Gerhard O. Orosel

Informational efficiency and welfare in the stock market

Abstract In an overlapping generations model each generation invests a given budget into a portfolio consisting of risky shares and a riskless asset. In each period all agents receive information about the future dividends of the shares. There is a unique stationary equilibrium. This equilibrium is not constrained efficient in the sense that there exists a (non market-clearing) share price such that all agents would be better off, if the shares were exchanged at this price. Further, for certain stochastic environments the public information is socially harmful, and we derive a necessary and sufficient condition for this to occur.

Quality Diversity and Prices in Markets for Experience Goods

We analyze vertical product differentiation in a model where a good’s quality is unobservable to customers before purchase, a continuum of quality levels is technologically feasible, and minimum quality is supplied by a competitive fringe of firms. After purchase the true quality of the good is revealed. To provide firms with incentives to actually deliver promised quality, prices must exceed unit variable costs. We show that for a large class of customer preferences there is “quality polarization,” that is, only minimum and maximum feasible quality are available in the market. For the case without quality polarization we derive sufficient conditions for the incentive constraints to completely determine equilibrium prices, regardless of demand, for all intermediate quality levels.

A note on the factor-price frontier

ConclusionsFor an economist the possibility of an upward sloping factorprice frontier is extremely surprising. It has been shown that although such a factor-price frontier is theoretically possible, it is not very likely that it can occur under given economic and technical conditions since it would imply that capitalists are a class of borrowers (from nature) whereas we can be fairly sure that they are a class of lenders.

Inheritance and Inequality when Wealth Enters the Utility Function

The distribution of wealth and its dynamic development are analyzed within a non-overlapping generations model. All individuals have identical preferences and abilities. Wealth is represented by land, which is available in fixed aggregate supply. Utility depends on a perishable consumption good and—due to a bequest and/or a prestige motive—in addition on land owned. Two configurations can occur as long run equilbrium: equality and two class dichotomy. All Two Class Equilibria are unstable. The Equality Equilibrium is unstable if and only if land is sufficiently productive. In the case of instability there is a process towards maximal concentration of wealth.

Capital formation as a problem of economic theory some aspects

ZusammenfassungDen Ausgangspunkt bildet die Diskussion über den Kapitalmangel und die Auswirkungen des öffentlichen Sektors auf die Kapitalbildung. Ziel des Aufsatzes ist die Herausarbeitung von verschiedenen Problemen, die zur Folge haben, daß die Wirtschaftstheorie wichtige Fragen über die gesamtwirtschaftliche Realkapitalbildung nicht beantworten kann.Zunächst ergibt eine Untersuchung der Kriterien, die für die Begründung eines Kapitalmangels üblicherweise herangezogen werden, daß diese Kriterien unzureichend sind. Dann wird anhand von drei Gegenüberstellungen illustriert, daß die Sicht des Prozesses der Kapitalbildung entscheidend von Basishypothesen über Sparverhalten, Investitionsverhalten und Rolle der Finanzmärkte geprägt wird, die zu völlig entgegengesetzen Schulußfolgerungen führen können. Weiters wird für den Bereich des öffentlichen Sektors der Einfluß der Gewinnbesteuerung und der staatlichen Pensionsversicherung erörtert und gezeigt, daß die theoretische Analyse keine eindeutigen Aussagen zuläßt, und daß auch die zahlreichen empirischen Studien keine Klärung der offenen Fragen gebracht haben. Zur Frage Kapitalbildung und Wirtschaftswachstum wird mit Hilfe eines didaktischen Modells dargelegt, wie unerwartete Rückwirkungen zu dem paradoxen Ergebnis führen können, daß eine Investitionsförderung die Verringerung von Wachstum und Investitionsquote zur Folge hat.Der Aufsatz schließt mit vier Thesen:1.Es gibt keine wissenschaftlich befriedigenden (hnd empirisch anwendbaren) Kritieren für einen “Kapitalmangel”.2.Die unmittelbaren Effekte des öffentlichen Sektors auf die Kapitalbildung sind theoretisch und empirisch ungeklärt.

A linear growth model including education

Education is a produced means of production and should be taken into account in models of economic growth. In the present article a growth model of the von Neumann type including education is investigated. The model consists of a disaggregated commodity sector and a disaggregated educational sector. Both sectors are treated simultaneously and the interdependence of the two sectors is allowed for. Hence the level of production as well as of educational activities are an outcome of the model and so is in the generalized version of section 5 with learning by doing the relation of formal eduction versus informal training at work. It can be shown that for any exogeneously given growth rate of the labour force not exceeding a technologically given upper bound there exists an equilibrium growth path of the economy with exactly this growth rate and therefore assuring maintenance of the initial employment ratio, hence possibly of full employment. This required growth rate is reached by fixing the wage for uneducated labour in such a way, that the resulting income distribution generates savings just sufficient for financing the investments necessary in order to realize this growth rate at equilibrium prices and activities. Activity levels, relative prices, including the prices for education and the differential wages, and the rate of interest are determined by the equi-

Discussion of Seidl’s Paper

The paper deals with a wide range of topics, covering the definition of rights, justice, efficiency versus equality of rights, conflicts of rights and basic rights. It starts with Sen’s well-known theorem on the impossibility of a Paretian liberal and ends with a discussion of the dangers of democracy. There is a diversity of interesting ideas, but it is difficult to see the main message of the paper. A related problem is the lack of an explicit model, which would specify, for example, what each agent knows at which point of time. Instead, the author seems to switch between different implicit models. In the following remarks I shall give a selection of comments on Sections 2 to 5 of the paper; the paper’s first section is only a restatement of known results and the last section mainly repeats arguments and judgements from the public choice literature.

Price rigidity, international mobility of financial capital and exchange rate volatility

Abstract The article deals with price rigidity, international mobility of financial capital and exchange rate volatility. International capital mobility is modelled as uncovered interest parity. On the basis of a ‘stochastic overshooting model’ it is shown that, given international capital mobility, we can expect exchange rates to be more volatile when prices are rigid than when they are flexible.