Models with externalities have become increasingly popular for studying both long-term growth and business-cycle fluctuations. Externalities can lead to indeterminacy, allowing self-fulfilling expectations to determine the equilibrium. This paper argues that the importance of indeterminacy might...

Professional forecasters may not simply aim to minimize expected squared forecast errors. In models with repeated forecasts, the pattern of forecasts reveals valuable information about the forecasters even before the outcome is realized. Rational forecasters will compromise between minimizing...

This paper shows that the under-investment in firm financed training caused by hold up can justify the introduction of firing taxes in a laissez-faire economy with search frictions and risk neutral agents. More precisely we highlight two results. First, the introduction of a firing tax for newly...

International surveys of educational achievement and functional literacy are increasingly common. We consider two aspects of the robustness of their results. First, we compare results from four surveys: the Trends in International Maths and Science Study, the Programme for International Student...

The signs of forecast errors can be predicted using the difference between individuals' forecasts and the average of earlier forecasts of the same variable. It is possible to improve forecasts without worsening any. It is difficult to reconcile this result with the rational expectations...

International surveys of learning achievement and functional literacy are increasingly common. We consider two aspects of the robustness of their results. First, we compare results from four surveys: TIMSS, PISA, PIRLS and IALS. This contrasts with the standard approach which is to analyse a...

This paper addresses two aspects of the model of rational addiction: forward looking behavior and time consistent preferences. It explores smoking by women before, during and after pregnancy using the European Community Household Panel (ECHP). Pregnancy is used as an instrument for a partially...

This paper studies whether anomalies in consumption can be explained by a behavioral model in which agents make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. The paper shows that, the null hypothesis of rational...