A regression-based smoothing spline Monte Carlo algorithm for pricing American options in discrete time

American options in discrete time can be priced by solving optimal stopping problems. This can be done by computing so-called continuation values, which we represent as regression functions defined recursively by using the continuation values of the next time step. We use Monte Carlo to generate data, and then we apply smoothing spline regression estimates to estimate the continuation values from these data. All parameters of the estimate are chosen data dependent. We present results concerning consistency and the estimates’ rate of convergence.     

How to measure and proxy permanent income: evidence from Germany and the U.S.

Permanent income (PI) is an enduring concept in the social sciences and is highly relevant to the study of inequality. Nevertheless, there has been insufficient progress in measuring PI. We calculate a novel measure of PI with the German Socio-Economic Panel (SOEP) and U.S. Panel Study of Income Dynamics (PSID). Advancing beyond prior approaches, we define PI as the logged average of 20+ years of post-tax and post-transfer (“post-fisc”) real equivalized household income. We then assess how well various household- and individual-based measures of economic resources proxy PI. In both datasets, post-fisc household income is the best proxy. One random year of post-fisc household income explains about half of the variation in PI, and 2–5 years explain the vast majority of the variation. One year of post-fisc HH income even predicts PI better than 20+ years of individual labor market earnings or long-term net worth. By contrast, earnings, wealth, occupation, and class are weaker and less cross-nationally reliable proxies for PI. We also present strategies for proxying PI when HH post-fisc income data are unavailable, and show how post-fisc HH income proxies PI over the life cycle. In sum, we develop a novel approach to PI, systematically assess proxies for PI, and inform the measurement of economic resources more generally.     

Informal Food Production in the Enlarged European Union

How widespread is the production of food in old and new member states of the European Union and what is the social meaning or logic of such activities? We show that growing food is (a) more widespread in former communist countries than in traditional market economies and (b) is predominantly a hobby or recreational activity in affluent countries, but a coping strategy in reaction to experienced difficulties in making ends meet in poorer nations, and especially so in the former communist countries.     

Perception of HIV risk and the quantity and quality of children: the case of rural Malawi

The empirical literature on the impact of HIV on the quality (Q) and quantity (N) of children provides limited and somewhat mixed evidence. This study introduces individual HIV risk perceptions, as a predictor of mortality, into a Q–N investment model. In this model, higher maternal mortality predicts lower N, while higher child mortality predicts lower Q. Thus, the two effects together make likely negative associations between HIV and both Q and N. Based on longitudinal micro-data on mothers and their children in rural Malawi, our results suggest that higher mothers’ reported HIV risk reduces both child quality, as reflected in children’s schooling and health, and child quantity, when the perceived risk is already moderate or high. The effects are sizable and, in the case of Q (schooling and health), are found for children and teenagers, both boys and girls, while in the case of N, they are found for young and mature women.     

Marital Aspirations,Sexual Behaviors,and HIV/AIDS in Rural Malawi

We explore how marital aspirations are related to the sexual behaviors of adolescents and young adults in Malawi, where HIV/AIDS prevalence among adults exceeds 10%. We also consider whether the specter of AIDS is shaping ideals about marriage. By combining survey data (N = 1,087) and in‐depth interviews (N = 133) with young Malawians from the Malawi Diffusion and Ideational Change Project, we show that looking for and finding a suitable spouse are linked to sexual behaviors and, thus, HIV risks. Moreover, concerns about contracting HIV are closely tied to the ideal characteristics of a future spouse. Our findings draw long‐overdue attention to the importance of marital aspirations in understanding adolescent sexual behaviors and risks in the era of AIDS.     

Globalisierung und die Veränderung sozialer Ungleichheiten in modernen Gesellschaften

This article deals with the effects of globalization on individual life courses and employment careers and the resulting changes in patterns of social inequality in modern societies. Empirically, we draw back to results from the international research project GLOBALIFE which studied the effects of globalization on modern life courses for the first time. The results show that the effects of globalization on individual life courses show marked differentiation with regards to specific life course phases: while especially the employment of mid-career men remained considerably stable under globalization, the careers of young adults, mid-career women as well as late-career workers underwent significant alterations. At the same time, results from the GLOABLIFE study indicate that the changes induced by globalization have not yet led to identical results at the national level. Globalization appears to be differentially filtered by deeply embedded and path-dependent national institutions. These “institutional packages” entail variable forms of labour market “flexibilisation” which themselves differentially shape patterns of social inequality in modern societies: While Scandinavian countries have largely succeeded in limiting an increase in social inequality under globalization through active public welfare engagement, globalization has led to a significant amplification of social inequalities in other regime types, either between labour market insiders and outsiders (in conservative and Southern European countries) or between individuals with different human capital resources (in liberal countries).