http://repub.eur.nl/res/concept/jel-D9/ Recent publications classified by JEL Code D9 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/39185/ 2013-02-26T00:00:00Z Wealthier individuals engage in healthier behavior. This paper seeks to explain this phenomenon by developing a theory of health behavior, and exploiting both lottery winnings and inheritances to test the theory. We distinguish between the direct monetary cost and the indirect health cost (value of health lost) of unhealthy consumption. The health cost increases with wealth and the degree of unhealthiness, leading wealthier individuals to consume more healthy and moderately unhealthy, but fewer severely unhealthy goods. The empirical evidence presented suggests that differences in health costs may indeed provide an explanation for behavioral differences, and ultimately health outcomes, Kippersluis, J.L.W. van Galama, T.J. http://repub.eur.nl/res/pub/33018/ 2012-10-01T00:00:00Z We study optimal investment in technologies characterized by the learning curve. There are two investment patterns depending on the shape of the learning curve. If the learning process is slow, firms invest relatively late and on a larger scale. If the curve is steep, firms invest earlier and on a smaller scale. We further demonstrate that learning investment differs greatly from investment in technologies without learning effects. Learning investments generate substantial initial losses and are very sensitive to downside risk. We show that the most susceptible to losses and risk are technologies with intermediate speed of learning. Della Seta, M. Gryglewicz, S. Kort, P.M. http://repub.eur.nl/res/pub/26379/ 2012-08-01T00:00:00Z The time tradeoff (TTO) method is often used to derive Quality-Adjusted Life Year health state valuations. An important problem with this method is that results have been found to be responsive to the procedure used to elicit preferences. In particular, fixing the duration in the health state to be valued and inferring the duration in full health that renders an individual indifferent, causes valuations to be higher than when the duration in full health is fixed and the duration in the health state to be valued is elicited. This paper presents a new test of procedural invariance for a broad range of time horizons, while using a choice-based design and adjusting for discounting. As one of the known problems with the conventional procedure is the violation of constant proportional tradeoffs (CPTO), we also investigate CPTO for the alternative TTO procedure. Our findings concerning procedural invariance are rather supportive for the TTO procedure. We find no violations of procedural invariance except for the shortest gauge duration. The results for CPTO are more troublesome: TTO scores depend on gauge duration, reinforcing the evidence reported when using the conventional procedure. Attema, A.E. Brouwer, W.B.F. http://repub.eur.nl/res/pub/32658/ 2012-03-01T00:00:00Z Deciding how much to save for retirement is a difficult task that includes many uncertainties. In this paper, we use data from a representative Dutch household panel to study the impact of uncertainty regarding one's savings adequacy on retirement savings contributions and information search processes. We combine ideas from the literature in psychology and economics that provide opposing predictions regarding the impact of uncertainty on retirement savings contributions. Our results indicate that the effect of uncertainty is moderated by two factors: an individual's perceived adequacy of current savings and that individual's financial constraints. In particular, we find that uncertainty increases retirement contributions for those who believe that they save adequately; however, it hinders retirement contributions for those who believe that they save inadequately. This effect of uncertainty is further moderated by the availability of financial means: a reduction in uncertainty results in greater contributions to savings only when financial constraints are absent. We also find that uncertainty has both indirect and direct effects on savings information search. In particular, uncertainty indirectly affects savings information search because it impacts individuals' intentions to save, which consequently forces individuals to engage in purchase-oriented information search; however, uncertainty also has a direct effect because individuals engage in ongoing information search processes to directly reduce uncertainty. The implications of these findings are discussed. Schie, R.J.G. van Donkers, A.C.D. Dellaert, B.G.C. http://repub.eur.nl/res/pub/34804/ 2011-01-01T00:00:00Z Height-for-age (HA) and weight-for-age (WA) of children are standard measures to study the determinants of stunting and short-term underweight. Rather than studying these indicators separately, this paper looks at their interaction and therefore at the dynamics of height and weight. Considering HA a child's health stock and WA nutritional investment, we develop an overlapping generations model. The main features of the model are self-productivity of health stocks and the dynamic complementarity between past health stocks and contemporaneous nutrition. We test the model's predictions on a Senegalese panel of 305 children between 0 and 5 years over three periods. To control for endogeneity and serial correlation we employ different GMM methods. We find evidence of self- productive health stocks and that child health produced at one stage raises the productivity of nutritional inputs at subsequent stages. Our results indicate that child health is quickly depleted and needs constant updating. Simulations based on our estimates show that a positive nutritional shock during the first six months of life is essentially depleted at the age of 2. Consequently, sustainable development and nutrition programs have to be long-term and yield higher returns if they reach babies in the early months of infancy. Wagner, N. Rieger, M. http://repub.eur.nl/res/pub/20413/ 2010-07-22T00:00:00Z Understanding of the substantial disparity in health between low and high socioeconomic status (SES) groups is hampered by the lack of a suffciently comprehensive theoretical framework to interpret empirical facts and to predict yet untested relations. We present a life-cycle model that incorporates multiple mechanisms explaining (jointly) a large part of the observed disparities in health by SES. In our model, lifestyle factors, working conditions, retirement, living conditions and curative care are mechanisms through which SES, health and mortality are related. Our model predicts a widening and possibly a subsequent narrowing with age of the gradient in health by SES. Galema, T.J. Kippersluis, J.L.W. van http://repub.eur.nl/res/pub/21096/ 2010-04-01T00:00:00Z ABSTRACT. This paper introduces time-tradeoff (TTO) sequences as a new tool to analyze time inconsistency and intertemporal choice. TTO sequences simplify the measurement of discount functions, requiring no assumption about utility. They also simplify the qualitative testing of time inconsistencies, and allow for quantitative measurements thereof. TTO sequences can easily be administered using only pencil and paper. They readily show which subjects are most prone to time inconsistencies. We further use them to axiomatically analyze and empirically test (quasi-)hyperbolic discount functions. An experiment demonstrates the feasibility of measuring TTO sequences. Our data falsify (quasi-)hyperbolic discount functions and call for the development of models that can accommodate increasing impatience. Attema, A.E. Bleichrodt, H. Rohde, K.I.M. Wakker, P.P. http://repub.eur.nl/res/pub/19990/ 2009-12-01T00:00:00Z Prelec (2004) showed that the Arrow–Pratt degree of convexity of the logarithm of the discount function can serve as a measure of decreasing impatience and of the corresponding time-inconsistency. In decision under risk and uncertainty the convexity of the utility function itself, not of its logarithm, has empirical meaning in terms of risk attitude. This paper introduces decreasing relative impatience, which is directly related to the degree of convexity of the discount function. By giving empirical meaning to the convexity of the discount function this paper clarifies the relations between several concepts in intertemporal choice. This paper also introduces a concept of spread seeking. Spread seeking and decreasing relative impatience are likely to have distinct underlying psychological motives, but are shown to be equivalent under discounted utility. Rohde, K.I.M. http://repub.eur.nl/res/pub/17490/ 2009-11-17T00:00:00Z Many empirical studies on intertemporal choice report preference reversals in the sense that a preference between a small reward to be received soon and a larger reward to be received later reverses as both rewards are equally delayed. Such preference reversals are commonly interpreted as contradicting constant discounting. We show that this interpretation is correct only if baseline consumption to which the outcomes are added, remains constant over time. The difficulty with measuring discounting when baseline consumption changes over time, is that delaying an outcome has two simultaneous effects: (1) due to the change in baseline consumption, it changes the increase in utility from receiving the outcome, and (2) it changes the discount factor applied to this increase in utility. In order to draw conclusions about discounting one needs to disentangle these two effects which seems impossible at first sight (Noor, 2009). Yet, in this paper we propose a way to disentangle the two effects. Gerber, A. Rohde, K.I.M. http://repub.eur.nl/res/pub/14975/ 2009-02-20T00:00:00Z This thesis investigates two questions: the determinants of capital structure in franchising and its subsequent impact on the franchise financing decisions; and the efficient governance structure choice in franchising. We posit that firms franchise in order to benefit from the reduced franchisees’ operational risks by limiting the debt level, such that the franchisor can bear more debt and gain tax-deduction benefits. Specific hypotheses are based on various theories like resource-based view, agency theory, signaling theory and classical capital structure theories. We empirically find that as the franchisor requires franchisees to put more equity in the initial investment, the franchisor does bear a higher debt level and gains from tax deductibility of interest expenses. This effect is stronger when more units are franchised. Moreover, we also find evidence supporting our prediction that the franchisee’s leverage is positively linked with franchisor’s maturity. This suggests that as the franchisor imposes a higher level of franchisee’s leverage in order to screen capable franchisees, the franchisor also increases their maturity to reduce bankruptcy risks. This thesis also explores the impact of governance structure on the incentives to invest in specific assets for the franchisor as well as the distributors. Wholly-owned, wholly-franchised, and mixed franchise systems are considered. Circumstances are identified when a dual distribution governance structure uniquely allocates efficient ownership over assets. A necessary condition for the efficiency of a dual distribution governance structure is a positive systemic effect, not the value of the brand name or location (or other) differences between outlets. We find that whether dual distribution benefits are realized in a franchise or a cooperative franchise depends on whether most value is added upstream or downstream. Jiang, T. http://repub.eur.nl/res/pub/13645/ 2008-09-01T00:00:00Z Prior research has argued that multinational enterprises (MNEs) prefer to enter culturally distant countries through greenfields rather than through acquisitions, since acquisitions in such countries are costlier to manage. This argument contains two hidden assumptions: (1) the additional costs of acquisitions in culturally distant countries are the same for all MNEs; and (2) such acquisitions have no benefits over their greenfield counterparts. In this paper we relax these two assumptions by arguing that an MNE's preference for greenfields in culturally distant countries depends on its international and host-country experience, and on the level of autonomy it plans to grant the focal subsidiary. Analyzing 171 wholly owned greenfield investments and full acquisitions made by Dutch MNEs in 35 countries, we find that these MNEs prefer to enter culturally distant countries through greenfields, but that this preference is lower when they have little international experience, or plan to grant the focal subsidiary considerable autonomy in marketing. Slangen, A.H.L. Hennart, J-F. http://repub.eur.nl/res/pub/10538/ 2007-09-11T00:00:00Z Prior research has argued that multinational enterprises (MNEs) prefer to enter culturally-distant countries through greenfields rather than through acquisitions, since acquisitions in such countries are costlier to manage. This argument contains two hidden assumptions: (1) the additional costs of acquisitions in culturally-distant countries are the same for all MNEs, and (2) such acquisitions have no benefits overtheir greenfield counterparts. In this paper we relax these two assumptions by arguing that an MNE’s preference for greenfields in culturally-distant countries depends on its international and host-country experience, and on the level of autonomy it plans to grant the focal subsidiary. Analyzing 171 whollyowned greenfield investments and full acquisitions made by Dutch MNEs in 35 countries, we find that these MNEs prefer to enter culturally-distant countries through greenfields, but that this preference is lower when they have little international experience, or plan to grant the focal subsidiary considerable autonomy in marketing. Slangen, A.H.L. http://repub.eur.nl/res/pub/10539/ 2007-09-11T00:00:00Z This paper reviews the empirical literature on the determinants of the choice by multinational enterprises between entering foreign countries through greenfields or acquisitions. We discuss and compare the main theoretical perspectives used, provide a detailed overview of the empirical findings, examine why these findings have often been inconsistent, and offer theoretical and methodological suggestions to guide future research. Slangen, A.H.L. Hennart, J-F. http://repub.eur.nl/res/pub/11073/ 2007-01-01T00:00:00Z Koopmans provided a well-known preference foundation for discounted utility, the most widely used model for intertemporal optimization. There were, however, some problems in his analysis. For example, there was an unforeseen implication of bounded utility. For some domains solutions have been advanced in the literature, primarily when particular production processes impose time-dependent restrictions on consumption. This paper completely resolves the problems mentioned, irrespective of what the restrictions on consumption are. It obtains complete flexibility concerningt he utility functions that can be used and concerning the conceivable economic growth. This paper, thus, provides a complete preference foundation of discounted utility, and clarifies the appeal of Koopmans’ intuitive axioms. Bleichrodt, H. Rohde, K.I.M. Wakker, P.P. http://repub.eur.nl/res/pub/11077/ 2007-01-01T00:00:00Z The commonly used hyperbolic and quasi-hyperbolic discount functions imply decreasing impatience, which is the prevailing empirical phenomenon in intertemporal choice, in particular for aggregate behavior. At the individual level there is much variation, however, and there will always be some individuals who exhibit increasing impatience. Hence, to fit data at the individual level, new discount functions are needed. This paper introduces such functions, with constant absolute (CADI) or constant relative (CRDI) decreasing impatience. These functions can accommodate any degree of decreasing or increasing impatience, which makes them sufficiently flexible for analyses at the individual level. The CADI and CRDI discount functions are the analogs of the well known CARA and CRRA utility functions for decision under risk. Bleichrodt, H. Rohde, K.I.M. Wakker, P.P. http://repub.eur.nl/res/pub/7670/ 2006-04-03T00:00:00Z This study explored the psychological mechanisms that underlie the retirement planning and saving tendencies of Dutch and American workers. Participants were 988 Dutch and 429 Americans, 25-64 years of age. Analyses were designed to: (a) examine the extent to which structural variables were related to planning tendencies, and (b) develop culture-specific path analysis models to identify the mechanisms that underlie perceived financial preparedness for retirement. Findings revealed striking differences across the Netherlands and the United States not only among structural variables predictive of key psychological and retirement planning constructs, but also in the robustness of the path models. These findings suggest that policy analysts should take into account both individual and cultural differences in the psychological predispositions of workers when considering pension reforms that stress individual responsibility for planning and saving. Hershey, D.A. Henkens, K. Dalen, H.P. van http://repub.eur.nl/res/pub/12368/ 2006-03-01T00:00:00Z The stock market collapse led to political tensions between generations due to the fuzzy definition of the property rights over the pension funds’ wealth. The problem is best resolved by the introduction of generational accounts. Modern consumption and portfolio theory shows that the younger generations should have the higher equity exposure due to their human capital. Stock market losses should be distributed smoothly over lifetime consumption by adjusting both current contributions and future entitlements. We present expressions for the substantial welfare losses involved in various practically relevant deviations from the optimal system. Teulings, C.N. Vries, C.G. de http://repub.eur.nl/res/pub/15824/ 2004-10-01T00:00:00Z We investigate the manifold posed question: To what extent does investment in human and social capital, besides the effect of talent, enhance entrepreneurial performance? We distinguish between three different performance measures: survival, profits, and generated employment. On the basis of the empirical analysis of a rich Dutch longitudinal data set of firm founders, we conclude that specific investments indeed affect the three performance measures substantially and significantly. Specific attention is paid to the unobserved talent bias. Moreover, the effect of the emergence of so called "knowledge industries" is explored. Bosma, N. Praag, M. van Thurik, A.R. Wit, G. de http://repub.eur.nl/res/pub/6597/ 2004-04-01T00:00:00Z In this paper we study the implications of population ageing in an economy with a sizeable non-traded goods sector. To this effect a highly stylized micro-founded macro model is constructed in which the age structure of the population plays a non-trivial role. The model distinguishes separate birth and death probabilities (thus allowing for net population change), allows for age-dependent labour productivity (thus mimicing life-cycle saving), and includes a rudimentary pension system (thus allowing for intergenerational redistribution). The model is used to analytically study demographic and pension shocks. Bettendorf, L.J.H. Heijdra, B.J. http://repub.eur.nl/res/pub/1091/ 2004-01-06T00:00:00Z This paper investigates the age-dependency of participation and unemployment by integrating job search with intertemporal optimizing behavior of finitely-lived households. We find that search frictions and tax rates distort the decisions of older workers to a much larger extent than that of young workers. This finding provides an explanation of the observed fall of participation rates of elder workers as a result of the post-war increase in tax rates and replacement rates. We show that the age pattern of search unemployment does not match observed unemployment and we propose a new concept of ‘voluntary’ unemployment that agrees well with observations. Bettendorf, L.J.H. Broer, D.P.