Not available in German. This paper examines the labor supply behaviour of married woman in France. A sequence of models is specified and estimated which incorporate different amounts of information on observed weekly hours. In all models the distinction is drawn between search and non-participation among non-workers. We provide extensive specification diagnostics, including Heckman-Andrews tests, as well as Hausman tests for the comparison of different handlings of the hours of information. It turns out that distinguishing between part-time, full-time and long hours gives virtually the same results as treating observed hours as reflecting desired hours.
The paper examines real and nominal wage rigidities. We estimate a switching regime model, in which the observed distribution of individual wage changes, computed from West German register data for 1976-1997, is generated by simultaneous processes of real, nominal or no wage rigidity, and measurement error. The fraction of workers facing wage increases that are due to nominal, but mostly real wage rigidity is substantial. The extent of real rigidity rises with inflation, whereas the opposite holds for nominal rigidity. Overall, the incidence of wage rigidity, which accelerates unemployment growth, is most likely minimized in an environment with moderate inflation.
Multivariate GARCH models have been designed as an extension of their univariate counterparts. Such a view is appealing from a modeling perspective but imposes correlation dynamics that are similar to time-varying volatility. In this paper, we argue that correlations are quite different in nature. We demonstrate that the highly unstable and erratic behavior that is typically observed for the correlation among financial assets is to a large extent a statistical artefact. We provide evidence that spurious correlation dynamics occur in response to financial events that are sufficiently large to cause a structural break in the time-series of correlations. A measure for the autocovariance structure of conditional correlations allows us to formally demonstrate that the volatility and the persistence of daily correlations are not primarily driven by financial news but by the level of the underlying true correlation. Our results indicate that a rolling-window sample correlation is often a better choice for empirical applications in finance.
Not available in German. The paper shows that several estimators for the panel probit model that are suggested in the literature belong to a common class of GMM estimators. They are relatively easy to compute because they are based on conditional moment restrictions involving univariate moments of the dependent variables only. Applying nonparametric methods we suggest an estimator that is optimal in this class. A Monte Carlo study shows that a particular variant of this estimator has good small sample properties and that the efficiency loss compared to maximum likelihood is small. An application to the product innovation decisions of German firms reveals important efficiency gains.
(doi:10.1016/S0304-4076(98)00008-6)
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With moral hazard and anonymous asset trade, first-order conditions need not characterize effort and portfolio choices. The standard procedure for establishing validity of the first-order approach in economies with one hidden asset is not fruitful when multiple assets are hidden.
We analyze the general equilibrium of an economy in which a competitive industry produces nonexclusive insurance services. The equilibrium is inefficient because insurance contracts cannot control moral hazard, and welfare can be improved by policies that reduce insurance by increasing its price above marginal cost. We discuss how insurance production costs that exceed expected claim payments interact with moral hazard in determining the equilibrium's inefficiency, and show that these costs can make insurance premia so actuarially unfair as to validate the standard first-order conditions we exploit in our analysis.
We show theoretically that income redistribution benefits borrowing-constrained individuals more than is implied by standard relative-income and uninsurable-risk considerations. Empirically, we find in international opinion-survey data that younger and lower-income individuals express stronger support for government redistribution in countries where consumer credit is less easily available. This evidence supports our theoretical perspective if such individuals are more strongly affected by tighter credit supply, in that expectations of higher incomes in the future increase their propensity to borrow.
Price discrimination incentives may induce dealers to bear the financial cost of their customers' credit purchases. We focus on how financial market imperfections make it possible to segment the customer population. When borrowing and lending rates differ from each other and from the rate of interest on a durable good purchase, the structure of those rates influences customers' choices to purchase on credit or cash terms, and the scope for dealers' price discrimination. Empirical analysis of a set of installment-credit, personal-loan, and regional interest rate data offers considerable support to the assumptions and implications of our theoretical framework.
