Arthur J. Hosios

On The Efficiency of Matching and Related Models of Search and Unemployment

This paper describes a simple framework for evaluating the allocative performance of economies characterized by trading frictions and unemployment. This framework integrates the normative results of earlier Diamond-Mortensen-Pissarides bilateral matching-bargaining models of trade coordination and price-setting, and consists of a set of general conditions for constrained Pareto efficient resource allocation that are applicable to conventional natural rate models. To illustrate, several conventional models of the labour market are reformulated as matching-bargaining problems and analyzed using this framework.

Measuring prices in resale housing markets in Canada: Evidence and implications*

The standard measure of resale prices in Canadian housing markets is the average price of units sold through the Multiple Listing Service (MLS). The widely-acknowledged limitation of MLS data is that the mix of units sold can vary over time. We use data for the City of Toronto from 1974 to 1989 to construct a quarterly price index based exclusively on the repeat sales of identical units. We use data on building permits to eliminate from the sample those dwelling units in which major renovations or improvements have occurred. We find quantitatively important differences in house price movements calculated from this benchmark index and the corresponding MLS index. Since house price movements do influence policy, we propose that the federal government estimate and publish an improved index of resale prices. We also find that house price movements, correctly measured, exhibit both persistence and a pronounced seasonal pattern. These, too, have potential implications for housing policy.

Factor Market Search and the Structure of Simple General Equilibrium Models

This paper presents a simple general equilibrium model in which unemployed workers search for jobs and vacant firms search for employees. Formally, I develop a two-sector, constrained efficient version of the Diamond-Mortensen-Pissarides matching model of trade coordination. This approach to modeling factor market search appears promising since its algebraic development parallels Joness treatment of the two-sector model of production, and the latter framework underlies most applied general equilibrium analyses. Some illustrative short-run and steady-state results are presented concerning the behavior of open and closed economies that exhibit unemployment and vacancies.

Repeated Insurance Contracts with Adverse Selection and Limited Commitment

In this paper we describe the sequential equilibria of a two-period monopoly with asymmetric information and limited commitment in the market for accident insurance. The role of learning is analyzed; and the possible sequential pooling, semiseparating, and separating equilibria are described (where the probability that a buyer will make a revealing first-period contract choice is equal to zero, is positive, and is equal to one, respectively). In the absence of discounting, we show that only pooling and semiseparating equilibria exist; provide a limited characterization of when these equilibria occur; and show that accident-contingent insurance and accident underreporting occur with positive probability along the equilibrium path of the game.

Interest‐Free Loans between Villagers

Interest‐free loans are a common feature of low‐income rural economies. In much of the economics literature, lending at zero and positive interest are viewed as being highly segmented in the community, with interest‐free loans an essential component of long‐term mutual consumption agreements between households. An alternative interpretation is that zero‐interest loans are a credit contract that, in lieu of interest, includes an option allowing the lender to tax the borrower at a future date. This option can take a variety of forms, including the provision of labor or draft animal services or possibly a future loan. In this paper, we develop and test a model of household contract choice between zero– and positive–interest rate loans that builds on this alternative perspective. It highlights the role of borrower and lender attributes and the economic environment in which they interact in determining contract choice. Enforcement considerations are secondary. We use a unique household‐level data set for rural China for the mid‐1930s to examine key predictions of the model.

IDA: An interactive data analysis system for clinical and experimental research

Abstract IDA is a general-purpose Interactive Data Analysis tool for small to medium size data bases, suitable for very small computers, as well as larger ones. It is aimed at users with little or no computer experience. IDA combines facilities for interactive data entry and editing, selective retrieval, and data analysis and presentation. All operations are controlled by the user through a simple and highly interactive dialogue. The user can specify complex logical relationships and arithmetic operations, and can request graphs, histograms, lists, tables and simple statistics.

Short-run and long-run equilibrium for a small open economy with intermediate goods

Abstract This paper analyzes the effects of changes in relative commodity prices on factor returns and the allocation of factor supplies in a two-sector general-equilibrium model with intermediate goods and various time-horizons. It is shown that when intermediate goods are introduced into the standard Heckscher-Ohlin model, there can be (i) nonstandard very short-run and short-run income effects and (ii) nonstandard short-run and long-run reallocations. The paper concludes with a discussion of the possible conflict of interests among factor-owners with respect to pricing (tariff) policy in light of these results.

Self-Selection and Monitoring in Dynamic Incentive Problems with Incomplete Contracts

A dynamic trading problem is examined in which a monopsonistic employer tries to hire workers whose productivities and reservation wages are private information. The employer can only observe an employees quality indirectly by monitoring a non-verifiable measure of on-the-job performance. The employer makes contract offers which employees can accept or reject. Once a contract has been accepted it is impossible for the employer to exchange messages with individual employees. On the unique stationary equilibrium path for the contracting game, the employer chooses between two mutually exclusive outcomes. In the market outcome, the employer offers long-term contracts and information is conveyed entirely through self-selection and delayed production. In the monitoring outcome, the employer offers short-term contracts, and contract renegotiation is conditioned by an employees past performance. A simple characterization theorem is provided which illustrates the often surprising effects of improvements in information in this setting. For example, an employer who is initially offering short-term contracts to exploit performance information may stop monitoring and shift to market screening when the monitoring technology becomes more informative.

Monitoring Price Behaviour in the Resale Housing Market: A Note on Measurement and Implications for Policy

The authors compare their constant-quality index of house prices in Toronto for the period 1974-89 with the standard Multiple Listing Service (MLS) index, which has widely acknowledged limitations. The short-run signals regarding price movements often diverge, and the MLS index suggests a more rapid rate of price escalation. They review the importance of accurate measures of resale prices to the formulation of housing policy, and to the related issue of whether the housing market is efficient.

Scheduling medical students to teaching hospitals

Abstract This paper describes a scheduling technique that has been successfully used to allocate medical students to the teaching hospitals affiliated with a university. The problem is to schedule individuals so that (i) every student is assigned a preferred sequence of medical activities in specific hospitals, and (ii) the difference between the maximum number of students allowed at each available hospital-medical activity-period position and those allocated to these positions is both nonnegative and approximately the same. The contribution of the present work is in the formulation of the problem, and the resulting ease with which good solutions to large-scale scheduling problems can be generated. The mathematical formulation of the problem is presented first and subsequently, the solution strategy is described. The results for two large medical classes at the University of Montreal are also presented.