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Utility Loss (utility + loss)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Paying for Minimum Interest Rate Guarantees: Who Should Compensate Who?

EUROPEAN FINANCIAL MANAGEMENT, Issue 2 2001
Bjarne Astrup Jensen
Defined contribution pension schemes often have a mandatory minimum interest rate guarantee as an integrated part of the contract. The guarantee is an embedded put option issued by the institution to the individual who is forced to invest in the option. As argued in this paper, the individual may in this way face a constraint on the feasible set of portfolio choices. We quantify the effect of the minimum interest rate guarantee constraint and demonstrate that guarantees may induce a significant utility loss. We also consider the effects of the interest rate guarantee in the case of heterogenous investors sharing a common portfolio on a pro rata basis. [source]

Centralisation versus Decentralisation of Public Policies: Does the Heterogeneity of Individual Preferences Matter?,

FISCAL STUDIES, Issue 1 2008
Carlo Mazzaferro
This paper explores the role of the heterogeneity of fiscal preferences in the assignment of policy tasks to different levels of government (decentralisation versus centralisation). With reference to a sample of European countries, a median-voter mechanism of collective decision is assumed to work at both a national and a supranational level. Using data from a large international survey (the International Social Survey Programme, ISSP), a series of econometric models are estimated in order to make individual attitudes representative of different categories of public expenditure and of different countries. The dominance of decentralisation over centralisation or vice versa is determined on the basis of the utility loss that each individual suffers in connection with the distance between his or her own most preferred level of public expenditure and that chosen by the national/supranational median voter. The main finding is that, differently from the predictions of Oates's decentralisation theorem, the assignment of responsibilities at the supranational level (centralisation) for a number of public expenditure programmes (healthcare, education, unemployment benefits) dominates (or is close to dominating) decentralisation, even in the absence of economies of scale and interregional spillovers. However, when the possibility of interjurisdictional mobility is explicitly considered, in line with the predictions of Tiebout's model, decentralisation dominance becomes more and more substantial and also prevails in the sectors where, under the nonmobility assumption, the assignment of responsibilities at the supranational level is efficient. [source]

TIME-INCONSISTENCY AND WELFARE PROGRAM PARTICIPATION: EVIDENCE FROM THE NLSY,

INTERNATIONAL ECONOMIC REVIEW, Issue 4 2009
Hanming Fang
We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the National Longitudinal Surveys (NLSY) 1979, we provide estimates of the degree of time-inconsistency, and of its influence on the welfare take-up decision. With these estimates, we conduct counterfactual experiments to quantify a measure of the utility loss stemming from the inability to commit to future decisions, and the potential gains from commitment mechanisms such as welfare time limits and work requirements. [source]

Monetary Policy in a Forward-Looking Input,Output Economy

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 4 2009
BRAD E. STRUM
inflation targeting; price-level targeting; intermediate goods This paper examines the implications for monetary policy of sticky prices in both final and intermediate goods in a New Keynesian model. Both optimal policy under commitment and discretionary policy under simple loss functions are studied. Household utility losses under alternative loss functions are compared; additionally, the robustness of policy performance to model and shock misperceptions and parameter uncertainty is examined. Targeting inflation in both consumer and intermediate goods performs better than targeting inflation in one sector; targeting price levels of both final and intermediate goods performs significantly better. Moreover, targeting price levels in both sectors yields superior robustness properties. [source]