texts: Why can't I find masks for the corona virus?

texts:
Not an economist by far, just a layman, and that's a layman question.

How is this possible that it's difficult to find mask for the Corona Virus? I have been several times to 7/11, boots, Watson, and other pharmacies, and everytime they did not have it as they ran out. How is it possible that the producers of masks give up on additional earning by not producing more masks, now that it's pretty obvious the demand is going up?

The fact that there are not enough masks is my personal experience in Bangkok - however, some friends of mine have the same experience in Italy, where the Corona Virus outbreak has reached a scary stage.

Generally. I would explain capitalism failure by pointing at government regulations - however in this case I don't see how the government can be involved into mask production.
Any idea?


texts: What's the advantage of repurchase agreements over collateral backed loans?

texts:
Is there any material difference between a repo and a collateral backed loan?
The one I can think of is that the collateral is owned by the lending party during the loan. So if the Fed uses this with treasuries they get to collect interest on it.
Why did the Fed adopt this as a tool over simple buying and selling? It seems to provide the same effect to the money supply and they don't need the interest from the treasury collateral given they return most of their money to the Treasury every year.


texts:
Is zero inflation really desirable?

To be more precise: Does inflation in real life have benefits that in some situations outweigh its social cost? E.g.: it works as a disincentive against holding money. The treasury derives income from printing new bills, which usually inflates prices.


texts: Differing Inflation Rates for Separate Income Groups; Literature?

texts:
So here's a few ideas that have been floating around my head since undergraduate university. It seems that money owned by the highest net wealth owners is always moving around and making a return, but only in markets that don't particularly affect the lower classes (debt and equity trading for example).

So might there be significantly different rates of inflation or expected rates of inflation for different income groups? As income inequality rises, would money demand also be lower for lower income groups and higher for high income groups, which would create inflation for luxury goods and such? If a central bank cares about population welfare and they know their policy may impact inflation differently for different income groups, couldn't this affect their planning/optimal policy?

I know these are a lot of questions. I am mainly interested in whether there have been studies or theories about any of these sorts of questions before and whether these questions are actually interesting, empirically. Feel free to give me suggestions on how to hone in this post; it's a lot of speculative questions, I know.

Edit: Otherwise, how might you guys approach this problem? How might you guys and gals try to model inflation for different income groups?


texts:
"An agent-based model (ABM) is one of a class of computational models for simulating the actions and interactions of autonomous agents (both individual or collective entities such as organizations or groups) with a view to assessing their effects on the system as a whole." Wiki

In game theoretic models, same thing is done- we model individuals and the process of interactions.

How game theoretic models and analysis is different from ABM? Is the simulation compulsory in ABM?


texts: Could the Feds objectives be adjusted to decrease or at least not increase wealth inequality?

texts:
The US congress "has assigned the Fed to conduct the nation’s monetary policy to support the goals of maximum employment, stable prices, and moderate long-term interest rates."(1)
It seems like the two objectives "maximum employment" and "moderate long-term interest rates" are at odd with each other?
At the moment the interest rates are far from moderate (extremely low).
From my understanding this is in order to reach maximum employment?
An interesting Federal Reserve Bank of New York staff report (2) finds that accommodative monetary policies (=QE?) leads to a small decrease in income inequality due to more jobs, but a large increase in wealth inequality.
Wealth inequality is already prevalent in the US (3).
Would changing the objectives of the Feds to:
low unemployment, stable prices, and moderate long-term interest rates
decrease or at least not increase wealth inequality?
(1) What economic goals does the Federal Reserve seek to achieve through its monetary policy?
(2) Monetary Policy and Racial Inequality
(3) Trends in income and wealth inequality


texts: What are examples of inversely (negatively) correlated stock prices in economics?

texts: I’m looking for example of two goods/wealth that demonstrate inverse/negative correlation. For example if price of A rises then price of B falls. May be it is oil or gold prices along with some other wealth. Or may be some share prices (stocks) of some two companies. I can’t find example of such negatively correlated prices data.


texts: Dynamic factor model for inflation (UIG)

texts:
I'm trying to replicate some results of Fed Underlying Inflation Gauge (UIG) model, which is a dynamic factor model to capture inflation trend.  https://www.newyorkfed.org/research/policy/underlying-inflation-gauge

I'm getting some not so good results. The following figure shows the UIG results while my is a lot smoother.

I'm trying to investigate the reason. One difference is that I used a dynamic factor model in statsmodels package in Python, which has the static format as following:
$\begin{align}
y_t^i & = \Lambda^i f_t + u_t^i \\
f_t & = A_1 f_{t-1} + \dots + A_p f_{t-p} + \eta_t \qquad \eta_t \sim N(0, I)\\
u_t^i & = \varepsilon_t^i \qquad \varepsilon_t^i \sim N(0, \Sigma)
\end{align}$

But the UIG is actually doing something like:

$\begin{align}
y_t^i & = \sum_{h}\beta_h^i f_{t-h} + u_t^i \\
u_t^i & = \varepsilon_t^i \qquad \varepsilon_t^i \sim N(0, \Sigma)
\end{align}$

Could this cause a problem?


texts: Imports not used in the country, still counting in the GDP calculation?

texts:
When we calculating GDP we use the given formula

$GDP = C + I + P + X - M$

Here $M$ means the imports.
My question is: What if I am not currently using the imports. For example I might have by the goods and preserve in the warehouse. In that case, Do the imports really affects GDP.


texts: Why the GDP does not decrease even when we are saving from our income?

texts: When we are saving from our income then we don't consume as mush as we earn. So the GDP should decrease as well as the income but this does not happen. Why?


texts:
I understand, commercial banks are entitled by the Central Bank to "create new money" when they issue a loan and correspondingly "destroy the money" when the loan is paid back (with the constraints of the fractional reserve system). Correct?
If so, I wonder how a Swiss bank, which is entitled by the Swiss National Bank rather than the FED, can issue a new loan in USD. What is the mechanism?
thank you!


texts: Why are there no minimum wage entry level IT jobs

texts:
In the UK, I have not seen any graduate level IT jobs offering a starting salary below £20,000. At the same time, about 10% of computer science graduates are unemployed six months after graduation. Also, a significant proportion of computer science graduates end up in minimum wage jobs that do not use their skills and would prefer to work in the IT sector even if their pay remained the same.

Why are there no minimum wage graduate level IT jobs? If there are job candidates whose labour is worth more than £20k a year, and there are candidates who are not worth employing even at minimum wage, then surely there must be candidates whose labour is worth less than £20k but more than minimum wage?
https://www.theregister.co.uk/2016/07/22/computer_science_graduates_hesa_employment/


texts: Locational Marginal Pricing when different prices and when the same?

texts:
I am kinda confused about this YouTube video.

So the LMP with no constraints is the same in both nodes. For me it was the same because I used those offers from node 1 also in node 2 and we chose the highest offer because also those companies who wanted to sell it for 35$ will not say no if you buy it from them for 42 dollars and we do this because it is the easiest way to calculate the price so everyone is happy.

Now later in the video (from 1:48-2:37 min) the price is different in each node because of the transmission constraint. Why? I mean I still just used the third package with 38$ per MWh because it is cheaper for node 2, why would I still let node 1 pay for that?


texts: Consumption based asset pricing book with Epstein-Zin(-Weil)

texts:
Any advice for a book covering consumption based asset pricing in general and in particular also covers non-standard asset pricing models / utility functions such as Epstein-Zin(-Weil)?

Besides the obvious 2001 Cochrane - Asset Pricing (which is great but doesn't really give any details about models other than the standard additive power utility model).

Thanks.


texts:
In an infinite-period alternating offer bargaining game if we suppose the discount factor is $\delta=1/2$, and the increment is $0.01$, what will be the subgame perfect Nash Equilibria?

It seems that the "proposer proposes $0.66$ and responder accepts" will be a subgame perfect Nash Equilibrium, but are there any other equilibria? How about the case when the proposer offers $0.67$?


texts: Income Offer Curve In Basic Microeconomics

texts: Can anybody explain to me the income offer curve? Is it a relationship between $x_1$ and $m$? If the budget equation is $p_1x_1+p_2x_2=m$? With income being the variable $m$?


texts: Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?

texts:
I recently read in a news article that a large amount of Libyan banknotes printed in Russia were seized in Malta following an order coming from the USA. Both Russia and the USA have geostrategic interests in this part of the world so I assume this action is probably linked to an economic warfare operation. Banknotes normally include a large amount of security features that prevent people to easily counterfeit them but I assume that for large countries like China, Russia or the USA it is not a big deal to print banknotes of a foreign country. In time of war it can be quite interesting for a large country to print a lot of banknotes and spread them in the economy of an adversary country to destabilize its economy. But putting apart the above mentioned news article I wasn't able to find evidences of such a scenario so my question is :
Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare ?


texts: Proving that Marshallian demand is of the form: $x_i^*(p,I) = \hat{x}_i^*(p)I$ with certain conditions

texts:
Can I please have some feedback/help proving the following. My proof is below but I am quite uncertain as to whether my solution is efficient. Thank you.
If $u(x)$ is a homothetic utility, then show that Marshallian demand is of the form: $x_i^*(p,I) = \hat{x}_i^*(p)I.$
$\textit{Proof.}$ If $u(x)$ is homothetic then
$$
\forall \alpha \in \mathbb{R}_{+}, \forall x : \hskip 6pt
\frac{\partial u(x)}{\partial x} =
\frac{\partial u(\alpha \cdot x)}{\partial x}.
$$
Now suppose $$
x_i^*(p,I) = \hat{x}_i^*(p)I
$$
does not hold, which is equivalent to
$$
u(x_i^*(p,I)) \ne u(\hat{x}_i^*(p)I).
$$
Precisely, $x_i^*(p,I)$ and $\hat{x}_i^*(p)I$ may be set valued. In this case we refer to two elements, with at least one of which is not included in both sets.
Case 1.
$$
u(x_i^*(p,I)) > u(\hat{x}_i^*(p)I)
$$
As $u$ is homothetic
$$
u(x_i^*(p,I)) =  u(I \cdot \frac{1}{I}\cdot x_i^*(p,I)) = I \cdot u(\frac{1}{I}\cdot \hat{x}_i^*(p)I).
$$
Using this we have
$$
I \cdot u(\frac{1}{I}\cdot x_i^*(p,I)) = u(x_i^*(p,I)) > u(I\cdot \hat{x}_i^*(p)I) = I\cdot u(x_i^*(p,I))
$$
thus we have
$$
u(\frac{1}{I}\cdot x_i^*(p,I)) > \hat{x}_i^*(p)I)
$$
However as $\frac{1}{I} \cdot x_i^*(p,I)$ is clearly an element of $B(p)I$ this is impossible as $\hat{x}_i^*(p)I$ gives maximal utility in that budget set.
Case 2.
$$
u(x_i^*(p,I)) < u(\hat{x}_i^*(p)I)
$$
As $\hat{x}_i^*(p)I$ is clearly an element of $B(p,I)$ this is impossible as $x_i^*(p,I)$ gives maximal utility in that budget set.
Thus we have proven that
$$
u(x_i^*(p,I)) = u(\hat{x}_i^*(p)I)
$$
which is equivalent with
$$
x_i^*(p,I) = \hat{x}_i^*(p)I.
$$


texts: How does one graph indifference curves for a set of Lexicographic preferences?

texts:
Two Questions:

Since Lexicographic preferences are not continuous, is it still appropriate to use $\Bbb{R}^n_+$ to define my coordinate axes when drawing Lexicographic preferences? If not, what should I use instead?
Since the indifference sets for Lexicographic preferences are singletons, how do I draw them? What's the convention? Will a single point do?

(related to this question)


texts: Relationship between parameters estimates of continuous variables and dummy variables

texts:
I had asked this question on cross validated before, and have deleted it.

Suppose we have a standard wage equation:
$$w_{i}=β+β_{1}educ_{i}+x_{i}'\gamma+ϵ_{i}$$

where educ corresponds to education levels, $x_{i}$ is a vector of covariates. If we treat educ as a continuous variables, we obtain a single estimate of $\beta_{1}$ . However, if we create dummy variables for different education levels, and therefore allow for different marginal effects (assuming we have a large enough sample size), we obtain k−1 different estimates of education levels if we include a constant. Can we think of think of the single estimate obtained from treating education as continuous as a weighted average of the k-1 coefficients, weighted by the number of individuals in each education block?


texts: Is a Nash equilibrium anything more than what it is?

texts:
(Sorry for the fuzzy title, could not think of something more informative. Feel free to suggest improvements)
This question is somewhat of a generalization of "Osborne, Nash equilibria and the correctness of beliefs".  Consider the normal form game

$G = \langle P, S, U \rangle$ with
$P = \{1,\dots, m\}$ the set of players,
$S =\{S_1,\dots,S_m\}$ the $m$-tuple of pure strategies for players in $P$
$U = \{u_1,\dots,u_m\}$ the $m$-tuple of payoff functions for players in $P$

The structure $G$ is rich enough to define the notion of a Nash equilibrium (NE).
However, authors sometimes describe NE based on richer models. For instance, the description by Osborne discussed in "Osborne, Nash equilibria and the correctness of beliefs" hinges on a structure

$\hat{G} = \langle P, S, B, U \rangle$ with
$P = \{1,\dots, m\}$ the set of players,
$S =\{S_1,\dots,S_m\}$ the $m$-tuple of pure strategies for players in $P$
$B = \{B_1,\dots,B_m\}$ the $m$-tuple of possible beliefs about each other's actions for players in $P$
$U = \{u_1,\dots,u_m\}$ the $m$-tuple of payoff functions for players in $P$

In this setting a NE is equivalent to

A strategy profile $s^*$ and a belief profile $b^*$ in which for all $i\in P$
$$ u_i ( s^*_i ~|~ s_{-i} = b^*_{i}) \geq  u_i ( s' ~|~ s_{-i} = b^*_{i}) \text{ for all } s' \in S_i$$
and
$$b^*_i = s^*_{-i}$$

Based on this equivalence, Osborne describes a NE as a situation in which

First, each player chooses her action according to the model of rational choice, given her beliefs about the other players' actions. Second, every player's belief about the other players' actions is correct.

Now in other settings, I have seen  justifications of NE based on other structures richer than $G$. For instance, one could have a game with incomplete information

$\tilde{G} = \langle P, \Theta, p , S, U \rangle$ with
$P = \{1,\dots, m\}$ the set of players,
$\Theta = \{\Theta_1,\dots,\Theta_m\}$ the $m$-tuple of possible types for players in $P$
$p$, a joint probability distribution over types
$S =\{S_1,\dots,S_m\}$ the $m$-tuple of pure strategies for players in $P$
$U = \{u_1,\dots,u_m\}$ the $m$-tuple of payoff functions for players in $P$

In $\tilde{G}$, a NE is equivalent to

A Bayesian-Nash equilibrium in which agent know each other types for sure, that is $p$ is degenerate.

In this case, one could therefore describe a NE as a situation in which

Players know each other's type for sure and play according to a Bayesian-Nash equilibrium

(See for instance "Featherstone, C., & Niederle, M. (2008). Ex ante efficiency in school choice mechanisms: an experimental investigation")
Now these two examples puzzle me. One seems to recommend to view NE as a situation in which beliefs about actions are correct, whereas the other suggests that NE be viewed as situations in which agent have perfect information about each other's preferences.
So my  question is :

Is any of these two argument better than the another in any meaningful way? Is any of the two generalization of $G$ (to $\tilde{G}$ or $\hat{G}$) any more helpful than the other in terms of understanding the necessary conditions for a NE to prevail?

My impression is that the concept of NE stands alone, independently of these generalizations and that there is no "correct" way of enriching the NE framework. As I understand it, "a NE is a situation in which agents are rational and beliefs are correct" is not more or less true than "a NE is a situation in which agents have perfect information on each other's payoffs". But as I see such somewhat conflicting claims showing up again and again, I am worried that I might be missing something.


texts: Is there any difference between using LRAC and LRATC in a long-run market structure diagram?

texts:
I am currently being taught to use average total cost (ATC) to label the U-shaped curve in the short-run on a market structure diagram, and long-run average cost (LRAC) for the equivalent curve in a long-run market structure diagram.

Is any difference between labeling the U-shaped curve in a long-run market structure diagram long-run average total cost (LRATC) and labeling it LRAC?


texts: Behavioral economics and utility function

texts:
I'm not very familiar with behavioral economics, but as a recommendation of a teacher I'm reading "A Behavioral New Keynesian Model" by Xavier Gabaix. There's a part that I don't understand, here it goes:

And the footnote says:

  In particular I use the objective (not subjective) expectations. Also, I do not include thinking costs in the welfare. One reason is that thinking costs are very hard to measure (revealed preference arguments apply only if attention is exactly optimally set, something which is controversial). In the terminology of Farhi and Gabaix (2015), we are in the “no attention in welfare” case.

What does he mean with "This is as in much of behavioral economics, which views behavioral agents as using heuristics, but experience utility from consumption and leisure like rational agents"? Which author says that behavioral agents has utility like rational agents?

Thanks in advance.


texts: Refunded Emission Payments - how does it work?

texts:
I know that there are different types of Refunded emission payments e.g., :

expenditure based
output based

However, I think it is difficult to understand how Refunded emission payments works?
I would be great full for a simple explanation on how it works and/or resources that explains this concept in an easy way.


texts:
I'm thinking about value generating. I hear it a lot in a innovation context, i.e. one should create a new product that a lot of people want to buy.

I can see how a new product can value more than the sum of its parts, but I don't understand how this can increase the wealth of a society.

The point of view that raised this question for me was: let's say a person can spend only what she earn as wage, so when a new product come out, this product is competing with all the pre existing products, someone should lose to someone else to win.

Where the economic growth of a society come from?


texts: Why is economic growth correlated with long-term interest rates?

texts: Historically, growth rate is not always equal to long-term interest rate, but there does seem to be some relationship between the two. Is it that rates influence growth, growth influences rates, or something else entirely? In a nutshell, how are long-term rates and economic growth related, and why?


texts: Equal payment series compound interest problem

texts:
I am stuck on a textbook question for a long time now.

What is the amount of quarterly deposits A, such that you will be able to withdraw the amounts in cash flow diagram if the interest rate is 8% compounded monthly ?

My attempt :

I found out the effective interest rate as $2\%$. Now I formed the equation :

$(A(F/P,2\%,4) + A(F/A,2\%,4) - 1500 )*(F/P,2\%,4) + A(F/A,2\%,4) = 2500$

Solving which I get $A = \$422.75$ . But the answer at the back of the book says $\$755.89.$

I don't understand where I am going wrong. Any suggestions as to where I might be going wrong?


texts: What does Hayek mean at the end of the first paragraph of The Use of Knowledge?

texts:
I reproduce here the first paragraph of Hayek's well-known essay The Use of Knowledge in Society:

  What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses. [emphasis added]

I have bolded the part that I don't quite grasp, not being a trained economist. Can anyone explain this in layman's terms? (I understand marginalism quite well, so no need to go in depth on that, though it could help others understand better. Of course, perhaps I don't understand marginalism as well as I thought.)


texts: how is a trade imbalance related to domestic savings?

texts:
I was confused by a statement in an article from Paul Krugman in the NY Times:

  The reason America runs persistent trade deficits isn’t that we’ve
  given away too much in trade deals, it’s that we have low savings
  compared with other countries.

Source: NYT

Intuitively I thought a trade imbalance was simply exports minus imports, and had nothing to do with savings.  I saw some referenced equation demonstrating its "truth", but I still don't understand it.

My questions:

Is he talking about personal savings, as in how much is in people's bank accounts?  Or is it about government savings, as in taxes minus expenditures?
Any hints to help intuitively shed light on how savings would affect a trade imbalance, which seems unrelated to me?


texts: Relationship between stock market and exchange rate

texts:
I am looking for some references on the relationship between the stock market and the exchange rate, both from the empirical and theorical side.
Is there any theory which suggests a relationship between the two series (e.g ftse100 and USD/GBP)?
A simple reasoning is that a rise in the stock market driven by foreign capitals flowing inside the country should lead  to an appreciation of the currency, due to an increase of the demand of the domestic currency (for a fixed supply).
On the other side, a depreciation of the currency might cause more export, higher profits and therefore might lead a rise in the stock market.
Do you know other channels which might explain why one of the two series theoretically leads the other one?


texts: Social conflicts in economic growth models

texts:
I'm highly interested in theories and models which explain how do social conflicts influence economic growth.
What papers on the topic can you recommend? I was searching for some seminal and most important articles just to get into, but there is so much of them.
Would it be okay to start from: Benhabib J., "Social conflict and growth"?
Thank you.


texts: Combining Compliment and Substitue Goods

texts:
Given
1) Perfect substitutes: X and Y
2) Compliments: Z and X
is it possible to generate a utility function that relates them?

X and Z must always be consumed together, and you can substitute Y for X.


texts: If $\{ X_t \}$ is a $I(1)$ series and $\{ Y_t \}$ is a $I(0)$ series, would it cause "spurious regression" when regressing like $Y_i=\beta_0+\beta_1 X_i+u_i$? Thanks!


texts: What is the resolution down to which the annual inflation value can be controlled?

texts: Judging by previous posts in the site, the inflation target is set annually to 2% by the Federal Reserve. Regardless of the reasons behind this choice, I am curious to understand how precisely can the Federal Reserve aim for a value (maybe understanding the means they use to control it will be enlightening for that purpose). Could it be set, for the sake of the example, to 1.9% instead? Or to 1.95%?


texts: The college admissions problem with externalities

texts:
In the classic College Admissions problem, there are $m$ colleges and $n$ students. The colleges have a preference over the students and the students have preferences over the colleges. The students do not care who are the other students admitted to the college. The Gale-Shapley algorithm guarantees a stable matching in this case.
Now suppose I introduce a form of externality where a student's utility depends not only on the college he/she is admitted to, but also on who are the other students who are admitted to that college. What is the definition of stability in this case? Does a stable allocation always exist here? How to find one if it does?


texts: Issues if insurance is not compulsory for population

texts: So I remember this in my Econ 101 course thing.. eg. If all cars are legally required to be insured, insurers work off a population statistic to calculate cost of crashes/ individual issues (population statistics are public). If insurance is not compulsory, worse drivers insure, better ones don't, then insurers can't price off the population statistic because they only have a sample statistic (not public) of worse drivers on their books. I believe this was called the 'pooling problem' in my lecture, but sadly google comes up with entirely different ideas for that search! Please enlighten me! :) (if possible, some links to theory would be great, thanks!)


texts:
I have been looking into expectation-based loss aversion following Kőszegi-Rabin (2005, 2007). In particular, I find their choice-acclimating personal equilibrium (CPE) interesting, but it has a feature that I find rather odd.

My question is: Is there substantial evidence that people choose stochastically dominated lotteries? Are there experimental studies (in addition to the crazy one below) that can support this prediction of CPE? Or has someone cleverly exploited a data set to point out this behavior in the field?

Let me clarify what I am after:

In CPE, a player makes makes a consumption plan and expects to follow it through such that it becomes her reference point, and this plan must be better than any other available plan. That is, outcome lottery and reference lottery are the same.

  For any choice set $D$, $F \in D$ is a CPE if $U (F | F ) \geq U (F' | F') \quad \forall F' \in D$.

If you want to know how $U$ looks like, here is the paper

In their Proposition 7, they show that people may choose stochastically dominated lotteries in CPE if losses hurt sufficiently badly.
Let me quote the authors:

  consider a lottery $F$ that yields $w + g> w$ with probability $p>0$ and
  $w$ with probability $1 -p$. Then
  \begin{aligned}
U(w + F|w +F) &=  [p (w + g)+(1-p)w] +   [p (1-p) \mu (g) + p (1-p) \mu (-g) \\
&= w + pg [1- (1-p)\eta (\lambda-1)].
\end{aligned}
  If $\eta(\lambda-1)>1$, which is a calibrationally plausible situation, the decision
  maker prefers $p=0$ over a small $p> 0$. Intuitively, raising
  expectations of getting $g$ makes an outcome of
  no gain feel more painful. To avoid such disappointments,
  the person would rather give up the
  fragile hope of making gains. In fact, if gain-loss
  utility is sufficiently important, reducing
  exposure to sensations of loss is the decision
  maker’s central concern.

Avoiding disappointment does not sound completely crazy, but I wonder if such risk preferences are observed in situations "that matter". Their example with the prisoner seems extremely constructed to me. They also refer to an experiment by Gneezy, List and Wu, in which people pay more for a \$50 gift card than for a lottery over a \$50 and a \$100 gift card, which seems outrageously crazy to me. I am inclined to say that these people just did not understand the questions.

Is there evidence that such behavior is prevalent?

Because -- if people play CPE and $\lambda$ estimates are on point -- it must be. Under CPE and the commonly used linear kinked $\mu$ with $\eta=1$, players prefer first-order stochastically dominated lotteries if $\lambda >2$.
Conventionally, "losses loom about twice as large as gains", meaning $\frac{1+\eta \lambda}{1+\eta } \approx 2 \Rightarrow \lambda \approx 3$. There are multiple studies backing up this parameter estimate. Therefore, under CPE we should see these crazy risk preferences all the time. Do we? I certainly don't have that feeling.


texts: Formula for Effective Discount Rate of Discount Rate Series

texts:
what is the formula to calculate an effective discount rate of Discount Series? For EX, If Price of Product A is $X and Discount Series is given like 10%,20%,30%,5%,2%. How can we calculate effective discount of this discount series?

https://answers.yahoo.com/question/index?qid=20110703053015AANbTBg

I found something here, but searching for a generalized formula for N number of Discount Series.
Thank you


texts:
I know that the Slutsky equation is defined as:

$\frac{\partial x_1^s}{\partial p_1} = \frac{\partial x_1^m}{\partial p_1} + x_1^o \frac{\partial x_1^m}{\partial m}$

My problem is right now is making use of this information given (I am aware of how to take partial derivatives) but cannot seem to understand how to apply it to problem sets.

Here's an example (I'm more concerned about the steps on how to get to the answer not just the answer);

A consumer has preferences given by $U(x_1,x_2)= x_1^2x_2$

(a) Derive the demand curves for $x_1, x_2$ when prices and income are given by $p_1, p_2$ and $m$

$x_1^*=2m/3p_1$ and $x_2^*=m/3p_2$  -I think I understood how to do that

(b) Illustrate the equilibrium on a diagram when $p_1$ = $p_2$ $ =$ 1 and
$I$ = $12

the way I did this was by graphing and simply finding the equllibrium point graphically based on the Demands for goods $1$ and $2$ on the budget line

(c) Calculate the exact income and substitution effects for $x_1$ when $p_1$
rises to $3.

-The only way I'm currently able to do this is without Calculus, as described in this video which doesn't seem to sit well with me being that the Slutsky Equation is defined very clearly with use of calculus. I just don't know how to apply it.

(d) Explain your exact results using the appropriate Slutsky equation.

same problem here.

Note: I'm no simply looking for someone to "do my homework" I'm primary interest is in knowing how to apply the Slutsky equation when facing similar problems.


texts: Demand estimation with a lagged dependent variable

texts:
Suppose I have the following structural equation for demand estimation in time-series:

$$q_t=\beta_0+\beta_1\hat{p_t}+\beta_2incom_t+\beta_3q_{t-1}+\epsilon_t$$

Where $q_t$ stands for the quantity of the product, $\hat{p}$ stands for the instrumented price with supply shifters, $incom_t$ stands for income, $q_{t-1}$ stands for the lagged quantity and $\epsilon_t$ are the random residuals. All the betas are estimated coefficients -- say, through two-stage least squares. All variables are log-transformed too.

Suppose also that the lagged variable seems to solve the problem of autocorrelation between the residuals and its coefficient is also significant. Suppose also that the model passes through all the necessary tests for a viable two-stage least squares estimation -- the sargan test is ok, the instruments are strong in the first stage etc.

Knowing this, what are the possible problems of having a lagged variable in your estimation? Does it change any interpretation of the elasticity ($\beta_1$)? I understand that I could also have some sort of long-run inferred elasticity if I set $q_t=q_{t-1}$ after estimating the coefficients of the equation (Am I wrong?).


texts:
How does an UHN individual leverage their wealth? Do they in fact do so, and should for example Bill Gates' 80 billion be understood as 800 - 900 billion dollar if he leverage his wealth 10 x?

Someone else said that this leveraging indeed occurs and magnifies the impact of these fortunes on an economy. But how should this be understood precisely?


texts: Cournot Duopoly and Non existence of best response function

texts:
Is it possible for a cournot duopoly game to not have the best response functions?

I have a profit function whose first-derivative is piece-wise. When I solve for one player's quantity (decision), it is equal to $0$. Does this mean there does not exist best response functions?

I am self-studying Game Theory and I apologize if this question is way too basic or completely wrong.


texts: What are main methods for econometrics of Macroeconomics?

texts:
I have a background in Finance and have become pretty interested in Macroeconomics as a graduate student. However the time is limited and I want to focus on econometrics part of Macroeconomics. In that case, could someone please give me tell me what are the main econometrics methods I should learn in Macroeconomics？In Finance we focus on models like ARMA and GARCH, how about Macroeconomics? I've learned VAR before. I also heard about the simultaneous equations, are those for Macro? What are methods that econometricians came up to handle Lucas's Critique? What might be a good book to learn Macro econometrics?

Thanks in advance!


texts: Why is Algeria the #2 milk powder importer in the world?

texts:
Can anyone explain to me why Algeria, a country of 40 million people is importing almost half as much milk powder as China?

Turkey has 80 million people yet it apparently doesn't import milk powder, or very little. Likewise for Libya, which is right next to Algeria, although it has only 6 million people. Egypt has about 100 million people and is similar to Algeria in some respects, yet it imports no milk powder.


texts: Did I do something wrong in calculating the market equilibrium?

texts:
Sorry for asking such a silly question, but something seems odd about my answer to this question:

  Suppose that two consumers, Jeff and Walt, are the only consumers in the market for carrots.  Jeff’s demand curve is given by $Q_{Jeff}=10-2P$ and Walt’s demand curve is given by $Q_{Walt}=15-3P$.

  a) Find the market demand curve for carrots.

  b) Suppose the market supply curve is given by $Q_S = 2P$.  Find the market equilibrium price and quantity.

So, this is how I answered the question:

  (a)
  Let $Q_{Jeff} = 10 – 2P$ and $Q_{Walt} = 15 – 3P$. Then, $Q_{Jeff} + Q_{Walt} = Q_D = (10 – 2P) + (15 – 3P) = 10 + 15 – 2P – 3P = 25 – 5P$. Therefore, the demand curve for carrots is $Q_D(P) = 25 – 5P$.

  (b)
    Let $Q_S = 2P$ and $Q_D = 25 – 5P$. At the market equilibrium price:
    $$2P = 25 – 5P
\implies 2P + 5P = 25
\implies 7P = 25
\implies P = 25/7.$$
  Thus, $P_E = 25/7$. Hence, $Q_E = 2P = 2(25/7) = 50/7$.

I guess I just wasn't expecting fractions in my answer. As far as I can tell, I did everything right. Did I screw up somewhere?


texts: Why does the following approximation hold?

texts:
In Essential Mathematics for Economic Analysis, on page 426 there is a model on gains from search where profit function is given as:
$$\pi (t) = [p^0 -p(t)]x^0 -wt$$
$t$ is time, $p$ price, $x$ quantity and $w$ wage. Later in the book on the same page it is stated that the gain expected from finding a lower price is:
$$\pi (t) = [p(t^*)-p(t^*+1)]x^0 $$
which is approximately equal to $-p(t)x^0$. I think I can understand everything else in this model but I don't understand how $[\pi (t) = p(t^*)-p(t^*+1)]x^0 \approx -p(t^*)x^0$. The book does not explain this.


texts:
I am bit curious to understand what it actually means when I read global recession is coming soon. There are some questions which pop in my mind reading such news. Some of them are:

What causes global recession?
How is it possible that all countries' economies go down at the same time. A loss in business for someone means profit for another. So how come all economies start going downward at the same time?
Does it mean that people's consumption capacity has declined or does it mean that the production of goods has declined which is leading to fall in GDP growths of all countries? If its the later case how difficult it is pump up the production capacity for any country to improve the economy instead of stating that global recession has led their economy to go down.
How does the world come out of global recession? If it has happened before many times in history, why haven't the major economies taken lessons from it and only do things which helped them to come out of recession last time?
Last but not least, is there a bigger picture which I am missing that all this global recession can be a planned activity by major economies every few years/decades to achieve something bigger?


texts: Does migration exacerbate (albeit delay) the problem of aging, economically-inactive populations in Western societies?

texts:
As a layman, I've always understood that there is a general consensus amongst economists that "immigration is economically beneficial" to rich Western countries (like Britain) who have aging populations because the influx of young economically active workers contributes to the economy (and tax coffers) and thereby supports the old economically inactive population.

But this seems quite obviously short-sighted.  Those immigrants will themselves grow old—and assuming that they remain in their new host countries, they will add to the economic burden of the elderly populations for future generations.

Is such immigration therefore not just kicking today's problems into the future, where it will have compounded and be exponentially worse?


texts:
Where can I find bilateral real exchange rates? For example per USD?

I can only find real effective exchange rates, but it is an index, not a bilateral rate.


texts: How much heath expenditure is due to conditions that people are born with?

texts:
The CDC says that 90% of US healthcare costs are attributable to chronic conditions. I am interested in an overlapping set of conditions: those that people are born with, including genetic diseases, birth defects, etc.

In various geographic areas, does anyone have a good estimate of what percentage of health expenditure is due to conditions like this?

I am aware that there could be some definition questions, since many medical conditions are partially but not fully due to factors present at birth, often in ways that may be changeable due to circumstances. I'm open to a range of ways of thinking about this.

Thanks!


texts: Why do all countries recognize foreign wealth?

texts:
Recently I learned that by 2016 that 1% of the population will have 50% of the worlds wealth. That means that more than 50% of individuals actually has less than he would in a totally fair economy.

Of course, money is a social construct. If someone does not acknowledge others wealth, that wealth might as well not exist (at least for the purposes of that relationship). So when enough people share this attitude, then all the wealth that exists might as well not exist, and a sort of "reset" happens?

However, I don't imagine it's that simple, especially for individuals, who are unlikely to be self-sufficient without making purchases using money. However, on a country level, there seem to be a number of countries that would benefit simply by turning inwards and actively failing to recognize foreign wealth. Notably, I recently watched a documentary on Lake Victoria fishing which had communities unable to eat any of their own fish for it was "better economically" to export it. And so they lived in poverty and starvation.

Well that just seems silly to me. So my question is, could a country like Tazania just turn inwards (don't recognize the concept of wealth with respect to other countries) and be self-sufficient (and thus, it seems, actually be able to use its food to feed its own people)? Even if just temporarily to build up important things like infrastructure education before joining the world economy again. If so, what are the caveats? If not, what are the factors stopping it?


texts: Reference Request: applied pricing techniques

texts:
Im looking for some resources on product pricing and other pricing methods commonly applied by price analyst's.

If anyone has a book or article to recommend i'd appreciate it.


texts: Second Order Derivatives in Becker's Crime and Punishment

texts:
I'm trying to understand Becker's seminal paper Crime and Punishment (1968) particularly the parameter of cost of apprehension and conviction and their second order partial derivatives.
The paper states the costs of various activities to apprehend is given by the function $C = C(A)$ where $C' = \frac{dC}{dA}$ and that activities can be approximate by the clearance rate $(p)$ and number of offences $(O)$ by the formula $A ≅ pO$
Now, partially differentiating once with respect to each $(p)$ and $(O)$ gives the following
$$C_p=\frac{∂C(pO)}{∂p} = C'O \quad \textrm{and;} \quad C_O = C'p \quad \textrm{respectively} \quad$$
Becker then says if $pO ≠ 0$ then an increase in either probability of conviction or number of offenses would increase total costs. This is where my confusion begins, when he discusses the marginal cost of increased activity given by second order differentiation where:
$$C_{pp}= C''O^2;\\
C_{OO}= C''p^2\\
C_{pO}=C_{Op}= C''pO + C'$$
Put simply, why is there an added $C'$ for the cross-partial differentiation results? I went through my calculus books and tried to figure out the chain rule application but to no avail.


texts: How does using HP filter allows us to estimate long-run values for variables such as output and unemployement?

texts:
I'm reading the paper "Okun's Law: Fit at 50?" written by Laurence Ball, Daniel Leigh and Prakash Loungani.
In it, in order to estimate Okun's Law in its level form, they use the HP filter to find the long-run values of the variable. I quote:

In this case, the tricky problem is to measure the natural rate $U_t^*$
and potential output $Y_t^*$. In most of our analysis, we use the most
obvious method: we smooth the output and unemployment series with the
Hodrick Prescott (HP) filter.

Could anyone explain to me how that works? From what I could gather, the HP filter is used to find the cyclical and trend components of a time series. How does one go from that to estimating long-run values?
Thanks!


texts: Do granting subsidies always cause allocative inefficiency?

texts:
I realise that subsidies cause allocative inefficiency if the market was already allocation efficient pre-subsidy due to deadweight loss.. but is this always true?

what if the subsidy was granted due to market failure (as is usually the case), that would mean that granting the subsidy would improve allocative efficiency, right? In this situation, does it still cause a certain degree of deadweight loss?


texts: What is steady state learning in the context of boundedly rational expectation modeling and how does it differ with other theories of learning?

texts:
What is steady state learning in the context of boundedly rational expectation modeling? E.g. see Evans et al. (2009)
They define it as: "Under steady-state learning, agents use past data to estimate the mean interest rate, which is then used as the forecast of future interest rates for all horizons".
However, also under adaptive learning past data are used to produce forecasts. Is SS learning just a synonym for infinite horizon adaptive learning? Or does it refer to a form of learning where rational expectations are replaced by boundely rational expectations in the steady state linear approximated solutions of the model? Rather than replacing them in the constituting equations directly and see explore determinacy/stability of SS solutions as such?
I would like to know what the main differences are with adaptive learning, Euler equation learning, infinite horizon adaptive learning, etc.  Adaptive learning could also be a trend following rule, an anchor and adjustment rule, etc. So I wondering what has been used here. In many policy oriented papers the specific adaptive rule that is employed by the agents is hard to find in the paper actually.
Evans, G.W. , Honkapohja, S. , Mitra, K. , 2009. Anticipated fiscal policy and adaptive learning. J. Monet. Econ. 56 (7), 930–953 .


texts: Is elasticity purely an aggregate concept or can it be individualized

texts:
First question here.  I am not an economist by training, but I do quite a bit of econometric analysis in my job (my background is maths).  I often get asked about elasticity, and I am familiar with several different ways of calculating elasticity.  My question is this: in the price-volume relationship for elasticity, does it make sense to ask about elasticity for individual customers, or is elasticity properly understood to be an aggregate (market) concept.  Is it possible to build an elasticity model for individual customers.

For clarification, these customer typically purchase thousands of units every month (these are B2B sales, not B2C).  Or is there something fundamental about elasticity that makes it intrinsically aggregate.  I have seen some discussion in the literature about individual customer elasticity, but the literature seems to be fairly sparse, so I am not sure how much to trust it.


texts: Evidence on economic impact of 2015 European refugee/migrant influx

texts:
At the time of writing (September 2015), Europe is dealing with a large influx of refugees/migrants. Many are fleeing violence in Syria and elsewhere, others come from Africa and the Middle East in search of economic opportunity.

I am interested in knowing what is the current state of the art in understanding the net economic impact of these inflows for the recipient countries in North Western Europe? I am interested in impact along a wide range of dimensions, growth, employment, etc.

In particular, I am interested in evidence that allows us to account for the specific demographic and skills profiles of these migrants. Assuming that the migrants reflect the typical UK asylum seeker, some demographic information can be seen here. The majority are male, between 20 and 50. At least in the current "crisis", the majority of migrants appear to be muslim, if that is of any consequence. I was not able to find information about skills.


texts: Are there any non-paywalled reputable economics journals?

texts:
I'm contributing to another open-source economics project, and was looking to compile a list of primary sources for modern developments in the field.

Basically something to help bridge the (occasionally decades long) time lag between what's taught at an undergrad/ introductory grad level and what's being researched in the field today.

Unfortunately as many in academia know, companies like Elsevier and others have most major publications locked up behind corporate paywalls, which makes them broadly incompatible with the principles of OSS/OSD.

There's Arxiv (and Vixra for the braver), but preprint servers are not really what I'm looking for. It's hard to separate the wheat from the chaff on many of them.

I'd like something with some editorial content, and especially peer-review.

I'd appreciate any suggestions.


texts:
Hello.
I'm graduate student in Japan.

This time, what I want to ask is how to solve the profit maximization problem using the image production function and derive the demand function.

This production function is a Cobb-Douglas production function, but it is also a CES type, and it is difficult for me to calculate.

Also, the paper states that the demand function has the same shape as a general monopolistic competition or an incomplete competition model.

So, the shape of the demand function is as follows.

$Q_n(j)=[P_n(j)/P_n]^{-σ}*Q_n$

where $P_n$ is final good price and $P_n(j)$ are intermediate goods (sector absorption) price

Thank you for answering.


texts: Can I make this assumption about the utility function?

texts: My question concerns a household's utility function U(c,l). We're told that the partial derivatives dU/dc and dU/dl > 0, and the second order partial derivatives are negative. Now, can I assume anything about the sign of the partial derivatives Ucl (or Ulc)?


texts: Example: Apple. People "overpay" for their products, money that ends up in corporate savings and not in their competitors' coffers, sort of a black hole because Apple doesn't see enough investment opportunities. Let's assume these savings are in the form of government bonds. Is this type of money flow deflationary? Are there studies about money flow/inflation impact by different savings types? Is there a general rule how savings vs investments affect inflation?


texts:
I am trying to prove a statement that if $c_R$ is a choice structure, then it must satisfy Sen's $\alpha$ condition.

However, if $X=\{a,b,c \}$, I can construct some choice structure like $c(\{a\})=a,c(\{b\})=b, c(\{c\})=c, c(\{a,b\})=a,c(\{b,c\})=b,c(\{c,a\})=c,c(\{a,b,c\})=a$.

Such choice structure clearly violates the $\alpha$ (shrinking) condition.

So can someone point out where do I make a mistake? Or is the statement assuming the relation $R$ to be rational?

Thanks!


texts: Consumer Preference when Consumer only consumes $A$ or $B$

texts:
Let's say Sally either wants to coke or pizza, but never both.

I am aware of the standard consumer preferences, such as Perfect Complements as well as Perfect Substitutes.

But I have never heard of the above case regarding Sally. Is there a particular name for this preference type?


texts: Is there still allocative efficiency when a subsidy is placed on a good?

texts:
An answer schedule for a practice exam I am doing states that when a subsidy is placed on a a good by the government, there is a loss of allocative efficiency.

I have also learnt from this video that when supply and demand change, the market will still be allocatively efficient, although the amount of consumer and producer surplus will change. However, the video does not take into account dead-weight loss.

When a subsidy is placed on a good by the government, there is obviously a loss in welfare due to the dead weight loss. By my question is this: is there still a point of allocative efficiency in the market of a good with a subsidy, or is there no longer allocative efficiency at all when there is a dead weight loss?


texts: Is corporate tax an argument in equal income tax (from labour and capital) debate and does the return on capital depend on rate of the corporate tax?

texts:
In our country we have 25% personal income tax on labour, 15% corporate tax on corporations and 10% personal income tax on income from capital (e.g. dividends). Pundits in our country are saying that we have flat tax rate across all types of income, because - they are saying - 15% corporate tax and 10% capital income tax amounts to the 25% tax on the income from the capital. Are their analysis correct?

This question leads to the following question - does return in capital (after taxes) depneds on the corporate tax rate? What empirical analysis and models are saying about this? From the one hand - it seems that corporate tax have impact on the gains after corporate tax from the other hand - maybe free market reprices the capital in such manner that the return on capital (after corporate tax) does not depend on the corporate tax rate?

Does the tax system of our country is just, normal, appropriate and similar to for the developed Western democracy country?

I feel that to speak about flat (equal) taxation we should have 25% tax on all the types of income and we should not take into account the corporate tax when considering personal income tax. How this analysis proceeds in Western democracies?

Or should we speak about price/earning share ratio as the most sensible measure of return on capital - does this ratio depend on the corporate tax?


texts: Finding the money supply graph for the UK

texts:
I have been trying to find a reliable source for the UK money supply over the past couple of decades, but it seems that in each different place I look I get completely different looking answers. Now I am aware that there are different measures of the money supply (M1, M2 etc) and I am also aware that these are defined differently in different countries, I am also aware that these definitions change from time to time.

What I would really like is the sum of instantly spendable British money that is currently possessed by all individuals and businesses. So I think this is the sum of notes&coins held outside banks plus the sum total of all sterling denominated demand deposits.

Certainly notes&coins on their own is not what I'm after because there is much more spendable money than that. This measure would be too small.

Also certainly I do not want to include the value of bonds or shares owned by people because that has to be sold (taking money from someone else) in order to convert their value into money. This measure would be too large.

I suspect that the data is probably available on this page on the Bank of England website, but there are so many choices and so much jargon that I am not at all confident of choosing the right data. Can anyone give me any pointers?


texts: Could robots replace humans as consumers?

texts:
Could it ever be economically viable, once technology allows, to create robot consumers to replace humans if demand was so low because of automation and reduced spending power/unemployment or is there simply no way to make robot consumers pay?

I am envisaging a future in which elite consumption has risen, but not enough to offset a huge decline in mass consumption. In that scenario, I was wondering if robot consumers could keep capitalism afloat? I am trying to check out for something I am writing whether such a thing could work economically ie whether there could be a profit in it for the producers and owners of the robots, I don’t think they could ever be economically autonomous because of the build and running costs. But could robot demand be sold or rented for example by the producers/owners to other companies to consume their products? There might be some state investment as well under the banner of demand stimulation? Or is it as the first reply argued, that this is just an economically illogical premise because the maths (profit) just can’t work because of cost of building and maintain the robots?


texts:
Suppose a (symmetric) CES utility function $$U(\mathbf{x})=\left[\int_{\Omega}\left(x_{\omega}\right)^{\frac{\sigma-1}{\sigma}} d \omega\right]^{\frac{\sigma}{\sigma-1}}, \sigma>1$$
1 The indirect utility function is $U\left(\frac{\mathbf{p}}{h}\right)=\left[\int_{\Omega}\left(\frac{p_{\omega}}{h}\right)^{1-\sigma} d \omega\right]^{\frac{1}{\sigma-1}}=\frac{h}{P(\mathbf{p})}$ where $h$ denotes the expenditure and $P$ is the price index. How to understand this indirect utility intuitively, especially the meaning of $\frac{p_{\omega}}{h}$?
2 The CES utility has the property of direct explicit additivity, i.e. $U(\mathbf{x})=M\left[\int_{\Omega} u\left(x_{\omega}\right) d \omega\right]$, where $M[\cdot]$ denotes a monotone transformation. This property imposes the strong restriction that income elasticity of a good must be proportional to the price elasticity of that good (i.e. the Pigou's Law), which has been argued to be too strong and rejected empirically. What is the intuition behind the linkage of direct explicit additivity and this restriction?
3 Standard homothetic CES is the only preference that satisfies both direct explicit additivity and indirect explicit additivity. The indirect explicit additivity, i.e. $U\left(\frac{\mathbf{p}}{h}\right)=M\left[\int_{\Omega} v\left(\frac{p_{\omega}}{h}\right) d \omega\right]$, again impose the similar restriction between the income elasticity and the price elasticity of the goods as direct explicit additivity. How to understand this intuitively?
4 Under either direct explicit additivity or indirect explicit additivity,  only homothetic preferences can be CES. What's the intuition?


texts: Code finding all stable matchings in one-to-one problem

texts:
Do you know of any publicly available code in python or R (or any other free high level language) that returns all the stable matchings for any one-to-one matching problem?

Note: This is related but different from Available code for computing solutions to matching algorithms?.

In this other question, I asked for code implementing famous mechanisms such as the deferred acceptance mechanism. Some of these mechanisms find one stable matching among others. Here I am looking for code that finds all stable matchings.

I have inspected the packages recommended in the answers I got to Available code for computing solutions to matching algorithms? and did not find anything that would do the job.


texts: Non-traded goods in Two Country New Keynesian Model

texts:
I am working on a two-country New Keynesian model, where I include traded and non-traded goods. The final good is produced using traded and non-traded inputs:

$$
Z_t=\bigg[a^\frac{1}{\kappa}Z_{T,t}^{\frac{\kappa-1}{\kappa}}+(1-a)^{\frac{1}{\kappa}}Z_{N,t}^{\frac{\kappa-1}{\kappa}}\bigg]^{\frac{\kappa}{\kappa-1}}
$$

and the traded component is produced using home and foreign produced traded goods:

$$
Z_{T,t}=\bigg[b^\frac{1}{\theta}Z_{H,t}^{\frac{\theta-1}{\theta}}+(1-b)^{\frac{1}{\theta}}Z_{F,t}^{\frac{\theta-1}{\theta}}\bigg]^{\frac{\theta}{\theta-1}}
$$

I am looking to derive the demand schedule for each intermediate good by the final good producer and the producer of the composite traded goods.

I understand that when there are only traded goods, the final good is produced by a competitive firm who uses a CES production function to aggregate all the differentiated intermediate goods in the economy

$$
Y_t=\bigg[\int_0^1y_t(i)^{\frac{\epsilon-1}{\epsilon}}\bigg]^{\frac{\epsilon}{\epsilon-1}}
$$

so that the final good producer aims to maximize profit

\begin{equation*}
\begin{aligned}
& \underset{y_t(i)}{\text{max}}
& & P_tY_t-\int_0^1p_t(i)y_t(i)di \\
& \text{s.t.}
& & Y_t=\bigg[\int_0^1y_t(i)^{\frac{\epsilon-1}{\epsilon}}\bigg]^{\frac{\epsilon}{\epsilon-1}}
\end{aligned}
\end{equation*}

My question is, how can I write this latter optimization problem, under the assumption of traded and non-traded goods (i.e. for the final good producer and the producer of the composite traded goods)? How can I derive the individual demands for the final good producer?

Thank you for your help.


texts:
I was reading this article about Denmark central bank defending its currency peg:

http://www.bloomberg.com/news/2015-01-22/denmark-cuts-key-deposit-rate-to-minus-0-35-to-drive-down-krone.html

In it he said they had "plenty of Kroner to defend against hedge funds"

My understanding of the issue is since Euro is coming under pressure for launching QE program, a lot of funds are moving their money into countries like Denmark -- which cause their currency demand spiked -- and hence its price.

But why did he say they had "plenty"? Apart from law, there's nothing physically stopping a country from keep printing its own currency right?

So I imagine its not hard at all for any country to defend a peg if its demand side spiked -- just keep printing currency to maintain the price?

Why does it seem that Denmark has limited supply of its own currency?


texts: I am calculating YoY change in macroeconomic variables (inflation, industrial production etc.). However this growth is distorted by low base of last year. Currently I am using 2 year cagr to adjust for the base effect. Is there a better statistical method to separate the base effect and momentum.


texts: Gini index vs Herfindahl index: one increases while the other decreases


texts:
Under    rational   expectations    and no  nominal  rigidities,    aggregate   output  is  sensitive    to
___________ supply  and ___________ demand  shocks.

a) Anticipated, anticipated
(b) Anticipated,    unanticipated
(c) Unanticipated,  anticipated
(d) Unanticipated,  unanticipated

My attempt:
The answer is (d) unanticipated, unanticipated
There is no nominal rigidity, so an expected demand shock would lead to a change in expected prices. Both Aggregate Demand and Supply curves would move so that output remains at full employment. All real variables will remain unchanged.
So only an unanticipated demand shock would cause output to change in the short run.
On the supply side, only unanticipated shocks would cause changes in output, eg. sudden increase in oil prices.


texts: Effect of a good's inputs on elasticity of supply

texts:
I am trying the answer the question:

  If a good is produced using inputs for which there are no substitutes, the good's

  A. Elasticity of supply is likely to be small
  B. Elasticity of supply is likely to be large
  C. Elasticity for demand will be small
  D. Elasticity of demand will be large

I am unsure of the correct answer. I don't think it would be (C) or (D) as the question notes that what goes into the good is likely substitutes, not the good itself. That leaves (A) and (B) I don't however see how these would effect the elasticity of supply. Elasticity of supply is defined as % change in quantity supplied divided by % change in price. I am failing to see how the price of a substitute would affect what is in the numerator or denominator. How is the quantity supplied of a product and the price at which it is sold dependent on the fact the substitutes are unavailable? Producers could adjust either quantity or price in order to make up for the substitute-less good. I would greatly appreciate some insight.


texts:
On the Wall Street Journal Op-Ed page (Trump’s Real Trade Problem Is Money  ), John D. Mueller discusses the gold standard and claims something that I've either never heard before, don't understand, or both.

  Many economists wrongly assume that total world net exports must equal
  zero, but in fact countries participating in the international gold
  standard had combined net exports equal to the total increase in world
  gold reserves (which in turn approximated world gold exports). As a
  result, world monetary policy was countercyclical: When the prices of
  other goods fell, the profitability of gold mining rose.

First, I thought it was tautological that global net exports had to be zero. Is Mueller's claim correct? Does it turn on a technicality of the definition of net exports? Please help me understand his position.

Second, is it accurate to characterize gold standard monetary policy as counter-cyclical?  My understanding is that recessions in the gold standard era were marked by deflation where as in the fiat currency era recessions are merely dis-inflationary. If so, is it fair to call the gold standard substantially less counter-cyclical than fiat currency systems?


texts: Typically in statistical software, the default confidence level is 95%. The higher the better, I suppose. But this is still not a rule of thumb, right? In Stock and Watson's paper (https://www.aeaweb.org/articles/pdf/doi/10.1257/jep.15.4.101), they use a 66% confidence level. While they did not explain why 66, not 95, I guess it makes some IRFs (which would be insignificant at 95%) more significant. For example, in their original paper, interest rate shock to inflation appears significant at a 66% confidence level, but my estimation at a 95% confidence level shows it is not significantly different from zero. I am not criticizing this paper or anything like that, but it appears the choice of the level of confidence is at the discretion of the researcher, either arbitrarily or purposefully. If this is not the case, what would make one choose a confidence level of 66% and not 95%, or even 99%?


texts:
I've been reading up on Walras' Law and thought I understood it pretty well. However one of my friends asked me point blank what is an example of excess demand or excess supply is and I had some difficulty answering and realized I had no clue.

What are examples of excess demand and excess supply?


texts: Why does firing employees appear to increase the share price of a company?

texts: The last case is GM in the USA. I fail to understand why does this happen. I understand that laying off jobs means higher dividend for the share holder and thus higher stock prices but in the long run is this a viable strategy, doesn't this mean lower income (and thus dividend) for the next quarter or year? Being that not only the employees are being fired but also that the factories are being closed it doesn't seem to me as a case of automation taking over the job. Can someone explain this to me? (I know that GM is allegedly cutting down the production of models non selling well, I am asking in general and not the specific case)


texts: How did "excess liquidity" in the US contribute to the 2008 crash?

texts:
Here I'm using "excess liquidity" not in reference to monetary policy, but to the concentration of capital at the top in regard to private citizens.

This excess liquidity, for which the tax cuts in the early 2000's were certainly a major contributing factor (changes to taxation regarding capital gains, dividends, etc.), created a condition where there was more money than places to invest, which led to the re-purposing of legitimate financial interests to create a new "casino" for investors to gamble in.

Since trickle down is a limited-at-best redistribution method (an individual can only buy so many goods & services, regardless of net worth), what is the thinking on possible repeat of 2008 re: the current US tax proposal (2017)?

i.e. Although the bill will certainly help legitimate small businesses in relation to how pass-though income is treated, the benefits will also be utilized by high-net worth individuals taking advantage of the pass-through rules.

Note: This question is not meant to be political.  Rather, my primary interest is in stability/instability, and how that is affected by tax and monetary policy, particularly in creating conditions for catastrophic "market corrections" that can result in sharp, persistent spiking of the national debt.


texts: Who exploits comparative advantage in international trade?

texts:
Suppose that under autarky, Colombia makes coffee and cars at \$1 and \$2 each, and Japan makes coffee and cars at \$20 and \$10 each. Since Japan has a comparative advantage in car manufacture, the standard theory says that Colombia will import cars and export coffee.

However, I'm having a hard time imagining how this actually happens in practice. If I run a Colombian car business, why would I import cars from Japan, when they cost five times as much? Why not just buy cars at home?

In general, I see no reason why any business dealing in a single market should care about price ratios; they only see the absolute prices of a single good. For the trade to actually happen in this case, you'd either need a company that trades both cars and coffee (do those actually exist?) or government-controlled trade. Neither of these feel realistic.

If we can look at Ricardo's original example, the same problem appears. Ricardo is assuming that production across an entire country is synchronized in some way; his theory would work if a single business in each country controlled all production of all goods there. But I don't see how the logic holds if there are separate companies producing cloth and wine.

In real life, how are comparative advantages actually exploited?


texts: Math based proof for currency changes (microeconomics)

texts:
This isn't part of my homework but I am genuinely interested in the mathematical proof behind this question (this is my line of work currently). I tried to work through it but after 2 hours gave up. It is beyond the scope of my intermediate economics class but I wanted to see what a proof would look like for it.

Suppose that the Japanese yen rises against the U.S. dollar—that is, it will take more dollars to
buy a given amount of Japanese yen. Explain why this increase simultaneously increases the
real price of Japanese cars for U.S. consumers and lowers the real price of U.S. automobiles for
Japanese consumers.


texts: Calculate supply function based on production or cost function

texts:
Q1: A company has the following production function:
$$f(x_1,x_2) = 2x_1 + x_2$$.
The factor prices are $w_1=4$ and $w_2=3$. Calculate the company's supply function.
Q2: A company's cost function is
$$C(y) = y^2 + 1$$
Calculate the company's supply function.
Unfortunately, I don't understand how the supply function can be calculated based on the production or cost function. I would be very grateful for solutions.
Thank you very much!


texts: I read that the tangency condition is not sufficient for optimality, and that one other condition is that the MRS must equal the slope of the budget line at an interior optimum. My confusion is that since MRS is the slope of an indifference curve, then wouldn't it automatically be equal to the slope of the budget line of the budget line is tangent to the indifference curve?


texts: What does the distribution of the savings rate in America look like?

texts: I know the average saving rate in the US is ~5%, but I'm curious about the distribution. An ideal answer would be a histogram with the data broken down by what proportion of population are saving at what percentage.


texts: Karl Marx said that capitalism commodifies everything. So I'm wondering if that rule applies to the very State itself.


texts: price space as a dual of commodity space

texts:
I often see papers in economic theory mentioning a duality between the price space and the commodity space. I think they refer to duality of vector spaces. I.e, the commodity space is a vector space, a price system is a linear functional over the commodity space (assigning a value to each bundle), and so the space of all possible price systems  is the dual of the commodity space.

Is there a standard reference that explains this duality in more detail?


texts:
First of all, that's a homework question, and I will try to make it as useful to future readers as possible.

Problem

So, I was given a problem about the model described by Botond Kőszegi and Matthew Rabin in "A Model of Reference-Dependent Preference" in 2006:

  A person deals with two goods: tea ($c_1 \in \{0, 1\}$), and money ($c_2 \in R$).
  $$
c_1 = \begin{cases}1, \mbox{if he buys tea}\\ 0, \mbox{if he does not buy tea} \end{cases}
$$
  His consumption utility is given by: $$m(c) = v \times c_1 + c_2$$
  His gain-loss utility is given by:
  $$
n(x | r) = \begin{cases} (x - r), \mbox{if } x \ge r\\ \lambda \times (x - r), \mbox{if } x \lt r \end{cases}
$$
  Tea costs $P_H = 30$; also, let $v = 13, \lambda = 4$.

There are multiple tasks, but I'm struggling even with the first one:

  Prove that the reference point $r = (c_1, c_2) = (1, -30)$ with probability 1 is his personal equilibrium.

  Do not forget that in the gain-loss utility in case of deviation from expectations, the lost utility should be considered - as it looks in the consumption utility.

Confusion 1: What does the second sentence even mean and how do I consider the lost utility??

My attempt

First of all, let's define what we're looking for. According to page 1143 of the paper:

  A selection $\{F_l \in D_l\}_{l \in R}$ is a personal equilibrium (PE) if for all $l \in R$ and $F'_l \in D_l$ $U(F_l | \int F_l dQ(l)) \ge U(F'_l  | \int F_l dQ(l))$.

So, provided that the probability is 1, I can get rid of the integrals and prove that $U(r | r) \ge U(x | r) \forall x \ne r$, or, given that there are only two possible choices (right?), that $U((1, -30) | (1, -30)) \ge U((0, 0) | (1, -30))$.

Confusion 2: does he really have only two choices and is the second choice $(0, 0)$?

Next, compute $U(r | r)$. As per p. 1138 of the same work:

  We assume that overall utility has two components: $u(c|r) = m(c) + n(c|r)$, where $m(c)$ is "consumption utility" typically stressed in economics, and $n(c|r)$ is "gain-loss utility."

$$
U(r | r) = U((1, -30) | (1, -30)) = m(1, -30) + n((1, -30) | (1, -30))
$$

As per the same page:

  We also assume that gain-loss utility is separable: $n(c|r) = \sum_{k=1}^K n_k(c_k | r_k)$.

So I can do:

$$
m(1, -30) = v \times 1 - 30 = 13 - 30 = -17\\
n((1, -30) | (1, -30)) = n(1 | 1) + n(-30 | -30) = (1 - 1) + (-30 + 30) = 0\\
\mbox{Thus, } U(r | r) = -17 + 0 = -17
$$

Now for the second option:

$$
U((0, 0) | (1, -30)) = m(0, 0) + n((0, 0) | (1, -30)) = 0 + n(0 | 1) + n(0 | -30) = \lambda \times (0 - 1) + (0 + 30) = 30 - \lambda = 30 - 4 = 26\\
\mbox{Thus, } U(x | r) = 0 + 26 = 26
$$

Confusion 3: So, I got $U(r | r) \lt U(x | r)$, which is quite the opposite of what I need to prove...

UPDATE

I'm being told by a fellow student that one should multiply the second part of the gain-loss utility by $v$ (!) to get:

$$
n(x | r) = \begin{cases} (x - r), \mbox{if } x \ge r\\ v \times \lambda \times (x - r), \mbox{if } x \lt r \end{cases}
$$

So that the computation of $U(x | r)$ I get:

$$
U((0, 0) | (1, -30)) = \lambda \times v \times (0 - 1) + (0 + 30) = -22
$$

...and the same for $U((1, -30) | (1, -30))$.

They also say that this is what the "Do not forget that in the gain-loss utility in case of deviation from expectations, the lost utility should be considered - as it looks in the consumption utility." part of the task tells me to do. Unfortunately, I still have no idea what this part means or why I should multiply only the second part of the function by exactly $v$. I mean, why would you just change the function out of nowhere?

Question

Where am I wrong? And why do I need to multiply by $v$, and do I actually need to do this?


texts: If we have a sequential game which is equivalent to a simultaneous move game because of its information structure, then the NE we find are also SPNE?


texts: Would a Job Guarantee impact Cost of Living?

texts:
What effect would a job guarantee, a method of achieving full employment often suggested by modern monetary theorists, have on the cost of living?

In the case of student loans offered by the government, all this has really done is push up the price of tertiary education (simplification for the purpose of example, I'm not really looking for discussion on this topic). Would a job guarantee inflate the cost of living? I suppose this question would also apply to universal basic income.


texts: Monetary economics: What is the causality between nominal and real interest rates?

texts:
I am very much confused about the causality between real and nominal interest rates, in monetary policy.

So we know the Fisher equation:
$$i_t = r_t + E \pi_{t+1}$$

Now imagine that the central bank sets an interest rate rule where $i_t = f(y, \pi, ...)$, i.e., some function of important economy parameters like output and inflation.

So far, so good. Now imagine the central bank increases the rates, as $i_t = f(y, \pi, ...) + \epsilon$. This will affect the economy parameters, so the future interest rate will change as a result of its own increase.

But how?

I think there are two ways of measuing that change, and I don't know which one is correct.

The first measure is to first calculate the effect of $i$'s change on all economy parameters: $y$, $r_t$, $\pi$, etc, etc. Then, plug all those changes back into the rule $i_t = f(y, \pi, ...)$ to figure out the interest rate.
The second way is to again calculate the interest rate increase's affect on the entire economy, on $y_t, r_t, \pi$, etc. And then ... simply use the Fisher equation: $i_t = r_t + E\pi$ and calculate the new $i_t$.

I'm thinking the second way is correct, since the first seems to assume that the Central Bank "constantly" increases the rates, ... but it probably doesn't right? The "rule" is only in affect when it decides, and the rest of the time, I need to use the Fisher equation, like in 2?


texts: On a graph where there is a shift in either the demand or supply curve, there is often a deadweight loss, but which triangle is correct? For instance in this image the DWL is the green triangle, but what about the white triangle beneath it? They have the same area, so are both of them equally valid? If not, how can I determine which triangle is DWL? Thanks!


texts: Comparative statics with multiple equations using calculus

texts:
I am currently learning a three market model of the economy, with the goods market, money market and factor market being in equilibrium respectively when-
$$Y=C(Y-tY)+ I(r) + (\bar G) + \bar{NX}$$
$$\frac{\bar M}{P} = M^d(r, Y)$$
$$P=P^e f(\frac{Y}{\bar L}, \bar \mu, \bar z)$$
Here all the variables with bars above them are exogenous, and the rest are endogenous. I have been taught to trace the effect of the change in a parameter by using graphs. The first equation and the second give us the IS and LM curves respectively in the $(Y, r)$ space, they together give rise to the downward sloping AD curve in the $(Y, P)$ space. The third equation generates the upward sloping AS curve in the same space.
For example, increasing G shifts the IS curve to the right, as given an interest rate, Y rises. This in turn raises r and Y. The increased Y at any given price level shifts the AD curve to the right. This raises P and Y again. The original LM curve moves slightly left but not to completely offset the original increase in Y, as the AD-AS diagram makes sure that Y actually increases.
I often convert the diagrammatic description to calculus and for each specific market, assuming all other markets to be not affected, it seemed fairly easy.
But I got completely lost when I tried to account for derivatives such that all the three equations are simultaneously satisfied, that is, to translate the diagrammatic logic into calculus.
How should I go about it? Also, where can I learn that technique for any arbitrary set of equations, and not just this particular model, to be able to use this in other models in the future?


texts:
I am currently a graduate student in Operations Research and I would like to learn econometrics, as it is not a part of the core curriculum.

I am comfortable with matrix algebra (many courses used it) and probability theory (used it vastly in stochastic calculus), so I don´t think that those specific things would be too much of an issue.

There are only two courses available. I can only choose 1.

Both only list as prerequisites undergraduate calculus based statistics and probability + econometrics + graduate matrix algebra. I will try and briefly tell you what I know about each:

1) Econometric Methods:
Uses Cameron & Trivedi´s two books. Covers chapters 4 (linear), 5 (MLE), 7 (hypot. testing), 13 (bayesian), 14 (discrete), multinomial, count, bootstrap. The professor said that for the theory part he follows the book closely. Seems to me that none of the models receive as much attention as other courses give to each of OLS/MLE/GMM, but on the other hand it seems to cover some theory of many models and sticks to the necessary estimation methods, I suppose.

2) Time Series
Uses Tsay´s book. Covers financial-related models such as GARCH, ARIMA, BEKK, multivariate GARCH, cointegration and so on. Employs R. The professor also said he follows the book closely and gives handouts on the MLE part of each model.

I don´t know much about econometrics at the graduate level. I have taken two undergraduate courses which covered basic OLS and MLE but honestly can´t pick a favorite between time series and microeconometrics. I would simply like to know more about econometrics.

The question is (i am sorry if it is too broad): which course would you say that would add more to my econometric toolkit? That could be in the form of professional/research applicability or simply preparation for future deeper study on the subject.

Thanks! First on the website, so please forgive me if I make mistakes!


texts: Testing if one regressor is a proxy for another

texts:
I'm reading Guiso, Sapienza and Zingales: "Trusting the Stock Market" The Journal of Finance, Vol. 63, No. 6, 2008 and have a question about how they test whether trust is a proxy for risk aversion.

I'm looking at pg. 2584 where they talk about the Poisson count model estimate where the dependent variable is the number of stocks invested in (measure for diversification). Their mathematical model implies (in section I) that both risk aversion and trust increase diversification--I think I understand that part. My problem is with the regression they run (results shown in Panel A of Table VIII).

The authors claim that because the coefficient on trust is positive and significant it tells us that trust is not a proxy for risk aversion. I understand that this result is consistent with the model, but since
(i) risk aversion should (theoretically, based on their model) also predict diversification, but
(ii) the regression doesn't give a significant coefficient on risk aversion, and
(iii) their measure of risk aversion is "noisy", i.e. has measurement error, and finally
(iv) risk aversion and trust are correlated--albeit weakly as shown in Table III Panel C,
couldn't they trust still be a proxy for risk aversion and with the coefficient estimate for trust being biased??

I might be missing something basic here...


texts: Difference(s) between Rational Expectations Equilibrium and Nash equilibium

texts: What is the major difference between the notion of rational expectations equilibrium and Nash equilibium? And why do we, only, have a rational expectation about the first moment (the price) in the former one? Do they coincide or they constitute a completely different framework? They seem so similar to me in some articles, that I can not distinguish their features if they are any!


texts: Sources for macro economic forecast data

texts:
I need data for these long run(atleast 10year forward) macroeconomic parameters from 2000, meaning I need forecasted data as in 2000 for 2010 so I can backtest my model with actual realised data:

Long run aggregate gdp growth

Long run population forecast by age groups

Long run inflation forecast

Current account deficit forecasts

Kindly provide me all available sources to such data.


texts: Market Value of a publicly traded company

texts: I want to know the market value (market capitalization) of a company on a particular day in the recent past (within the past 5 years). How can I do this, may be with the help of Google Finance or Yahoo Finance or some other tool?


texts: Wage regressions: Nominal versus real wage

texts: I'm wondering do I need to convert nominal wages to real wages when running wage equations using panel data sets? My dependent variable is log of wage and I'm looking at returns to education across countries over time. Does the decision to use nominal versus real wage depend on what model I'm using- namely random, fixed effects or pooled OLS?


texts:
Theoretically real money balances ($m_t$) are defined as:
$m_t=\frac{M_t}{P_t}$
Where $M_t$ are nominal money balances, and $P_t$ is the price index of the economy. If I were to make an empirical study involving real money balances, what is the correct approximation for obtaining time series of this variable?
My try is obtaining time series for M1, that would be my empirical nominal money balances, as well as obtaining some price index time series as CPI. Then my real money balances time series would be the result of computing in each cross-section:
$\text{real money balances}_t=\frac{M1_t}{CPI_t}$
Is that right?


texts: Question on an argument in "The Myth of Absolute Advantage"

texts:
Brandis (1967) argues that "absolute advantage does not exist" and "that it is a logical impossibility". (See also comment, comment, reply.)

My question here is very narrow and specific. I do not understand why the highlighted sentence below (from p. 172) is true.

Brandis seems to be claiming that the last 5 units of Product Y cannot possibly cost 5 units of capital and 15 units of labor. But I do not understand why this is not possible.


texts: Partial R2 and contribution of Regressors

texts:
I asked a similar question on Cross Validated, but got no answer. The following question is sufficiently different.

Consider the following deterministic relationship:$$Y_{t}=C_{t}+I_{t}+G_{t}+(X_{t}-M_{t})$$

If we run an OLS regression of Y
  on the covariates, of course, we get an $R^{2}$
 of 1, and the vector of coefficients equal to their population counterparts, i.e. $$\hat{\beta}=
 \beta=1$$

Now, this means the marginal effect of each regressor is constant. However, the contribution of each regressor depends on its relative variance to y.
  In fact, in the univariate case, it can be shown that:$$R^{2}=\beta^{2}\frac{var(x)}{var(y)}$$
 which shows that even when the marginal effect of $x$
  on $y$
  is large, its contribution in the partial $R^{2}$
 sense is high only when it varies a lot, causing y
  to vary with it as well.

Now, consider the same above expression:$$Y_{t}=C_{t}+I_{t}+G_{t}+(X_{t}-M_{t})$$

Let us divide both sides by $Y_{t}$
  for the entire vector of coefficients and the design matrix.

We get:$$1=\frac{C_{t}}{Y_{t}}+\frac{I_{t}}{Y_{t}}+\frac{G_{t}}{Y_{t}}+\frac{(X_{t}-M_{t})}{Y_{t}}$$

This holds for each realization of $Y_{t}$
 and the design matrix by construction. Now, each regressor here is the relative contribution (which we can multiply by 100 to get percentage contribution) to the dependent variable.

Now that we have the relative contribution for each regressor for each observation, we can get the mean contribution of the regressor across observations.

I ran some simulations, and found that the mean contribution of each regressor is close, but not exactly equal to the partial $R^{2}$
  of each regressor. Is there any relationship between them? Intuitively, they should be the same, right? Thanks a lot!


texts: How can I add a multidimensional panel to estimate TFP (year, id, region) in R?

texts:
I'm not sure about adding fixed effects for the variables year,id,region (using the estprod library) as in this paper using LP stimator.

In the STATA forum ( #18 #19; prodest library) it seems that to add fixed effects I have to create dummies Control parameter.

qui tab year, gen(dy) // generate one dummy per year

prodest log_y, free(log_lab1 log_lab2) state(log_k) proxy(log_investment) va met(op) poly(4) reps(40) id(id) t(year) control(dy*)

To make a third panel PLM I found in STATA as in R

Code
library(dplyr)
library(estprod)

data = read.csv("data_tfp.csv")

data = data %>%
  mutate(v = 1,
         rgn = region,
         group = group_indices(., id, region),
         grp = group) %>%
  spread(rgn, v, fill = 0) %>% #generate one dummy per region
  arrange(id, year)

md0 = estprod::levinsohn_petrin(data,
                                formula = y ~ l | k | m | a+b+c+d,
                                id = "id",
                                time = "year",
                                reps = 10,
                                gross = T)
summary(md0)

My data
here


texts: Why do some perfectly competitive, loss-making firms shutdown and others don't?

texts:
Question:

Why do perfectly competitive, loss-making firms that have (AC>AVC>AR) shutdown but

Firms that have (AC>AR>AVC) not shutdown?

-Both of these types of firms are making a loss. How is it significant that the latter type's AVC is less than AR ? How does that affect whether it shuts down ?**

These two graphs are for the two types of firms in perfectly competitive markets:

Loss-making firms where their AC > AR & AVC > AR that shutdown

Loss-making firms where their AC > AR & AVC < AR that don't shutdown.


texts:
Why do these M1 Money supply charts show data only up to 7th May, when the Fed data is released weekly?

https://fred.stlouisfed.org/series/M1

http://schrts.co/zgaAPi

Thanks


texts: Can linearization change the time index?

texts:
In Smets and Wouters 2003, we first have a capital accumulation of the form $K_t= \text{some terms}+ f(I_t)$.
Later on when linearising the model, they get $\hat K_t= \text{other terms}+ \hat f(I_{t-1})$.

The hat means log deviations from steady-state.

Any help would be appreciated.


texts: How can 'the best and worst lotteries exist when the set of outcome is finite and the rational preference relation satisfies independence axiom' be proven?


texts: How do I quantitatively visualize this situation?

texts: Imagine a case where an average of 10% of the income of the people in a certain country is spent on petrol(gas). Now someone comes up with an invention, say a DIY unlimited power source which anyone can make for practically nothing. Obviously the price of oil will fall. But apart from that, how are the other economic indexes going to be affected? Will GDP rise or fall. What kind of parameters of the country will be affected?


texts:
The price index in the year 1993 is 60.
The base at 2012 is 100.
The annual nominal interest rate between 1993 and 2012 is 66% on average.
What is the average annual inflation between 1993 and 2012?
I know that
Inflation = $\frac{X_{t+s}-X_t}{X_t}$x$ 100$
where $X_{t+s}$ is the current year and $X_t$ is the year being compared.
However, when I use this formula with $X_{t+s}=100$ (since it is the base of the index) and $X_t=60$, I just get the annual nominal interest rate of 66.6666%.
What did I do wrong here?


texts: Three stage two player signalling game, pooling equilbrium

texts:
I am solving a three-stage game in which first the sender sends the signal, then the receiver acts based on the signal and finally, the sender moves again. The sender has two types high and low and the high type would like to pretend to be the low type. The last stage action of high or low type is already defined and is different for the agents. I am struggling with the pooling equilibrium. Since the last stage actions of the senders are different, the optimal pooling signal of them is different as well. How should I come up with the pooling equilibrium?
Thank you very much


texts: How to estimate loss of customers due to customer support inefficiency?

texts:
I have a data about customers and their activity on a website for a two-year period. Also, I have a customer support work evaluation data for a shorter period of that two-year period. The question is:

How to find out if inefficient customer support affected loyalty of customers and, in particular, how many customers were lost due to this factor?

So far, I just made a simple comparison on how many customers kept using the website after leaving the negative (unsatisfactory) or positive (satisfactory) evaluation of the customer support work. The comparison shows that the customer retention rate for customers who left negative feedback is lower than for those who provided positive (satisfactory) feedback.

I'm not an economist, but I'm sure there's a more scientific way to estimate the influence of one factor on another using statistical analysis.


texts: Any examples of non-parallelism making Diff-in-Diff estimation biased?

texts: The key assumption in a Differences in Differences design is that both the control and the treatment group have parallel tendencies, that is, they'd follow similar paths over time if there was no treatment. I can see how it is important and unparallel tendencies surely make LATE estimation biased, but is there any pratical example of this problem? Any papers on it or that suffer from it?


texts:
What is the difference between a perfect foresight equilibrium and a rational expections equilibrium?

Why is it the same in case of a non-stochastic model?

Can there be a perfect foresight equilibrium in a stochastic model?


texts: How can I prove that the following estimator is biased?

texts: I'm trying to prove that $e^{x\hat{\beta}}-1$ is  a biased estimator for $e^{x \beta}-1$. I know that this involves taking the expected value of the estimator and showing that it is not equal to $e^{x \beta}-1$. Unfortunately, I'm stuck on the math. Any hints?


texts:
I earn a salary, but, like many American workers, I don't spend all of it -- I stash away some in the bank. This is a good thing, since I can one day retire (stop producing), and still live comfortably.

Suppose everyone succeeded in this goal. Could such a thing be possible?

Reason for no: everyone can't save money at the same time, because money is only obtained by taking it from someone else. And printing money into the economy inflates it such that it doesn't actually bring inherent value.


texts: How does raising interest rates calm inflation?

texts:
My understanding is that by raising interest rates, domestic CPI indices are less likely to rise signicantly. However, raising interest rates also attracts capital inflows and can create asset bubbles. Can these asset bubbles not influence the level of inflation? It seems that a high demand for a country’s currency might indirectly cause inflation through asset bubbles even in a floating system. (I’m thinking specifically about the Bundesbank using rates to combat inflation)

Any thoughts appreciated.


texts: Negative capitalist savings rate in the 30s, does this refute stimulus


texts:
I am reading Lucas (1980) and I am a bit confused about the way he formulates the utility function.

So there is one non-storable good that comes in $n$ colours and one unit of labor produces $y$ units of any color. He says:

  Consumption is now a vector $(c_{1t},...c_{nt})$ where $c_{it}$ is the consumption of color $i$ in period $t$.

So far I have no problems. But then he defines current period utility as:

$V(c_{1},...c_{n}) = U[\pi_{i=1}^{n}(\frac{c_{i}}{\alpha_{i}})^{\alpha_{i}}]$ where U is a standard utility function. $\sum _{i} \alpha_{i}=1$ and $\sum _{i} c_{i}=c$

What seems to confuse me is first of all the use of lower case pi. Surely Lucas is referring to the multiplication operator? I.e $V(c_{1},...c_{n}) = U[(\frac{c_{1}}{\alpha_{1}})^{\alpha_{1}}...(\frac{c_{n}}{\alpha_{n}})^{\alpha_{n}}]$

Then he says that the relative prices of the goods must be unity which I understand. However, the next part is where my main source of confusion lies, he says:

  With these prices, consumers will select color proportions $c_{i}/c=\alpha_{i}$ and given this mix   $V(c_{1},...c_{n}) = U(c)$. Without altering the example one can think of all agents having the same $\alpha$-weights, of agents distributed by a c.d.f. $F(\alpha)$ of weights. (...) In each of these cases, the equilibrium output mix (per capita) is $(\bar{\alpha_{1}}y_{1},...,\bar{\alpha_{n}}y_{n})$ each period, where  $\bar{\alpha_{i}} = \int\alpha_{i}dF(\alpha)$

I tried equating MRS to the relative prices (i.e 1) but since I'm unsure about the form of the utility function I don't know if my working is correct. Also, I am very confused about the definition of $\alpha$. What does it mean for agents to have weights? Is it just a way of stating that they are equally distributed?


texts:
In Walrasian equilibrium there is a market clearing price, that is
$$
D(p) = S(p)
$$
or the supply is worthless, so you can have
$$
D(p) < S(p) \mbox{ if } p = 0.
$$
This can be summarized as
$$
p \cdot D(p) = p \cdot S(p)
$$
If the demand function is not always downward sloping (e.g. Giffen goods, markets with asymmetric information) or the supply function is not always upward sloping (e.g. economies of scope) multiple Walrasian equilibria may exist. If this is the case, are these all considered equally 'valid' equilibria or are there some established refinements to the equilibrium concept?

An illustrative example:

Are $A$, $B$, and $C$ all equilibria?

(Personally I dislike $B$. You may well have no problems with the bugger.)


texts: A question about Fixed effects estimation

texts:
I have a fixed effects model as follows:

$Y = x_1, x_2, x_3$, (fixed effect), (error term)

Is there any way I can check whether Cov($x_1$, (fixed effect)) is larger or smaller than 0?

The panel data I have consists of 7858 individuals and 5 years.

Thanks!


texts: What is the difference between Q4/Q4 and Y/Y GDP growth?

texts: Per US media, the US economy grew 3.1% in 2018 Q4/Q4 and 2.9% in 2018 Y/Y. 2.9% seems the reference number in various databases (World Bank, Reuters, Bloomberg, etc) but what exactly does Q4/Q4 mean and which measures changes from Jan 1 2017 to  Dec 31 2017 compared to Jan 1 2018 to Dec 31 2018


texts: Why do we need at least as many instrumental variables as endogenous regressors to identify parameters in 2SLS?

texts: As the title says. Why do we need at least as many instrumental variables as endogenous regressors to identify parameters?


texts:
I am currently working on a large sample of textual data from news articles. I was just wondering whether there exists any studies which tries to explain the market anomaly known as "The-Day-Of-The-Week effect" or the "Weekend Effect" with news articles or news in general?

What kind of news can impact the stock market in such a way?


texts:
https://fr.wikipedia.org/wiki/Plan_d%27%C3%A9pargne_en_actions says:

Le PEA a été créé en 1992 afin d'encourager l'investissement en bourse des particuliers, notoirement bas en France.

Google translation:

The PEA was created in 1992 to encourage investment in the stock market [by] individuals, notoriously low in France.

Why did the French not invest much in the stock market prior to 1990?