Most economists, without much prompting, would claim that the annual rate of growth in public expenditure since 1990 has been 'excessive'. However, the case is distinctly underwhelming if it relies on standard macroeconomic arguments. The general Government Deficit (GGD) has been kept below 3%...

Commonly used linear-quadratic solution methods to nonlinear models are described in detail using a closed economy real business cycle model as an illustration. We find that all method yield identical coefficients on optimal decision rules. Some methods are easier to use in economies where...

draft paper

In this paper we test for risk compensation in wages using Danish panel data. With the conviction that the type of education is as important as the education length, we use a very detailed description of the type of education reached by the Danish population to calculate different measures of...

This paper examines the optimal allocation each period of an internationally diversified portfolio from the different points of view of a UK and a US investor. A multivariate GARCH model is used to estimate the conditional covariance matrix of returns, and to rebalance their portfolios each...

We analyze a sequential decision model, where in every period a new agent seeks to determine the payoff of some actions. Every agent receives a possibly uninformative signal about the payoffs, and she observes previous choices. Some actions have a saturation effect; i.e., their payoffs become...

We argue that reluctance to invest in drug treatments to fight the AIDS epidemics in developing countries is largely motivated by severe losses occurring from the future albeit uncertain appearance of a curative vaccine. We design a set of securities generating full insurance coverage against...

This paper examines how employment protection legislation affects location decisions of multinationals. Based on a simple theoretical framework, we estimate an empirical model, using OECD-data on bilateral FDI-flows and employment protection indices. We find that, while an “unfavourable”...

We consider a regulator providing deposit insurance to a bank with private information about its investment portfolio. Following current regulatory practices, we assume that the regulator does not commit to audit and sanction after any risk report from the bank. We show that, in absence of...