Search results for "Marginal utility"
showing 6 items of 6 documents
The shape of small sample biases in pricing kernel estimations
2016
AbstractNumerous empirical studies find pricing kernels that are not-monotonically decreasing; the findings are at odds with the pricing kernel being marginal utility of a risk-averse, so-called representative agent. We study in detail the common procedure which estimates the pricing kernel as the ratio of two separate density estimations. In the first step, we analyse theoretically the functional dependence for the ratio of a density to its estimated density; this cautions the reader regarding potential computational issues coupled with statistical techniques. In the second step, we study this quantitatively; we show that small sample biases shape the estimated pricing kernel, and that est…
Household debt and labor market fluctuations
2011
Abstract The co-movements of labor productivity with output, total hours, vacancies and unemployment have changed since the mid 1980s. This paper offers an explanation for the sharp break in the fluctuations of labor market variables based on endogenous labor supply decisions following the mortgage market deregulation. We set up a search model with efficient bargaining and financial frictions, in which impatient borrowers can take an amount of credit that cannot exceed a proportion of the expected value of their real estate holdings. When borrowers' equity requirements are low, the impact of a positive technology shock on the marginal utility of consumption is strengthened, which in turn re…
Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve
2009
The paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, the environmental quality affects positively not only to utility but also to production. However, cleaner technologies can be used in the economy whether a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low then the shadow price of a cleaner technology is low relative to the cost of developing it given by the marginal utility of consumption and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulati…
Money in an Estimated Business Cycle Model of the Euro Area
2006
We present maximum likelihood estimates of a small scale dynamic general equilibrium model for the Eurozone. We pay special attention to the role of money, both through its direct effect upon private agents’ decisions and as a component of the monetary policy rule. Our results can be summarized as follows. First, we find no direct effect of money upon inflation and output but money growth plays a significant role in the interest rate rule. Second, money demand shocks mainly help to forecast real balances while real shocks explain the bulk of price, output and interest rates fluctuations. Third, the estimated model predicts sensible conditional correlations among those variables both to dema…
AN ECONOMIC APPROACH TO THE STUDY OF LAW IN THE EIGHTEENTH CENTURY: GAETANO FILANGIERI AND LA SCIENZA DELLA LEGISLAZIONE
2011
This work presents the elements of economic analysis of law that occur in the thought of Gaetano Filangieri. In the pages of La Scienza della Legislazione the Neapolitan writer develops a utilitarian and economic investigation that pays attention to the judgments individuals make over social phenomena at the margin point. A proof of this development can be found in the explanation of the principle of decreasing marginal utility, argued in Head XXXI of Book III, which represents one of the most effective demonstrations that can be found before the end of nineteenth-century literature. The most remarkable fact is that, of all the five parts that compose the Filangierian work, the most rich in…
Adjusting to Climate Change: Implications of Increased Variability and Asymmetric Adjustment Costs for Investment in Water Reserves
1997
Abstract In this paper we study the determination of optimal water storage capacity in a region, taking into account that the supply of the resource, the flow into the reserve, is uncertain, that a measure of the uncertainty, the variance, is likely to increase with climate change, that building capacity is costly, and that the development of water resources may entail alsoenvironmental costs. We find that water storage capacity in the long run ispositivelyrelated to increases in uncertainty if the marginal benefit of water withdrawal isconvexand that, for the case of costly reversibility of investment, a range of inaction for investment appears, and the stability of water storage capacity …