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06-46 Bellavance; Dionne, Georges; Lebeau, Martin - The Value of a Statistical Life: a Meta-Analysis with a Mixed Effects Regression Model

The value of a statistical life (VSL) is a very controversial topic, but one which is essential to the optimization of governmental decisions. Indeed, our society faces any number of risks (health, transportation, work, etc.) and, as resources are limited, their complete elimination is impossible. The role of governments is to act as effectively as possible in reducing these risks. To do so, one must first determine the value that society is willing to pay in order to save a human life. However, we see a great variability in the values obtained from different studies. The source of this variability needs to be understood, in order to offer public decision-makers better guidance in choosing a value and to set clearer guidelines for future research on the topic. This article presents a meta-analysis based on 40 observations obtained from 37 studies (from nine different countries) which all use a hedonic wage method to calculate the VSL. Our meta-analysis is innovative in that it is the first to use the mixed effects regression model (Raudenbush, 1994) to analyze studies on the value of a statistical life. The outcome of our meta-analysis allows us to conclude that the variability found in the results studied stems in large part from differences in methodologies.

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06-45 Dostie, Benoit - Wages, Productivity and Aging

In this article, we estimate age based wage and productivity differentials using linked employer-employee Canadian data from the Workplace and Employee Survey 1999-2003. Data on the firm side is used to estimate production functions taking into account the age profile of the firm's work-force. Data on the workers' side is used to estimate wage equations that also depend on age. Results show concave age-wage and age-productivity profiles. Wage-productivity comparisons show that the productivity of workers aged 55 and more with at least an undergraduate degree is lower than their wages. For other groups, we find that wages do not deviate significantly from productivity estimates.

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06-44 Makdissi, Paul - On the Definition of Economic Efficiency

This paper analyzes the definition of economic efficiency. The standard definition used in economic literature is the Pareto Optimum which is based in the space of individual utilities. This paper proposes new definitions based on alternative spaces. The paper also introduces a dominance criterion for efficiency over a set of social evaluation spaces.

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06-43 Audet, Mathieu; Makdissi, Paul; Wodon, Quentin - Analyse de l'incidence des dépenses publiques en éducation en Côte d'Ivoire: une approche par dominance stochastique

Dans cet article, nous utilisons et adaptons une approche par dominance stochastique proposée par Duclos, Makdissi et Wodon (2005) à l'analyse des dépenses publiques en éducation en Côte d'Ivoire. Nous montrons qu'une réallocation des dépenses publiques en éducation vers le niveau primaire et secondaire peut faire diminuer la  pauvreté et que cette conclusion demeure valide pour une large classe d'indices et de seuils de pauvreté. Nous analysons aussi le rôle de l'efficacité relative des dépenses aux différents niveaux et montrons que même si on tient compte de cette différence relative entre les dépenses publiques au niveau universitaire et technique et celle  au niveau secondaire et primaire, la conclusion précédente sur la réallocation des dépenses  publiques demeure vérifiée.

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06-42 Makdissi, Paul; Mussard, Stéphane - Between Group Transfers and Poverty-Reducing Tax Reforms

In this paper, we propose the conception of within-group CD-Curve, to apprehend the impact of indirect tax reforms on truncated distributions of consumption expenditures. This confers decision makers the ability to perform within-group transfers as well as between-group transfers to reduce poverty in particular groups or to obtain an overall poverty alleviation. Between-group transfers are implemented in order to introduce a fairness element into the indirect tax framework, allowing to test for the robustness of reducing-tax reforms, for any order of stochastic dominance.

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06-41 Makdissi, Paul; Mussard, Stéphane - Decomposition of s - Concentration Curves

For any given order of stochastic dominance, standard concentration curves are decomposed into contribution curves corresponding to within-group inequalities, between-group inequalities, and transvariational inequalities. We prove, for all orders, that contribution curve dominance implies systematically welfare-improving tax reforms and conversely. Accordingly, we point out some undesirable fiscal reforms since a welfare expansion may be costly in terms of particular inequalities.

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06-40 Bibi, Sami - Growth with Equity is Better for the Poor

Putting the combat against poverty to the fore as the main objective of the development process has raised the issue of the linkage between economic growth, inequality and poverty. There is now a growing agreement that both the rate and the distributional impact of growth are important in fighting poverty. This means that pro-poorness of a given growth rate is more important in certain cases than in others. Using complete and partial poverty orderings, this paper suggests indices of pro-poor growth according to different ethical principles. Evidence from Mexico and Tunisia shows that economic growth periods were to a large extent equitable and even largely pro-poor during the last two decades.

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06-39 Bibi, Sami; El Lahga, AbdelRahmen - Les mesures multidimensionnelles de la pauvreté: une application sur l'Afrique du Sud et l'Égypte

Il est souvent admis que la pauvreté est un phénomène multidimensionnel. Néanmoins, rares sont les travaux qui ont tenu compte des multiples facettes de la pauvreté dans un cadre unifié. Récemment, des nouvelles approches se sont développées dans le but de dériver des indices synthétiques des multiples facettes de la privation individuelle sous la forme de mesures multidimensionnelles de pauvreté. Toutefois, les fondements normatifs de ces mesures demeurent méconnus et peu discutés dans la littérature. La présente étude analyse de façon détaillée les fondements éthiques qui sous-tendent la procédure d'agrégation des multiples aspects de la pauvreté adoptée sous chacune de ces nouvelles approches. Elle offre également  une application empirique des principales approches développées afin d'établir un classement complet et partiel de l'Afrique du Sud et l'Égypte en termes de pauvreté bi-dimensionnelle.

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06-38 Araar, Abdelkrim; Taiwo Timothy, Awoyemi - Poverty and Inequality Nexus: Illustrations with Nigerian Data

The main aim of this paper is to explore the link between poverty and inequality. In developing countries, there is a general consensus that high inequality can dampen significantly the impact of economic performance on poverty. In this paper, we propose a new theoretical framework that links poverty and inequality. We also show between and within group inequalities, as well as inequality in income sources, can contribute to total poverty. The methodology of the paper is illustrated using the 2004 Nigerian national living standard survey.

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06-37 Güth, Werner; Kröger, Sabine; Maug, Ernst - Bargaining under Large Risk - an Experimental Analysis -

We present an experimental study to learn about behavior in bargaining situations under large risks. In order to implement realistic risks involved in the field, we calibrate the experimental parameters from an environment involving substantial variation in profits, the motion picture industry. The leading example is the production of a movie that may give rise to a sequel, so actors and producers negotiate sequentially. We analyze the data in light of alternative behavioral approaches to understanding bargaining behavior under large risk.

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06-36 Lefebvre, Pierre; Merrigan, Philip; Verstraete, Matthieu - Impact of Early Childhood Care and Education on Children's Preschool Cognitive Development: Canadian Results from a Large Quasi-experiment

On September 1st 1997, a new early childhood care and education policy was initiated by the provincial government of Québec, the second most populous province in Canada. Providers of childcare services licensed by the Department of the Family began offering daycare spaces at the reduced parental contribution of $5 per day per child for children aged 4. In successive years, the government reduced the age requirement and engaged in a plan to create new childcare facilities and pay for the cost of additional $5 per day childcare spaces. By September 2000, the low-fee policy applied to all children aged 0 to 59 months and the number of partly subsidized spaces increased from 77,000 in 1998 to 170,000 spaces, totally subsidized, by midyear 2003. In addition, on September 1st 1997, all public schools offered full-day rather than part-day kindergarten for 5-year-old children. No such important policy changes for preschool (including kindergarten) children were enacted in the other Canadian provinces over the years 1994 to 2003. Using biennial data drawn from Statistics Canada’s National Longitudinal Survey of Children and Youth (NLSCY), conducted since 1994-1995, this study attempts to estimate the effect of the policy on Québec’s preschool children cognitive test scores. A non-experimental evaluation framework based on multiple pre- and post-treatment periods is used to estimate the effect of the early childhood care and education regime on school readiness. The econometric results support the hypothesis that the policy had no effects on the cognitive development of 4-year-olds (the PPVT-R raw scores and the PPVT-R standardized scores). However, we provide evidence that the policy had a substantial negative impact on the scores of 5-year-olds.

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06-35 Chakroun, Oussama; Dionne, Georges; Dugas-Sampara, Amélie - Empirical Evaluation of Investor Rationality in the Asset Allocation Puzzle

We examine the portfolio-choice puzzle posed by Canner, Mankiw, and Weil (1997). The idea is to test a conclusion reached by Elton and Gruber (2000), stating that a bonds/stocks ratio which decreases in relation to risk tolerance does not necessarily mean a contradiction of modern portfolio-choice theory and does not cast doubt on the rationality of investors. From data on the portfolio composition of 470 clients of a Canadian brokerage firm, we obtain that the bonds/stocks ratio does decrease in relation to risk tolerance. We also verify the existence of the two-fund separation theorem in the assets data available to the investors in our sample.

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06-34 Araar, Abdelkrim - Poverty, Inequality and Stochastic Dominance, Theory and Practice: Illustration with Burkina Faso Surveys

In this paper we provide a set of rules that can be used to check poverty or inequality dominance using discrete data. Existing theoretical rules assumes continuity in incomes or in percentiles of population. In reality, with the form of household surveys, this continuity does not exist. However, the said discontinuity can be exploited in testing the stochastic dominance. Moreover, in this paper, we propose the stochastic dominance conditions that take into account the statistical robustness in testing the stochastic dominance. Findings of this paper are illustrated using the Burkina Faso's household surveys for the years of 1994 and 1998.

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06-33 Demougin, Dominique; Fluet, Claude - Rules of Proof, Courts, and Incentives

We analyze the design of legal principles and procedures for court decision-making in civil litigation. The objective is the provision of appropriate incentives for potential tort-feasors to exert care, when evidence about care is imperfect and may be distorted by the parties. Efficiency is shown to be consistent with courts adjudicating on the basis of the preponderance of evidence standard of proof together with common law exclusionary rules. Inefficient equilibria may nevertheless also arise under these rules. Directing courts as to the assignment of the burden of proof is then useful as a coordination device. Alternatively, burden of proof guidelines are unnecessary if courts are allowed a more active or inquisitorial role, by contrast with that of passive adjudicator.

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06-32 Normandin, Michel - Fiscal Policies, External Deficits, and Budget Deficits

This paper studies the effects of fiscal policies on external and budget deficits. From a tractable small open-economy, overlapping-generation model, the effects are measured by the responses of the external deficit to an increase in the budget deficit due to a tax-cut. The responses are positively affected by the birth rate and the degree of persistence of the budget deficit. Empirical results for the G7 countries over the post-1975 period reveal that the values of birth rate are small for all, but one, countries; but  the responses of external and budget deficits are substantial and persistent for most countries. In particular, the fiscal policy has the most important effects on the external deficits for Canada, Japan, and the United States; somewhat smaller impacts for France, Germany, and the United Kingdom; and negligible effects for Italy.

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06-31 Bellemare, Charles; Shearer, Bruce S. - Sorting, Incentives and Risk Preferences: Evidence from a Field Experiment

The, often observed, positive correlation between incentive intensity and risk has been explained in two ways: the presence of transaction costs as determinants of contracts and the sorting of risk-tolerant individuals into firms using high-intensity incentive contracts. The empirical importance of sorting is perhaps best evaluated by directly measuring the risk tolerance of workers who have selected into incentive contracts under risky environments. We use experiments, conducted within a real firm, to measure the risk preferences of a sample of workers who are paid incentive contracts and face substantial daily income risk. Our experimental results indicate the presence of sorting; Workers in our sample are risk-tolerant. Moreover, their level of tolerance is considerably higher than levels observed for samples of individuals representing broader populations. Interestingly, the high level of risk tolerance suggests that both sorting and transactions costs are important determinants of contract choices when workers have heterogeneous preferences.

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06-30 Duclos, Jean-Yves - Liberté ou égalité?

Qu'est-ce que la liberté? Qu'est-ce que l'égalité? En quoi une plus grande égalité peut-elle accroître la liberté? Telles sont les questions principales auxquelles tente de répondre cet article. Le problème du choix entre liberté et égalité soulève en effet le problème de la définition de ces deux objets. Une fois cette définition clarifiée, il ressort que, sous certaines conceptions de la liberté et de l'égalité, il n'est pas nécessaire ou utile de choisir entre ces deux objets: ils deviennent alors complémentaires plutôt que substituts. L'égalité peut en effet renforcer à la fois la liberté réelle et la liberté morale des individus, et ainsi contribuer au bien-être de tous. L'article traite aussi des difficultés de mesure de l'égalité, et en quoi ces difficultés peuvent affecter la comparaison de l'égalité à travers le temps et l'espace.

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06-29 Duclos, Jean-Yves - Equity and Equality

Is horizontal equity (HE) the "most widely accepted principle of equity"? Or does it stand in "opposition to the advancement of human welfare"? This paper argues that the case for the HE principle is not as straightforward as is usually thought and that it requires advanced notions of justice and well-being. The most likely ethical basis for HE appears to combine a Rawlsian maximin principle and a view of well-being that allows for relative local comparison effects. The paper also explores some of the dimensions of equality and well-being along which the HE principle can be applied and presents a number of  examples showing how HE considerations can provide an important input into policy analysis.

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06-28 Duclos, Jean-Yves; Sahn, David; Younger, Stephen D. - Robust Multidimensional Poverty Comparisons with Discrete Indicators of Well-being

This paper provides a method to make robust multidimensional poverty comparisons when one or more of the dimensions of well-being or deprivation is discrete. Sampling distributions for the statistics used in these poverty comparisons are provided. Several examples show that the methods are both practical and interesting in the sense that they can provide richer information than do univariate poverty comparisons.

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06-27 Duclos, Jean-Yves; Fortin, Bernard; Fournier, Andrée-Anne - Une analyse des taux marginaux effectifs d'imposition au Québec

Cet article dresse un portrait de la situation des taux marginaux effectifs d'imposition (TMEI) sur le revenu de travail au Québec. Il vise à permettre une meilleure compréhension de l'impact des politiques gouvernementales sur le comportement des agents économiques. À l'aide d'un modèle de microsimulation comptable reproduisant les systèmes d'impôts et de transferts au Québec pour 2002, nous mesurons les TMEI qui résultent de l'interaction des mécanismes de perception et de redistribution. En outre, nous en évaluons la répartition au sein de la population. L'analyse de ces taux démontre, entre autres, que la politique familiale du gouvernement, dont l'aide est ciblée vers les familles à faible revenu, engendre des TMEI élevés attribuables à la réduction généralement rapide des transferts avec le revenu de travail. Ainsi, plus du quart des chefs de famille monoparentale ont un TMEI pouvant atteindre, et même excéder, 80%. Quant aux familles biparentales, elles font majoritairement face à un TMEI qui approche 50%. Nous montrons l'importance de tenir compte de l'hétérogénéité, à la fois selon les types de familles et selon les niveaux de revenu, de manière à bien évaluer la variabilité des TMEI à  travers la population.

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06-26 Boubakri, Narjess; Dionne, Georges; Triki, Thouraya - Consolidation and Value Creation in the Insurance Industry: the Role of Governance

We examine the long run performance of M&A transactions in the property-liability insurance industry. We specifically investigate whether such transactions create value for the bidders' shareholders and assess how corporate governance mechanisms affect such performance. Our results show that M&A create value in the long run as buy and hold abnormal returns are positive and significant after three years. While tender offers appear to be more profitable than mergers, our evidence does not support the conjecture that domestic transactions create more value than cross border transactions. Furthermore, positive returns are significantly higher for frequent acquirers and in countries where investor protection is better. Internal corporate governance mechanisms are also significant determinants of the performance of bidders.

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06-25 Truchon, Michel; Gordon, Stephen - Statistical Comparison of Aggregation Rules for Votes

If individual voters observe the true ranking on a set of alternatives with error, then the social choice problem, that is, the problem of aggregating their observations, is one of statistical inference. This study develops a statistical methodology that can be used to evaluate the properties of a given voting or aggregation rule. These techniques are then applied to some well-known rules. (révisé avril 2007)

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06-24 Gordon, Stephen; Truchon, Michel - Social Choice, Optimal Inference and Figure Skating

We approach the social choice problem as one of optimal statistical inference. If individual voters or judges observe the true order on a set of alternatives with error, then it is possible to use the set of individual rankings to make probability statements about the correct social order. Given the posterior distribution for orders and a suitably chosen loss function, an optimal order is one that minimises expected posterior loss. The paper develops a statistical model describing the behaviour of judges, and discusses Markov Chain Monte Carlo estimation. We also discuss criteria for choosing the appropriate loss functions. We apply our methods to a  well-known problem: determining the correct ranking for figure skaters competing at the Olympic Games. (révisé février 2007)

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06-23 Truchon, Michel - Borda and the Maximum Likelihood Approach to Vote Aggregation

Drissi-Bakhkhat and Truchon [“Maximum Likelihood Approach to Vote Aggregation with Variable Probabilities,” Social Choice and Welfare, 23 (2004), 161-185.] extend the Condorcet-Kemeny-Young maximum likelihood approach to vote aggregation by relaxing the assumption that the probability of correctly ordering two alternatives is the same for all pairs of alternatives. They let this probability increase with the distance between the two alternatives in the true order, to reflect the intuition that a judge or voter is more prone to errors when confronted to two comparable alternatives than when confronted to a good alternative and a bad one. In this note, it is shown that, for a suitably chosen probability function, the maximum likelihood rule coincides with the Borda rule, thus, partially reconciling the Borda and the Condorcet methods.

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06-22 Dessy, Sylvain; Ewoudou, Jacques; Ouellet, Isabelle - Understanding the Persistent Low Performance of African Agriculture

We explain the persistence of low performances in African agriculture by analyzing the determinants of farmers' decisions to modernize their farming practices. Owing to sociocultural factors specific to Sub-Saharan Africa, farmers' decisions on farming practices are strategic complements. We demonstrate that the modernization game these farmers play admits two pure-strategy, Pareto-ranked, symmetric Nash-equilibria. The equilibrium where all farmers choose to modernize their farming methods is preferred to the one where all of them choose to stick to a traditional method. We argue that scarcity and economic opportunities put forward by neo-Boserupian theories of induced-innovation as determinants of the onset of agricultural innovations are, in the context of African countries, only necessary, but not sufficient to generate modernization of farming methods. Deliberate action to enhance adoption of agricultural innovations must therefore take the African's sociocultural context into consideration, or risk failure.

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06-21 Donni, Olivier - Choix collectifs des heures travaillées, consommation publique et équilibre de Lindahl

Dans cet article, je considère un modèle collectif d'offre de travail sous l'hypothèse que la consommation est purement publique. Je montre, ensuite, que le processus de décision peut être décrit par un équilibre de Lindahl. Les dotations, les préférences et les prix public de chacun des membres du ménage peuvent être retrouvés à partir de l'estimation des fonctions d'offre de travail.

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06-20 Donni, Olivier - On the Identification of Frisch Labor Supplies

This paper examines how Frisch labor supplies, and other structural components of the intertemporal model of labor supply, can be recovered from estimates obtained with the approach developed by Heckman and MaCurdy.

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06-19 Chiappori, Pierre-André; Donni, Olivier - Learning from a Piece of Pie: the Empirical Content of Nash Bargaining

Consider a model of bargaining, in which two players, 1 and 2, share a pie of size y. The bargaining environment is described by a set a parameters λ that may affect agents' preferences over the agreement sharing, the status quo outcome, or both. The outcomes (i.e., whether an agreement is reached, and if so the individual shares) and the environment (including the size of  the pie) are known, but neither the agents' utilities nor their threat points. Assuming that the agents adopt a Nash bargaining solution, we investigate the empirical content of this assumption. We first show that in the most general framework, any outcome can be rationalized as a Nash solution. However, if (i) the size of the pie y does not influence the players' threat points and (ii) there exist (at least) two parameters λ1 and λ2 that are player-specific, in the sense that λi does not influence the utility or the threat point of player j ≠ i, then Nash bargaining generates strong testable restrictions. Moreover, the underlying structure of the bargaining, i.e., the players' utility and threat point functions, can be recovered under slightly more demanding conditions.

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06-18 Dessy, Sylvain; Mbiekop, Flaubert - Democratic Voting and Social Exclusion

This paper explores the political determinants of societies' tolerance for social exclusion on the basis of ethnicity, religion, or race. We develop a political-economic model of social exclusion with three main features. First, each individual living in this society must submit a political proposal regarding the extent to which society must tolerate social exclusion. Second, depending on the realized degree of society's tolerance for social exclusion, each population group comprising the society must decide on how much resources to expend in order to exclude rival groups from, or include its members in, the public allocation of education resources. Third, allocation of resources to participation in the exclusion contest trades off private investment in child's human capital. To the extent that population size is, at least initially, the only source of asymmetry between rival groups, our analysis suggests that the introduction of democratic voting may not be sufficient to save small, but visible, minorities from social exclusion. Only where this asymmetry is moderate, can the introduction of democratic voting suffice to eliminate social exclusion.

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06-17 Alarie, Yves; Dionne, Georges - Lottery Qualities

The aim of this paper is to propose a model of decision-making for lotteries. Lottery qualities are the key concepts of the theory. Qualities allow the derivation of optimal decision-making processes and are taken explicitly into account for lottery evaluation. Our contribution explains the major violations of the expected utility theory for decisions on two-point lotteries and shows the necessity of giving explicit consideration to lottery qualities. Judged certainty equivalent and choice certainty equivalent concepts are discussed in detail along with the comparison of lotteries. Examples are provided by using different test results in the literature.

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06-16 Cummins, J. David; Dionne, Georges; Gagné, Robert; Nouira, Abdelhakim - Efficiency of Insurance Firms with Endogenous Risk Management and Financial Intermediation Activities

Risk management is now present in many economic sectors. This paper investigates the role of risk management in creating value for financial institutions by analyzing U.S. property-liability insurers. Property-liability insurers are financial intermediaries whose primary roles in the economy are risk pooling and risk bearing. The risk pooling ad risk bearing functions performed by insurers are the primary determinants of the need for risk management. The main goal of this paper is to test how risk management and financial intermediation activities create value for insurers by enhancing economic efficiency. Insurer cost efficiency is measured relative to an econometric cost function. Since the prices of risk management and financial intermediation services are not observable, we consider these two activities as intermediate outputs and estimates their shadow prices. The shadow prices isolate the contributions of risk management and financial intermediation to insurer cost efficiency. The econometric results show that both activities significantly increase the efficiency of the property-liability insurance industry.

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06-15 Wasmer, Étienne - Links Between Labor Supply and Unemployment: Theory and Empirics

This paper discusses the various causal relations between unemployment and participation to the labor market, notably for groups with elastic labor supply such as women. A flow model of labor market participation is used to describe how various exogenous variations jointly affect unemployment and participation. Empirical tests based on time-series of OECD countries are proposed. Notably, the model is used to determine short-run identification restrictions of a structural VAR. It concludes that, in some countries, fast rising female participation may have had a moderate short and medium run impact on unemployment rates. A variance decomposition exercise indicates that, in Continental Europe, participation is driven in the short run by unemployment shocks, while in the US, it is driven by participation shocks, interpreted as demography or immigration. Unemployment in Europe is driven in the short run by participation shocks while in the US, it is driven by unemployment shocks.

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06-14 Dostie, Benoit; Jayaraman, Rajshri; Trépanier, Mathieu - The Returns to Computer Use Revisited, Again

Using North American data, we revisit the question first broached by Krueger (1993) and re-examined by DiNardo and Pischke (1997) of whether there exists a real wage differential associated with computer use. Employing a mixed effects model to correct for both worker and workplace unobserved heterogeneity using matched employer-employee panel data, we find that computer users enjoy an almost 4 per cent wage premium over non-users. Failure to correct for the worker selection effect leads to a more than twofold overestimate of this premium, as does failure to correct for workplace unobserved heterogeneity.

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06-13 Dionne, Georges; Laajimi, Sadok; Mejri, Sofiane; Petrescu, Madalina - Estimation of the Default Risk of Publicly Traded Canadian Companies

In this paper, we investigate the hybrid contingent claim approach with publicly traded Canadian companies listed on the Toronto Stock Exchange. Our goal is to assess how combining their continuous valuation by the market with the value given in their financial statements improves our ability to predict their probability of default. Our results indicate that the predicted structural probabilities of default (PDs from the structural model) contribute significantly to explaining default probabilities when PDs are included alongside the retained accounting variables. We also show that quarterly updates to the PDs add a large amount of dynamic information to explain the probabilities of default over the course of a year. This flexibility would not be possible with a reduced-form model. We also conducted a preliminary analysis of correlations between structural probabilities of default for the firms in our database. Our results indicate that there are substantial correlations in the studied data.

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06-12 Dostie, Benoit; Léger, Pierre Thomas- Self-Selection in Migration and Returns to Skills

Several papers have tested the empirical validity of the migration models proposed by Borjas (1987) and Borjas, Bronars, and Trejo (1992). However, to our knowledge, none has been able to disentangle the separate impact of observable and unobservable individual characteristics, and their respective returns across different locations, on an individual's decision to migrate. We build a model in which individuals sort, in part, on potential earnings - where earnings across different locations are a function of both observable and unobservable characteristics. We focus on the inter-provincial migration patterns of Canadian physicians. We choose this particular group for several reasons including the fact that they are paid on a fee-for-service basis. Since wage rates are exogenous, earning differentials are driven by differences in productivity. We then estimate a mixed conditional-logit model to determine the effects of individual and destination-specific characteristics (particularly earnings differentials) on physician location decisions. We find, among other things, that high-productivity physicians (based on unobservables) are more likely to migrate to provinces where the productivity premium is greater, while low-productivity physicians are more likely to migrate to areas where the productivity premium is lower. These results are consistent with a modified Borjas model of self-selection in migration based on both unobservables and observables.

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06-11 Duclos, Jean-Yves; Araar, Abdelkrim; Giles, John - Chronic and Transient Poverty: Measurement and Estimation, with Evidence from China

The paper contributes to the measurement of poverty and vulnerability in three ways. First, we propose a new approach to separating poverty into chronic and transient components. Second, we provide corrections for the statistical biases introduced when using a small number of periods to estimate the importance of vulnerability and transient poverty. Third, we apply these tools to the measurement of chronic and transient poverty in China using a rich panel data set that extends over approximately 17 years. We find that alternative measurement techniques yield significantly different estimates of the relative importance of chronic and transient poverty, and that precision of estimates is enhanced with simple statistical corrections.

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06-10 Auray, Stéphane; Mariotti, Thomas; Moizeau, Fabien - Dynamic Regulation of Public Good Quality

We investigate the design of incentives for public good quality provision in a dynamic regulation setting in which maintenance efforts and quality shocks have durable effects. When the regulator contracts with a sequence of agents, asymmetries of information can lead to over-provision of quality under optimal regulation, reflecting a dynamic rent extraction motive. When the regulator hires a single agent to manage public good quality, over-provision of quality can also occur as a result of quality pooling, which typically occurs if quality depreciates slowly and the discount factor is large. We further show that for small levels of asymmetric information, the regulator prefers to hire a single agent rather than to contract with a sequence of agents, provided all parties can commit to a long-term contract. When no such commitment is feasible, the fact that quality physically links periods together leads to a ratchet effect even when private information is recurring, and shorter franchises are beneficial from a social point of view.

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06-09 Davidson, Russell; Duclos, Jean-Yves - Testing for Restricted Stochastic Dominance

Asymptotic and bootstrap tests are studied for testing whether there is a relation of stochastic dominance between two distributions. These tests have a null hypothesis of nondominance, with the advantage that, if this null is rejected, then all that is left is dominance. This also leads us to define and focus on restricted stochastic dominance, the only empirically useful form of dominance relation that we can seek to infer in many settings. One testing procedure that we consider is based on an empirical likelihood ratio. The computations necessary for obtaining a test statistic also provide estimates of the distributions under that satisfy the null hypothesis, on the frontier between dominance and nondominance. These estimates can be used to perform bootstrap tests that can turn out to provide much improved reliability of inference compared with the asymptotic tests so far proposed in the literature.

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06-08 Dionne, Georges; Fluet, Claude; Desjardins, Denise - Perception of the Risks Associated with Impaired Driving and Effects on Driving Behavior

This research studies the perception of the risks associated with impaired driving - probability of being apprehended or of having an accident - and the relation between the perception of risks and driving behavior. The most important determinants of perceptual biases are age, an accumulation of violations in the year preceding the survey, being a non-drinker, knowledge of the legal alcohol limit for driving, opinion about zero tolerance for impaired driving, and family income. Perceptual biases are shown to influence driving behavior, as captured by drivers' accumulated violations, demerit points and bodily injury accidents, in the years preceding and in the year following the survey. In conclusion, we analyze the results in terms of public policy for road safety.

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06-07 Dionne, Georges; St-Amour, Pascal; Vencatachellum, Désiré - Adverse Selection in the Market for Slaves in Mauritius, 1825-1835

Evidence on adverse selection in slave markets remains inconclusive. We study this question through notarial acts on public slave auctions in Mauritius between 1825 and 1835, involving 4,286 slaves. In addition to slave characteristics, the acts document the identities of buyers and sellers. We use this information to determine whether the buyer of a slave was related (e.g. a relative or a spouse) to the original slave owner, and thus most likely better–informed than other bidders. Auction–theoretic models predict that bidding should be more aggressive when informed bidders are present in open–bids, ascending auctions, such as slave auctions. By proxying informed bidders by related bidders, our results consistently indicate that this is the case, pointing toward presence of residual adverse selection in the market for slaves in Mauritius.

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06-06 Fluet, Claude - Liability Rules under Evidentiary Uncertainty

I consider the efficiency of liability rules when courts obtain imperfect information about precautionary behavior. I ask what tort rules are consistent with socially efficient precautions, what informational requirements the evidence about the parties' behavior must satisfy, what decision rules courts should apply when faced with imperfectly informative evidence, whether these decision rules can be formulated in terms of the legal concept of standard of proof, and whether some general characterization of the efficient standard can be given. I show that court judgments provide appropriate incentives to exert care if they signal that the party prevailing at trial most likely exerted due care, neither more nor less.

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06-05 Dionne, Georges; Gauthier, Geneviève; Ouertani, Nadia; Tahani, Nabil - Heterogeneous Basket Options Pricing Using Analytical Approximations

This paper proposes the use of analytical approximations to price an heterogeneous basket option combining commodity prices, foreign currencies and zero-coupon bonds. We examine the performance of three moment matching approximations: inverse gamma, Edgeworth expansion around the lognormal and Johnson family distributions. Since there is no closed-form formula for basket options, we carry out Monte Carlo simulations to generate the benchmark values. We perform a simulation experiment on a whole set of options based on a random choice of parameters. Our results show that the lognormal and Johnson distributions give the most accurate results.

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06-04 Boadway, Robin; Marceau, Nicolas; Mongrain, Steeve - Redistributive Taxation Under Ethical Behaviour

We consider the implications of ethical behaviour on the effect of a redistributive tax-transfer system. In choosing their labour supplies, individuals take into account whether their tax liabilities correspond to what they view as ethically acceptable. If tax liabilities are viewed as ethically acceptable, a taxpayer behaves ethically, does not distort her behaviour, and chooses to work as if she were not taxed. On the other hand, if ethical behaviour results in tax liabilities that exceed those that are ethically acceptable, she behaves egoistically (partially or fully), distorts her behaviour, and chooses her labour supply taking into account the income tax. We establish taxpayers' equilibrium behaviour and obtain that labour supply is less elastic when taxpayers may behave ethically than when they act egoistically. We characterize and compare the egoistic voting equilibrium linear tax schedules under potentially ethical and egoistic behaviour. We also compare our results to those obtained under altruism, an alternative benchmark.

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06-03 Dessy, Sylvain; Ewoudou, Jacques - Microfinance and Female Empowement

In the informal economy of developing countries, female entrepreneurs face a comparative disadvantage for operating high-productivity activities, owing to the prevalence of patriarchal forms of business regulations. Yet, for microfinance institutions (MFIs) to succeed in enhancing female empowerment, increased access to credit must enable female entrepreneurs to tap into the range of high-productivity activities. So when the costs of legality are too high in developing countries, and the informal economy becomes the only affordable venue for operating a business venture, this paper shows that access to microfinance services becomes only necessary, but not sufficient for female empowerment. Based upon a game-theoretic model of activity choices by  ex ante homogenous women, we argue that conditioning well-trained women's access to credit to the adoption of high-productivity activities may enable MFIs to induce the emergence of networks of female entrepreneurs large enough to mitigate patriarchal practices that raise the costs of operating such activities in the informal economy.

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06-02 Araar, Abdelkrim - On the Decomposition of the Gini Coefficient: an Exact Approach, with an Illustration Using Cameroonian Data

Decomposing inequality indices across household groups or income source is useful in estimating the contribution of each component to total inequality. This can help policy makers draw efficient policies to reduce disparities in the distribution of incomes using targeting tools. Decomposing relative inequality indices, such as the Gini coefficient, is not a simple procedure since, in many cases, the functional form of inequality indices is not additively separable in incomes. More importantly, for some of the indices on which this decomposition can be performed, the interpretation of the decomposition components is often not well founded. In this paper, we use the Shapley value as well as analytical approaches to perform the decomposition of the Gini coefficient and generalize it, in some cases, to the decomposition of other inequality indices. For the analytical approach, our aim is to extend the same interpretation, attributed to the Gini coefficient, to that of the contribution components.

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06-01 Normandin, Michel; Powo Posso, Bruno - Global versus Country-Specific Shocks and International Business Cycles

This paper documents the relative importance of global and country-specific shocks for international business cycles. For this purpose, we rely on a symmetric two-country, dynamic, general-equilibrium model with costly, incomplete, international financial markets. We also relate exogenous technologies and government expenditures to unobservable common and idiosynchratic components, and apply a Kalman filter to extract the associated global and country-specific shocks. We show that the baseline parametrization of the model, including all shocks, closely matches the cyclical fluctuations of key macroeconomic variables for the United States and a non-US aggregate over the post-1975 period. We then experiment alternative parametrizations, isolating the effects of each shock, and find that country-specific technology shocks constitute a prime determinant of international business cycles. Also, global technology shocks have marginal contributions, whereas global and country-specific government-expenditure shocks have negligible effects on cyclical fluctuations.

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