Announcement or Contribution? The Relative Efficiency of Manipulated Lindahl Mechanisms

The private provision mechanism is individually incentive compatible but inefficient. The Lindahl mechanism is efficient but not incentive compatible. We analyze the outcome of the manipulated Lindahl mechanism. When the demand announcements of participants are unrestricted the Lindahl mechanism suffers from multiple equilibria. If the government removes the multiplicity by restricting the functional form of announcements the resulting Lindahl equilibrium can be made approximately efficient. Approximate efficiency is achieved by announcements that are one-dimensional regardless of the number of participants in the mechanism. This is in contrast to mechanisms that achieve exact efficiency but require announcements whose dimensionality increases at the same rate as the number of participants. The mechanism we describe benefits from simplicity at the cost of approximate efficiency. We demonstrate that mechanisms in which a linear demand function is announced are supermodular so play will converge to the Nash equilibrium for a range of learning dynamics.

Human capital and growth under political uncertainty

In this paper we show how political uncertainty may impede economic growth by reducing public investment in the formation of human capital, and how this negative effect of political uncertainty can be offset by a government contract. We present a model of growth with accumulation of human capital and government investment in education. We show that in a country with an unstable political system the government is reluctant to invest in human capital. Low government spending on education negatively affects productivity and slows growth. Furthermore, a politically unstable economy may be trapped in a stagnant equilibrium. We also demonstrate the role of a government retirement contract. Public investment in education and economic growth are higher when the future retirement compensation of the government depends on the future national income, in comparison with investment under zero or fixed retirement compensation.Endogenous growth

Type I and Type II Fractional Brownian Motions: a Reconsideration

The so-called type I and type II fractional Brownian motions are limit distributions associated with the fractional integration model in which pre-sample shocks are either included in the lag structure, or suppressed. There can be substantial differences between the distributions of these two processes and of functionals derived from them, so that it becomes an important issue to decide which model to use as a basis for inference. Alternative methods for simulating the type I case are contrasted, and for models close to the nonstationarity boundary, truncating infinite sums is shown to result in a significant distortion of the distribution. A simple simulation method that overcomes this problem is described and implemented. The approach also has implications for the estimation of type I ARFIMA models, and a new conditional ML estimator is proposed, using the annual Nile minima series for illustration.Fractional Brownian motion, long memory, ARFIMA, simulation.

Fixed-b Asymptotic Approximation of the Sampling Behavior of Nonparametric Spectral Density Estimators

We propose a new asymptotic approximation for the sampling behavior of nonparametric estimates of the spectral density of a covariance stationary time series. According to the standard approach, the truncation lag grows slower than the sample size. We derive first order limiting distributions under the alternative assumption that the truncation lag is a fixed proportion of the sample size. Our results extend the approach of Neave (1970) who derived a formula for the asymptotic variance of spectral density estimators under the same truncation lag assumption. We show that the limiting distribution of zero frequency spectral density estimators depends on how the data is demeaned. The implications of our zero frequency results are qualitatively similar to exact results for bias and variance computed by Ng and Perron (1996). Finite sample simulations indicate that new asymptotics provides a better approximation than the standard asymptotics when the bandwidth is not small.

Growth and Inverted U in Child Labour: A Dual Economy Approach

While it is commonly accepted that the main cause of child labour is poverty, empirical observations suggest that economic growth is not always associated with the reduction in child labour. We show, in a dual economy framework, that the e¤ect of productivity growth upon child labour may be positive or negative. In particular, changes in the productivity gap between the modern and the traditional sectors, due to the technological progress, can generate an increase in child labour. In a dynamic version of the model we also investigate how this e¤ect depends on the quality of schooling.

Representation and Weak Convergence of Stochastic Integrals with Fractional Integrator Processes

This paper considers the asymptotic distribution of the covariance of a nonstationary fractionally integrated process with the stationary increments of another such process - possibly, itself. Questions of interest include the relationship between the harmonic representation of these random variables, which we have analysed in a previous paper, and the construction derived from moving average representations in the time domain. The limiting integrals are shown to be expressible in terms of functionals of Itô integrals with respect to two distinct Brownian motions. Their mean is nonetheless shown to match that of the harmonic representation, and they satisfy the required integration by parts rule. The advantages of our approach over the harmonic analysis include the facts that our formulae are valid for the full range of the long memory parameters, and extend to non-Gaussian processes.Stochastic integral, weak convergence, fractional Brownian motion.