Aging, fertility, social security and political equilibrium

We analyze the effect of population aging on the political choice of the size of a pay-as-you-go (PAYG) social security system, incorporating the heterogeneity of individuals in their preference for having children, and hence the endogenous fertility choices of individuals, into a simple overlapping generations model. We show that population aging may result in an increase in the contribution rate, increasing the share of the retired population who prefer a higher contribution rate; and that, if the system involves redistribution between retirees with different contributions, the increased contribution rate raises the number of individuals who have children, i.e., future contributors.     

A Quantitative Theory of Unsecured Consumer Credit with Risk of Default

We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady‐state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macroeconomic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of “means testing” for households contemplating a Chapter 7 bankruptcy filing. We find that this policy change yields large welfare gains.     

Fertility, child care outside the home, and pay-as-you-go social security

We examine the long-run effects of the pay-as-you-go (PAYG) social security scheme on fertility and welfare of individuals in an overlapping generations model, assuming that child-care services are available in the market. We show that the impact of a tax increase on fertility depends on the relative magnitudes of the standard intergenerational redistribution effect through the social security system, the (implicit) subsidy effect through tax-exemption of child rearing at home, and the price effect through changes in the relative price of market child care, and that if parental child-rearing time is inelastic, a tax cut could bring about a Pareto-improving allocation.

A two-stage procedure for estimating a linear function of K multinormal mean vectors when covariance matrices are unknown

We consider the problem of constructing a fixed-size confidence region for a linear function of mean vectors of k multinormal populations, where all covariance matrices are completely unknown. A two-stage procedure is proposed to construct such a confidence region. It is shown that the proposed two-stage procedure is consistent and its asymptotic property for the expected sample size is also given. A Monte Carlo simulation study is given for an illustration.     

Second-order properties of improved two-stage procedure for a multivariate normal distribution

We consider the classical two problems: (I) fixed-size confidence region estimation problem, and (II) bounded risk point estimation problem, for the mean vector μ in the N_p(μ, ∑) population when ∑ is unknown and positive definite. Healy's (1956) solution given by a two-stage procedure for the prob¬lem (I) is improved in terms of the sample size. The second-order properties of the solution to each problem are verified under the assumptions that the maximum latent root which is simple of ∑ is bounded below for (I) and tr(∑) is bounded below for (II), by respective known and positive number.     

Population Decline,Labor Force Stability,and the Future of the Japanese Economy

Demographic trends in Japan are producing a declining population that is rapidly growing older. With a total fertility rate of around 1.3 children per woman, the population has already begun to decline. This article examines the impact of these demographic trends on the level of employment and economic growth that Japan is projected to experience over the next 20 years. We explore the effect of changes in labor market policies on age-specific employment rates and assess whether innovative policies can moderate the decline in employment. Public policies encouraging increased employment of women and persons aged 60 and older could partially offset the anticipated decline in employment. The importance of the Japanese experience for European policy makers is discussed.     

Non-expected utility maximizers behave as if expected utility maximizers: An experimental test

We investigate the behaviors of subjects who either do or do not adhere to the expected utility theory using the Becker–DeGroot–Marschak (BDM) method. We directly examine the validity of the expected utility theory in order to distinguish subjects into two groups: those who adhere to the expected utility theory (expected utility maximizers) and those who do not adhere to it (non-expected utility maximizers), and then execute the BDM experiment in the both groups. We find that the differences in the stated prices between the expected and non-expected utility maximizers are not significant. This result implies practical usefulness for the BDM method.     

Spontaneous Facial Expressions Reveal New Action Units for the Sad Experiences

Facial expressions related to sadness are a universal signal of nonverbal communication. Although results of many psychology studies have shown that drooping of the lip corners, raising of the chin, and oblique eyebrow movements (a combination of inner brow raising and brow lowering) express sadness, no report has described a study elucidating facial expression characteristics under well-controlled circumstances with people actually experiencing the emotion of sadness itself. Therefore, spontaneous facial expressions associated with sadness remain unclear. We conducted this study to accumulate important findings related to spontaneous facial expressions of sadness. We recorded the spontaneous facial expressions of a group of participants as they experienced sadness during an emotion-elicitation task. This task required a participant to recall neutral and sad memories while listening to music. We subsequently conducted a detailed analysis of their sad and neutral expressions using the Facial Action Coding System. The prototypical facial expressions of sadness in earlier studies were not observed when people experienced sadness as an internal state under non-social circumstances. By contrast, they expressed tension around the mouth, which might function as a form of suppression. Furthermore, results show that parts of these facial actions are not only related to sad experiences but also to other emotional experiences such as disgust, fear, anger, and happiness. This study revealed the possibility that new facial expressions contribute to the experience of sadness as an internal state.     

An axiomatization of the Kalai-Smorodinsky solution when the feasible sets can be finite

We axiomatize the Kalai-Smorodinsky solution (1975) in the Nash bargaining problems if the feasible sets can be finite. We show that the Kalai-Smorodinsky solution is the unique solution satisfying Continuity (in the Hausdorff topology endowed with payoffs space), Independence (which is weaker than Nash's one and essentially equivalent to Roth (1977)'s one), Symmetry, Invariance (both of which are the same as in Kalai and Smorodinsky), and Monotonicity (which reduces to a little bit weaker version of the original if the feasible sets are convex). Received: 4 November 1999/Accepted: 6 June 2001