The portfolio selection problem is traditionally modelled by two different approaches. The first one is based on an axiomatic model of risk-averse preferences, where decision makers are assumed to possess an expected utility function. The second approach, first proposed by Markowitz (1952), reduces the portfolio choice to a set of two criteria, reward and risk. Usually the reward-risk model is not consistent with the first approach, even when the decision is independent from the specific form of the risk-averse expected utility function. In this paper we generalize the reward-risk model for portfolio selection. We define reward measures and risk measures by giving a set of properties these measures should satisfy. One of these properties will be the consistency with second order stochastic dominance, to obtain a link with the expected utility portfolio selection. We characterize reward and risk measures and we discuss the implication for portfolio selection.
"We present a model in which two of the most important features of the long-run growth process are reconciled: the massive changes in the structure of production and employment; and the Kaldor facts of economic growth. We assume that households expand their consumption along a hierarchy of needs and firms introduce continuously new products. In equilibrium industries with an expanding and those with a declining employment share co-exist, and each such industry goes (or has already gone) through a cycle of take-off, maturity, and stagnation. Nonetheless macroeconomic aggregates grow pari passu at a constant rate."
This paper investigates the effectiveness of benefit sanctions in reducing unemployment duration. Data from the Swiss labor market allow making a distinction between the effect of a warning that a person is not complying with eligibility requirements and the effect of the actual enforcement of a benefit sanction. We find that both warning and enforcement have a positive effect on the exit rate out of unemployment. Moreover, the stricter the sanction policy the shorter is the duration of unemployment of the non-sanctioned. This can be taken as evidence of a strong ex-ante effect of a strict sanction policy.
We suggest a new micro-foundation of money in which markets are well-organized but consumers' preferences are stochastic. In this model, we solve for stationary equilibria and show that there is an optimum quantity of money. The rational solution of our model is compared with actual behavior in a laboratory experiment. It turns out that the experiment gives support to our theoretical results.
Empirical evidence is provided for the importance of non-reciprocal pro-social behavior of individuals in an anonymous, n-person pure public good setting. A unique panel data set of 136,000 observations is matched with an extensive survey.nEven under anonymous conditions, a large number of individuals are prepared to donate a not insignificant sum of money. Cooperation conditional on giving by specific other personsn(reciprocity) is present but the causal relationship is ambiguous. It is crucially important, whether, and in what way, one is asked to donate. Identification with the organization is also important.
This paper analyzes the impact of the Austrian Regional Extended Benefit Program (REBP) on the labor market outcomes for elderly workers in Austria. The REBP extended entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions. This policy change created a large-scale quasi-experimental situation from which a lot can be learned about the impact of unemployment insurance rules on the dynamics of employment, unemployment, and wages. We find that the REBP led to a tremendous increase in unemployment which was due to both an increase in the inflow to and thenoutflow from unemployment. The REBP also induced a strong increase in early retirement and in many cases, in particular for steel workers, entering unemployment meant withdrawal from the labor force. Finally, we show that there were also non-negligible eects of extended benefits on the level and the distribution of wages.
Rational Choice Theory is often criticized to indoctrinate students in a negative, which is supported by some laboratory experiments. But do students of Rational Choice Theory really behave more selfishly? This paper presents evidence from a natural decision on voluntary donation at the University of Zurich. The analysis of the very large panel data set reaches significant different results than previous studies: Rational Choice Theory does not indoctrinate students. However, there are good other reasons to criticize Rational Choice Theory. The paper argues that ideas from other social sciences should be imported to improve the theory. Three elements are presented which lead to new and different policy conclusions.
Many people believe that economists in general are more selfish than other people and that this greater selfishness is due to economics education. This paper offers empirical evidence against this widely held belief. Using a unique data set on giving behaviour in connection with two social funds at the University of Zurich, it is shown that economics education does not make people act more selfishly. Rather, this natural experiment suggests that the particular behaviour of economists can be explained by a selection effect.
How are political events reflected in financial asset prices? Break points in sovereign debt prices are analyzed for Denmark, Norway, Finland, Sweden, Germany and Belgium during 1930-1948, using unique data from the Stockholm Stock Exchange. Unlike in countries in-volved in WWII, this market was unregulated. The outbreak of World War II heavily depressed prices of government bonds. Countries which were occupied (Belgium, Denmark and Norway) or under attack (Finland) saw their debt depreciate substantially. The battle of Stalingrad turns out indeed to be a turning-point of the war. This approach represents a complementary quantitative method to analyze the impact of political events.
"We use alternative assumptions about the divisibility of goods and money and thenability of agents to use lotteries on money to investigate to what extent the indivisi-bilitynof money is the cause for the typically ine .cient production and consumption decisions in search-theoretic models of money. Our framework potentially generates three types of inefficiencies: the no-trade inefficiency, where no trade takes place even though it would be socially efficient to trade; and the too-much-trade and too-little-trade inefficiencies, where the quantities produced and exchanged are either larger or smaller than what the solution to a social planner’s problem would mandate. It is shown that while the no-trade and the too-much-trade inefficiencies are caused by the indivisibility of money, the too-little-trade inefficiency remains even when money is divisible unless it is sufficiently valued."
