Junior Must Pay: Pricing the Implicit Put in Privatizing Social Security

Proposals that portion of the Social Security Trust Fund assets be invested in equities entail the possibility that a severe decline in equity prices renders the Fund assets insufficient to provide the currently mandated level of benefits. In this event, existing taxpayers may be compelled to act as insurers of last resort. The cost to taxpayers of such an implicit commitment equals the value of a put option with payoff equal to the benefit's shortfall. We calibrate an OLG model that generates realistic equity premia and value the put. With 20 percent of the Fund assets invested in equities, the highest level currently under serious discussion, we value a put that guarantees the currently mandated level of benefits at one percent of GDP, or a temporary increase in Social Security taxation of at most 25 percent. We value a put that guarantees 90 percent of benefits at merely .03 percent of GDP. In contrast to earlier literature, our results account for the significant changes in the distribution of security returns resulting from Trust Fund purchases. We also explore the inter-generational welfare implications of the guarantee.

Junior is Rich: Bequests as Consumption

We explore the consequences for asset pricing of admitting a bequest motive into an otherwise standard overlapping generations model where agents trade equity and perpetual debt securities. Prices of securities are seen to be approximately 50% higher in an economy with bequests as compared to an otherwise identical one where bequests are absent. Robust estimates of the equity premium are obtained in several cases where the desire to leave bequests is modest relative to the desire for old age consumption.

Energy harvesting from suspension system using regenerative force actuators

In this paper harvesting vibration energy from suspension is investigated. Theoretical values for the harvested energy are calculated. Experimental evaluation of the energy is performed using vehicle road simulation facilities. An excitation signal in the frequency range of 0.5Hz to 20Hz is applied to the vehicle and the harvested power is calculated. Experimental results give a maximum harvested power of 984.4 W at the highest frequency, which is close to the theoretically computed value of 1106 W, for each suspension. Application of Regenerative Force Actuators (RFA) is explored for harvesting the vibration energy and controlling vibration. It is shown that the harvested power increases with the value of the actuator constant.Peer reviewe

Development and Validation of a Novel Laboratory-Specific Correction Equation for Total Serum Calcium and Its Association With Mortality Among Hemodialysis Patients.

Conventional albumin-corrected calcium is inaccurate in predicting ionized calcium, and hidden hypercalcemia, characterized as high ionized calcium with normal total calcium, is associated with higher mortality in hemodialysis patients. By using a national cohort of hemodialysis patients in the Unites States, a novel laboratory-specific prediction equation composed of total calcium, albumin, and phosphorus was derived from 242 patients in the South Atlantic division (adjusted R2  = 0.80 versus 0.71 for the conventional equation) and then validated among 566 patients in the other divisions (adjusted R2  = 0.79 versus 0.68 for the conventional equation). Compared with the conventional equation, the novel equation showed a greater correlation with intact parathyroid hormone. Its relative performance against the conventional equation was consistent across subgroups based on medications related to calcium metabolism. The novel equation also had a higher sensitivity (57% versus 34%) and an equivalent specificity (99% versus 100%) against ionized hypercalcemia at a cut-off value of 10.2 mg/dL. Sensitivity and specificity at 9.4 mg/dL was 94% and 76% (versus 87% and 82% for the conventional equation), respectively. A survival analysis in 87,779 incident hemodialysis patients showed that among patients who were categorized as having a high-normal calcium status (ie, >9.4 to 10.2 mg/dL) by the conventional equation, there appeared a trend toward higher adjusted mortality risk across higher calcium status defined according to the novel equation. Meanwhile, the mortality risk was consistent across calcium strata defined according to the conventional equation within the categories defined by the novel equation. In conclusion, in comparison to the conventional equation, a novel laboratory-specific correction equation derived for correction of total calcium performs significantly better in ascertaining hidden hypercalcemia in hemodialysis patients, and aids in identifying patients at higher risk for mortality. © 2016 American Society for Bone and Mineral Research

Impact of Obesity on Modality Longevity, Residual Kidney Function, Peritonitis, and Survival Among Incident Peritoneal Dialysis Patients.

BACKGROUND:The prevalence of severe obesity, often considered a contraindication to peritoneal dialysis (PD), has increased over time. However, mortality has decreased more rapidly in the PD population than the hemodialysis (HD) population in the United States. The association between obesity and clinical outcomes among patients with end-stage kidney disease remains unclear in the current era. STUDY DESIGN:Historical cohort study. SETTING & PARTICIPANTS:15,573 incident PD patients from a large US dialysis organization (2007-2011). PREDICTOR:Body mass index (BMI). OUTCOMES:Modality longevity, residual renal creatinine clearance, peritonitis, and survival. RESULTS:Higher BMI was significantly associated with shorter time to transfer to HD therapy (P for trend < 0.001), longer time to kidney transplantation (P for trend < 0.001), and, with borderline significance, more frequent peritonitis-related hospitalization (P for trend = 0.05). Compared with lean patients, obese patients had faster declines in residual kidney function (P for trend < 0.001) and consistently achieved lower total Kt/V over time (P for trend < 0.001) despite greater increases in dialysis Kt/V (P for trend < 0.001). There was a U-shaped association between BMI and mortality, with the greatest survival associated with the BMI range of 30 to < 35kg/m2 in the case-mix adjusted model. Compared with matched HD patients, PD patients had lower mortality in the BMI categories of < 25 and 25 to < 35kg/m2 and had equivalent survival in the BMI category ≥ 35kg/m2 (P for interaction = 0.001 [vs < 25 kg/m2]). This attenuation in survival difference among patients with severe obesity was observed only in patients with diabetes, but not those without diabetes. LIMITATIONS:Inability to evaluate causal associations. Potential indication bias. CONCLUSIONS:Whereas obese PD patients had higher risk for complications than nonobese PD patients, their survival was no worse than matched HD patients

The Central-Bank Balance Sheet as an Instrument of Monetary Policy

While many analyses of monetary policy consider only a target for a short-term nominal interest rate, other dimensions of policy have recently been of greater importance: changes in the supply of bank reserves, changes in the assets acquired by central banks, and changes in the interest rate paid on reserves. We extend a standard New Keynesian model to allow a role for the central bank's balance sheet in equilibrium determination, and consider the connections between these alternative dimensions of policy and traditional interest-rate policy. We distinguish between "quantitative easing" in the strict sense and targeted asset purchases by a central bank, and argue that while the former is likely be ineffective at all times, the latter dimension of policy can be effective when financial markets are sufficiently disrupted. Neither is a perfect substitute for conventional interest-rate policy, but purchases of illiquid assets are particularly likely to improve welfare when the zero lower bound on the policy rate is reached. We also consider optimal policy with regard to the payment of interest on reserves; in our model, this requires that the interest rate on reserves be kept near the target for the policy rate at all times

Cyclooxygenase in biology and disease

Cyclooxygenase (COX), the key enzyme required for the conversion of arachidonic acid to prostaglandins was first identified over 20 years ago. Drugs, like aspirin, that inhibit cyclooxygenase activity have been available to the public for about 100 years. In the past decade, however, more progress has been made in understanding the role of cyclooxygenase enzymes in biology and disease than at any other time in history. Two cyclooxygenase isoforms have been identified and are referred to as COX‐1 and COX‐2. Under many circumstances the COX‐1 enzyme is produced constitutively (i.e., gastric mucosa) whereas COX‐2 is inducible (i.e., sites of inflammation). Here, we summarize the current understanding of the role of cyclooxygenase‐1 and ‐2 in different physiological situations and disease processes ranging from inflammation to cancer. We have attempted to include all of the most relevant material in the field, but due to the rapid progress in this area of research we apologize that certain recent findings may have been left out.—DuBois, R. N., Abramson, S. B., Crofford, L., Gupta, R. A., Simon, L. S., van de Putte, L. B. A., Lipsky, P. E. Cyclooxygenase in biology and disease. FASEB J. 12, 1063–1073 (1998)Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/154527/1/fsb2fasebj12121063.pd

Demographics and FDI: lessons from China’s one-child policy

peer reviewedFollowing the introduction of the one-child policy in China, the capital-labor ratio of China increased relative to that of India, while FDI/GDP inflows to China versus India simultaneously declined. These observations are explained in the context of a simple neoclassical overlapping generations paradigm. The adjustment mechanism works as follows: the reduction in the growth rate of the (urban) labor force due to the one-child policy increases the capital per worker inherited from the previous generation. The resulting increase in China’s domestic capital-labor ratio thus "crowds out" the need for foreign direct investment (FDI) in China relative to India. Our paper is a contribution to the nascent literature exploring demographic transitions and their effects on FDI flows

The equity premium and the allocation of income risk

This paper examines the extent to which the equity premium puzzle can be resolved by taking account of the fact that stockholders bear a disproportionate share of output uncertainty. We do this in the context of a non-Walrasian RBC model where risk reallocation is justified by borrowing restrictions. The risk shifting mechanism we propose has the same effect as would arise from a substantial increase in the risk aversion parameter of the representative agent. As with more standard RBC models, it remains that our model is unable to replicate key financial statistics. In particular, the observation that the equity return is more variable than national product cannot be accounted for under standard technology assumptions.Risk ; Stock - Prices