infonet-economy

To fully understand the motives for delegating a decision right, it is important to study responsibility attributions for outcomes of delegated decisions. We conducted laboratory experiments in which subjects could either choose a fair allocation or an unfair allocation or delegate the choice, and we used a punishment option to elicit responsibility attributions. Our results show that, first, responsibility attribution can be effectively shifted and, second, this can constitute a strong motive for the delegation of a decision right. Moreover, we propose a simple measure of responsibility and show that this measure outperforms measures based on inequity aversion or reciprocity in predicting punishment behaviour.

This study applies financial portfolio theory to determine efficient electricity-generating technology portfolios for the United States and Switzerland, adopting an investor point of view. Expected returns are defined by the rate of decrease of power generation cost (with external costs included), their volatility, by its standard deviation. The 2003 portfolio contains Coal, Nuclear, Gas, Oil, and Wind in the case of the United States, and Nuclear, Storage hydro, Run of river, and Solar in the case of Switzerland, a country without domestic supplies of fossil fuels. Since shocks in generation costs are found to be correlated, Seemingly Unrelated Regression Estimation (SURE) is used to filter out the systematic component of the covariance matrix of the cost changes. Results suggest that as of 2003, the feasible maximum expected return (MER) electricity portfolio for the United States contains more Coal, Nuclear, and Wind than actual but markedly less Gas and Oil. By way of contrast, the minimum variance (MV) portfolio combines markedly more Oil, Coal, Nuclear, and Wind but almost no Gas. Therefore, regardless of the choice between MER and MV, U.S. utilities as investors are substantially inside the efficient frontier. This is even more true of their Swiss counterparts, likely due to continuing regulation of electricity markets.

This study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the Allais paradox or the fourfold pattern of risk attitudes. Stochastic Expected Utility Theory parsimoniously extends the standard microeconomic model, whereas Prospect Theory, the benchmark for aggregate choice so far, is based on psychological findings. First, the two theories' fit to representative choice is assessed for two experimental data sets, one Swiss and one Chinese. In a second step, finite mixture regressions reveal a consistent mix of two different behavioral types suggesting that researchers may take individual heterogeneity into account in order to avoid aggregation bias.

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 technology. In this setup, I show that the optimal provision of a public consumption good depends positively on the degree of openness. Moreover, the richer and more productive country chooses a lower optimal government share.

High parental income, while undeniably causing beneÞts for a child in terms of better access to education and more favorable labor market outcomes, may at the same time increase a childÕs income aspirations and thereby reduce Þnancial satisfaction, ceteris paribus. In this paper, we investigate the relationship between Þnancial satisfaction and parental income with data from the German Socio-Economic Panel. The results indicate that there is indeed a negative well-being externality of parental income, and that children appear to compare their actual income situation with the aspiration level acquired while growing up.

Quality of life factors continue to gain importance in residential location decisions as well as location decisions of firms. One such factor is an attractive local landscape. The aim of this paper is to provide a survey of the empirical literature on the role of landscape amenities in local economic change. Following common amenity definitions, we define landscape amenities as landscape features that are location-specific, latent non-market input goods that directly enter residents’ utility functions. Using this definition we identify thirty-nine relevant studies that use either migration or regional economic models or hedonic pricing techniques. One result from the analysis of migration and regional economic studies is that intra-country migrants were attracted by amenities about as frequently as by a low tax burden. Effects of amenities on employment and income are less well established. However, many of these studies used rather limited amenity variables. The results from hedonic studies show that a wide variety of local amenity attributes are partly capitalized in housing prices and that studies on a larger geographic scale are more likely to identify a significant a role of amenities. Newly available land cover datasets and spatial analysis tools have the potential to overcome important data limitations of many earlier studies. Future research may thus contribute to a better understanding of the role of landscape amenities in economic change and to a better coordination of regional and environmental policies.

This paper examines the role of geography and culture in explaining bankruptcy. We adopt survival analyses to model the bankruptcy risk of a firm, allowing for time-varying covariates. Based on a large sample from all major sectors of the Swiss economy, we find the following results: (i) The geographic location of a firm, which is characterized using a core-periphery approach, has a significant impact on its bankruptcy risk; (ii) Variables proxying for the cultural environment of a firm have significant explanatory power; (iii) The results of the previous literature on the standard determinants of bankruptcy are confirmed.

Elements of regulation inherent in most social health insurance systems are a uniform package of benefits and uniform cost sharing. Both elements risk to burden the population with a welfare loss if preferences differ. This suggests introducing more contracted choice; however, it is widely believed that this would not benefit the aged. This study examines the relationship between age and willingness-to-pay (WTP) for additional options in Swiss social health insurance. Through discrete choice experiments (DCE), a marked diversity of preferences can be established. The findings suggest that while the aged do exhibit more status quo bias, they require less rather than more specific compensation for selected cutbacks considered, pointing to potential for contracts that induce self-rationing in return for lower premiums.

With prospective payment of hospitals becoming more common, measuring their performance is gaining in importance. However, the standard cost frontier model yields biased efficiency scores because it ignores technological heterogeneity between hospitals. In this paper, efficiency scores are derived from a random intercept and an extended random parameter frontier model, designed to overcome
the problem of unobserved heterogeneity in stochastic frontier analysis. Using a sample of 100 Swiss hospitals covering the years 2004 to 2007 and applying Bayesian inference, significant heterogeneity is found, suggesting rejection of the standard cost frontier model. Estimated inefficiency decreases even below the 14 percent reported by Hollingsworth (2008) for European countries. Accounting for unobserved heterogeneity would make hospitals rated below 85 percent efficiency according to the standard model gain up to 12 percentage points, serving to highlight the importance of heterogeneity correction in the estimation of hospital performance.

In this paper, we quantitatively analyze to what extent a benevolent government should issue debt in a model where households are subject to idiosyncratic productivity shocks, insurance markets are missing and borrowing is restricted. In this environment, issuing government bonds facilitates saving for self-insurance. Despite this, we find that in a calibrated version of the model that is consistent with the skewed wealth and earnings distribution observable in the U.S., the government should buy private bonds, and not issue public debt in the long run. The reason is that in the U.S., a large fraction of the population has almost no wealth or is even in debt. The wealth-poor, however, do not profit from an increase in the interest rate following an increase in public debt. Instead, they gain from higher wages that result from a reduction in debt. We show that even when the short run costs of higher capital taxation are taken into account, it still pays off to reduce government debt on overall. Moreover, we find that endogenizing household’s borrowing constraints by assuming limited commitment leads to even higher asset levels being optimal in the long run.