Many studies have established that people care a great deal about their relative economic position and not solely, as standard economic theory assumes, about their absolute economic position. However, behavioral evidence is rare. This paper provides an empirical analysis on how individuals’ relative income position affectsntheir performance. Using a unique data set for 1114 soccer players over a period ofneight seasons (2833 observations), our analysis suggests that the larger the income differences within a team, the worse the performance of the soccer players is. Thenmore the players are integrated in a particular social environment (their team), thenmore evident this negative effect is.
Distributions of assets returns exhibit a slight skewness. In this note we show that our model of endogenous price formation [Reimann 2006] creates an asymmetric return distribution if the price dynamics are a process in which consecutive trading periods are dependent from each other in the sense that opening prices equal closing prices of the former trading period. The corresponding parameter skewness (preference) parameter is estimated from daily prices from 01/01/1999 - 12/31/2004 for 9 large indices. For the S&P 500, the skewness distribution of all its constituting assets is also calculated. The skewness distribution due to our model is compared with the distribution of the empirical skewness values of the single assets.
Seit Mitte der achtziger Jahre hat die neue Wachstumstheorie verstärkt Aufmerksamkeit auf Humankapital als eine Quelle des Wirtschaftswachstumsngelenkt. Neuere empirische Ergebnisse weisen allerdings darauf hin, dass Bildungsinvestitionen nur geringe soziale Externalitäten erzeugen und dass der direkte Beitrag des Humankapitals zum Wirtschaftswachstum relativngering ist. In dieser Arbeit wird der Beitrag des Humankapitals zur Wirtschaftsentwicklungnim Rahmen der langfristigen Wachstumstheorie dargestellt,nderen Gegenstand ist, den Übergang von Ländern von vor-industrieller Stagnation zu stetigem Wirtschaftswachstum zu erklären. Hier erweist sich,ndass Humankapital nicht nur direkte Produktivitätseffekte erzeugt, sondern auch als Auslöser verschiedener entwicklungsfördernder politischer Reformen dienen kann.
We argue that one major cause of the U.S. postwar baby boom was the increased demand for female labor during World War II. We develop a quantitativendynamic general equilibrium model with endogenous fertility and female labor-force participation decisions. We use the model to assess the long-term implications of a one-time demand shock for female labor, such as the one experienced by American women during wartime mobilization. For the war generation, the shock leads to a persistent increase in female labor supply due to the accumulation of work experience. In contrast, youngernwomen who turn adult after the war face increased labor-market competition, which impels them to exit the labor market and start having children earlier. In our calibrated model, this general-equilibrium effect generates a substantial baby boom followed by a baby bust, as well as patterns for agespecific labor-force participation and fertility rates that are consistent withnU.S data.
This paper asks whether tax cycles can represent the optimal policy in a modelnwithout any extrinsic uncertainty. I show, in an economy without capital and where labor is the only choicenvariable (a Lucas-Stokey economy), that a large class of preferences exists, where cycles are optimal, as well as a large class where they are not. The larger government expenditures are, the larger the class of preferences fornwhich cycles are optimal becomes. nTax cycles are also more likely to be optimal if frictions (deviations of the model from Walrasian markets) are added. While this cannot be shown inngeneral and will not be true for arbitrary frictions, I demonstrate this in two specific worlds. I consider an economy with search frictions in the labor market, and one with frictions in the goods and credit market. A reasonablenparametrization of both economies shows that results change considerably. Even with constant relative risk aversion, cycles can be optimal, whereas this class of preferences rules out cycles in the Lucas-Stokey economy.nFinally, I characterize the optimal policy. No more than two tax rates are needed to implement the Ramsey policy both in the Lucas-Stokey economynand in the model with frictions.
This paper studies the joint business cycle dynamics of innation, money growth, nominal and real interest rates and the velocity of money. I extend and estimate a standard cash and credit monetary model by adding idiosyncratic preference shocksnto cash consumption as well as a banking sector. The estimated model accounts very well for the business cycle data, a finding that standard monetary models have not been able to generate. I find that the quantitative performance of the model is explained through substantial liquidity effects.
Central bankers' conventional wisdom suggests that nominal interest rates should be raised to implement a lower inflation target. In contrast, I show that the standard New Keynesian monetary model predicts that nominal interest rates should bendecreased to attain this goal. Real interest rates, however, are virtually unchanged. These results also hold in recent vintages of New Keynesian models with sticky wages, price and wage indexation and habit formation in consumption.
Understanding the mechanism through which financial globalization affects economic performance is crucial for evaluating the costs and benefits of opening financial markets. This paper is a first attempt at disentangling the effects of financial integration on the two main determinants of economic performance: productivity (TFP)nand investments. I provide empirical evidence from a sample of 70 countries observednbetween 1975 and 1999. The results for both de jure and de facto indicators suggest that financial integration has a positive direct effect on productivity, while it does not directly affect capital accumulation. I control for indirect effects of financialnglobalization through financial development and banking and currency crises. While the evidence on financial depth as an indirect channel is weak, the results are more robust for financial crises: they depress both investments and TFP, and are favored by financial integration, though only to a minor extent. The overall effect of financialnliberalization is positive for productivity and negligible for investments.
In the heart of the Great Crisis, amidst great uncertainty and concerns surrounding the future of capitalism, John Maynard Keynes launched his optimistic prophecy that growth and technological change would allow mankind to solve its economic problem within ancentury. He envisioned a world where people would work much less and be less oppressednby the satisfaction of material needs. To what extent have his predictions turned out to benaccurate? This essays attempts to provide some answers.
In this paper we show that subtle forms of deceit undermine the effectiveness of incentives.nWe design an experiment in which the principal has an interest in underreporting the true performance difference between the agents in a dynamic tournament. According to thenstandard approach, rational agents should completely disregard the performance feedback of self-interested principals and choose their effort level as if they had not been given any information. However, despite substantial underreporting many principals seem to exhibit lying aversion which renders their feedback informative. Therefore, the agents respond to the feedback but discount it strongly by reducing their effort relative to fully truthful performance feedback. Moreover, previous experiences of being deceived exacerbate the problem and eventually reduce average effort even below the level that prevails in the absence of any feedback. Thus, both no feedback and truthful feedback are better for incentives than biased feedback.
