Microeconomic Theory in Canada

 
 

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A website containing information about micro theory in Canada. This contains a working paper repository, linked to RePEc. Also links to the Canadian Economic Theory Conference.

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Recent Papers

  • Productivity Measurement in the Public Sector
    In many sectors of the economy, governments either provide various goods and services at no cost or at highly subsidized prices. It is usually possible to measure the quantities of these government sector outputs and inputs as well as input prices but the problem is how to estimate the corresponding output prices. Once meaningful output prices have been estimated, the measurement of productivity growth using index numbers can proceed in the usual manner. This chapter suggests three possible general methods for measuring public sector output prices and quantities. If little or no information on the quantity of nonmarket outputs produced is available, then the method recommended in the System of National Accounts 1993 must be used, where aggregate output growth is set equal to aggregate input growth. If information on nonmarket public sector outputs is available then the second general method sets the missing output prices equal to the unit costs of producing each output while the third general method uses purchaser’s valuations to determine the missing output prices. Specific measurement issues in the health and education sectors are discussed. Similar output and productivity measurement issues arise in the regulated sectors of an economy since regulated producers are forced to provide services at prices that are not equal to marginal or average unit costs. Finally, the problems associated with measuring capital services are discussed. The focus of the chapter is on the use of index number methods to measure the Total Factor Productivity of production units in the public and regulated sectors.
    Creation Date: 2016-11-25   Revision Date: 2016-11-25
  • Developing Land and Structure Price Indexes for Ottawa Condominium Apartments
    Diewert, W. Erwin, , erwin.diewert@ubc.ca
    Huang, Ning, , nings.huang@canada.ca
    Kate Burnett-Isaacs, Kate, , kate.burnett-isaacs@canada.ca
    Measuring the service flow and the stock value of condominium apartments in Canada and decomposing these values into constant quality price and quantity components is important for many purposes. In addition, the System of National Accounts requires that these service flows and stock values for condos be decomposed into constant quality land and structure components. In Canada and most other countries, such a land and structure decomposition of condominium apartment sale prices does not currently exist. In this paper, we provide such a decomposition of condominium apartment sales in Ottawa for the period 1996-2009. Specific attention is paid to the roles of communal land and structure space, as well as building commercial space, on condominium apartment unit selling prices. Key findings include methods to allocate land and building space to a single condominium unit, identifying the characteristics that best explain condominium prices, and developing an average depreciation rate for condos for the 14 year time period.
    Creation Date: 2016-11-23   Revision Date: 2016-11-23
  • Parametric Recoverability of Preferences
    Halevy, Yoram, , yoram.halevy@ubc.ca
    Persitz, Dotan, , persitzd@post.tau.ac.il
    Zrill, Lanny, , lannyzrill@gmail.com
    Revealed preference theory is brought to bear on the problem of recovering approximate parametric preferences from consistent and inconsistent consumer choices. We propose measures of the incompatibility between the revealed preference ranking implied by choices and the ranking induced by the considered parametric preferences. These incompatibility measures are proven to characterize well-known inconsistency indices. We advocate a recovery approach that is based on such incompatibility measures, and demonstrate its applicability for misspecification measurement and model selection. Using an innovative experimental design we empirically substantiate that the proposed revealed-preference-based method predicts choices significantly better than a standard distance-based method.
    Creation Date: 2016-11-02   Revision Date: 2016-11-02
  • Decomposing Value Added Growth over Sectors into Explanatory Factors
    Diewert, W. Erwin, , erwin.diewert@ubc.ca
    Fox, Kevin J., , K.Fox@unsw.edu.au
    A decomposition of nominal value added growth over multiple sectors of an economy into explanatory factors is presented. The explanatory factors over a single sector are changes in the efficiency of the sector, growth of primary inputs, changes in sectoral output and input prices, technical progress and returns to scale. In order to implement the decomposition for a sector, an estimate of the sector’s cost constrained value added function for the two periods under consideration is required, which is taken to be the free disposal hull of past observations. The problems associated with aggregating over sectors are also considered. The methodology is illustrated using U.S. data for two sectors over the years 1960-2014.
    Creation Date: 2016-09-27   Revision Date: 2016-09-27
  • Alternative User Costs, Rates of Return and TFP Growth Rates for the US Nonfinancial Corporate and Noncorporate Business Sectors: 1960-2014
    Diewert, W. Erwin, , erwin.diewert@ubc.ca
    Fox, Kevin J., , K.Fox@unsw.edu.au
    Using the new Bureau of Economic Analysis (BEA) Integrated Macroeconomic Accounts as well as other BEA data, we construct a set of productivity accounts for two key sectors of the US economy: the Corporate Nonfinancial Sector (Sector 1) and the Noncorporate Nonfinancial Sector (Sector 2). Calculating user costs of capital based on, alternatively, ex post and predicted asset price inflation rates, we provide alternative estimates for capital services and Total Factor Productivity growth for the two sectors. Rates of return on assets employed are also reported for both sectors. Finally, the paper compares rates of return on assets employed and TFP growth rates when the land and inventory components are withdrawn from the asset base.
    Creation Date: 2016-06-30   Revision Date: 2016-06-30