Economics - Research Publications
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ItemNon-monotone incentives in a model ofcoexisting hidden action and hidden information( 2006-12)In this paper I consider a model of coexisting moral hazard andadverse selection, similar to one considered by Guesnerie, Picard, and Rey(1989). I provide an explicit solution for the optimal incentive scheme in thecase, when the effort is observed with a normally distributed error. The mainobservation is that in this case the optimal incentive scheme often fails tobe monotone. If the monotonicity constraint is imposed on the solution foreconomic reasons there would exist a region of profit realizations, such thatthe optimal compensation will be independent of on performance.Keywords and Phrases: hidden action, hidden information, Fredholmintegral equations of the first type, Hermit polynomials.
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ItemEducation vouchers: means testing versusuniformity( 2006-12)This paper compares a uniform education voucher system with ameans-tested scheme in which the voucher is subject to a taper orwithdrawal rate as parental gross income increases. Parents are assumedto maximise a utility function which includes their consumption,leisure and the human capital of children. The human capitalproduction function has inputs consisting of parental human capitaland expenditure on education. The government faces a budget constraintsuch that the voucher and a social dividend are financed froma proportional income tax. Alternative combinations of voucher andtax and transfer schemes are evaluated using a social welfare functiondefined in terms of the utility of parents. It is found that for allcombinations of policy variables, a uniform voucher turns out to beoptimal. However, if a binding constraint is placed on the maximumtax rate, means-testing, with a low taper, is found to be optimal.
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ItemConsequences of FDI in Australia-Casual Links Between FDI, Domestic Investment, Economic Growth and Trade( 2006-12)In this paper the consequences of FDI inflows in Australia, the second largest netimporter of FDI in the developed world, are analysed using quarterly aggregate data forQ3/1985 to Q2/2002. The dynamic relationship between Australia’s aggregate quarterly FDIinflows and a set of endogenous variables including GDP, domestic investment, imports andexports was explored by estimating a multivariate vector error correction model. Grangercausalitytests and impulse response analysis were applied. FDI was found to directly increasedomestic investment growth, GDP growth and FDI itself, but decrease export growth.Furthermore, through its impact on GDP growth, FDI also leads to an increase in importgrowth.
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ItemHorizontal mergers with free entryin differentiated oligopolies( 2006-10)Antitrust authorities view the possibility of entry as a key determinant of whether a proposedmerger will be harmful to society. This paper examines the effects of horizontalmergers in models of non-localized, differentiated Bertrand oligopoly that allow for freeentry. The analysis of the long run effects of mergers in differentiated products marketsraises issues that are significantly different from those in the short run or in homogeneousproducts markets due to the introduction of new varieties. Our analysis reveals that determiningthe properties of consumer preferences is crucial to the antitrust analysis of mergersin differentiated products markets. Specifically, we show that if the demand system satisfiesthe Independence from Irrelevant Alternatives (IIA) property and if the number of firms istreated as a continuous variable, mergers in differentiated products markets have no longrun effect on consumer welfare. Moreover, in this case, marginal cost savings are to a largeextent irrelevant to the consumer welfare effects of mergers. If the number of firms is treatedas a discrete variable, fixed or marginal cost savings are a necessary condition for mergersto have zero or positive effect on consumer welfare. Using the example of linear demand,we show that if the demand system does not satisfy the IIA property, mergers in differentiatedproducts markets can harm consumer welfare in long run equilibrium. Moreover, theamount of harm increases with consumers’ taste for variety.
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ItemSubject pool effects in a corruption experiment: a comparison of Indonesian public servants and Indonesian students.( 2006-10)We report results from a corruption experiment with Indonesian public servants andIndonesian students. Our results suggest that although both subject pools show a high levelof concern with the extent of corruption in Indonesia, the Indonesian public servantsubjects have a significantly lower tolerance of corruption than the Indonesian students.We find no evidence that this is due to a selection effect. The reasons given by the publicservants for either engaging in or not engaging in corruption suggest that the differences inbehavior across the subject pools are driven by their different real life experiences. Forexample, when abstaining from corruption public servants more often cite the need toreduce the social costs of corruption as a reason for their actions, and when engaging incorruption they cite low government salaries or a belief that corruption is a necessary evilin the current environment. In contrast, students give more simplistic moral reasons. Weconclude by arguing that experiments such as the one considered in this paper can be usedto measure forward-looking attitudinal change in society and that results obtained fromdifferent subject pools can complement each other in the determination of such attitudinalchanges.
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ItemSubject pool effects in a corruption experiment: a comparison of Indonesian public servants and Indonesian students( 2006-10)We report results from a corruption experiment with Indonesian public servants andIndonesian students. Our results suggest that although both subject pools show a high levelof concern with the extent of corruption in Indonesia, the Indonesian public servantsubjects have a significantly lower tolerance of corruption than the Indonesian students.We find no evidence that this is due to a selection effect. The reasons given by the publicservants for either engaging in or not engaging in corruption suggest that the differences inbehavior across the subject pools are driven by their different real life experiences. Forexample, when abstaining from corruption public servants more often cite the need toreduce the social costs of corruption as a reason for their actions, and when engaging incorruption they cite low government salaries or a belief that corruption is a necessary evilin the current environment. In contrast, students give more simplistic moral reasons. Weconclude by arguing that experiments such as the one considered in this paper can be usedto measure forward-looking attitudinal change in society and that results obtained fromdifferent subject pools can complement each other in the determination of such attitudinalchanges.
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ItemGender and corruption: insights from an experimental analysis( 2006-10)In recent years, a substantial body of work has emerged in the social sciences exploringdifferences in the behavior of men and women in various contexts. This paper contributes tothis literature by investigating gender differences in attitudes towards corruption. It departsfrom the previous literature on gender and corruption by using experimental methodology.Attitudes towards corruption play a critical role in the persistence of corruption. Based onexperimental data collected in Australia (Melbourne), India (Delhi), Indonesia (Jakarta) andSingapore, we show that while women in Australia are less tolerant of corruption than men inAustralia, there are no significant gender differences in attitudes towards corruption in India,Indonesia and Singapore. Hence, our findings suggest that the gender differences found in theprevious studies may not be nearly as universal as stated and may be more culture-specific.We also explore behavioral differences by gender across countries and find that there arelarger variations in women’s attitudes towards corruption than in men’s across the countriesin our sample.
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ItemAn employment equation for Australia: 1966-2001( 2004-01)We model the relationship between hours of work and employment and argue thatunless actual hours are varying with a change in ‘standard hours’, actual hours shouldnot appear in the long-run component of an equation for employment. If howeverstandard hours are changing then it is desirable that this variable be incorporated intothe employment equation. Our theoretical model yields an expression for the elasticityof employment with respect to standard hours which shows that the elasticity isrelated to the size of the premium for overtime. Using quarterly data for the period1966:3 – 2001:3 we estimate a new employment equation for Australia incorporatingstandard hours of work. We find empirical support for our approach and we providenew estimates of the elasticity of employment with respect to the real wage and GDP.We also find a marked asymmetry in the response of employment to variations in realGDP and real wages in recession periods as against non-recession periods.
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ItemBudget balance and trade balance: kin or strangers. A case study of Taiwan( 2004-01)In line with the deterioration of Taiwanese budget deficits, the trade surplus has alsodecreased. It is the ideal time to investigate the relationship between budget balances andtrade balances. Unit root tests, cointegration tests, Granger causality tests and the VARsmodel are techniques used to test the Keynesian proposition and the Ricardianequivalence. The main findings are that Keynesian proposition is supported only by themodel using data of the whole period. There is no support for the Ricardian equivalence.That budget balances and trade balances being kin or strangers varies over periods of dataused.
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ItemStochastic growth with nonconvexities: the optimal case( 2004-02)This paper studies optimal investment and dynamicbehaviour of stochastically growing economies. We assume neitherconvex technology nor bounded support of the productivity shocks.A number of basic results concerning the investment policy and theRamsey–Euler equation are established. We also prove a fundamentaldichotomy pertaining to optimal growth models perturbedby standard econometric shocks: Either an economy is globallystable or it is globally collapsing to the origin.