Medical Malpractice Litigation Under National Health Insurance: Essential or Expendable?

Identification of time-continuous models from sampled data is a long standing topic of discussion, and many approaches have been suggested. The Maximum Likelihood method is asymptotically and theoretically superior to other methods. However, it may suffer from numerical inaccuracies at fast sampling and it also requires reliable initial parameter values. A number of efficient and useful alternatives to the maximum-likelihood method have been developed over the years. The most important of these are State-Variable filters, combined with Instrumental Variable methods, including the simplified refined IV method. In this contribution we perform unpretentious numerical experiments to comment on these methods, and their mutual benefits.CADIC

Political Uncertainty and Crime in Transition Economies

Political Uncertainty and Crime in Transition Economies Two stylized facts are often used to characterize the economies in transition: an increase in the crime level and frequent government changes, where the party in power is replaced by another party with a different, and often opposite, ideological orientation. We investigate the impact on agents’ honesty when agents perceive the future form of government as uncertain, and also know that their own collective decisions will effect the government’s choice of type. Furthermore, we assume that the form that the government will take depends, in part, on the collective behavior of the agents. By endogenizing the joint decisions made by the agents, as well as the government, we derive the social consequences of these choices, the induced level of crime. Using the level of crime permits us to investigate comparative statics for possible policy implications. We show that the complex interactions between the government and the agents leads to some non-intuitive results

An Evaluation of Shareholder Activism

We develop a method to evaluate shareholder activism when an activist targets firms whose shareholders are diversified portfolio holders of possibly correlated firms. Our method of evaluation takes the portfolios of all of the shareholders, including the activist, as its basis of analysis. We model the activist from the time of the acquisition of a foothold in the target firm through the moment when the activist divests the newly acquired shares. We assume that during this period, all exchanges of securities, and their corresponding prices, are achieved in Walrasian markets in which all participants, including the activist, are risk-averse price-takers. Using the derived series of price changes of all the firms in the market, as well as the derived series of changes in all the portfolio holdings over this period, we evaluate the impact of activism on the activist, on the group of other shareholders, and on the combined group. We show that when activism is beneficial to the activist, the group of other investors may not benefit; furthermore, even when the activist benefits from activism, the value of the market may decrease. When the activist benefits from activism, an increase in the value of the market is a necessary but not sufficient condition for the group of other investors to benefit also from activism. In addition, we show that the combined group, the activist plus the group of other investors, benefits if and only if the value of the market increases and, under this condition, either the activist or the group of other investors, but not necessarily both, benefits

Crime and Uncertain Punishment

We consider agents in a country in an early stage of transition from a planned to a market economy. As the transition is in progress, the nature of the government’s policies are unknown to the agents. Property rights once held by the state have already been transferred to the agents, with each agent owning one firm. However, the agents are uncertain of the level of law enforcement the government will provide. Specifically, they are unsure of the tax and confiscation consequences of both legal and illegal acts. Each agent, having a different cost of stealing, must decide how much of the firm to divert to himself. The agents believe the government may become either a traditional democratic government that supplies law enforcement as well as infrastructure leading to positive firm growth, or a corrupt government that may or may not provide law enforcement, does not provide a climate for firm growth, and may be confiscatory. All agents presume the government will choose its behavior as a function of the tax revenue it will collect under each scenario; however, the tax revenue results from the collective decisions of the agents. This interaction between tax revenue and agents’ decisions, together with the uncertainty of law enforcement and tax policy, forms the framework within which the agent chooses his level of honesty. By calculating the percentage of agents who steal some amount from the firm, we investigate the relationship between the level of criminality and the various uncertainties facing the agents. We show how expectations of the agents about the future behavior of their government induce the degree of criminality in society

Exploring Tax Evasion in the Context of Political Uncertainty

We present a model of agents facing the uncertainty of two future forms of government who are able to insure against this uncertainty by hiding funds from taxation. In order to choose whether or not to hide funds from taxation, agents need to know policy choices that each government would make should it come to power. But each government, before it could make its decision, would need to know the choices of the agents who would, for example, produce tax revenues. This informational tension is resolved endogenously. We derive the resulting level of tax evasion in society and the optimal choices made by the potential governments. We examine how changes in governmental structure would affect the level of tax evasion, and how that, in turn, would affect a particular form of capital flight

Moving Toward the Rule of Law in the Face of Corruption: Re-examining the Big-Bang

We investigate the claim that the establishment of property rights in an economy in transition would create its own demand for the enforcement of laws to protect those rights. Our model contains a government seeking activities to accomplish certain objectives that depend on public support for the enforcement of the rule of law. It also contains agents who interpret the activities of the government as signals as to the intent of the government to enforce the rule of law. The agents use the signals in their choice of whether to support the objectives of the government. With both the government and the agents playing an active role, we establish conditions under which the activities chosen by the government will maximize its benefits and, at the same time, maximize the constituency in support of enforcement. These conditions provide a basis for the argument for the implementation of the big-bang policy in economies in transition. However, when these conditions do not hold, we show that in pursuing its own goals, the government reduces support for the enforcement of the rule of law, which, in our model, leads to an increase in corruption. Two characteristics play an important role in these conditions: the initial level of corruption in the economy and the types of activities the government chooses to undertake. We present four examples to determine the relative importance to our conclusions of each of these characteristics.Statistics Working Papers Serie