Michael Beenstock

The demand for electricity in Israel

Quarterly data for Israel are used to compare and contrast three dynamic econometric methodologies for estimating the demand for electricity by households and industrial companies. These are the Dynamic Regression Model and two approaches to cointegration (OLS and Maximum Likelihood). Since we find evidence of seasonal unit roots in the data we also test for seasonal cointegration. We find that the scale elasticities are similar in all three approaches but the OLS price elasticities are considerably lower. Moreover, OLS suggests non-cointegration. The paper concludes by stochastically simulating the DRMs to calculate upside-risk in electricity demand.

Spatial Vector Autoregressions

Abstract A spatial vector autoregressive model (SpVAR) is defined as a VAR which includes spatial as well as temporal lags among a vector of stationary state variables. SpVARs may contain disturbances that are spatially as well as temporally correlated. Although the structural parameters are not fully identified in SpVARs, contemporaneous spatial lag coefficients may be identified by weakly exogenous state variables. Dynamic spatial panel data econometrics is used to estimate SpVARs. The incidental parameter problem is handled by bias correction rather than more popular alternatives such as generalised methods of moments (GMM). The interaction between temporal and spatial stationarity is discussed. The impulse responses for SpVARs are derived, which naturally depend upon the temporal and spatial dynamics of the model. We provide an empirical illustration using annual spatial panel data for Israel. The estimated SpVAR is used to calculate impulse responses between variables, over time, and across space. Finally, weakly exogenous instrumental variables are used to identify contemporaneous spatial lag coefficients.

Energy consumption and economic activity in industrialized countries: The dynamic aggregate time series relationship

Abstract Most econometric studies suggest that the income elasticity of demand for energy is approximately unity. For the developed market economies it is shown that over the period 1950–1978 the long-run income elasticity is substantially higher than unity in terms of a CES energy demand function. This result reflects the application of a generalized dynamic estimation methodology where serial correlation is regarded as a diagnostic guide to distributed lag fitting. Price elasticities are also estimated but these are in line with conventional estimates.

The Effect of Linguistic Distance and Country of Origin on Immigrant Language Skills: Application to Israel

This article is concerned with identifying, for the first time, the separate effects of linguistic distance (language of origin) and country of origin on the destination language proficiency of immigrants. The determinants of Hebrew language proficiency (fluency and literacy) among immigrants in Israel are studied using the 1972 Census of Israel and the Immigration Absorption (panel) Surveys conducted in the 1970s. Country of origin and language of origin matter for proficiency in Hebrew, especially in the longer term. By country of origin, those from North Africa are the least proficient. By language of origin, Arabic speakers are the most proficient, suggesting a small linguistic distance from Hebrew. Immigrants from English-speaking origins are the least proficient in Hebrew. This may reflect a large linguistic distance or, more likely, the unique role of English as the international language, which reduces incentives for investments in Hebrew. Immigrants from dual-language countries of origin are more proficient in Hebrew than those from single language origins.

The world economy in transition

1.Sea Change in the West 2. Global Theories of Secular Stagnation 3. Transition Theory 4. Empirical Aspects of the Transition Theory 5. The Long Wave Hypothesis 6. Transition in the Nineteenth Century: the British Climacteric 1860-1900 7. A Re-run of the 1970s 8. The Relative Economic Performance of the United Kingdom 1950-80 9. The Future of the International Economic Order 10. Postscript: the International Banking Crisis

Testing Gateway Theory: do cigarette prices affect illicit drug use?

We test the causal Gateway Theory of drug use dynamics by way of a natural experiment. We randomize cigarette smoking by birth cohort and cigarette prices. We use data for Israel to show that while cigarette smoking causes cannabis use, the evidence that cannabis use causes hard drug use is much weaker. These results are based on various econometric methodologies including two-stage logit (2SL), bivariate probit, and frailty analysis for survival data.

Lottomania and other anomalies in the market for lotto

Abstract This research is concerned with the determination of the demand for “lotto” in Israel. While an important focus of our research is upon the effects on the demand for lotto of ticket pricing and jackpot announcements, we also investigate several empirical phenomena that are apparently inconsistent with expected utility theory. These include an effect we call “lottomania” which is induced by rollover, and “prize fatigue” when the jackpot does not increase. Another aberration from expected utility theory is that the underlying odds of winning have no measurable effect on sales.

Globalization in road safety: explaining the downward trend in road accident rates in a single country (Israel)

A theoretical model is proposed in which road safety in a single country depends upon parochial considerations, such as police enforcement, and upon global considerations, such as international road safety technology. We show that there is a non-spurious relationship between the downward trend in the rate of road accidents in Israel and the road accident rate abroad. We suggest that this reflects the international propagation of road safety technology as it is embodied in motor vehicles and road design, rather than parochial road safety policy. Recent developments in the econometric analysis of time series are used to estimate the model using data for Israel. We make no direct attempt to explain the downward trend in the rate of road accidents outside Israel.

Generators and the cost of electricity outages

Abstract Investment in back-up generators is treated as insurance against the adverse effects of power outages. A theoretical model is developed which implies that the cost of outages may be inferred from revealed preference data on expenditure on generators. The conditions for the optimal social provision of electricity reliability are discussed.

Specification search in nonlinear time-series models using the genetic algorithm

Abstract The Genetic Algorithm (GA) is used to estimate dynamic nonlinear time-series models from nonstationary data. Specification search takes place at three different levels: between competing covariates, between different dynamic specifications, and across functional forms. A variation of GA is developed that operates on strings representing functional forms. Although the dimensionality of the specification space is very large, we show that GA succeeds in estimating strings that have straightforward economic interpretations. The nonstationarity of the data gives rise to the problem of spurious fitness in strings obtained by GA. We suggest the use of stationarity tests on the residuals obtained from static versions of dynamic strings to determine whether the underlying relationship is cointegrated. We use data on “Lotto” sales in Israel to illustrate the application of GA. Finally, we compare models estimated by artificial intelligence (GA) with models estimated by conventional specification search.