A simple way to obtain the spectral decomposition of variance components models for balanced data

By means of an example it is shown how eigenvalues and eigenvectors of variance components models can be obtained straightforwardly when balanced data are available. Simple asymptotically efficient estimators of the variance components are presented.     

The individual welfare function: A review

The Individual Welfare Function (IWF), introduced by Van Praag (1968), is a cardinal utility function. It can be measured by means of survey questions. Since its introduction, the IWF has been used extensively in both theoretical and empirical research. This research is reviewed, with an emphasis on policy applications.     

Subjective measures of risk aversion, fixed costs, and portfolio choice

The paper investigates risk preferences among different types of individuals. We use several different measures of risk preferences, including questions on choices between uncertain income streams suggested by Barsky, Juster, Kimball, and Shapiro (1997) and a number of ad hoc measures. As in [Barsky et al., 1997] and [Arrondel and Calvo-Pardo, 2002], we first analyze individual variation in the risk aversion measures and explain them by background characteristics (both “objective” characteristics and other subjective measures of risk preference). Next we incorporate the measured risk preferences into a household portfolio allocation model, which explains portfolio shares, while accounting for incomplete portfolios and fixed costs. Our results show that a measure based on factor analysis of answers to a number of simple risk preference questions has the most explanatory power. The Barsky et al. (1997) measure has less explanatory power than this “a-theoretical” measure, suggesting that sophisticated measures based on economic theory may exceed the financial capability of respondents. Fixed costs turn out to provide an economically and statistically highly significant explanation for incomplete portfolios.     

What can we learn from (and about) global aging?

Although aging is a global phenomenon, there are large differences across countries in both the speed of aging and the current age composition. Furthermore, countries adopt vastly different policies. This creates a natural laboratory that scientists can use to understand how policies affect outcomes. I discuss under what circumstances data from different countries can be used for inference about policy effects. Although comparable health and retirement data are currently being collected in some 25 countries, the use of such data requires careful modeling of differences in institutions and in response styles across countries.     

The measurement of household cost functions: revealed preference versus subjective measures

Since the work of Pollak and Wales (1979), it is well-known that demand data are insufficient to identify a household cost function. Hence additional information is required. For that purpose I propose to employ direct measurement of feelings of well-being, elicited in surveys.In the paper I formally establish the connection between subjective measures and the cost function underlying the AID system. The subjective measures fully identify cost functions and the expenditure data do this partly. This makes it possible to test the null hypothesis that both types of data are consistent with one another, i.e. that they measure the same thing. I use two separate data sets to set up a test of this equivalence. The outcomes are somewhat mixed and indicate the need for further specification search. Finally, I discuss some implications of the outcomes.Presidential address delivered at the seventh annual meeting of the European Society for Population Economics, June 2–5, Budapest, Hungary. A first version was presented at the meetings of the Allied Social Sciences Associations, Anaheim, California, January 5–7, 1993. The author thanks Rob Alessie for help with the data, and the Netherlands Central Bureau of Statistics for their permission to use the data. Both Rob Alessie and an anonymous referee made very helpful comments on an earlier version.     

Empirical evidence on preference formation

To explain the empirical fact that different individuals have different individual welfare functions, a theory of preference formation has been developed by the first author. The theory essentially states that an individual's welfare function is identical to the distribution of consumption patterns the individual has observed over time. This includes both his own consumption and the consumption by others in his social reference group. The paper reviews the evidence collected with respect to directly measured individual welfare functions in Europe. Evidence obtained in related research by economists, psychologists, and sociologists is also discussed.     

Errors in variables: consistent adjusted least squares (cals) estimation

A single equation errors-in-variables model is considered. Exact restrictions on the parameters in the model are assumed to be available such that the model is just-identified. A Consistent Adjusted Least Squares (CALS) estimator for this model is proposed and its asymptotic distribution is given. Special cases are given as illustrations. CALS is identical to the Method of Moments (MM), and to Maximum Likelihood (ML) under the structural interpretation. Under the functional interpretation it is identical to ML in cases where the latter method is consistent.     

Why do some Irish drink so much? Family, historical and regional effects on students’ alcohol consumption and subjective normative thresholds

This paper studies determinants of drinking behavior and formation of subjective thresholds of acceptable drinking behavior using a sample of students in a major Irish University. We find evidence of strong associations between amounts of alcohol students consume and drinking of their fathers and older siblings. In contrast, we find little evidence of impacts of other non-drinking aspects of family background on students’ drinking. Parental and older sibling drinking appears to affect subjective attitudes of students towards what constitutes problem drinking behavior. We investigated historical origins of drinking behavior including the role of the Church, English cultural influences, the importance of the brewery and distilling industry, and the influence of weather. We find relatively strong influences of the Catholic Church and English colonial settlement patterns on Irish drinking patterns but little influence of Irish weather. Historical licensing restrictions on the number of pubs and off-license establishments also appear to matter.     

The individual welfare function : A rejoinder

The Individual Welfare Function (IWF), introduced by Van Praag (1968), is a cardinal utility function. It can be measured by means of survey questions. Since its introduction, the IWF has been used extensively in both theoretical and empirical research. This research is reviewed, with an emphasis on policy applications.     

Commentary on “Anchoring and Acquiescence Bias in Measuring Assets in Household Surveys”

Journal of Risk and Uncertainty -