The bootstrap can be validated by considering the sequence of P values obtained by bootstrap iteration, rather than asymptotically. If this sequence converges to a random variable with the uniform U(0,1) distribution, the bootstrap is valid. Here, the model is made discrete and finite, characterised by a three-dimensional array of probabilities. This renders bootstrap iteration to any desired order feasible. A unit-root test for a process driven by a stationary MA(1) process is known to be unreliable when the MA(1) parameter is near −1. Iteration of the bootstrap P value to convergence achieves reliable inference unless the parameter value is very close to −1.
Testing the specification of econometric models has come a long way from the t tests and F tests of the classical normal linear model. In this paper, we trace the broad outlines of the development of specification testing, along the way discussing the role of structural versus purely statistical models. Inferential procedures have had to advance in tandem with techniques of estimation, and so we discuss the generalized method of moments, non parametric inference, empirical likelihood and estimating functions. Mention is made of some recent literature, in particular, of weak instruments, non parametric identification and the bootstrap.
This paper questions the ability of the standard HOS (Heckscher-Ohlin-Samuelson) model to explain changes in the labor shares (LS) of income in OECD countries. We use the Davis (1998) version of the HOS model with wage rigidity in a sub-group of countries. We show that trade openness with developing countries reduces LS in rigid wage countries and does not affect LS in free wage countries. This pattern is induced by factor reallocation towards capital-intensive sectors in rigid wage countries. Using the KLEMS dataset for 8 OECD countries over the period 1970–2005, we show that the weight of capital-intensive sectors substantially increased in continental European countries, while it did not change or even decreased in the US and the UK. Fixed effects regressions suggest that trade intensity with China explains between 50% (IV estimates) and 80% (OLS estimates) of the observed differential labor share change between Continental Europe and Anglo-Saxon countries.
Nous nous intéressons dans cet article à la théorie Héréditaire et Relativiste (HR) de la demande de monnaie. Cette théorie, proposée par Allais en 1965, est restée dans l’ombre notamment en raison de son cadre conceptuel incongru à l’approche dominante. Elle propose en effet une modélisation orientée vers le passé d’un comportement héréditaire à l’ère d’une macroéconomie révolutionnée par la notion des anticipations. Elle stipule que l’échelle du temps physique n’est pas pertinente pour analyser les phénomènes monétaires. Et elle s’appuie sur l’idée de la relativité du temps pour concevoir une échelle de temps psychologique sur laquelle elle fonde sa formulation de la demande de monnaie. Nous entendons dans cet article replacer cette théorie par rapport au courant dominant. Nous montrerons qu’elle croise l’évolution méthodologique de ce courant en des points cruciaux. Nous y soulignerons en effet une conception originale « d’anticipations autorégressives dynamiques ». Nous montrerons qu’elle rend compte, de par l’endogénéité de ces anticipations, d’un problème de non-invariance similaire à celui posé par les anticipations rationnelles et mis en évidence par Lucas (1976) dans sa fameuse critique. Nous montrerons qu’elle lui apporte une solution tout à fait originale.
In this paper, we examine the impact of the economic crisis and the policy reaction on inequality and relative poverty in four European countries: France, Germany, Ireland and the UK. The period examined, 2008–13, was one of great economic turmoil, yet it is unclear whether changes in inequality and poverty rates over this time period were mainly driven by changes in market income distributions or by tax‐benefit policy reforms. We disentangle these effects by producing counterfactual (‘no reform') scenarios using tax‐benefit microsimulation and representative household surveys for each country. For the first stage of the Great Recession, we find that the policy reaction contributed to stabilising or even decreasing inequality and relative poverty in the UK, France and, especially, Ireland. Market income changes nonetheless pushed up inequality and relative poverty in France. Relative poverty increased in Germany as a result of policy responses combined with market income changes. Subsequent policy reforms, in the later stage of the crisis, had markedly different cross‐country effects, decreasing overall poverty in France, increasing it in Ireland, and giving mixed effects for different subgroups in Germany and the UK.
Equality of opportunity is usually defined as a situation where the effect of circumstances on outcome is nullified (compensation principle) and effort is rewarded (reward principle). We propose a new version of the reward principle based on the idea that effort deserves reward for it is costly. We show that luck can be introduced in two ways in the definition of these principles, depending on whether the correlation between luck and circumstances should be nullified and whether the correlation between luck and effort should be rewarded. In this regard, the timing of luck with respect to effort decisions is crucial, as is exemplified by moral hazard where effort choice influences the lottery of future uncertain events.
We analyse the optimal contract between a riskâ€ averse manager and the initial shareholders in a twoâ€ period model where the manager's investment effort, carried out in period 1, and his or her current effort, carried out in period 2, both impact the secondâ€ period profit, so that it may be difficult to disentangle the incentives for these two types of effort. We show that stock grants play different roles according to whether the signal of investment effort is less noisy, or noisier, than that of current effort. We determine simultaneously the optimal stock grants and the optimal restrictions on sales of shares.
The literature offers competing estimates of disease costs, with each study having its own data and methods. In 2007, the Dutch Center for Public Health Forecasting of the National Institute for Public Health and the Environment provided guidelines that can be used to set up cost-of-illness (COI) studies, emphasising that most COI analyses have trouble accounting for comorbidity in their cost estimations. When a patient has more than one chronic condition, the conditions may interact such that the patient’s healthcare costs are greater than the sum of the costs for the individual diseases. The main objective of this work was to estimate the costs of 10 non-communicable diseases when their co-occurrence is acknowledged and properly assessed.
Sovereign wealth funds (SWFs) have been increasingly active over the past decade, with governments raising concern regarding their actual motives and the potential for cross-border interest in national strategic sectors. The aim of this paper is to contribute to the existing literature by improving our understanding of the decisions being taken by this new class of investors. The decision-making process informing such investments is complex in the sense that it involves several levels of decision that may potentially interact. In this study, we investigate the determinants of SWFs' foreign investments, while considering in a single model the sequence of choices involved in their decisions, specifically (i) the decision to invest abroad or not, (ii) the decision to invest in a listed versus unlisted firm, and (iii) the decision to take large versus small stakes. Using a nested logit approach on one of the largest SWFs, the Singaporean fund Temasek, over the period 1990–2010, we provide clear evidence of dependence in the three levels of decision making considered. In addition, we show that the probability of Temasek's cross-border investment increases with the excess of foreign exchange (FX) reserves, that the SWF tends to target unlisted firms when asymmetry of information is low between the target company and its home country, and that its involvement in large stakes depends on a firm's financial characteristics.
The main purpose of this paper is to investigate the relationship between financial sector development and economic growth taking into consideration the role of institutions quality. Our sample is on a group of 143 countries observed during the period of 2006-2013. The sample is dived into 100 developing and 43 developed countries. Using structural GMM the paper shows that financial sector plays a crucial role in economic development and growth for the whole sample as well as for developed and developing countries. However, the results show that unlike developing countries, developed countries enjoyed the presence of proper institutions in their countries which in turn have contributed further to the development of their financial sector.