Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society

## Volume 27, Issue 2 (June 2016)

Cover Pages
Abstract | PDF (134 kilobytes)

The Rise and Fall of Miracles, Pages 1–38

Jang-Ok Cho, Sookyoung Kim

Abstract | PDF (781 kilobytes)

It is shown that an economy can grow endogenously in early stage of development. However, the growth is not due to the factors emphasized in the literature but due to abundant labor. If labor is abundant enough to render real wage rate fixed as Lewis (1954) postulated, the marginal product of capital does not decrease with capital and hence endogenous growth emerges. However, the endogenous growth is temporary in the sense that once labor has been fully utilized, the growth enters neoclassical phase in which the economy converges along saddle path to its steady state of low growth. The model is proposed to explain the difference between West German and Japanese growth pattern after World War II. It is argued that West Germany was a highly industrialized Solow (1956) economy far below her steady state due to wartime destruction. As was predicted by Solow, West German growth rate was extremely high initially. However, her growth pace slowed down gradually from the beginning to a low growth steady state. By contrast, Japanese economy after the war was a largely agrarian and labor abundant Lewis economy. Japan's rapid economic growth which had been sustained temporarily for about twenty years before she took the path converging to the present steady state of low growth was endogenous. Almost all of the growth miracles since the latter half of the twentieth century have been of Japanese pattern.

A Characterization of Equilibrium in Incomplete Markets with Real Assets, Pages 39–62

Dong Chul Won

Abstract | PDF (195 kilobytes)

A closed-form solution of equilibrium outcomes is generally unavailable in a general equilibrium model with incomplete markets (GEI model). Competitive equilibrium may not be directly computable from the aggregate excess demand functions because they need not be continuous in GEI economies.
This paper provides a new characterization of competitive equilibrium in the GEI model by putting into a new perspective the sudden shrinkage of risk-sharing opportunities at a spot price that makes some of the assets redundant and thus, may cause the discontinuity of demand functions. The new characterization is based on the notions of pre-GEI equilibrium' and test equilibrium'. Pre-GEI equilibrium outcomes yield a computational equivalent of competitive equilibrium while test equilibrium outcomes may provide existential information on equilibrium. Competitive equilibrium for the GEI model is generically computable as an outcome of pre-GEI equilibrium without resort to any element of the Grassmann manifold.

Group Contests and Technologies: Weakest-Link and Best-Shot Group Contests, Pages 63–95

Dongryul Lee

Abstract | PDF (222 kilobytes)

We study the role of returns to scale of production function in contests between groups. Two types of group contests are considered, the weakest-link group contest and the best-shot group contest. In each group contest, we investigate the existence and characteristics of the Nash equilibrium of the game, given different returns to scale of the production function for the contest. We find that, in both group contests, the constant returns and decreasing returns to scale bring the same nature of equilibrium. On the other hand, the increasing returns to scale causes the nonconcavity of players' payoff functions, complicates the analysis of the game, and makes changes in equilibrium properties.

Preference Revelation Games in School Choice When Students Are Naive or Strategic, Pages 96–108

Wonki Jo Cho

Abstract | PDF (150 kilobytes)

Abdulkadiroglu, Che, and Yasuda (2011) consider the preference revelation games induced by the immediate acceptance and deferred acceptance mechanisms (henceforth, the IA and DA games, respectively) when students are naive or strategic. They study properties of a class of equilibria of the IA game in which some strategic student misrepresents his preferences with positive probability but they do not establish the existence of such equilibria. We show that in fact, depending on the parameters of the model, the IA game may have no such equilibrium. Then we provide a condition, termed richness, on the preference type space that ensures existence. Another result of Abdulkadiroglu, Che, and Yasuda (2011) is that in a symmetric equilibrium of the IA game, if a strategic student of some preference type reports his preferences truthfully, then a naive student of the same preference type is at least as well off in that equilibrium of the IA game as in the dominant strategy, truth-telling equilibrium of the DA game. This comparison, however, is silent on the welfare of the other naive students. We show that some naive students are indeed worse off under the immediate acceptance mechanism than under the deferred acceptance mechanism.

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