An experimental investigation of risk sharing and adverse selection

Does adverse selection hamper the effectiveness of voluntary risk sharing? How do differences in risk profiles affect adverse selection? We experimentally investigate individuals’ willingness to share risks with others. Across treatments we vary how risk profiles differ between individuals. We find strong evidence for adverse selection if individuals’ risk profiles can be ranked according to first-order stochastic dominance and only little evidence for adverse selection if risk profiles can only be ranked according to mean-preserving spreads. We observe the same pattern also for anticipated adverse selection. These results suggest that the degree to which adverse selection erodes voluntary risk sharing arrangements crucially depends on the form of risk heterogeneity.     

Giving in the face of risk

Decisions about how to share resources with others often need to be taken under uncertainty regarding its allocational consequences. Although risk preferences are likely important, existing research is silent about how social and risk preferences interact in such situations. In this paper we provide experimental evidence on this question. In a first experiment givers are not exposed to risk while beneficiaries’ final earnings may be larger or smaller than the allocation itself, depending on the realized state of the world. In a second experiment, risk affects the earnings of givers but not of beneficiaries. We find that individuals’ risk preferences are predictive for giving in both experiments. Increased risk exposure of beneficiaries tends to decrease giving whereas increased risk exposure of givers has no effect. We propose a simple non-linear generalization of a model allowing for other-regarding preferences, ex-post and ex-ante fairness, and risk aversion. We find some support for it in our data when risk is on the beneficiaries’ side but less so when risk is on the givers’ side. Our results point to the importance of the further development of models of social preferences that also incorporate risk preferences.     

The trinity of wage setting in EMU: A policy proposal

Diverging labor cost developments are often considered to be one of the most important factors that led to large current account imbalances in the euro area (EA) in the run-up to the global financial crisis. It has also been shown that wage growth differentials have significantly lowered the co-movement of EA countries’ business cycles – the most widely used meta-criterion for optimum currency areas. Against this background, this paper develops a wage-setting benchmark that aims to keep the economy in internal equilibrium and to maintain price stability, while it also exhibits the capacity to correct for external imbalances. The proposed wage benchmark is very simple and may serve as an anchor for the macroeconomic dialogue in Economic and Monetary Union. In order to demonstrate the potentially beneficial effects of such a wage benchmark we present some simulations showing how current account balances and labor costs would have developed across EA countries if the rule had served as a benchmark already in the run up to the crisis.     

How to Spend Public Money Efficiently: A Cost-Effectiveness Model Illustrated Using the EU’s “Youth”-Program

Since it is crucial for public entities to spend the taxpayer’s money effectively and efficiently, we have analyzed the methods used to check for the two criteria in the European Union’s “Youth”-program. We find that the currently applied method is not theoretically sound and hardly politically justifiable. Therefore, we present a new approach which includes the important aspects that a public organization needs to respect. It is theoretically correct and fulfills economic standards; it is valid in political standards; it is feasible; and it is easily understandable for a large public. We singled out two factors which are readily observable and a good proxy for the decision if a project is worthy to be supported by public funds: the number of people reached and the quality of the program proposed.     

New directions for management accounting

Using a general systems rationale, this paper develops a theoretical structure for approaching the problem of management accounting. The management control problem is explicated in terms of maintaining a relationship between the enterprise's structure and its environment. An enterprise's structure is composed of three elements (and their inter-relations): a decision and control subsystem; a financial funds subsystem and an operating (physical transforms) subsystem. Portrayed in these terms, the problem of management accounting is shown to require a methodology which is able to take cognizance of economic, sociological, psychological and other aspects of the enterprise system. The model described here provides a general intellectual frame of reference for ordering the problem.     

Researching social care for minority ethnic older people: implications of some Scottish research

Summary The paper explores issues raised by research on patterns ofwelfare and mutual care among older Pakistani people and theirfamilies, with particular reference to their use, or lack ofuse of social care services. Qualitative interviews were conductedwith (self-defined) minority ethnic older people, professionalsin statutory services and in minority-led community-based groups.The organization of services is discussed, with special referenceto issues of power and control, the role of the voluntary (non-profit)and statutory sectors, the debate regarding the possible needfor specialist versus generic services, and the role of minority-ledinitiatives. Secondly, issues of service staffing are examined,and the dangers of marginalizing minority services and staffreviewed, especially with reference to divisions of labour inservice provision and staff's own perspectives. Thirdly, themethodological implications of the work are explores, includingissues of linguistic and cultural communication and workingwith relatively powerless social groups, whose views are sought.Examining the views of professional social care workers is alsoproblematized, with reference to their gate-keeping role. Itis argued that user perspectives are essential to the developmentof appropriate services for minority ethnic groups. In conclusion,the need to raise these issues in other work is discussed.     

Dividing Justly in Bargaining Problems with Claims

Theoretical research on claims problems has concentrated on normative properties and axiomatizations of solution concepts. We complement these analyses by empirical evidence on the predictability of three classical solution concepts in a bankruptcy problem. We examine both people’s impartial normative evaluations as well as their actual negotiation behavior in a bargaining with claims environment. We measure people’s judgments on the normative attractiveness of solution concepts with the help of a survey and also observe actual agreements in a bargaining experiment with real money at stake. We find that the proportional solution is the normatively most attractive rule, whereas actual negotiation agreements are closest to the ‘constrained equal-award’ solution.     

Hormone profiles,body mass index and aging male symptoms: results of the Androx Vienna Municipality study

Aging in the male is accompanied by steroid hormonal decline, and men may develop symptoms associated with hypogonadism. Increased awareness of ‘andropause’ in recent years has led to greater demand for hormonal assessments, resulting in a rising burden for health economics. We conducted a cross-sectional study to define men at risk for hypogonadism, in whom further hormonal investigation should be performed.

We examined 664 blue-collar workers aged 40–60 years at their workplace and determined hormonal status and body mass index (BMI). Men with an abnormal urogenital status and those on medication that might affect endocrine status were excluded from the study. All participants completed the validated Aging Male Symptom (AMS) questionnaire and obtained scores for psychological symptoms, somatovegetative symptoms, and sexual symptoms.

Multiple logistic regression analyses revealed a significantly increased risk (represented by the odds ratio) of psychological symptoms for men with low levels of testosterone and/or bioavailable testosterone (BAT). Increased BMI as well as low testosterone levels and/or low BAT levels raised the risk of somatovegetative symptoms. Each decrease of BAT by 1?ng/ml caused an approximately 1.8-fold increase of the risk (odds ratio?=?1.832, p?=?0.005). Additional independent risk factors were increased age and low luteinizing hormone (LH) level. Men aged 55 years with BMI >?28?kg/m² and with somatovegetative symptoms and moderate or severe psychological symptoms had a 7.2-fold increase in the risk of a BAT level <?1.5?ng/ml compared to men without these risk factors (p <?0.001). Sensitivity and specificity were 75% and 71%, respectively.

The AMS score combined with age and BMI provides an easy and convenient method to identify men with probable androgen deficiency who require hormonal assessment.     

Keep it simple: estimation strategies for ordered response models with fixed effects

By running Monte Carlo simulations, we compare different estimation strategies of ordered response models in the presence of non-random unobserved heterogeneity. We find that very simple binary recoding schemes deliver parameter estimates with very low bias and high efficiency. Furthermore, if the researcher is interested in the relative size of parameters the simple linear fixed effects model is the method of choice.