199 research outputs found

    Identities For Homogeneous Utility Functions

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    Using a homogeneous and continuous utility function that represents a household's preferences, this paper proves explicit identities between most of the different objects that arise from the utility maximization and the expenditure minimization problems. The paper also outlines the homogeneity properties of each object. Finally, we show explicit algebraic ways to go from the indirect utility function to the expenditure function and from the Marshallian demand to the Hicksian demand and vice versa, without the need of any other function, thus simplifying the integrability problem avoiding the use of differential equations.Identities, homogeneous utility functions and household theory.

    TO DUAL OR NOT TO DUAL?

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    Research Methods/ Statistical Methods,

    DUAL REPRESENTATIONS OF STRONGLY MONOTONIC UTILITY FUNCTIONS

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    We present theorems that establish dualities, i.e., bijections, be- tween speci¯ed sets of direct utility functions, indirect utility functions and expenditure functions. The substantive properties characterizing the speci¯ed set of direct utility functions are strong monotonicity, upper semicontinuity and quasi-concavity. Our results are strictly in- termediate between two classes of analogous results in the literature. We also provide applications that use all the three classes of duality results.Direct utility function, indirect utility function, ex-penditure function, duality, strong monotonicity

    National economic impacts of an EU environmental policy: an applied general equilibrium analysis

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    The objective of this paper is to quantify the economic effects of the introduction of a system of tradable permits in the European Union (EU). For this purpose we use linked applied general equilibrium models (AGE) for eleven EU member countries. This method enables us to measure the change in competitiveness for domestic industries, the impact on growth, employment and inflation in member countries, and the cost and benefits of a cooperative approach to adhere to a EU target of emissions of air pollutants. The results we will present are first results from the SOLVGE/GEM-E3 Projekt. GEM-E3 stands for General Equilibrium Modeling for Energy - Economy - Environment, a joint undertaking of NTUA-Athens (P. Capros, P. Georgakopoulos), CESKULeuven (S. Proost and D. Van Regemorter), Univ. Mannheim and ZEW (K. Conrad and T. Schmidt), GEMME-CEA (N. Ladoux), Univ. Strathclyde (P. MacGregor), CORE-UCL (Y. Smeers), With respect to a policy on greenhouse gases we will quantify the economic impact for the, EU by introducing a EU-wide tradable permit system, free of charge and based on the present energy intensity and energy mix. Under growth there will be a positive market price for permits with demand by countries where the cost of substitution are high and supply by those countries where the cost of substitution are low. We will measure economic performance and trade flows under a noncoordinated CO2 policy where each country limits the emission of CO2 by 10% and will compare the result with a cooperative outcome where the European Union as a decision maker aims at reducing CO2 by 10%. --

    A DUAL APPROACH TO THE IMPLEMENTATION OF A GENERAL EQUILIBRIUM MODEL

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    Safety in numbers? Geographic diversification and bank insolvency risk

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    The Riegle-Neal Interstate Banking and Branching Efficiency Act, passed in September 1994 and effective June 1, 1997, will allow nationally chartered banks to branch across state lines. This act will remove impediments to interstate expansion and permit the consolidation of existing interstate networks ; What will be the impact of this legislation on bank performance and bank safety? Removing impediments to geographic expansion should improve the risk-return tradeoff faced by most banks. However, this paper argues that economic theory does not tell us whether an improvement in the risk-return tradeoff will lead to a reduction in the volatility of bank returns or in the probability of insolvency. ; The authors investigate the role of geographic diversification on bank performance and safety using bank holding company data. The authors find that an increase in the number of branches lowers insolvency risk and increases efficiency for inefficient bank holding companies; an increase in the number of states in which a bank holding company operates increases insolvency risk but has an insignificant effect on efficiency. Branch expansion raises the risk of insolvency for efficient bank holding companies, while an increase in the number of states has an insignfiicant effect on insolvency riskBank failures ; Interstate banking

    A new approach to evaluating trade policy

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    The authors introduce a new measure, the Trade Restrictiveness Index, to measure the restrictiveness of a system of trade protection. They propose an alternative to the commonly used ad hoc indexes of trade restrictiveness, such as the trade-weighted average tariff. That measure has no welfare-theoretic basis and can be highly misleading, in practice. For example, the complete exclusion of trade in a commodity would usually lower the index, because its trade weight would fall to zero. The authors show that their proposed index is soundly based in standard welfare economics. When trade is restricted by tariffs only, the Trade Restrictiveness Index equals the uniform tariff, which would be equivalent to the existing system of tariffs in the sense of yielding the same level of aggregate welfare. But tariffs have declined in importance in recent years as a means of restricting trade, so the measure must also be able to take account of quantitative restrictions on trade. Where quotas are the only form of restriction, this is easy: the Index equals the equiproportionate reduction in permitted import volumes that is welfare-equivalent to the initial structure of quotas. When both quotas and tariffs are present, the Index can be defined as the uniform tariff factor (one plus the uniform tariff) and uniform import reduction factor which would yield the same level of welfare as the initial system of trade restrictions. The authors show how this can be formulated, noting that if a single good is subject to both a binding quota and a tariff, it should be viewed as quota-constrained - the tariff serves merely to ensure that some of the rents accrue to the importing country. These theoretical derivations permit a major synthesis of the theory of protection and suggest how the results of computable general equilibrium models might be presented to make them internationally and intertemporally comparable. But in most cases such a model is not available and, even if it were, it would not be sufficiently disaggregated to deal with a complicated system of trade protection. So the authors present some empirical short-cuts that can be adopted for estimating changes in the Index. Chief among these is the assumption that the goods under consideration are separable from others in an appropriate general-equilibrium sense. This can provide a rigorous foundation for a form of partial-equilibrium analysis (the consideration of a subset of markets in an economy). They also show how the Trade Restrictiveness Index can be adapted to allow for different forms of rent sharing and for a country's ability to influence its terms of trade. Applying these empirical methods to exports of textiles and apparel from Hong Kong to the United States, the authors find that the protective system becomes more restrictive for both countries over the seven years considered (1982-88). Increased trade restrictiveness does not necessarily mean that quotas have been tightened. When there is economic growth, constant or even rising import quotas might still amount to a tightening of protection. Results based on the trade-weighted average of"tariff equivalents"(the gaps between Hong Kong and U.S. prices) diverge significantly from those of the Trade Restrictiveness Index. The two measures have opposite implications for the change in trade restrictiveness for two-thirds of the observations.Environmental Economics&Policies,Trade Policy,Transport and Trade Logistics,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

    Public capital and the demand for private inputs

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    The paper investigates the impact the provision of public capital has on the demand for private capital and labour using a cost function with public capital included as a fixed unpaid factor of production. Special attention is paid to the examination of the influence tax vs. debt financing of public investment might have on the demand for private capital. The model is applied to a panel of 31 2-digit industries of the West German manufacturing industry. It is shown, that private and public capital are complements whereas a substitutive relation emerges for labour and public capital. Decomposing the adjustment of the demand for private labour and capital reveals a stabilizing but steadily decreasing impact of public capital on private inputs. --

    Microeconometric Models of Rationing, Imperfect Markets, and Non-Negativity Constraints

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    This paper provides a theoretically consistent approach to estimating demand relationships in which kink points occur either in the interior or on the vertices of the budget set. There are important classes of problems in developing countries which demonstrate such kinked budget sets including binding non-negativity constraints. This paper also extends these methods to the estimation of production structures. As an application a translog cost function for three energy inputs is estimated from cross-sections of individual Indonesian firms.Political Economy,
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