The present paper thoroughly explores second-best efficient allocations in an adverse selection insurance economy. We start from a natural extension of the classical model, assuming less than perfect risk perceptions. We propose first and second welfare theorems, by means of which we describe efficiencyenhancing policies. Notions of weak and strong adverse selection are promising for interpreti...

It is well-know that estimation by reduced rank regression is given by the solution to a generalized eigenvalue problem. This paper presents a new proof to establish this result and provides additional insight into the structure of the estimation problem. The proof is a direct algebraic proof that some might find more intuitive than existing proofs. JEL Classification: C3, C32

A new multivariate heavy-tailed distribution is proposed as an extension of the univariate distribution of Politis (2004). The properties of the new distribution are discussed, as well as its effectiveness in modeling ARCH/GARCH residuals. A practical procedure for multiparameter numerical maximum likelihood is also given, and a real data example is worked out. JEL codes: C3; C5.

An identity links the rate of economic growth, the speed of poverty reduction and changes in the distribution of income during some time period in a given country. A few authors used that identity to understand the causes for observed changes in poverty and to identify the exact role of economic growth in poverty reduction. Yet, many empirical cross-country studies of the relationship between g...

This paper discusses estimation of causal effects of non-randomly assigned binary treatments on binary outcomes. The approach is full information maximum likelihood estimation of endogenously switching nonlinear regressions with a multivariate Student’s-t error structure. An application measures the effect of problem drinking on probability of employment. JEL Classification: I1, C3 I thank the ...

This paper and its companion, Dutta-Siconolfi (2016a) proves a First Welfare Theorem for Games. It shows that infinite horizon asynchronous dynamic games with voluntary one period ahead transfers have a unique equilibrium that coincides with the Utilitarian Pareto Optimum and hence can be computed from a (simpler) programming problem (rather than as a fixed point). The only way that multiplicit...