Testing Substitutability of Weak Preferences

In many-to-many matching models, substitutable preferences constitute the largest domain for which a pairwise stable matching is guaranteed to exist. In this note, we extend the recently proposed algorithm of Hatfield et al. [3] to test substitutability of weak preferences. Interestingly, the algorithm is faster than the algorithm of Hatfield et al. by a linear factor on the domain of strict preferences.Comment: 7 page

Weak and strong sustainability indicators, and regional environmental resources

Many attempts to operationalize the ecological concept of sustainability have been undertaken by the economics profession during recent years. It seems that many mainstream economists tend to focus their research on the assumption of substitutability between man-made (manufactured) capital and natural capital (natural resources, goods and services). The crucial points of this discussion can be seen especially in contributions by R. Solow (on a more theoretical level) and by R. Atkinson and D. Pearce (on an empirical level) who all plead for at least partial substitutability. As H. Daly has pointed out, the assumption of substitutability cannot be drawn in the search for an adequate treatment of natural resources in economic and ecological modeling and policy. The paper tries to clarify some questions regarding weak and strong sustainability indicators as well as sustainability rules for dealing with regional natural resources. In the first part of the paper, the assumption of substitutability is discussed in various aspects. Given weak sustainability indicators, calculating the ?sustainability" of a regional system (or national economy) becomes almost trivial. If the rate of depreciation of natural capital is at least offset by savings (accumulation) of man-made capital then the economy is on a sustainable development path. Besides the missing of the social ?branch" of sustainability, the depreciation-savings approach lacks understanding of the fundamental objections against monetizing natural resources (e. g. biodiversity). Some crucial aspects in this context are discussed in the paper (e. g. lexicographic preferences, ?consumer"-vs.-?citizen" approach). The strong sustainability indicators are in favor of different approaches, e. g. the save-minimum-approach. The second part of the paper deals with practical sustainability rules on a regional level regarding water resources. If sustainability as a concept for future ecological, economic and social development is taken seriously, only physical constraints (taking time as an additional factor of production into account) and an applied precautionary principle can indeed lead to sustainability. Congress topic: Environmental Management, Sustainability and Development Keywords: Weak/Strong Sustainability Indicators; Regional Indicators for Sustainable Development

Competitiveness of U.S. Meats in Japan and South Korea: A Source Differentiated Market Study

The restricted source differentiated almost ideal demand system (RSDAIDS) is used to estimate the parameters of the Japanese and South Korean source differentiated meat demand models. Expenditure and own-price elasticities indicate that Japanese beef, Canadian and Danish pork, and Brazilian and Thai poultry have a competitive advantage in Japan. The BSE outbreak in Japan decreased the shares of Japanese and U.S. beef. Regarding South Korea, the results indicate that imported beef from the U.S. and Australia, Danish pork, and South Korean and Thai poultry have a competitive advantage. The U.S. BSE outbreak decreased the market shares of U.S. beef in the South Korean beef market.BSE, competitive advantage, FMD, Japanese meat demand, RSDAIDS, South Korean Meat Demand, Demand and Price Analysis,

How Strong is the Relationship between Defence Expenditure and Private Consumption? Evidence from the United States

A long run conditional demand model is specified to provide empirical evidence on the relationship between government defence expenditure and private consumption in the United States. By assuming that government defence expenditure is exogenously determined with respect to private consumption decisions, the empirical results show a significant impact on the utility function of households and substitutable or complementary effects for specific categories of private expenditure. The findings are in line with the evidence that in aggregate it is possible to obtain a weak impact of defence expenditure on consumption.Military Expenditure; Consumption; crowding out/in;

IMPORT DEMAND SYSTEM ANALYSIS OF THE SOUTH KOREAN WINE MARKET WITH THE SOURCE DIFFERENTATED AIDS MODEL

Under the assumption of block substitutability and partial aggregation, a source differentiated AIDS model was used to estimate South Korean wine import demand. Empirical results indicate that South Korean wine consumers have a strong preference for high quality French wines. French wines are shown to be substitutes for wines from other countries in the South Korean wine market. Since the implementation of a free trade agreement between South Korea and Chile, Chilean wines have steadily increased their market share exhibiting strong price competitiveness in the South Korean wine market.wine, AIDS, block substitutability, import demand, Demand and Price Analysis,

Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data

In conducting empirical investigations of the permanent income model of consumption and the consumption-based intertemporal asset pricing model, various authors have imposed restrictions on the nature of the substitutability of consumption across goods and over time. In this paper we suggest a method for testing some of these restrictions and present empirical results using this approach. Our empirical analyses focuses on three questions: (i) Can the services from durable and nondurable goods be treated as perfect substitutes? (ii) Are preferences completely separable between durable and nondurable goods? (iii) What is the nature of intertemporal substitutability of nondurable consumption? When consumers' preferences are assumed to be quadratic, there is very little evidence against the hypothesis that the services from durable goods and nondurable goods are perfect substitutes. These results call into question the practice of testing quadratic models of aggregate consumption using data on nondurables and services only. When we consider S branch specifications, we find more evidence against perfect substitutability between service flows, but less evidence against strict separability across durable and nondurable consumption goods. Among other things, these findings suggest that the empirical shortcomings of the intertemporal asset pricing model cannot be attributed to the neglect of durable goods.

Measuring Intratemporal and Intertemporal Substitutions When Both Income and Substitution Effects Are Present: The Role of Consumer Durables

Hall (1988) estimates the intertemporal substitutability for nondurable goods economically and statistically insignificant. Ogaki and Reinhart (1998) introduce the service flow from durable goods using within-period-nonseparable homothetic preference specification. They estimate the intertemporal substitutability significant - around 0.4, and the intratemporal substitutability greater than one. I show that homotheticity induces a surprisingly dramatic statistical bias in the estimates of the intratemporal and intertemporal substitutions. Using aggregate consumption data, I discover that the estimate of the intertemporal substitutability is economically quite negligible - on the order of 0.04, a magnitude close to Hall’s original estimate. In addition, I estimate the intratemporal substitutability between nondurable goods and service flow from the stock of consumer durable goods economically small as well - around 0.18. In addition, I find potent support in favor of nonhomotheticity, with nondurable goods being necessities and durable goods luxuries. Despite that, due to the secular decline of the rental cost, the budget share of consumer durable goods appears trendless.

Testing Top Monotonicity

Top monotonicity is a relaxation of various well-known domain restrictions such as single-peaked and single-crossing for which negative impossibility results are circumvented and for which the median-voter theorem still holds. We examine the problem of testing top monotonicity and present a characterization of top monotonicity with respect to non-betweenness constraints. We then extend the definition of top monotonicity to partial orders and show that testing top monotonicity of partial orders is NP-complete

Religious Extremism, Clubs, and Civil Liberties: A Model of Religious Populations

This paper extends the club model of religion to better account for observed patterns of extremism. We adapt existing models to a multi-agent framework and analyze the distribution of agents and clubs. We find that extremism is more successful when religious groups are able to produce close substitutes for standard goods and that increased access to publicly provided goods can reduce the extremist population share. Quantile regression modeling of data from a multi-nation survey and institutional indices corresponds to the model’s key results. Our findings offer a mechanism supporting research linking terrorist origination to civil liberties.Extremism, Religion, Sacrifice and Stigma, Multi-Agent Model, Civil Liberties

Screening tests, information, and the health-education gradient

The association between health outcomes and education - the health-education gradient - is widely documented but little is known about its source. Using microeconomic data on a sample of individuals aged 50+ in eight European countries, we find that education and cognitive skills (such as verbal fluency) are associated with a greater propensity for standard screening tests (mammography and colonoscopy). In order to study the role of information on the decision to screen, we test whether the health-education gradient varies with the quality of the information provided by the health care system, as proxied by the quality of the General Practitioner. Using an Instrumental Variable approach to control for the potential endogeneity of the GP quality score, we find evidence of a strong and significant complementarity between education and quality of primary care. We interpret this result as evidence that health-education gradient can be explained, at least in part, by the fact that better educated individuals are more able to process and internalize health related information as provided by GPs