infonet-economy

This paper analyzes the effect of trade liberalization on government spending in a general equilibrium model with a continuum of industries supplying tradable and nontradable goods under monopolistic competition. Trade liberalization is modeled as the opening up of product markets between two countries, which may differ in total factor productivity, factor endowment and fix cost…

The use of microworlds (MWs), or complex dynamic systems, in educational testing and personnel selection is hampered by systematic measurement errors because these new and innovative item formats are not adequately controlled for their difficulty. This empirical study introduces a way to operationalize an MW's difficulty and demonstrates the strong effects of variations in it. A…

This paper examines whether contacts between caseworkers in public employment offices and employers impact on the reemployment chances of the unemployed they counsel. This analysis is made possible through a large administrative dataset on unemployed combined
with an extensive survey of caseworkers' characteristics and their strategies. This data was created for evaluating…

Neuroeconomics is one prominent example of the technology driven shift in social sciences. As a new and interdisciplinary field combining Neuroscience, Psychology and Economics, it is expected to provide the premise of fundamentally new insights into human behaviour and in improving the existing models in rational choice and game theory or to advance attempts in marketing. New…

We extend the original form of prospect theory by Kahneman and Tversky from finite lotteries to arbitrary probability distributions, using an approximation method based on weak-⋆ convergence. The resulting formula is computationally easier than the corresponding formula for cumulative prospect theory and makes it possible to use prospect theory in future applications in economics and…

How does risk tolerance vary with stake size? This important question cannot be adequately answered if framing effects, nonlinear probability weighting, and heterogeneity of preference types are neglected. We show that, contrary to gains, no coherent change in relative risk aversion is observed for losses. The increase in relative risk aversion over gains cannot be captured by the…

The issue of potentially endogenous control variables in causal studies based on the assumption of no selection bias conditional on observables (conditional independence assumption, CIA) is discussed. The paper shows that the standard formulation of the CIA obscures the endogeneity problem. It suggests a CIA based on potential variables together with explicit exogeneity conditions,…

ENGLISH: Conventional wisdom views demographic change as a set of exogenous shocks impinging on social security, with the economy treated as a closed system. This contribution argues that demographics is nothing but the aggregate of individual decisions, which are influenced by social security. This claim is supported by both theoretical argument and empirical evidence with regard to…

This paper examines the interplay of endogenous vertical integration and cost-reducing downstream investment in successive oligopoly. Analyzing a linear Cournot model, we establish the following key results: (i) Vertical integration increases own investment and decreases competitor investment (intimidation effect). (ii) Asymmetric integration is a non-degenerate equilibrium outcome…