texts: Error in cbind(yX1[[i]], V1) : number of rows of matrices must match (see arg 2) in r

texts:
I estimated a gmm model using pgmm() of the plm package, but received the following error term:
Error in cbind(yX1[[i]], V1) : number of rows of matrices must match (see arg 2)

My Model looks like this:
pgmm(X1 ~ X2 +X3 +X4 +X5| X6 +X7 +X8 +X9 +X10 +X11 +X12, data= mydata,
 effect = "twoways", model = "twosteps", transformation = "ld")

The Data and my R Script can be found here:
https://drive.google.com/drive/folders/1_DtL9-rOZ8rXO6RPOHfeByD_1GnWxXK9?usp=sharing


texts: not following a step in a paper on rational expectations

texts:
Hi: I'm reading a paper by Broze and Szafarz titled "On Econometric Models with Rational Expectations and I don't follow a step in section 3.2 which discusses the method of undetermined coefficients. So,  I was hoping that someone could explain the derivation. I will write down the equations and then explain the step that I don't follow.

1) $p_{t} = a \times E(p_{t+1} | I_{t}) + u_{t} $ This equation  is given. It comes out of the Cagan Hyperinflation model. $u_{t}$ is an error term.

2) $ u_{t} = \epsilon_{t} + \alpha \epsilon_{t-1} + \ldots + \alpha_{k} \epsilon_{t-k} + \ldots = A(B) \epsilon_{t} $

3) $ p_{t} = \psi_{0} \epsilon_{t} + \ldots \psi_{k} \epsilon_{t-k} + \ldots = \Psi(B) \epsilon_{t} $

4) $ E(p_{t+1}| I_{t} ) = \frac{\Psi(B) - \psi_{0}}{B}    \epsilon_{t} $
So, $B$ denotes the lag operator which is often denoted as $L$ in the literature. The explanations of the equations follow.

1) As stated above, this is given. This is clear.

2) This is the standard infinite MA representation that follows from Wold's decomposition. This is clear.

3) This is the guess that is made in the method of undetermined coefficients. This is clear.

4) This is not clear to me. They say "it follows". I see that it's kind of coming by subtracting $\psi_{0} \epsilon_{t}$ from both sides of 3) but $B$ is the infinite lag polynomial and they are dividing by it which confuses me.

Thanks in advance for the help. Some discussion has been omitted so, if anyone needs to see the actual pages, I can scan and send them. My email is my name with a 2 on the end of it and the mail server is that famous one that starts with a g.

                                        Mark


texts: Is the government a producer, a consumer, or both?

texts:
Example: A soldier is paid \$50,000 a year to serve in the army. So \$50,000 worth of defense services are produced and consumed.

In this example, who is the consumer (C) and who is the producer (P)?

Possible interpretations:

C: government. P: soldier (a private producer).
C: government. P: government (soldier is merely an employee of the government qua producer).
C: all individuals that make up the economy. P: government.

Please answer with reference to the above example. Please make use of economic logic and also how the above would actually be done in national accounting.


texts: Boundary solutions in the Utility Maximization Problem

texts:
I'm trying to find boundary solutions for the following utility maximization problem, but i'm unsure on how to proceed. Here is the problem and what I got so far:
$ \max x_1^\alpha + x_2 \qquad \text{s.t.}\ x_1 \geq 0,\ x_2 \geq 0,\ p_1x_1 + p_2x_2 \leq w$
where $\alpha \in [0,1]$. The Kuhn-Tucker conditions are
$\begin{equation}
\dfrac{\partial \mathcal{L}}{\partial x_1} = \alpha x_1 ^{\alpha -1} - \lambda p_1 + \mu_1=0,\\
\dfrac{\partial \mathcal{L}}{\partial x_2} = 1 - \lambda p_2 + \mu_2 =0,\\
p_1x_1 + p_2x_2 \leq w,\\
x_1\geq 0,\\
x_2 \geq 0,\\
\lambda(p_1x_1 + p_2x_2-w)=0,\\
\mu_1x_1 = 0,\\
\mu_2x_2=0,\\
\lambda \geq 0, \quad \mu_1 \geq 0, \quad \mu_2 \geq 0.\\
\end{equation}$
If I consider boundary solutions with $x_1=0$ and $x_2>0$, then by the complementary slackness condition we have $\mu_1 \geq 0$ and $\mu_2=0$.
Since $\nabla u(x_1,x_2) \gg 0$ and $p_1,p_2 > 0$, $\lambda > 0$. The constraint on the budget set is binding (Walras' law holds). My candidate for the optimum therefore is $x_2=w/p_2$.
The Kuhn-Tucker necessary (and in this case also sufficient) conditions for $x_2=w/p_2$ being optimal restrict to
$\begin{equation}
 \alpha x_1 ^{\alpha -1} \leq \lambda p_1 ,\\
 1 = \lambda p_2,\\
x_1 = 0,\\
x_2 \geq 0.
\end{equation}$
By dividing the first condition by the second we obtain
$MRS_{1,2}(x_1,x_2)= \alpha x_1 ^{\alpha -1} \leq \dfrac{p_1}{p_2}$
but then I do not know how to proceed.


texts: Why doesn't government work more like a company when it comes to taxes?

texts:
In government, the revenue is fixed (most of the time); you don't have to anything extra to get money from your "investors", i.e citizens. Similarly, from a citizens' perspective, whether the government reduces the cost of doing business will not have a direct effect on the taxes they will be paying (more of less). Plus, they probably wouldn't even know how cost-effective the government is and wouldn't change who they vote for.
So, overall, the government doesn't have any real incentive to operate in a cost-effective manner.
But, let's consider this. The government & parliment (as usual) outline what they what they will fund in the next year, and outlines the overall cost. Then, the percentage of taxes (income, wealth, capital gain) are determined [with a fixed proportion; cost = (%a of income tax) + (%b of wealth tax) + ..., where a,b,.. are fixed] according to that cost.
This way, for a citizen, how cost-effective the government would have a direct consequence on their own personal economy, so they would vote for government who could/do work cost-effectively. They would vote for representatives who pushes for cost-effective reforms.
Question:
Have there been such governments in the history? What would be the downsides of such a scheme?


texts: A Specialized Guide for Deflating Variables: does it exist?

texts:
I have done this very frequently in this year, deflating variables, specially for the purpose of demand estimation. I also asked a relevant question on the subject previously (here: Heuristics with time series measured in dollars).

Since by my experience results can often change, depending on the index used, and you might have indexes that invalidate IV estimations (e.g. when in demand estimation one uses a instrument, a sectoral cost index, which might be related to the variable used for deflating the observations [by the way, here it is another question related to this particular subject that I've asked: Does it make sense to 'deflate' a sectoral price index in a regression analysis? ]), I was wondering if there is specialized guide to detail the various tips and/or problems you might run into when deflating variables. Does it exist?


texts: Why do economists want Marginal Social Benefit to equal Marginal Social Cost not be greater than?


texts: How will non-rich citizens make a living if jobs keep getting replaced by robots and are outsourced?

texts:
Decades ago a factory job could support a wife and kids until retirement and they offered insurance, benefits, etc. Now, no more unions, those jobs as well as tech and customer service jobs are outsourced, and anything left in the US is mostly being replaced by a machine or robot.
Assembly lines had 50 guys in the factory, all gone due to 2 robots assembly something and only needs a few men to monitor them. Blockbuster and Borders were destroyed by online video streaming and Ebooks. Wages also aren't keeping up with the cost of living. The rich get all these tax cuts even if they outsource every job they make, but us "little people" keep getting the downside.
I'm young and very scared of the future. Technology and new companies use to make jobs. Now one guy can make billions of dollars with a few friends only.


texts:
What is the basis for interest rate parity to hold?
I know, the reason stated is excess returns

Excess returns as such should not be the reason for a currency depreciation. for e.g. when we posit that forward rate converge to the spot rates over time and back by arbitrage argument it is actually because forward prices, if less than spot prices, would result in an increase in the demand for forwards and subsequently increase its price. (talking about long positions here).

Hence, in relation to interest rate parity, excess returns(which is wrongly stated sometimees as arbitrage) should put downward pressure on the interest rates. (you keep investing more and more money in a bank at a given rate obviously it cant keep it up and has to lower the rates, also it now has a lot of reserves so it wants to lend again leading to lowered rates) why it should affect the exchange rate beats me.

To the contrary a high interest rate(say of country A) should put upward pressure on exchange rates(foreign/home); People want to invest more into A's banks so they convert more foreign currency to A and hence the A's currency should appreciate


texts: How does stronger dollar drive down prices of commodities and/or materials like oil?


texts: How much was it going to cost to pay Bombardier a premium to restart production of Mark I trains?

texts: I read many web pages discussing the future plans of the Scarborough RT and the cost of plans they were planning to do but not the cost of the premium they decided not to carry on with. Without knowing the cost of the premium, how can ordinary citizen help research whether paying a premium is a good solution?


texts: How does a mortgage-backed security issued by a bank allows it to borrow cheaper and make more loans?

texts:
I am currently reading a book called "Austerity, the history of a dangerous idea" by Mike Blythe. I am not an economist, but I am interested to learn more.

Blythe writes (p.24):

  "The old 3-6-3 model presumed that the bank that issued a loan to a
  customer held the loan until it was paid off, with profits accruing
  from the interest payments it received. But what if these loan
  payments could be separated out and sold on to someone else? What if
  many such loans, mortgages for example, could be bundled together as a
  pool of mortgage payments and sold to investors as an
  income-generating contract called a mortgage-backed security? That
  way, the bank that issued the loan could borrow cheaper and make more
  loans because the risk of the loan not being paid back was no longer
  on its books, and the borrower would get better rates. It was win-win,
  as they say."

I don't understand how selling them to investors can borrow money cheaper. Is it the investors' money directly? For example, if I am a bank, can I raise private capital (i.e. from investors) with the agreement of giving them a mortgage-back security?

Thank you for your input!


texts: Supporting Hyperplane Theorem and quasiconcave utility function

texts:
My notes says that if $u(.)$ is strictly quasiconcave and differentiable, by the supporting hyperplane theorem, there exists $p >>0$ and $w \geq 0$ such that $ x = x(p,w)$ $\forall x$. I am having a little trouble understanding this. Here's how I think:

$u(.)$ quasiconcave,so the set $X = \{x \in R^L: x  \succeq x_0\}$ is convex. We also know that $u(.)$ is differentiable, and thus continuous, so $X$ is closed. Thus, $x_0$ is on the boundary of $X$. Then according to the theorem, there is some $p$ such that if $x \succeq x_0$ then $p.x > p.x_0$ This means that with this $p$ and $w = p.x_0$, $x_0 = x(p,w)$.

Is my understanding correct? In addition, if the set $X$ is strictly convex, does that mean that theorem is now "if $X$ is a convex set and $x_0$ is a point in the boundary of $X$ there must exist a $p$ such that $p.x > p.x_0 \forall x \in X$ and not $\geq$?


texts: The mathematical model of integrated marketing communications

texts:
I am trying to generalize the media buying problem, the first steps are to use media buying approach to several advertising channels at once. But there should be next steps as well. Are there works that try to model the entire ICM? ICM planning at the enterprise level for one or several product groups. Google and Google scholar give none. Maybe such endeavours exists but under different names (terms)?

There is lot of literature under terms "mathematical model of marketing mix".


texts:
Consider a very simple version of the Solow model with discrete time, a fixed population size and no technological progress (a fuller description of the assumptions is outlined here). Capital is at 'steady state' when the total amount of depreciation equals the total amount of saving; graphically, this occurs at the intersection of the blue and purple functions below:

Consider the adjustment process to the steady state. I have often heard it claimed that the lower capital starts, the faster growth will be. Hence, the model predicts that poor countries will grow faster than rich countries, assuming that these countries are the same in all other respects ('conditional convergence'). However, looking at the graph here, it seems that at a very low level of capital, growth will actually be very slow. The reason is that the savings function (blue) is barely above the depreciation line (purple), so the increase in capital is small. As capital increases, the gap between these functions gets larger, so the growth rate should increase. Eventually, however, the gap begins to get smaller, and growth does indeed slow down (as commonly claimed).

Of course, I have been discussing the growth rate in capital, while we are interested in the growth rate in output. And indeed the marginal product is capital monotonically falls as capital increases. Is this what ensures that the growth rate in capital is always falling? Or is there still a period when the growth rate in output is increasing?


texts: Why is the USA not capable to pay its debt?

texts:
Why is the USA not capable to pay its public debt on its own?

The country needs to create new debt in order to pay its due debt.

Not only that, but the debt is also only increasing and the country is not capable to reduce the debt. Since 2000 or so, the country is only capable to increase its debt. And the prediction is that the debt will only increase - Link1 - Link2 - Link3

Hungary and the Czech Republic are capable to pay their debt on their own but in the same time USA is not capable to pay its debt on its own. Why is that?

What makes a country not capable to pay its debt on its own?


texts: Why am I getting 3 different answers for Point Elasticity of Demand?

texts:
First year Econ. Question:

Demand function: $P=50-4Q$ (Price in cents/kilo)

Supply function: $P=25+Q$

Equilibrium Price and Quantity: 30 cents, 5 kilos.

Price change: 40 cents, 2.5 kilos.

I've tried 3 different methods of calculating point elasticity:

$\frac{\% \Delta Q}{\% \Delta P}$ =  $\frac{-50\%}{133\%}= -.375$;
$\frac{\frac{Q_{1}-Q_0}{Q_0}}{\frac{P_1-P_0}{P_0}} = \frac{\frac{2.5-5}{5}}{\frac{40-30}{30}}=-1.5 $
$\frac{1}{slope}\frac{P}{Q}=\frac{-1}{4}\frac{40}{2.5} = -4$

The right answer is -4, but why the variability?


texts: Are all country government budgets made up of taxes?

texts: Sorry for my ignorance, but I was doing research and noticed that the US's budget is made up of taxes. Is that for all countries? Where is the line between the economy and the government budget? Are natural resources used for government spending?


texts: Measuring time discount in scheduled services: is there a literature in empirical economics?

texts: Prices might be different, for the same service at some date, if you try to acquire the service two weeks in advance and again at a closer date (e.g. two days prior to the scheduled date), such as hotel prices, plane tickets etc. Is there a literature on this? Something like a hedonic regression on prices using a regressor such as the quantity of days between the booking and the contracted service.


texts: What are the rules of total differentials? I. e., given an arbitrary expression of which to take the total differential, what rules can be applied to arrive at the desired result, and how does one go about doing so?


texts:
This is a homework question:

$y_t = \alpha y_{t-1} + \beta_0 x_t + \beta_1 x_{t-1} + \epsilon_t , 0<\alpha<1, (t=1,...,T)$
where $x_t$ is an I(1) process independent from $\epsilon_t$ for all $s$ and $t$, and $\epsilon_t , t=1,...,T $ are i.i.d with mean zero and variance $\sigma^2$

Question

1) Suppose that $\beta_0 \not= -\beta_1$. Is it possible that $y_t$ is stationary?

2) Write down the error correction form of the model, showing the relationship between the new parameters and those in the original model.
Argue that $y_t$ and $x_t$ are co-integrated and write down the co-integrating vector

Any help/pointers would be great.


texts: Based on the graph, would you say that there is some sort of heteroscedasticity in the data? Y-axis is residual squared and X-axis is predicted values of Y


texts:
Premise: I see that the site is for professional and academic economicists, and I'm neither. However,  since I've been participating to other SE sites for some time now, I consider SE a trusted source, and reading here I think my question is on-topic, thus I'll take my chance and ask.

I was talking about Russia at work, and a coworker started saying that Russia is, and has been for a lot of time, in a deep economic crisis, nearly on the verge of bankrupcy. This guy is used to pretending he knows all about everything, thus I don't trust him. But, come to think of it, I noticed that I know very little about Russian economy: I don't know if it has a large national debt, who's the owner of that debt (Russians or other states?), whether it has a positive or negative trade export, etc.

On one hand, I guess Russian economy must have taken a blow from the failing oil prices, because lower prices => less profits for exporters like Russia (right?) and also because cheaper oil => less market for gas, which Russia also exports. However, shouldn't this be compensated by higher oil exports because of the lower price? I'm getting a bit confused here. Also, sanctions against Russia must take a toll on its economy.

On the other hand, Russia is considered a big international power. It has a lot of natural resources, and one of the strongest armies in the world. It seems weird to me that a nation "on the verge of bankrupcy" could mantain such a military power. Is my coworker really mistaking Russia for old Soviet Union? Or is he right, and Russia is actually down to its feet in a dramatic crisis?


texts: What are some applications of Akerlof's 'lemons' in goods and services markets?

texts: How can the idea of Akerlof's 'lemons' be applied to goods and services markets (that doesn't include second-hand cars)?


texts: What are the exact sources of CARES Act economic transfers?

texts:
The bill Coronavirus Aid, Relief, and Economic Security Act provides "2 trillion".  (There is also H.R.6201 - Families First Coronavirus Response Act providing aid.)

From which sources will the government pay for this?  For instance, how much is in the government ``wallet'' right now?  Is there are form of money printing planned for this?  Any form of loan being made so that the government has a way to pay for the economic aid?

Another question I plan to ask, but that you may ignore it for the moment, is: as this money is consumed by society, can we expect to see a rise in inflation in the years to come?  What does macroeconomic theory say?


texts:
We know that in regular economies general equilibrium theory predicts a finite and odd number of equilibria, using the properties of the excess demand function and the index theorem.

How about the non-regular economies? From my understanding, these are the economies in which at least one price vector equilibirum generates a singular matrix of price effects. Geometrically, this can be interpreted as the excess demand function having a zero slope at one of the equilibria as shown in the picture below

Can we say something more about the equilibria, in case they are a finite number? Do they need to be even, odd or there is no restriction?


texts: How to interpret "desired significance level"?

texts:
I was studying threats to internal validity from Stock and Watson's Introduction to Econometrics 2nd edition, chapter 14 Assessing studies based on multiple regression.

The textbook says "hypothesis tests should have the desired significance level (the actual rejection rate of the test under the null hypothesis should equal its desired significance level). and confidence intervals should have the desired confidence level.

How should I interpret this short paragraph?

What I think it means is that the hypothesis tests should have appropriate/not-too-off-tract significance level. But what is desired confidence level? And why does these conditions have to do with threats to internal validity?

Pardon my poor understanding...

Thanks in advance for your help!


texts: Why doesn't Dollar exchange rate go down?

texts:
I am from India and my question is related to conditions based in India which may be applicable to other countries as well.
Dollar value is gradually rising in India. I was trying to understand why. During this COVID season I was expecting the Dollar value to go down base on my below reasons and it didn't happen.
I read about a little bit about it and trying to make connection between the below points to understand why.
India's usual major expense for Dollar in large scale

Crude oil purchase and Defense purchase expense.

India's Rupee(currency) gain

Huge remittance from US and middle east countries
India's forex reserve increase because of increase in foreign remittance
Crude oil prices were down before a few months due to COVID
India's IT service sector performance was excellent and got many US deals worth billions.

What perplexing me are

How can the foreign reserve go high without reducing Dollar exchange rates? The country holding more Dollars and still the exchange rate is high.
When the main expense of Crude oil purchase was down(also demand was down) why didn't it affect the exchange rate?


texts: Papers on International Trade and Environment

texts:
everyone.

As a requirement to get my bachelor's in economics, I have to write a paper. The theme I picked is something along the lines of "the impact of environmental crimes and regulation on international trade". The problem is I've always worked on topics that are based on microeconomics, never on macroeconomics.

Therefore, I'd like to ask for paper recommendations on international trade, if possible related to environmental issues, as a way for me to develop a solid foundation regarding this macroeconomic topic.

I'll also be consulting Krugman's book, but I feel reading some papers that use theories and models tailored to international trade might be very useful.

I appreciate any help!

Feel free to ask for any clarifications if needed.

Kind regards,
Pedro.


texts: Comparative Methods of Econometric Analysis

texts:
While RIMS II, IMPLAN, and other methods regularly deviate substantially from each other in the answers they yield to analytical questions, is there a "band" within results should be considered "more accurate".

For example, if RIMS and IMPLAN give a quantitative result on the order of x, and a third method gives a result 2,3, or more orders of magnitude higher, should the third method be disregarded?

I ask this because I've submitted analysis based off industry-specific methods and had it roundly rejected not because there was a flaw in my analysis, but because it didn't agree with general case tools, or differed to markedly.

Is there a best practice within econometrics that says "throw out all results farther than Y from some accepted average"?


texts:
Why Hanson's logarithmic scoring rule define an Automated Market Maker?
We have in this paper
in page 47, section automated market maker, that this scoring rule can "easily" be turned into an AMM. But it seems to be so easy that no one can explain that clearly. Sometimes, LMSR is directly defined as an AMM like here
middle of page 2.
Well, in all research I did, everyone consider that it's an AMM, but Hanson do not really explain why...


texts: Why would a government allow currency speculation?

texts:
I would like to know the reasons for any government to allow currency speculation. What is the benefit for a country and for it's people if the currency speculation is allowed?

My cousin's farm is producing vegetables. Providing some goods that the consumers need or desire and they are ready to pay for.
My fruit shop is selling fruits and vegetables. Providing a service that the consumers need or desire and they are ready to pay for.
My uncle's credit bank is helping the people who can save enough to buy a car today instead of waiting many years until they saved enough. Providing a service that the consumers need or desire and they are ready to pay for.
My aunt's currency trading company is helping the people based in the EU to buy products or services made in the USA. Providing a service that the consumers need or desire and they are ready to pay for.

If I, or my cousin or my uncle create monopolies or cartels and speculate and fix prices, artificially inflating the cost of the goods/services we provide, the government will put punish us for that, because we harm the consumers. That's why most countries have a Competition Council. But if my aunt creates a monopoly or cartel and buys large amounts of currency (becoming a speculator instead of being a trader) artificially increasing the price of the US dollar for the EU based consumers, reducing their buying power and therefore harming them, shouldn't the government react in the same manner?

Now, the currency speculators do not produce any good or service that consumers actually need or desire. Not even the international traders need to buy currency from speculators—they can buy the currency from the international traders based in the targeted country, or from the currency traders. So, nobody actually need the speculators "services".
By the contrary, their actions will make the target currency to be weaker (so the working people can buy less with their money - they have less buying power), and they will make profit from this.

At the end of the day, me, my cousin, my uncle and my aunt will be able to buy less food or clothes or computers with our income, even though we keep producing goods and services the consumer need, helping them to get what they need.
And in the same time, the speculators can buy a lot of food or clothes or computers even though they produced nothing that the consumers needed, all that at the expense of the consumers, harming them.

So we have a situation where money do not measure work anymore. Your money do not measure your capacity to produce some needed goods or services. Now the money measure your capacity to speculate and to harm other people by reducing their buying power, driving them poorer.

A very basic logic says that the money were created in order to help the people who produce goods and services to trade those goods and services. So the reason for using money (currency) is because it's supposed that the use of money will help them, instead of harming them. If using money hurts me more than helps me, I will think very seriously about not using money anymore.

It can't be hard at all for a government to detect if Brian Jones buys currency in order to actually buy goods with it or to simply speculate the currency value. They simply have to look at what Brian Jones is buying with the currency once it has it. The government can put a penalty (a fine) for speculating the currency so the consumers and the working people do not have to suffer from the speculation. And then it won't be profitable anymore to speculate a currency.

And then, what would be a government's arguments for allowing the speculation with it's own currency?

I provided all the data above in order to avoid superficial answers like "currency speculators help the people to buy foreign currency" - there are currency traders for that.


texts: is it better a low or high WACC for a company valuation?

texts: I'm doing a statistical report of some italian banks and I'm looking for correlation between Corporate governance practices and bank values. I'm focusing on WACC and I would like to understand if an high value of WACC it's better than a lower value or vice versa.


texts: CES aggregator for intermediates with heterogeneous productivity

texts:
I'm following Atkeson, Burstein (2019 JPE), and cannot understand the aggregation result.

There is measure $M(z)$ of firms with productivity $z$, with production function
$$
y(z) = z k(z)^\alpha l(z)^{1-\alpha}
$$
Aggregate output is
$$
Y = \left[ \sum_z y(z)^{\frac{\rho-1}{\rho}} M(z) \right]^{\frac{\rho}{\rho-1}}
$$
Assuming that markup is constant across firms and factor markets are competitive, they get the result
$$
Y = Z K^\alpha L^{1-\alpha}
$$
where $Z = \left[ \sum_z z^{\rho-1} M(z) \right]^{\frac{1}{\rho-1}}$, $K = \sum_z k(z) M(z)$ and $L = \sum_z l(z) M(z)$.

I don't quite understand this jump. Following the usual steps for intermediate goods, I can derive the marginal cost and prices for each firm. They are dependent on $z$, so I can't simply apply the trick that all firms behave in the same way. What I do get is $PZ = p(z) z$ and $y(z)=(z/Z)^\rho Y$. Now I'm lost which way to proceed.


texts: In the BLP paper, why interacting consumer characteristic with product characteristic can generate more desirable substitution pattern

texts:
Got a question about the famous BLP paper (http://people.stern.nyu.edu/wgreene/Econometrics/BLP.pdf). When there is no interaction between product characteristic and consumer characteristic, the utility of consuming product $j$ is given by equation (2.3) in the paper: $x_j\beta-\alpha p_j+\xi_j+\epsilon_{ij}\equiv\delta_j+\epsilon_{ij}$. Suppose there are 4 options: the outside option, product 1, product 2 and product 3. Then it is clear that the market shares depend only on the mean utilities: $s_j=S_j(\delta_0,\delta_1,\delta_2,\delta_3)\equiv \int\prod _{p\neq j}Pr(\delta_j-\delta_p\geq\epsilon_{ip}-\epsilon_{ij}|\epsilon_{ij} )f(\epsilon_{ij})d\epsilon_{ij}\equiv \int\prod _{p\neq j}F_{\epsilon_{ip}-\epsilon_{ij}|\epsilon_{ij}}(\delta_j-\delta_p)f(\epsilon_{ij})d\epsilon_{ij}$
and this implies that cross-price derivatives $\frac{\partial S_1(\delta_0,\delta_1,\delta_2,\delta_3)}{\partial p_3}=\frac{\partial S_2(\delta_0,\delta_1,\delta_2,\delta_3)}{\partial p_3}$ as long as $s_1=s_2$ (paragraph 3 on page 847). My question is mathematically, why introducing interaction between consumer characteristic $v_i$ with product characteristic $x_j$ will allow for more reasonable substitution pattern such that if $x_1$ is closer to $x_3$ than $x_2$, then $|\frac{\partial S_1(\delta_0,\delta_1,\delta_2,\delta_3)}{\partial p_3}|$ will be larger than $|\frac{\partial S_2(\delta_0,\delta_1,\delta_2,\delta_3)}{\partial p_3}|$ (in plain words: if product 3 is more similar to product 1, then as product 3 becomes more expensive, increase in demand for product 1 should be larger). I'm asking this question as intuitively, it seems that we need to interact price with the product characteristic instead of interact consumer characteristic with product characteristic to create the pattern we want.


texts: What's the relationship between IS-LM model and loanable funds model and what's the differences?

texts:
Are the two models compatible?

Consider the situation: consumers lost their confidence in the economy so that they consume less and save more, hence the IS curve shift down. Since the consumers save more, there should be more loanable money in the bank.

So, why doesn't the LM curve as well as the interest rate shift down when there is more lonable money？

(I can tell the two models apart.But I think it is natural for the interest rates to go down when people save more/consume less)


texts:
This is a fairly basic question. What are the real benefits of formalizing the unorganized sector? What does integrating these into the organized sector achieve other than maybe increased tax revenue for the government?
It just seems like a hassle for the people who are used to working in the unorganized sector. They have to learn new skills and spent time and energy to get used to new ways of working. I can think of labor safety to be another good reason as government's administration can be streamlined. But for some reason none of these feel compelling to change the entire system when millions of people are employed in unorganized sector. I am surely overlooking a lot of things here. Please enlighten me. Thank you for your time.


texts: Cournot's game profit maximisation first order condition question

texts: My question is about the last part (I attached the rest for context). I don't understand the final line at all. I thought the first order condition would just be to set the derivative = 0. Very confused! Any help would be greatly appreciated! Thank you :D


texts: Is the rent we get from firms and households treated the same while calculating gdp

texts: When we rent out our land to firm,they use that land to produce goods and services,so the money we earn is a factor income but my question is that when we rent out our land to people,who don't use it for that purpose does that mean that the money we earn is for a final service which can be broken down into factor income further. Another question that i have is doesn't the rent i get from either firms or individuals contain both the interest for capital and the rent for land. Is there a flaw in my argument or assumption


texts: Which institution (government or private) provides the complete data on HS (Harmonized System Code), tariff schedules for India, China and US?

texts:
Was looking out for options on building a data store having HS code and tariff schedule data for few countries, which I can use as a base for import calculations and general HS lookup.

Is there a government or private body (specifically for the countries US, China and India) from which I can source this data in a digital format, which of course I may further process according to my storage model.

Just a note: I'm aware that there already exist websites and applications which provide cost calculations services as limited free and on chargeable terms.


texts:
The HP Filter has two objectives, with the importance of each objective denoted by the user given value of lambda:

Objective 1: minimize the $\tau_t$ in the term in the square brackets such that we minimize the changes in the estimated growth rate over time.

Objective 2: We want to bring the $\tau_t$ to be as close as possible to $y_t$ to minimize the first sum in the equation.

What I am failing to understand is why these acts of minimization will help us discover what the cyclical component of GDP is? Is there a fundamental gap in my knowledge?


texts: How has the Chinese freight industry developed during last year?

texts:
The last year has been filled with so many unfamiliar circumstances such as Covid-19, and now with the rising tensions as well, I'm wondering how the Chinese freight industry is developing during these times.
I'm researching the attractiveness of expanding a freight forwarding business to China at this moment.
Any information is welcomed, thank you.


texts: Empirical explanation on divergence between productivity and wages since the 70s

texts:
There is a well know graph, that shows a tight link between productivity and wages, until the 70s, and a break of the link since:

There's a lot of possible explanations for this, I keep hearing more of them:

Tax cuts to corporations, that changed the profits distribution
detachment from the gold standard
Rise in global trade and the consequential drop in the US industry power in the economy
The loss of power of labour unions

There is a good article here

I actually thought of a possible reason myself: the decrease of competitiveness of the labor market as a result of mergers and acquisitions or the drop in power of labour unions, as said

High wages in today's hi tech industry can support this explanation in the opposite way

Is there any empirical evidence to support any of these theories?


texts: Why are CAD, AUD known as commodity currencies

texts: Why are some currencies like CAD, AUD known as commodity currencies?


texts: If the Engel Curve of a Cobb-Douglas utility function is positive and linear, than does that mean it is neither a necessity nor a luxury good?

texts:
Since the concavity of the Engel Curve determines whether it is a necessity or luxury (i.e. how fast quantity demand changes in relation to changes in income), and since the second derivative of a Cobb-Douglas Engel Curve is 0, does that mean it is neither category?

Edit:  In simple terms, if an Engel Curve is a straight positively-sloped line, it is obviously a normal good.  But if the curve is represented by a function like so:

$I = 10 * P_x * x.$

Then the curve is ambiguously sloped.  If the price of $x$ ($P_x$) happens to be greater than 1/10 then the good is a luxury, and vice versa for a good with $P_x < 1/10$.  But if it's ambiguous like this, then the second derivative (which indicates concavity and therefore what direction the curve is increasing/decreasing in) then is it impossible to tell?

For reference, this Engel Curve was derived from the Cobb-Douglas utility function:

$U(x,y) = x^{(1/10)}y^{(9/10)}.$


texts: Taxes levied on sellers = Taxes levied on buyers

texts:
All page numbers refer to Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw.

  [p 125:] Taxes levied on sellers and taxes levied on buyers are equivalent.
  [p 156:] ... When a tax is levied on buyers, the demand curve shifts downward
  by the size of the tax; when it is levied on sellers, the supply curve shifts upward
  by that amount. In either case, when the tax is enacted, the price paid by buyers
  rises, and the price received by sellers falls. ...

What's the intuition?  I already proved this 'surprising conclusion' with a supply-demand graph (p 130, Question 6.7) and so ask NOT about a graphical or rigorous math proof.
I understand the para below, but don't comprehend how it intuitively explains the supply-demand mechanisms (the quote below concerns only how the tax is sent to the government)?

  [p 125:] The equivalence of these two taxes is easy to understand if we imagine that the
  government collects the $0.50 ice-cream tax in a bowl on the counter of each ice cream
  store.' .....


texts: Teaching: from Microeconomics to Open-economy macro

texts:
I am a new faculty teaching MBA courses. Presently, I am teaching International Financial Management (IFM) and Macroeconomics. I have prepared the syllabus of macroeconomics based on first 9 chapters of the core module in "Macroeconomics, Blanchard and Johnson, 6/E, Pearson, 2017, 9789332587601". The idea is to keep mathematical exposition to the minimum while building a base for the discussion of open-economy macroeconomics based on chapter 20 & 21 in the above-mentioned book during IFM course.

I would also be teaching microeconomics.

How do I form the syllabus for microeconomics to support my teaching of Macroeconomics and IFM while focusing on intuition rather than extensive mathematical exposition? Suggest some appropriate textbooks for this purpose.
Any suggestions to enhance my research (maybe in Macro-Finance) based on the teaching of above subjects.


texts:
How is AVC(Average Variable Cost) ‘U’ shaped because of the principle of variable Proportions?
How are average variable cost(AVC) and marginal product(MP) related?


texts:
Norway intends to shutdown the fur farming industry over the next 5+ years. In the meantime, can Norway ban imports and sales of fur without violating WTO regulation?

Are there alternative strategies? Examples of countries doing something similar (banning imports of goods it exports)?


texts: How can I model the impacts of improved agriculture technologies and food aid in a multimarket model?

texts:
Given a multimarket model for staple agricultural commodities wheat, rice, maize and sorghum, in a low-income economy, Im trying to figure out how I can use the multimarket framework to look at the impacts of bringing in food aid to the economy as well as introducing improved agricultural technologies. Would it just be re-defining the equations used to solve the model to incorporate the changes and then re-solve the model to determine the results?

This village economy has 4 households including poor rural, rich rural, poor urban, and rich-urban. Would all or any of these households be harmed by these two changes? I think that the food aid would benefit the poor households and the improved ag tech could potentially harm the rural poor since they would make up most of the ag labor force which might be harmed by introducing new ag technology.


texts: Should minimum wage be regulated for developing countries

texts:
I live in a developing country, where unemployment is at roughly 25%. There is a large divergence in population whereby skilled workers are typically active within in the manufacturing, finance, tourism, retail  etc. sectors, however the bulk of the unskilled population typically would/could find employment in other sectors such as Manufacturing(again), Mining, Agriculture, construction and the like.

The problem is, within a highly unionised country, minimum wage is set to first world standards whereby its mostly cheaper to export our raw materials, and buy back finished products from China, India etc.

Is there a timing factor associated with implementation of minimum wage? surely there are natural supply vs demand factors at play in determining minimum wage. would it not be better to reach a critical mass in the labor force whereby skills, infrastructure & techniques are at par with international competition.


texts: Help understanding this inclusive capitalism proposal

texts: Robert Ashford has written about his proposal for a better, inclusive capitalism, but I don't understand the method. For example, take a look at this article. All is very obscure. It seems to be about paying workers with shares, but I don't quite understand it. Why would companies expand their shares? That lowers their price. Can't see how this would work. Is anyone familiar with his proposals?


texts:
I heard one professor of my university say that "lottery is a kind of auction. So we can predict it! Then we could get a lot of money!"

Since he is in the mathematics department, and I know little about that matter, I couldn't answer to my gut feeling which told me that he was wrong.

So, from the Economist's perspective, is it true? Is a lottery some kind of an auction?


texts:
I'm a bachelor student writing a paper on the effects of China's one child policy on future GDP. My professor told me to use growth models. However, I'm unsure which growth model I need to use for this kind of research. I'm only familiar with the Solow model and two-sector models that expands on the Solow model by introducing an R&D sector (I've seen these in their most basic form in one of my classes).

Since a major effect of the policy is a decreasing workforce, I think that technological progress (knowledge accumulation) and population growth are important, but a lot of models seem to hold population growth constant?


texts: Persistent changes in relative prices due to productivity differences

texts:
I read a couple of years ago that in the long run (in centuries) the relative price between, say, schooling and agriculture keeps increasing, since the latter sector gets more and more productive, while there are barely any productivity gains in schooling.

I couldn't find literature that talks about it.  What is the name of this mechanism, or related literature?


texts: Are goods that are wasted counted into the GDP of a nation?

texts: If x apples are produced in an economy, and only x - y are consumed (y apples get rotten at different stores in the country), is the value of these wasted apples considered as a part of GDP?


texts:
Wikipedia states GHH preferences to have the general form

$$V(c, l) =  U(c - G(l))$$

with $U$ increasing concave, and $G$ increasing convex.

In interior solution w.r.t. $l$ requires

$$ U'(c - G(l))(\frac{dc}{dl} - G'(l)) = 0$$

As wikipedia says, this is given by

$$ \frac{dc}{dl} = G'(l)$$

However, what about the peculiar case where $c = G(l)$? Could someone elaborate a bit on the intuition


texts:
Suppose the government imposes a tax on each unit of output
produced of $t. What is the firm’s new profit maximizing level of
output?
The question suggests the use of comparative to determine how a change in tax affects a change in output. The firm would operate under perfect competition conditions.
I started to answer it this way.
Before Tax:
π = revenue - costs
π = pq - C(q)
dπ/dq = p - C'(q)
Set dπ/dq for profit-maximisation
0 = p - C'(q)
p = C'(q)
p = MC
After Tax:
π = revenue - costs - tax
π = pq - C(q) -tq
dπ/dq = p - t - C'(q)
Set dπ/dq for profit-maximisation
0 = p - t - C'(q)
p = t + C'(q)
p = t + MC
Next I would try to find out how quantity changes with tax t by taking derivates? Any ideas?


texts: Saudi Arabia motivations for OPEC production cut

texts:
I'm wondering whether one of Saudi Arabia's principle motivations for supporting OPEC production cuts is so that the price of crude oil will increase and so Saudi Aramco, Saudi's state-owned oil company, will be valued higher prior to its upcoming IPO?

I would appreciate any help understanding whether this is the case.


texts:
I tried to solve by myself the exercises of MWG(Mas Colell). However, I think the exercise has an error at 17.D.1.

The 17.D.1 asks us that "verify that there are multiple equilibria". However, The excess demand function
$Z_1(p,1)=\frac{p}{p+(\frac{p}{2})^\frac{1}{1-\rho}}+ \frac{1}{p+(2p)^\frac{1}{1-\rho}}-1$

And since $\rho=-4$,

$Z_1(p,1)=\frac{p}{p+(\frac{p}{2})^\frac{1}{5}}+ \frac{1}{p+(2p)^\frac{1}{5}}-1$

At equilibrium, $Z_1=0$, and I think this has only one solution at $p=1$  since Z is increasing.

How can we find multiple equilibria?

  Original problem is following: An exchange economy with two commodities and two consumers. Both consumershave homothetic preferences of the constant elasticity variety. Moreover, the elasticity of substitution is the same for both consumers and is small (i.e., goods are close to perfect complements).$U_1(x_{11},x_{21}) = (2x^ρ_{11} +x^ρ_{21})^{\frac{1}{ρ}}$
  and $U_2(x_{12},x_{22}) = (x^ρ_{12} +2x^ρ_{22})^{\frac{1}{ρ}}$
  and
   $ρ=−4$.

  The endowments are $ω_1= (1,0)$  $ω_2= (0,1)$.
  Compute the excess demand function of this economy and verify that there are multiple equilibria.


texts: Does an increase in the money supply increase or decrease interest rates?

texts:
What I understand is that an increase in the money supply brings about a fall in interest rate as there is more money available, the price of money will be cheaper. But some theory such as liquidity effect posits that increase in money supply will increase in interest rate. Is that they view the problem differently or the two situations are different?

  "Money growth also affects interest rates and prices and those in turn will
  influence stock prices. Assuming that money demand remains constant, increase in money supply raises interest rates thereby increasing the opportunity cost of holding cash as well as stocks. Lured by higher interest earnings, people are likely to convert their cash and stock holdings to interest-bearing deposits and securities with obvious implications for stock prices. Since the rate of inflation is positively related to money growth, an increase in money supply may lower the demand for stocks and assets (as real value of such assets decline due to inflation) resulting in higher discount rates (as banks become more cautious in its lending) and lower stock prices. The rising interest rates and inflation will also adversely affect corporate profits (earnings) leading to lower stock returns (both actual and expected) and thereby making stock possession (as well as new purchase) less attractive."

The above is quoted from an article. It mention that increase in money supply raises interest rates thereby increasing the opportunity cost of holding cash as well as stocks. I don't understand how increasing in money supply would increase interest rate. Could you explain?


texts: Data request: guidance to find football betting data

texts:
Can someone please guide me to find data which fulfills following requests:

It should be from one of the major leagues: Premier League, Bundesliga, La liga or Serie A.
From a given betting company, I need odds for a home win, draw, away win for all games in an entire season
It doesn't matter for which season but I would prefer for a recent season.


texts: Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?

texts:
A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited
" has this abstract, finding in favor of the Chicago Plan an all counts basically:

  At the height of the Great Depression a number of leading U.S. economists advanced a
  proposal for monetary reform that became known as the Chicago Plan. It envisaged the
  separation of the monetary and credit functions of the banking system, by requiring 100%
  reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this
  plan: (1) Much better control of a major source of business cycle fluctuations, sudden
  increases and contractions of bank credit and of the supply of bank-created money.
  (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt.
  (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous
  debt creation. We study these claims by embedding a comprehensive and carefully calibrated
  model of the banking system in a DSGE model of the U.S. economy. We find support for all
  four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state
  inflation can drop to zero without posing problems for the conduct of monetary policy.

Interestingly, that paper even has a Wikipedia article but the only criticism mentioned there is from Austrians. I suspect however that the Chicago Plan couldn't be all that uncontroversial with mainstream either, as it would pretty much eliminate the fractional reserve etc. Has this DSGE model of Benes and Kumhof, validating the Chicago Plan with such rosy outlooks (10% improvement in output etc.) received any critical commentary in mainstream/orthodox sources?

I also found a paper by Dittmer (2015) about the topic (of full reserve banking) in Ecological Economics, but this journal is also rather heterodox. And another Sawyer and Fontana (2016) in the leading journal of heterodox economics...  (N.B.: the article in Ecological Economics is probably in part motivated by the fact that the Green Party of England and Wales has incorporated this full-reserve banking proposal in their platform; strangely enough, the former paper doesn't mention this fact, but the latter one does.)


texts: Why is the U.S. birth rate considered below replacement if more people are being born than are dying annually?

texts:
In 2018 there were 3.85 million births and 2.81 million deaths.
My understanding is that the U.S. birth rate is near or below replacement rate, but I don't understand why. If more people are being born than are dying, won't the population continue to grow?


texts: Set Theory Properties of the Budget Constraint

texts:
In Microeconomic theory, the budget constraint is defined by 4 distinct properties:
It is

Bounded
Closed
Convex
Non-empty

The 1. 2. and 4. are very straight forward and the benefits in terms of analysis are apparent. My question is with respect to convexity.

Convexity of a set implies that any line between two points is the set is also within the set (i.e. take any two points say $q$ and $q'$ that both satisfy the constraint, then any linear combination of the $q$ and $q'$ also satisfy the constraint)

My question is, what is the benefit or added utility to this property holding?
I immediately think of a budget constraint that, rather than exhibiting diminishing marginal returns, exhibits increases returns in a kind of learning sense: As more of one good is produced, the production becomes more efficient as the producer is learning. Whether or not this is a realistic circumstance, it begs the question.

What happens if convexity is violated? or rather, what can we no longer do?


texts: How does everyone not become poor over time?

texts:
Look at the whole world --the union of all goods and services and workers and customers. Everyone who is a customer is a worker somewhere (they had to get the money to be a customer somehow). But not all revenue goes toward worker wages--some goes to cost of goods--production, not just labor. And considering the whole world--it's a closed system...so if everyone pays Z in as a customer--they lose X to cost of goods and are paid out up to Z-X as workers -- then, when they are next customers, next round of purchasing, Z-X goes back in as rev and Z-2X comes back to everyone... keeps going. You lose cost of goods each round of purchasing.  you need X more from customers to sustain this--which means you need  to keep injecting X from outside or have more customers than workers. But where do these injections come from if we are accounting for all goods and services? Or where is this larger set of customers who are not also workers? Where does their money come from if not from work? Elderly, children and those who do not work also derive their money from this cycle--they were workers, will be workers or live off a % of workers' wages from taxes or friends and family.
The answer is presumably wealth or value creation but how is this integrated into the cycle of workers and customers so that Z grows instead of shrinks?
Economic novice--thanks!


texts: Can I treat pooled cross-section as panel data and do regression analysis?

texts: I work with a large survey data that is pooled cross-section, i.e, people interviewed are randomly chosen in each time period. This is not panel data. But, I aggregate the individual cells according to age and gender groups and then run the regressions. Now that I work with age-gender groups, is this considered panel data?


texts: "Supply creates its own demand. Only by consistently supplying it can we hope to increase the demand for the substantive over the superficial"

texts:
Keynes has disapproved the say's law "supply creates its own demand" but I want to know if there is any empirical evidence that this law doesn't hold true? Theoretically, keynes successfully disapproved it by stating that if supply is there and no demand follows or demand doesn't rise in proportion to the supply then inventories will build up and producers will be forced to cut price and halt production and then we will have slowdown. But does this hold true?

The reason for my curiosity is if look at things whether in realm of society or business, supply does create its own demand. For eg - Every new invention or technological breakthrough ranging from Ipod to computers, e commerce to MOOCs, they are first supplied and then demands build up. If I may also put it in abstract terms also then it seems to hold valid. For eg - The more we love, the more generous we are, the more gratitude we supply from our own side the more we find we are capable to render. In my opinion only by consistently supplying goodwill or any good thing can we hope to increase the substantive over superficial in our individual lives and in the collective dream called culture.


texts: Why are the financial intermediation theory of banking or fractional reserve theory of banking still accepted despite evidence to the contrary?

texts:
In most textbook economics I came across the financial intermediation theory of banking and the fractional reserve theory of banking are presented as theories as how money is created.
However there is evidence that these theories are wrong. See for example
Economist A. Werner writes in his empirical case study:

An empirical test is conducted, whereby money is borrowed from a
cooperating bank, while its internal records are being monitored, to
establish whether in the process of making the loan available to the
borrower, the bank transfers these funds from other accounts within or
outside the bank, or whether they are newly created. This study
establishes for the first time empirically that banks individually
create money out of nothing. The money supply is created as ‘fairy
dust’ produced by the banks individually, "out of thin air".

The study even includes a letter signed by the manager of the bank in which Werner did his experiments:

Dear Prof. Dr. Werner,

Confirmation of Facts

In connection with the extension of credit to you in August 2014 I am pleased to confirm that neither I as director of Raiffeisenbank Wildenberg eG, nor our staff checked either before or during the granting of the loan to you, whether we keep sufficient funds with our central bank, DZ Bank AG, or the Bundesbank. We also did not engage in any such related transaction, nor did we undertake any transfers or account bookings in order to finance the credit balance in your account. Therefore we did not engage in any checks or transactions in order to provide liquidity.

Yours sincerely,

M. Rebl,

Director, Raiffeisenbank Wildenberg e.G.

Similar claims are made by Kumhof and Jakab published by the IMF (International Monetary Fund):

Specifically, virtually all recent mainstream neoclassical economic research is based on the highly misleading “intermediation of loanable funds” description of banking, which dates to the 1950s and 1960s and back to the 19th century.We argue instead for the “financing through money creation” description, which is consistent with the 1930s view of economists associated with the Chicago School. These two views have radically different implications for a country’s macroeconomic response to financial and other shocks. This in turn has obvious relevance for key policy choices today.
Lending, in this narrative, starts with banks collecting deposits of previously saved real resources (perishable consumer goods, consumer durables, machines and equipment, etc.) from savers and ends with the lending of those same real resources to borrowers. But such institutions simply do not exist in the real world.


texts: Do the partial derivatives of the compensated demand have an interpretation?

texts:
When obtaining the Marshallian demand from a utility maximization problem we have a classification of normal goods, inferior goods, Giffen-goods, etc.. These are related to the first derivative of the Marshallian demand function with respect to prices or income.

My question is whether a similar classification exists for compensated demand functions of the expenditure minimization problem or whether the (same) goods classification can be derived via the compensated demand.


texts: Merging Panel data with two different splits. Is it possible?

texts:
I have two data frames with panel data. The first contains data on companies on a yearly basis. The layout is as below:

ID Year x1  x2  x3
A1 2000 10  11  12
A2 2000 13  25  20
A1 2001 13  58  13

and so on.
The second data set contains the same companies, but data that is split by state AND year.

ID  Year  State  xx1  xx2  xx3
A1  2000   AL    581  135  1.22
A1  2000   FL    584  51    1.5
A2  2000   AL    5138 84   1.7
...

Now, I am wondering if and how I can merge these two?
Economically, it makes sense to have these different data panels as some data is only available on an overall company level (total assets, debt, income) and some data can be split for example: revenue in state; customers in state and so on...

I am very grateful for any idea on this!

p.s. using R


texts: Is there a list of U.S. government regulations or actions that depend on government produced statistics?

texts: I'm interested in compiling a list of government actions that depend on government produced figures. For example social security benefits depend on the CPI. I don't know if such a list already exists.


texts: The relationship between indirect utility and expenditure functions

texts:
I am trying to understand the fact that $e(p, v(p,y)) = y$. There is a proof in the text Advanced Microeconomic Theory (Jehle and Reny) that states the following:

  Because $u(·)$ is strictly increasing on $R_n^+$, it attains a minimum at $x = 0$, but does not attain a maximum. Moreover, because $u(·)$ is continuous, the set $U$ of attainable utility
  numbers must be an interval. Consequently, $U = [u(0), u^b)]$ for $u^b > u(0)$, and where $u^b$ may be either finite or $+∞$.

  To prove, fix $(p, y) ∈ R^{++}_n × R^+$. We know $e(p, v(p, y)) ≤ y$. We would like to show in fact that equality must hold. So suppose not, that is, suppose $e(p, u)<y$, where $u = v(p, y)$. Note that by definition of $v(·), u ∈ U$, so that $u<u^b$. By the continuity of $e(·)$ from, we may therefore choose $ε > 0$ small enough so that $u + ε<u^b$, and $e(p, u +
ε)<y$.

I don't understand the point below:

  Note that by definition of $v(·)$, $u ∈ U$, so that $u<u^b$.

$v(·)$ denotes the maximum utility that can be achieved for given prices and wealth, and I do not see why we cannot have $u = u^b$ such that $u ≤ u^b$ since $u^b$ may be finite. What am I missing here?


texts: Research on the existence of utility functions?

texts:
I've been having difficulty finding some research on indifference curves/utility functions and methods in constructing them in an applied manner.

Does anyone have any papers or pdf books to recommend?


texts:
I'm asking this board for resources and figures on the Soviet command economy, specifically good places to start.

I understand this question has political connotations, and that there are claims of obfuscation and misunderstanding from both command and market camps, but I am asking for the most perspicacious and academic assessment of the performance of the Soviet command economy. I am skeptical about claims against its effectiveness.

I would be interested in resources that support other countries attempting the command economy.


texts: Study guide (and...) for "Intermediate Microeconomics with Calculus" by Varian

texts:
I have been googling study guides, solution manuals and other helpful material made by professors. But I have not found anything useful.

Q: Do you guys know anything that will make the book easier and faster to digest?

Kind regards,


texts: How is the growth rate form of the exchange equation derived?

texts:
Equation of exchange states:
$ MV=PY $
where,
       $ M $ is Quantity of Money
       $ V $ is Velocity of Money
       $ P $ is Price Level
       $ Y $ is Real GDP
Could someone please share how the above common form of equation is converted to the growth rate form:
$ \%\Delta M + \%\Delta V = \%\Delta P + \%\Delta Y $

Edit: Sorry the latex doesn't seem to be working. Unable to figure that out.


texts:
I am reading Modern Microeconomics by Koutsoyiannis. In a Non Collusive Cournot Duopoly model with two firms, zero costs and linear demand curve.

Firm A produces half the total market demand to maximise revenue.

Further, Firm B takes A's output as given and operates on the left over demand curve eD' and produces 1/4th of output (AB).

Now Firm A in period 3 should respond by taking the leftover demand curve e'D' and produce $\frac{1}{2}$ of the leftover market that is $ (1 - \frac{1}{2} - \frac{1}{4})\frac{1}{2} = \frac{1}{8}th $ of total market output.

But it is mentioned


texts:
Let's assume that the price of apples has risen and that the quantity of apples sold during the last couple of weeks has decreased. From that, we can infer that the supply curve must've shifted to the left.

I still have trouble fully understanding this. I was told that when the endogenous variables, such as price and quantity, change, only a movement on the demand/supply curve happens and when exogenous variables change (demand shocks etc.) the curves themselves will shift to the left or right.

In this example a price increase takes place, so we're just moving up the demand curve, no? And when we reach the target price level, there'll be a corresponding quantity. And now because of market equilibrium the supply curve has to reach that spot, too? So it shifts to the left? Is that correct? So in a demand - supply model, there can't be singular movements on the curves, as there will always be immediate reactions that seek to recreate the equilibrium?

Edit: Thanks for all the answers!


texts: Isn't it the case that figures on employment should equal the sum of employees plus the self-employed?

texts:
This is a question about data consistency. I'm using the AMECO database and I'm interested in employment data for Greece.

My current understanding is that the series about Employment (NETD) should in principle be equal to the sum of the series on Self-employed persons (NSTD) plus the series on Wage earners (NWTD).

In fact, this is what the information on the Employment series says.

Now, if one plots the employment series along with the sum of the series on wage earners and the self-employed-or inspects their relationship otherwise- it will become evident that the expected equality is verified only for a part of the sample (after the '90s).

What is the reason for this discrepancy?

update: In the following plot the blue series depicts Employment proper (NETD) while the red series is the one I constructed by adding NSTD (self-employed) and NWTD (employees). It's the later one that falls short of the former.

This becomes more evident in the next plot. It depicts the annual percentage difference between the constructed employment series (the red line above) and the AMECO series for employment (blue), which I consider as a baseline.

Casual inspection of the plots demonstrates the fact that for almost the first half of the sample the constructed series falls short of the baseline. In plain English, up until the 90's employment in Greece is not exhausted by the sum of the self-employed and employees.

Such a discrepancy is not detailed in the data description for employment (see link in the question above) and it begs the question which series provides the correct answer to the question "What is the level of employment in Greece up to and including the nineties?".

Also, the motivation for this question is not simply the level of employment. Please note that if the constructed series is off, that means that eg when trying to retrieve the adjusted wage share for Greece, one ends up with a lower figure for the period relevant to the observed discrepancy.


texts: Do I have to bootstrap the dummy variables used for event dates in an event study?

texts:
I am doing a project where i am trying to estimate the effect of the inclusion of a stock in an ETF on its returns, meaning that i am trying to see how the inclusion of a stock in a given ETF affects that stocks returns, I have collected return data on more than 150 equities, their event dates (when they were included in the ETF and so on).
my design is this, i have divided the sample into the estimation periot starting 130 days before the inclusion and the forecast window which inclused 10 days.
I am using the Multivariable Regression Model (MVRM) technique and the market model with dummy variables, the market model's dependant variable is the firms returns on the left hand side of the equation and on the right hand side of the equation qe have the market returns represented by the returns of the S&P500 index and 10 dummy variables where every dummy takes the value of 1 for the observations within the forecast interval.
More can be read on the model in Karafiath 1988.
I want to do determine the distribution of the sum of the dummy estimators which pretty much represents the cummulative abnormal returns in this case by bootstrapping.
Now my question is this:
Do i have to use a bootstrap method by simply resampling with replacement from the Dependant Variable (firm i's returns) and the market returns (S&P500's returns) and once i have drawn a sample I run a regression with the resampled values of those two and estimate the the coefficients of the dummies and save them, then draw another sample from the DepVar and IndVar and again run a regression and estimate the coefficients of the dummy variables and save them and repeat this process 10 000 times and then construct the empirical distribution of the dummy variables?
OR
Should i draw 10 000 samples and run the regression for all the variables in the regression including the dummies?
will this second case imply that when resampling from the dummy variable which is basically a bunch of zeros with only one 1 at the position of the date in the forecast interval, would this mean it will randomly assign the number 1 to some other non forecast interval because that would not make sense.
Thanks in Advance.


texts: In GDP growth studies, are factors of production measured as stock or flows?

texts:
Consider the following cases:

One machine (capital) is used by multiple producers within one year. For instance, farmers renting tractors from the same company. In this case, in terms of GDP, there is one unit of capital which was used to produce value added by many producers.
One worker (labour) which have two jobs. For instance, in a factory during the day, and as a Uber driver during the night. In this case, in terms of GDP, there is one unit of labour, used to produce value added in different goods/services.

The common feature is that the same factor of production (stock) is employed in more than one activity over a given period (flow).

Is the measurement of capital and labour used in the standard "determinants of growth" studies based on the stock or flow approach?

In other words, are capital and labour measured in terms of the flow of services that these factors produce, or in terms of the stock of factors available in an economy over time? It is clear to me that the latter approach is plagued with problems, and the former is clearly more accurate.

My experience is that the use of stock is more common.


texts:
When the treasury or equivalent institution of a country auctions of government bonds there is frequently (i.e. in most countries) some sort of restriction on who can participate. The term primary dealers refers to agents who participate in this primary auction with the intent of reselling the acquired bonds on the secondary market. Usually there is a gap between the bond price (or implied interest rate) of the primary and the secondary market so this is profitable.

Some papers on the phenomenon:

VALUING DEALERS' INFORMATIONAL ADVANTAGE: A STUDY OF CANADIAN TREASURY AUCTIONS (JStor access needed)
Who Buys Treasury Securities at Auction

What benefit if any does the treasury derive from this setup, i.e. restricting auction access?


texts: Including (demand) price elasticity in a price regression model

texts:
I am wondering how to include price elasticity (demand side) in a linear price regression model that is based on asuming price is the result of demand=supply.

Constructing a price regression under the asumption of price inelastic demand is pretty straight forward, since you do not have the problem of dealing with simultaneous equations. Yet, I cant wrap my head around how to implement the asumption of price elastic demand in a simple linear price regression.

Thanks in advance for any kind of comment on that problem!


texts: What is an estimate of the value of the world's assets?

texts: Gross world product is on the order of 80E12 $ per year (PPP). Where can I find an estimate of the net value of the world's assets (companies, properties, infrastructure...)? Preferably with some more granular statistics.


texts: Variance of $\hat{\beta _0}$ in case of homoskedasticity

texts:
Stock and Watson express the variance of $\hat{\beta _0}$ like
$\hat{\sigma }^2_\hat{\beta _0}=\frac{E({X_{i}}^{2})}{n\sigma _{X}^{2}}\sigma ^{2}$, but starting from variance of $\hat{\beta _1}=\frac{\sigma^{2}}{n\sigma_{X}^{2}}$ i proved only that $\hat{\sigma }^2_\hat{\beta _0}=\frac{1}{n}\sigma^{2}(1+\frac{\bar{X}^2}{\sigma_{X}^{2}})$, that is the same that is showed here.

How can i prove that are similar forms?


texts: Has anyone peer-review researched investors buying another, but similarly spelled, ticker?

texts:
GLDD - Believing Robinhood users are dumb is profitable... : wallstreetbets

Academics need to research the correlation between performing tickers and their closely related (only in name) cousins.

Have any academics done so?

Has any forensic linguist investigated the morphological traits behind such "false friends"?

E.g. in February 2020, many investors misconstrued ZOOM for their desired ZM (Zoom Video Communications). Similarly, I wonder if some investors misconstrued GLDD (Great Lakes Dredge and Dock Company) for their desired GLD, or KDKN (Kodiak Energy) for their desired KODK (Eastman Kodak Company).


texts: How does the euro swap for Greek debt work?

texts: As I understand it, some portion of the Greek sovereign debt has been converted into "Euro swaps". Can someone explain in simple terms what that means? What debt was given to whom?


texts: Why so many suppliers of inexpensive ordinary products

texts:
There are a very large number of suppliers of common, inexpensive products, and I am wondering why a few large companies don't simply provide all the supply? I am not thinking of food or clothing or something where people could meaningfully differ on preferences, I mean things we don't see or can't distinguish anyway, things that I call 'commodities'. The best example I have today is cabin air filters for cars.
I went to buy one at Walmart today, and there were several brands and about 50 different sizes, and all the brands had a different numbering scheme. This was vexing, and I bought one only to discover that it didn't fit. I looked at Amazon.com and found an absolutely staggering number of brand names. Is there some point to this? Are cabin air filters so exciting that everyone needs to get in on the action? Why don't a few companies make them all? Is there a reason that the 'marketplace' can support a huge number of producers for something no one could tell apart or really care much about?
Perhaps this relates to the concept of Indifference in economics. I have seen this dynamic in other products, but this is the best example I know of. Try looking on Amazon and see for yourself.


texts: How to calculate the intercept of an indifference curve in an Edgeworth box?

texts:
Consider an exchange economy with two goods (Good 1 and 2) and two individuals ($A$ and $B$):

$A$'s utility function is $u_A(x_{A_1}, x_{A_2}) = 2x_{A_1} + 5x_{A_2}$
$B$'s utility function is $u_B(x_{B_1}, x_{B_2}) = 3x_{B_1} + 7x_{B_2}$
$A$'s initial endowment is $(\omega_{A_1}, \omega_{A_2}) = (4, 6)$
$B$'s initial endowment is $(\omega_{B_1}, \omega_{B_2}) = (10, 2)$

The core condition requires:

$$
2x_{A_1} + 5x_{A_2} \geq 2\omega_{A_1} + 5\omega_{A_2} = 2 \times 4 + 5 \times 6 = 38
$$

and

$$
3x_{B_1} + 7x_{B_2} \geq 3\omega_{B_1} + 7\omega_{B_2} = 3 \times 10 + 7 \times 2 = 44
$$

The line with  equation $2x_{A_1} + 5x_{A_2} = 38$ hits the left boundary at:

$$
(x_{A_1}, x_{A_2}) = (0,38/5), ~~~~(x_{B_1}, x_{B_2}) = (14, 2/5)
$$

The line with equation $3x_{B_1} + 7x_{B_2} = 44$ hits the left boundary at:

$$
(x_{A_1}, x_{A_2}) = (0,54/7) ~~~ (x_{B_1}, x_{B_2}) = (14, 2/7)
$$

I don't understand how these intercepts have been calculated.

I've used the MRS and endowment point to calculate the $(x_{A_1}, x_{A_2})$
intercepts correctly:

$$x_{A_2} = -\frac{2}{5}x_{A_1} + \frac{38}{5}$$

But get an incorrect $(x_{B_1}, x_{B_2})$ intercept:

$$
x_{A_1} = 14, ~~ x_{A_2} = 2
$$

Please can someone enlighten me? No worries if you can't.

Alex


texts: Coefficient omitted because of collinearity

texts:
I have a panel data that includes a decade of firm-year observations (1995- 2005). These companies are from different countries.

A law has passed in (almost) every country at different points in time. For example, if a law passed in France in 2001, the variable 'law' is equal to 0 for firm-year observations in France from 1995 to 2000 and to 1 from 2001 to 2005.
France is a developed country. The variable 'developed' is equal to 1 for all firm-year observations in France over the decade 1995-2005.

I ran this line of code with Stata:

areg payable i.law##i.developed i.year, absorb(firmid) vce(cluster countryindust)

I want to know what is this impact of the law alone, market development (developed country or not) and the interaction between the passage of the law and market development on accounts payable.

The problem is that the coefficient 'developed' is omitted. It says that '1.developed omitted because of collinearity'. Is it because my model has a constant? I don't understand because people use this specification all the time.

Note: I also have time and firm fixed effects. I cluster for country-industry.

Am I doing something wrong? What should I do so that no coefficient is omitted?


texts: Value flow in economy - redefinition credit and money?

texts:
There are voices that there are already too much debt in the world (government, personal, government debt) and that can be the cause of the crisis. From the other hand the the only solution offered by the governments and the central banks to the possible (forthcoming or not) crisis is to create more debt. So - if consumers take loans and spend them, then manufacturers can produce and the GDP grows. But if consumers are prudent and save money, then manufacturers can not sell produce and can not continue operations, GDP falls and recession emerges.

If this vignette is true, then how sustainable growth can happen? Or is this vignette the example that there always should be boom/bust cycles? Or does my vignette contain some paradox, some oversimplification, some mistake? My question is - is my vignette correct or does it contain mistakes and what are those mistakes?

One can try to solve the paradox in vignette by saying that consumers create value as well (labor) and that they can spend the money earned with their labor without taking loans and so the sustainable GDP can exist. If that is so, then why governments or other entities are trying to boost credit instead of boosting labor? Some can say that "boosting" labor can be quite cruel - e.g. the governments can put into force laws that pressure citizens to accept any work however bad paid it is (i.e. if there are no betters jobs available in the economy). But from the other side one can argue that government can increase the skill level, the creativity level, the entrepreneurial spirit of the citizens and so they can create new businesses, new ideas, be worthy employees for businesses that pay high wages. So - such boosting of labor can be beneficial for the all (citizens, businesses, budgets; such boosting does not require increase of the debt level). Why such beneficial boosting is not happening? Why central banks does not suggest such boosting and why everything is talking about increase quantitative easing and debts?


texts: Literature Request: how does the house quality distribution change endogenously over time?

texts: Is there existing literature on how the distribution of housing quality changes with time? For example, literature saying "using 2000 as a baseline distribution $X$, the housing quality distribution is $1.2X$ in years when GDP is rising and $0.8X$ in years when GDP is decreasing." This is of course very naive, but hopefully it gets my point across. Perhaps housing price distribution could be used as a proxy for house quality, as there may not be data on the latter.


texts:
I just came across the concepts of merit and demerit goods for the first time, in the Cambridge A-level economics syllabus. I wasn't sure what they were.

Is a merit good simply a good that has positive 'internalities' (benefits that the consumer is unaware of)?

And similarly, is a demerit good simply one with negative 'internalities' (costs that the consumer is unaware of)?


texts: How can an outcome be Pareto efficient but not Kaldor-Hicks efficient?

texts:
An policy is a Pareto improvement if it makes some people better off and no one worse off.  And a policy is a Kaldor-Hicks improvement if it can be turned into a Pareto improvement by redistributing money.  Every Pareto improvement is a Kaldor-Hicks improvement, but not every Kaldor-Hicks improvement is a Pareto improvement.

Now an outcome is called Pareto efficient if there are no possible Pareto improvements of it, and Kaldor-Hicks efficient if there are no Kaldor-Hicks improvement of it.  Now clearly every Kaldor-Hicks efficient outcome is Pareto-efficient, because if a Pareto improvement were possible it would also be a Kaldor-Hicks improvement.  But my question is, why is the converse not true?

Here is my argument for why the converse is true.  Suppose that X is a Pareto-efficient outcome which is not Kaldor-Hicks efficient.  Then there exists a Kaldor-Hicks improvement which can be turned into a Pareto improvement by a redistribution of money.  But then that Kaldor-Hicks improvement together with that redistribution is a Pareto improvement, so there exists a possible Pareto improvement of X, contradicting the fact that X was Pareto efficient.  Where am I going wrong?


texts:
$MC = (TC)'(q) = 3q^2 - 40q+220, \quad  where \quad  1 \leq q \leq 20 $

The task is to deduce a function of $TC$, if for the production of the first item we need 291 monetary units, and to write out the cost value if $q$ = 8 units.

I have found that $TC = q^3-20q^2+220q$, but i can't understand how to use that 291 monetary units for finding the cost value


texts: Why are prices considered the best information we could have?

texts: We often talk about information as pricing being the best information or reflection of different aggregate pieces of information existing on markets. Why do we then also often hear that some prices do not reflect reality or do not compare with the real economy? Thanks.


texts: We are writing a paper about the 'economic man.' By this, we mean that the choices he makes epitomize a rational economic thinker. However, we also acknowledge the fact that there are other, non-economic reasons that people make decisions such as religion. What (if any) literature addresses the idea that even with other considerations, a person will still act rationally in the economic sense. Preferably we would like to have a theoretical model that encases these other choice considerations. Also, we would love to hear whether there are any case studies on this idea.


texts: What is meant by the sentence in the context of "Monetary Policy in India"?

texts: To quote from the book, "Indian Economy by Nitin Singhania," this is what I found out,"It is a macroeconomic policy used by RBI to influence the supply of money." What is meant by macroeconomic policy here?


texts:
I want to analyze the following setting:

An entrepreneur (with monopoly power) sells a product in two periods. In period 1 there are two consumer groups (denoted by 1 and 2) and in period 2 there is only one consumer group (denoted by 3). He has to set the three prices $p_1$, $p_2$ and $p_3$ in order to maximize his total profit (period 1 and 2), taking into account each consumer's participation and incentive compatibility constraints.

The different consumer groups are separated by their taste parameter, $θ$. A consumer in period 2 derives the following utility: $U_3 = θ_3 - p_3$, where $p$ is the price. The consumers in period 1 receive additional benefits by consuming in period 1. A consumer from group 1 and group 2 get respectively: $U_1 = θ_1(1+δ) - p_1$ and $U_2 = θ_2(1+δβ) - p_2$, where $δ>0$ and $0<β<1$.

I assume the following ranking $θ_1 > θ_2 > θ_3$. Assuming a unit mass of consumers, the consumer groups can be divided like this: $θ ∈ [0,θ_2]$ (period 2 consumers), $θ ∈ [θ_2,θ_1]$ and $[θ_1,1]$ (period 1 consumers). I also assume a unit demand.

I write the consumer's participation (PC) and incentive compatibility constraints (IC) for each consumer group:

Consumer group 3:

$U_3 \geq 0$ (PC3)

$U_3 \geq U_2 $ (IC3A)

$U_3 \geq U_1 $ (IC3B)

Consumer group 2:

$U_2 \geq 0$ (PC2)

$U_2 \geq U_3 $ (IC2A)

$U_2 \geq U_1 $ (IC2B)

Consumer group 1:

$U_1 \geq 0$ (PC1)

$U_1 \geq U_3 $ (IC1A)

$U_1 \geq U_1 $ (IC1B)

The entrepreneur's maximization problem is:

$π = p_1q_1 + p_2q_2 + p_3q_3$

, where $q$ is the output or the number of consumers in each consumer group.

Finding the equilibrium prices that induce self-selection, I solve for the subgame-perfect Nash equilibrium.

In order to solve the game using backwards induction, I have to find the "right" PC's and IC's.

When there are only two consumers groups at least one PC and one IC have to hold. Usually, it is participation of the low type (in this case $θ_3$) and self-selection of the high type (in this case $θ_1$).

If I assume all IC's and PC's bind in equilibrium ($=$ instead of $\geq$), then I get $θ_1 = θ_2$. I then tried to separate the consumer groups according to their type like this:

$θ_1(1+δ) - p_1 = θ_1(1+δβ) - p_2 $ (here I want to separate the two consumer groups in period 1)

$θ_2(1+δβ) - p_2 = θ_2 - p_3 $ (here I want to separate the low-valuation consumer in period 1 from the consumer in period 2)

This approach didn't induce self-selection between the two consumer groups in period 1. More specifically, this approach is wrong, I believe because the results are $θ_1 = 1/2$ and $θ_2 = \frac{1+2δ}{1+4δβ}$, which violates the condition from earlier: $θ_1 > θ_2 > θ_3$.

Any suggestion on which PC's and IC's should hold in equilibrium in order for self-selection to appear is much appreciated.


texts: Link between elasticity and marginal utility

texts:
The above is taken from "Economics" 8th Edition by John Sloman, a textbook commonly used at the introductory undergraduate level.

I would like assistance in understanding the bracketed portion - how a decrease in consumption of alternative goods results in a low increase in total utility and thus a small decrease in marginal utility. Thanks.

You may ignore the following picture, "Figure 2". It was uploaded to illustrate something in response to a comment.


texts: Should the control variables in an econometric regression be correlated with both the dependent and the primary independent variables?

texts:
If, for instance, my dependent variable is some happiness index, and my independent variable is a dummy for whether they experienced some randomly occurred natural disaster. I am trying to analyze the effect of having experienced that disaster on the happiness index.

I am using a fixed effects model.

I have basically two interrelated questions:

What I read so far is that in regressions, control variables need to be correlated with both (primary) x and y variables. If that is the case I do not see a lot of variables that are correlated with both the disaster and happiness, besides:

Wealth (the poor are affected more by the disaster; wealth is also correlated to happiness)
Some disaster-induced variable like dummies for whether the disaster affected their water source, whether they had to live in a temporary shelter (tents), whether their livestock was killed, etc., which are all correlated with happiness.
However, I also think that if I control for both of these factors, then I am controlling for the mechanism in which an individual's happiness could be affected by the disaster, i.e. taking away the effect of the earthquake-induced factors in the second point above. Am I thinking correctly?

Is it plausible to control for factors like age, education, etc.? These factors influence happiness (may even influence post-disaster happiness), but these variables like age are not directly correlated with whether they experienced disaster or not. Am I thinking correctly?


texts: Social planner's first order condition (current-value Lagrangian)

texts:
Here is (one of the ways to state) social planner's problem:

Eric Sims' notes then immediately gives the solution:

I am trying to connect these two lines. This is what I get after taking a derivative with respect to consumption.

Question is: how did he get rid of expectation and discount factor?


texts:
My intuition tells me that an increase in interest rates will make saving more attractive and should encourage saving.

But if that is the case, why the MPS( marginal propensity of saving )doesn't include interest rates?


texts: Is price in this situation exogenous or endogenous?

texts: My supply function is $Q = a + bP + u$. My demand function is $Q = c + u$. The error terms $u$ in both equations are mutually i.i.d random variables with a mean of zero and a constant variance. My question is: since the demand curve is a constant, is price an endogenous or exogenous variable?


texts: Example of a utility maximization problem with a non-binding budget constraint

texts:
Given a utility function $U(x,y): \mathbb{R}^{2} \to \mathbb{R}$, the general utility maximization can be stated as follows:
$$
\max_{x, y} U(x,y) \text{ s.t. } p_{x}x + p_{y}y \leq m
$$
where the $p_{i}$ are prices, and $m$ is total income. In the Cobb-Douglas case, for example,
$$
U(x,y) = x^{\alpha} y^{1 - \alpha}
$$
for some $\alpha \in (0,1)$. We notice that in Cobb-Douglas, the more you buy, the more utility you get. Thus your budget constraint must hold with equality, because the more you spend, the more utility you get.

What are examples of utility functions that don't have positive marginal utility of income after some point? I can think of functions that have bliss points. For instance, if $U(x,y) = -(x-25)^{2} - (y-20)^{2}$, then $(25,20)$ is the best you can get, even if your income allows you to spend more. What are other examples of this?


texts: Does a structural variance break in one variable of a VAR model matter?

texts:
There is a structural variance break in one of my variables ($y_t$) for a VAR model (visually though). Using an AR(1) model and CUSUM square test, I was able to detect it.
However, after putting it into my 5-variable VAR model, the structural variance break is undetected in each of the 5 equations.
My guess is that a structural break in some variables of the VAR model does not necessarily make the parameters of the model (here, estimated variance-covariance matrix) unstable. Or could it be that the CUSUM square test has weak power to detect it?


texts: What is the best observable proxy for the instantaneous risk-free market interest rate?

texts:
I am exploring a number of different models using daily data, of the US economy, and am trying to gather up observable proxies for some of the most important macro and micro variables, and surveying methods of constructing nowcasting indicators for others. One of my goals is to produce a number of forecasts of what will happen today, i.e. in the next 24 hours, based on variables that are observable after we wake up in the morning, say between 6 and 9 AM. So I am looking for the best available market indicator of the interest rate that is observable at a moment in time, i.e. that is based on continuously reported transactions.

The best I have found so far is the overnight effective federal funds rate (EFFR). That is a big important number available at daily frequencies, but it is still a good ways away from the quality of, e.g., treasury bond yields, which are available pretty much minute-by-minute based on trades in a real market. And I worry that the EFFR may be fully or partially set by Fed policies, rather than private market forces. Can I do better than the EFFR, in terms either of frequency or market-based-ness? Should I be constructing the interest rate from the T-bill yields? What do people think is the best observable proxy or proxies?

Oh, and I should specify that I am looking for the nominal rate. I think I have some good daily proxies for inflation, so I'd like to keep these separate.


texts: Why do Eurozone members have a commonly higher Debt-to-GDP ratio?

texts:
As you could find out from the map, among 22 countries whose debt-to-gdp ratio is above 50%, only 7 are not Eurozone members, and from which only UK is comparably large economical entity.

Interestingly, according to Euro convergence criteria, to adopt the euro as one country's currency:

  The ratio of gross government debt (measured at its nominal value
  outstanding at the end of the year, and consolidated between and
  within the sectors of general government) relative to GDP at market
  prices, must not exceed 60% at the end of the preceding fiscal year.

So what's the reason behind that most Eurozone members have a higher Debt-to-GDP ratio?


texts: How are elasticity of demand, marginal revenue, and total revenue connected?

texts:
I am completely new to economics, and am looking at some old exam papers. The question is as following:

"In a normal marked, where there is a negative correlation between quantity and price, which of the following are true for elasticity of demand, marginal revenue, and total revenue?"

The correct alternative was:

d) When the absolute value of elasticity is 1, the marginal revenue is 0, and total revenue is maximized

I was wondering:

Why is the total revenue maximized when marginal revenue is 0? I know that, usually, total revenue is maximized when marginal revenue = marginal cost. In this case, however, no information is given about the marginal cost, so it does not make sense to me that it should be 0.

Also, is the marginal revenue always 0, when elasticity is exactly equal to 1? How does that make sense?


texts: etymology of TFP (total factor productivity)

texts:
In economics, total-factor productivity (TFP), also called
multi-factor productivity, is usually measured as the ratio of
aggregate output (e.g., GDP) to aggregate inputs.1 Under some
simplifications about the production technology, growth in TFP becomes
the portion of growth in output not explained by growth in
traditionally measured inputs of labour and capital used in
production.

https://en.wikipedia.org/wiki/Total_factor_productivity
How can factors "not explained by growth in traditionally measured inputs of labour and capital" come to be described as "total"? Etymology, please. It would seem like "not" implies "complements" and "complementary" so CFP sounds better than TFP.


texts: Interpreting coefficients with Delta ln as independant and dependent variables

texts:
Imagine we have a DGP such that

$$
\Delta \ln y_{it}=\beta\times\Delta\ln x_{it}
$$

How do you interpret the $\beta$ coefficient, since it is expressed in an approximation of a growth rate?

Thanks for your help


texts: Pareto optimality when the allocations are restricted

texts:
This question is about Pareto optimality (PO) in cake-cutting.

The basic definition is: an allocation is PO if there does not exist another allocation in which all players are weakly better off and at least one player is strictly better off. For example, consider the following cake (where "C" means Chocolate and "V" means Vanilla):

  CVCV

Suppose there are two players: Alice wants only chocolate and Bob wants only vanilla. Then, there is only one PO allocation, and that is to give slices 1 and 3 to Alice and pieces 2 and 4 to Bob.

Now, suppose we restrict the cake-cutting such that the pieces must be connected. With this restriction, there are two possible definitions of PO:

If we remain with the previous definition, then there exits no PO allocations with connected pieces, since the only PO allocation requires disconnected pieces.
On the other hand, we can change the definition and say that an allocation is PO if there does not exist another allocation with connected pieces in which all players are weakly better off and at least one player is strictly better off. Under this definition, of course there exist PO allocations, such as, giving slice 1 to Alice and slices 2-4 to Bob.

Both definitions are reasonable. My question is:

which definition is more common in the economics literature?


texts: What benefits do governments receive from not eliminating debt?

texts:
Most major economies have substantial government debt; for example among the OECD countries the lowest debt rate is Estonia with around 6% of GDP. Now we may be in a global recession at the moment, but even during the more prosperous times of the twentieth century most countries maintained substantial public debt. Here is a graph of the US federal debt:

And here is one of the UK's national debt:

(Both graphs via Wikimedia.)

What benefits do governments of advanced economies receive from not eliminating their debt?


texts: GDP per industry and per region in Europe

texts: I'm looking for a breakdown of GDP per region and industry in Europe. Do such data exist, ideally in the public domain? I'm looking for a breakdown of GDP per region and industry in Europe. Do such data exist, ideally in the public domain? If so, please identify and link to such sources.


texts:
What is the definition of a dollar now without gold backing?  It seems that a dollar is now just an entry in a book somewhere in some bank.  Or it is the federal reserve note?  Or is it both?  I understand the concept of the monetary base.  But what I don't understand is how this works.  If a dollar is in part just an entry in a book, what stops some bank from simply claiming they have an infinite amount of dollars?  Or is there some central registry that claims to keep track of how many dollars each bank has? (This would seem absurd to me.  How then would foreign banks holding US dollars keep track of how many dollars they had?)  If there is no central registry, then how do you prevent people claiming to have dollars on their books?

I think explaining what a dollar is would go toward answering these questions.


texts: increased demand but no increase in price?

texts:
I am teaching myself basic economics and I'm trying to understand supply and demand.
Recently, in my country, there was news of a strike by the petroleum suppliers. Expectations of an impending fuel shortage increased demand. (as evidenced by the long queues at petrol stations).

Now,by plotting the supply and demand curves, it seems apparent that an increase in demand would lead to an increase in equilibrium price and equilibrium quantity. However, in reality, during this time, none of the petrol stations increased the price of petrol. Is this because of government regulation of prices or due to some other factor?
Thanks


texts: How to make a timeline in given problem?

texts:
How much money should be deposited each year
  for 12 years if you wish to withdraw $309 each year for
  five years, beginning at the end of the 14th year? Let
  i = 8% per year.

In the problem what does "end of 14th year" refer to? Will that amount remaining will compound interest when deposited at the "end of 14th year"?