Optimal maintenance of multi-component systems: a review

In this article we give an overview of the literature on multi-component maintenance optimization. We focus on work appearing since the 1991 survey "A survey of maintenance models for multi-unit systems" by Cho and Parlar. This paper builds forth on the review article by Dekker et al. (1996), which focusses on economic dependence, and the survey of maintenance policies by Wang (2002), in which some group maintenance and some opportunistic maintenance policies are considered. Our classification scheme is primarily based on the dependence between components (stochastic, structural or economic). Next, we also classify the papers on the basis of the planning aspect (short-term vs long-term), the grouping of maintenance activities (either grouping preventive or corrective maintenance, or opportunistic grouping) and the optimization approach used (heuristic, policy classes or exact algorithms). Finally, we pay attention to the applications of the models.literature review;economic dependence;failure interaction;maintenance policies;grouping maintenance;multi-component systems;opportunistic maintenance;maintencance optimization;structural dependence

Unemployment and Portfolio Choice: Does Persistence Matter?

We use a life cycle model of consumption and portfolio choice to study the effects of social security on the investment decisions of households for the European case. Our model is mainly based on the one developed by Cocco, Gomes, and Maenhout (2005). We extend it by unemployment risk using Markov chains to model the transition between different employment states. In contrast to most models in the life cycle literature, our model allows for three different states, namely employment, short-term as well as long-term unemployment. This allows us to examine the effects of persistence in the unemployment process on portfolio choice. Our main findings are, first, that in case of short-term unemployment only, social security systems as those established in the EU are able to offset the negative impact of unemployment risk on the portfolio-share invested in risky assets. Second, the simulation results reveal that when allowing for long-term unemployment the equity-share is suppressed, especially for young investors. We show that this negative effect of unemployment is mainly driven by its persistence.Precautionary savings, unemployment insurance, long-term unemployment, income uncertainty

Consistency properties of a simulation-based estimator for dynamic processes

This paper considers a simulation-based estimator for a general class of Markovian processes and explores some strong consistency properties of the estimator. The estimation problem is defined over a continuum of invariant distributions indexed by a vector of parameters. A key step in the method of proof is to show the uniform convergence (a.s.) of a family of sample distributions over the domain of parameters. This uniform convergence holds under mild continuity and monotonicity conditions on the dynamic process. The estimator is applied to an asset pricing model with technology adoption. A challenge for this model is to generate the observed high volatility of stock markets along with the much lower volatility of other real economic aggregates.Comment: Published in at http://dx.doi.org/10.1214/09-AAP608 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org

Search, self-insurance and job-security provisions

We construct a general equilibrium model to evaluate the quantitative effects of severance payments in the presence of contracting and reallocational frictions. Key elements of the model are: 1) establishment level dynamics, 2) imperfect insurance markets, and 3) variable search decisions. Contrary to previous studies that analyzed severance payments in frictionless environments, we find that severance payments reduce unemployment, produce negative insurance effects and improve levels.Job security ; Unemployment

Optimal Unemployment Insurance over the Business Cycle

This paper examines how optimal unemployment insurance (UI) responds to the state of the labor market. The theoretical framework is a matching model of the labor market with general production function, wage-setting mechanism, matching function, and preferences. We show that optimal UI is the sum of a conventional Baily-Chetty term, which captures the trade-off between insurance and job-search incentives, and a correction term, which is positive if UI brings labor market tightness closer to its efficient level. The state of the labor market determines whether tightness is inefficiently low or inefficiently high. The response of optimal UI to the state of the labor market therefore depends on the effect of UI on tightness. For instance, if the labor market is slack and tightness is inefficiently low, optimal UI is more generous than the Baily-Chetty level if UI raises tightness and less generous if UI lowers tightness. Depending on the production function and the wage-setting mechanism, UI could raise tightness, for example by alleviating the rat race for jobs, or lower tightness, for example by increasing wages through bargaining. To determine whether UI raises or lowers tightness in practice, we develop an empirical criterion. The criterion involves a comparison of the microelasticity and the macroelasticity of unemployment with respect to UI.

Optimization of replacement policy for a one-component system subject to Poisson shocks

In reliability engineering, system failures may occur due to intrinsic or extrinsic factors. For example, drinking water systems may fail due to ageing and deterioration (i.e., intrinsic factors) or flooding (i.e., extrinsic factors). An interesting question is: for such systems, how should preventive maintenance be scheduled? This paper investigates this question. The paper develops a maintenance policy for repairable systems subject to extrinsic shocks. It assumes that a system may fail due to either intrinsic factors or extrinsic factors. Reliability indexes and the expected long run cost rate are then derived. A numerical example is given to illustrate the theoretical results

Demography, capital flows and unemployment

This paper contributes to the already vast literature on demography-induced international capital flows by examining the role of labor market imperfections and institutions. We setup a two-country overlapping generations model with search unemployment, which we calibrate on EU15 and US data. Labor market imperfections are found to significantly increase the volume of capital flows, because of stronger employment adjustments in comparison with a competitive economy. We next exploit themodel to investigate how demographic asymmetriesmay have contributed to unemployment and welfare changes in the recent past (1950-2010). We show that a policy reform in one country also has an impact on labor markets in other countries when capital is mobile.demographics; capital flows; overlapping generations; general equilibrium; unemployment

Demography, Capital Flows and Unemployment

This paper contributes to the already vast literature on demography-induced international capital flows by examining the role of labor market imperfections and institutions. We setup a two-country overlapping generations model with search unemployment, which we calibrate on EU15 and US data. Labor market imperfections are found to significantly increase the volume of capital flows, because of stronger employment adjustments in comparison with a competitive economy. We next exploit the model to investigate how demographic asymmetries may have contributed to unemployment and welfare changes in the recent past (1950-2010). We show that a policy reform in one country also has an impact on labor markets in other countries when capital is mobile.demographics, capital flows, overlapping generations, general equilibrium, unemployment

Income support systems for the unemployed : issues and options

The report reviews the performance of various income support systems for the unemployed, and provides guidelines for developing and transition economies. It finds that: a) Unemployment insurance enables a high degree of consumption smoothing, performs well under various types of shocks, and acts as an automatic stabilizer. But it also creates reemployment disincentives, and wage pressure which increase the equilibrium unemployment rate, contributing to persistent unemployment. b) Unemployment assistance, while enabling more effective targeting, may not bring savings in comparison to unemployment insurance, and may well prove fiscally unsustainable. c) Unemployment insurance savings accounts, internalize the costs of unemployment benefits, and thus avoid the moral hazard inherent in traditional unemployment insurance, given the weak monitoring capacity of developing countries, an important advantage. d) Public works program is effective in reaching the poor, can attract informal sector workers, and provides flexible, fast responses to shocks. Despite its high non-wage costs, and possible stigmatization of participants, it is found suitable for developing countries, particularly as a complementary program. e) Severance pay offers few advantages - it adversely affects efficiency, produces high litigation costs, and offers limited risk-pooling.Environmental Economics&Policies,Rural Poverty Reduction,Safety Nets and Transfers,Services&Transfers to Poor,Health Economics&Finance