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

  • Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data
    Diewert, W. Erwin, , erwin.diewert@ubc.ca
    Fox, Kevin J., , K.Fox@unsw.edu.au
    The use of multilateral comparison methods in a time series context is increasingly becoming an accepted approach for incorporating scanner data in a Consumer Price Index. The attractiveness stems from the ability to be able to control for chain drift bias. Consensus on two key issues has yet to be achieved: (i) the best multilateral method to use, and (ii) the best way of extending the resulting series when new observations become available. This paper presents theoretical and simulation evidence on the extent of substitution biases in alternative multilateral methods. The multilateral index number formulae studied include the GEKS, CCDI, Geary-Khamis and Weighted Time Product Dummy Methods as well as some price similarity linking methods. The paper also assesses alternative methods for extending non-revisable series, with particular regard to the possibility of introducing chain drift bias. Overall, our results suggest the use of the CCDI index with a new method, the “mean splice”, for updating.
    Creation Date: 2017-03-23   Revision Date: 2017-03-23
  • Ambiguous Correlation
    Epstein, Larry G. , , lepstein@bu.edu
    Halevy, Yoram, , yoram.halevy@ubc.ca
    Many decisions are made in environments where outcomes are determined by the realization of multiple random events. A decision maker may be uncertain how these events are related. We identify and experimentally substantiate behavior that intuitively reflects a lack of confidence in their joint distribution. Our findings suggest a dimension of ambiguity which is different from that in the classical distinction between risk and "Knightian uncertainty."
    Creation Date: 2017-02-15   Revision Date: 2017-02-15
  • Productivity Measurement in the Public Sector: Theory and Practice
    Diewert, W. Erwin, , erwin.diewert@ubc.ca
    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: 2017-02-02   Revision Date: 2017-02-02
  • Investment and Uncertainty With Time to Build: Evidence from U.S. Copper Mining
    Marmer, Vadim, , vadim.marmer@ubc.ca
    Slade, Margaret, , mslade@mail.ubc.ca
    The standard real-options model predicts that increased uncertainty discourages investment. When projects are large and take time to build, however, this prediction can be reversed. We investigate the investment/uncertainty relationship empirically using historical data on opening dates of new U.S. copper mines - large, irreversible projects with substantial construction lags. Both the timing of the decision to go forward and the price thresholds that trigger that decision are assessed. We find that, in this market, greater uncertainty encourages investment and lowers the price thresholds for many mines.
    Creation Date: 2016-12-22   Revision Date: 2016-12-22
  • 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