Intergenerational Risk Sharing by Means of Pay-as-you-go Programs – an Investigation of Alternative Mechanisms

A pay-as-you-go (paygo) pension program may provide intergenerational pooling of risks to individuals’ labor and capital income over the life cycle. By means of a model that provides illuminating closed form solutions, we demonstrate that the magnitude of the optimal paygo program and the nature of the underlying risk sharing effects are very sensitive to the chosen combination of risk concepts and stochastic specification of long run aggregate wage income growth. In an additive way we distinguish between the pooling of wage and capital risks within periods and two different intertemporal risk sharing mechanisms. For realistic parameter values, the magnitude of the optimal paygo program is largest when wage shocks are not permanent and individuals in any generation are considered from a pre-birth perspective, i.e. a “rawlsian risk sharing” perspective is adopted.social security, risk sharing, portfolio choice, persistence in income shocks

Direct and mediated impacts of product and process characteristics on consumers’ choice of organic vs. conventional chicken

There is a lack of research into why consumers value process characteristics. In this study, we test the hypothesis that the impact of process characteristics such as organic and free-range on consumers’ choices of food products is at least partly mediated through expected eating quality or taste expectations. In other words, the process characteristics partly function as cues to (eating) quality. Using a traditional metric conjoint approach based on an additive model, four product characteristics (production method, price, size and information about farmer and rearing conditions) were varied in a fractional factorial conjoint design, creating nine profiles of whole chickens. 384 respondents rated the nine different chickens in terms of taste expectations and willingness to buy. Since the nine records for each respondent are not independent, we used linear mixed modelling for the mediation analysis, We find that, as expected, taste expectations are a strong predictor of willingness to buy. As hypothesized, the impact of both product and process characteristics on willingness to buy is at least partly mediated through taste expectations. Hence, the study shows that process characteristics are important for consumers, not only in and off themselves, but partly because consumers make inferences about eating quality from knowledge about such process characteristics

A Self-determination Theory Approach to the Study of Body Image Concerns, Self-presentation and Self-perceptions in a Sample of Aerobic Instructors

This study examined motivational predictors of body image concerns, self-presentation and self-perceptions using Self-determination Theory as a guiding framework. Aerobic instructors (N = 149) completed questionnaires measuring general need satisfaction, exercise motivational regulations, body image concerns, social physique anxiety and self-perceptions. Introjected regulation predicted all outcome variables in the expected direction. Intrinsic motivation positively predicted physical self-worth. Further, autonomy need satisfaction negatively predicted body image concerns. Finally, differences existed in need satisfaction, introjected regulation, self-perceptions and social physique anxiety between those at risk of developing eating disorders and those not at risk. The results underline the importance of overall and exercise-specific feelings of self-determination in dealing with body image concerns and low self-perceptions of aerobics instructors

The role of self-determined motivation in the understanding of exercise-related behaviours, cognitions and physical self-evaluations

Grounded in self-determination theory (Deci & Ryan, 1985), the purpose of the present study was to examine whether motivation, self-determined and controlling types of motivation could predict a range of exercise-related behaviours, cognitions and physical self-evaluations. Exercisers (n¼375) from ten health clubs in the North of England completed questionnaires measuring exercise motivation, exercise stages of change, number of relapses from exercise, future intention to exercise, barriers self-efficacy, physical self-worth and social physique anxiety. Controlling for age and sex, multiple and logistic regression analyses supported our hypotheses by showing self-determined motivation (i.e. intrinsic motivation and identified regulation) to predict more adaptive behavioural, cognitive and physical self-evaluation patterns than external regulation and amotivation. Introjected regulation was related to both adaptive and maladaptive outcomes. Furthermore, a multivariate analysis of variance revealed that exercisers in the maintenance stage of change displayed significantly more self determined motivation to exercise than those in the preparation and action stages. The results illustrate the importance of promoting self-determined motivation in exercisers to improve the quality of their experiences, as well as to foster their exercise behaviour. Future research should examine the mechanisms that promote self-determined motivation in exercise

Designing Social Security – A Portfolio Choice Approach

Public social security systems may provide diversification of risks to individuals’ life-time income. Capturing that a pay-as-you-go program (paygo) may be considered as a “quasiasset”, we study the optimal size of the social security program as well as the optimal split between a funded part and a paygo part by means of a theoretical portfolio choice approach. A low-yielding paygo system can benefit individuals if it contributes to hedge other risks to their lifetime resources. Moreover, a funded part of the social security system can be justified by potential imperfections to the individuals’ free access to the stock market. Numerical calculations for Sweden, Norway, the US and the UK demonstrate that the optimal size of paygo-part of the pension program varies considerably in response to differences in projected growth rates and the correlation between stock returns and growth. Our calculations suggest that a paygo program has an important role in the three former countries – but not in the U.K.Social security; risk sharing; portfolio choice

Habit formation, strategic extremism and debt policy

We suggest a probabilistic voting model where voters’ preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of re-election. Comparing to a benchmark case of a certain re-election, we demonstrate that the incumbent’s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.Budget deficits; voting; extremism; habit formation

Financial Integration and Consumption Comovements in the Nordic Countries

The cross-country correlations between annual per capita consumption growth in the Nordic countries (Denmark, Finland, Norway and Sweden) during the period 1973-1996 are much lower than predicted by the basic theory of international financial integration. Capturing that the consumption behavior of parts of the population may be myopic and that some external consumption risks may be uninsured, this paper attempts to shed light on this observation. We find some evidence of myopic consumption behavior in Denmark, Finland and Sweden. Taking this into account, the financial markets of the Nordic economies seem to be well integrated. It proves hard to identify uninsured external consumption risks at the aggregate level.International financial integration; international risk sharing; capital mobility

Borrow and Adjust: Fiscal Policy and Sectoral Adjustment in an Open Economy

Should the government run fiscal deficits in response to an adverse external shock that warrants transfer of resources from production of non-traded to traded goods? This paper considers normative fiscal policy implications of sectoral adjustment costs in a two-sector model with overlapping generations. Fiscal deficits benefit present generations by depleting foreign assets and slowing down the adjustment process. We show that despite no nominal rigidities, temporary fiscal deficits increase social welfare if adjustment costs prevent immediate sectoral reallocation of inputs. If there are no adjustment costs, the case for fiscal deficits vanishes.fiscal policy, sectoral adjustment, intergenerational welfare

Habit Formation, Strategic Extremism and Debt Policy

We suggest a probabilistic voting model where voters’ preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of re-election. Comparing to a benchmark case of a certain re-election, we demonstrate that the incumbent’s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.budget deficits, voting, extremism, habit formation