (–0·753; p=0·021). Men are more likely than women to have higher health knowledge and living conditions capabilities but lower knowledge capabilities. Results suggest the importance of some exogenous factors in the conversion of capabilities into achievements (eg, location of residence). With the exception of health, the data show higher capabilities in Areas A and B of the West Bank than in Area C and the Gaza Strip (mean 0·71 and 0·69 vs 0·60 and 0·61 vs 0·57 and 0·68 for wealth and knowledge, respectively). Interpretation Although achieving good health appears to entail knowledge capabilities, the wealth-health association is blurred by the effect of exogenous factors (eg, health-care access). Capability deprivation in the local context seems to derive from geographical barriers, as is captured by the contribution of location of residence. This reflects the effect of geopolitical segregation that restricts the movement of people. Funding Investissements d’Avenir French Government programme, managed by the French National Research Agency (ANR).
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Abstract This paper proposes a Bayesian non-parametric mortality model for a small population, when a benchmark mortality table is also available and serves as part of the prior information. In particular, we extend the Poisson-gamma model of Hardy and Panjer to incorporate correlated and age-specific mortality coefficients. These coefficients, which measure the difference in mortality levels between the small and the benchmark population, follow an age-indexed autoregressive gamma process, and can be stochastically extrapolated to ages where the small population has no historical exposure. Our model substantially improves the computation efficiency of existing two-population Bayesian mortality models by allowing for closed form posterior mean and variance of the future number of deaths, and an efficient sampling algorithm for the entire posterior distribution. We illustrate the proposed model with a life insurance portfolio from a French insurance company.
Keywords Parameter uncertainty, Credibility, Two-population mortality model, Autoregressive gamma
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Abstract In this paper we present a principled view that grounds the need for whistleblowing protection, often missing in the literature. They argue that whistleblowers have a right to protection because of their role in ensuring accountability against wrongdoings that go unnoticed due to unrestrained practices of secrecy. This right derives from the crucial role of whistleblowing in exposing right limitations, in absence of procedures of redress, and information of public interest. Given this role, absence of procedures of protection and fair hearing of disclosure claims puts unfair burdens on whistleblowers so much as to, in some instances, preclude the very possibility of disclosure. In this regard, a cognizance of their role in ensuring protection of rights and structure of accountability demands a system of protection extended to human rights defendants. We argue that the European Union should stand up for the legal protection of whistle-blowers and encourage their contribution towards more transparent institutions and economic transactions.
Keywords Whistleblowing, Accountability, Public Interest, Europe
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Abstract This paper investigates the biological standard of living in the Philippines toward the end of Spanish rule. We investigate levels, trends, and determinants of physical stature from the birth cohorts of the 1860s to the 1890s using data on 23,000 Filipino soldiers enlisted by the US military between 1901 and 1913. We estimate average heights and use province-level information for investigating the determinants of biological well-being. We find that at 159.3 cm (62.7 inches), the average height of soldiers born in the mid-1870s was very short even for the time. The low biological standard of living observed in late nineteenth-century Philippines was not due to the tropical disease environment alone since greater heights were recorded for the same period in other parts of Asia with a similar climate. The results also indicate a decline of more than 1.5 cm (0.6 inches) in the height of soldiers born between the early 1870s and the late 1880s. This decline occurred at a time when there was an expansion of commercial activity in cash crop production for export. Heights did not regain the level of the 1870s until the late 1930s and early 1940s.
Keywords Tropical diseases, Height, Biological standard of living, Human capital, Philippines, Truncated regression
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Abstract [Fr] Les normes comptables IFRS ont intégré dans le bilan des banques l'essentiel des instruments financiers dérivés que nous considérons ici sous le terme de « hors-bilan », au prix d'une certaine invisibilité de leur « effet de levier ». Nous décrivons l'activité des banques de financement et d'investissement et montrons que ces instruments dérivés correspondent à une fonction d'intermédiation du risque dans l'économie où les banques ne « portent » pas ce risque au bilan, contrairement au métier bancaire traditionnel de « transformation ». Nous décrivons la banque comme une source d'« accroissement des possibles de la taille du marché » que nous définissons au préalable d'une manière générale. Une telle source, comme toute innovation, est synonyme de risque. Le « hors-bilan » bancaire apparaît dans ce cadre comme un effet de levier sans limite naturelle. Nous étudions alors ce que pourraient être des fiscalités adaptées à trois objectifs différents : corriger et capter les rentes, limiter le risque systémique, maîtriser l'« accroissement des possibles ». Une assiette considérant une mesure des engagements en valeur absolue associés aux positions sur les produits dérivés, dans le bilan des banques, paraît pertinente pour limiter l'accroissement des possibles et, partant de là, le risque. [Eng] The accounting standard IRFS have integrated the bulk of derivatives (the off-balance sheet in this paper) in the balance sheet of the banks at the cost of masking their leverage effect. We describe the bank activity and we show that these derivatives correspond to a financial intermediation function of the banking system, which supplements the standard lending role of banks. We show that the banking activity naturally increases the possibility set of the capital market that we define in general terms. As all innovations, this increase bears additional risk. The off-balance sheet appears in this framework as bringing a leverage effect without natural limit. We study what could be the role of different types of taxes: first, correcting and capturing the rents, second, limiting the systemic risk, third, mastering the “growth of the feasible set”. A tax base consisting in financial liabilities (in absolute value) associated to positions on financial derivatives may be viewed as well-focused to limit the growth of the possibility set and therefore of the risk.
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Abstract We study count processes in insurance, in which the underlying risk factor is time varying and unobservable. The factor follows an autoregressive gamma process, and the resulting model generalizes the static Poisson-Gamma model and allows for closed form expression for the posterior Bayes (linear or nonlinear) premium. Moreover, the estimation and forecasting can be conducted within the same framework in a rather efficient way. An example of automobile insurance pricing illustrates the ability of the model to capture the duration dependent, nonlinear impact of past claims on future ones and the improvement of the Bayes pricing method compared to the linear credibility approach. Introduction We propose a time series model for count variables encountered in insurance, when the underlying risk factor is time varying and unobservable. We introduce the au-toregressive gamma process for the latent factor dynamics and show how it provides an integrated framework for the efficient estimation, pricing, and forecasting of the risk. One typical application of the model is automobile insurance, for which the insurer holds the history of individual yearly claim counts over several periods. This information should then be taken into account in order to update the future premium regularly, on an individual basis.
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