magazine

Fall 2003

tinbergen institute8

Tinbergen Magazine is published

by Tinbergen Institute, the

Institute for economic research of

Erasmus Universiteit Rotterdam,

Universteit van Amsterdam and

Vrije Universiteit Amsterdam.

Practical auctioneering

Enough work for motivated economists

An interview with Robert Dur

Weak instruments and empirical economics

Practical auctioneering

Enough work for motivated economists

An interview with Robert Dur

Weak instruments and empirical economics

In depth

References

Jury

In short

2

www.tinbergen.nl

In this issue

In depth

Practical Auctioneering

Jacob K. Goeree & Theo Offerman

“Enough work for motivated economists”

An interview with Robert Dur

Robert Mosch

Weak instruments and empirical economics

Frank Kleibergen

Jury report, Tinbergen Prize 2003

In short

Papers in Journals

Discussion papers

Theses

References

Theses, Papers in Journals and books published by TI fellows

and discussion papers that have appeared in the last half year

3

11

14

15

15

18

magazine

Fall 2003

tinbergen institute8

Tinbergen Magazine is published

by Tinbergen Institute, the

Institute for economic research of

Erasmus Universiteit Rotterdam,

Universteit van Amsterdam and

Vrije Universiteit Amsterdam.

Practical auctioneering

Enough work for motivated economists

An interview with Robert Dur

Weak instruments and empirical economics

Practical auctioneering

Enough work for motivated economists

An interview with Robert Dur

Weak instruments and empirical economics

Highlighting ongoingresearch at TinbergenInstitute for policymakersand scientists.

8

17

Tinbergen Prize 2003

This issue of Tinbergen Magazine features articles written by the winners of

the Tinbergen Prize 2003, Jacob Goeree and Frank Kleibergen. Jacob Goeree’s

piece, “Practical auctioneering” (on page 3), is co-authored with Theo Offerman.

“Weak instruments and empirical economics” (on page 11) is the title of the

article by Frank Kleibergen.

3

Auctions provide a familiar and simplemethod for reallocating resources from sell-ers to buyers. They have been used in thesale of a variety of goods since antiquity, andwith the recent advent of the Internet, therange and number of goods sold in auctionshave reached enormous proportions.1

Auctions have also been increasingly appliedin the transfer of assets from the public sec-tor to the private sector. A particularlyprominent example is the sale of spectrumfor telecommunication purposes. Followingthe successful auctions in the US in 1994,many countries decided to auction theirspectrum as well. In the summer of 2000,these UMTS auctions raised over 100 billionEuros across Europe.

The modern approach to auctions start-ed with William Vickrey’s seminal paper inthe March 1961 issue of the Journal ofFinance. Vickrey was the first to analyse auc-tions in the context of Bayesian games ofincomplete information (e.g. bidders for apainting know how much it is worth to them,but they don’t know rivals’ valuations).Vickrey studied the familiar first-price auc-tion, in which the high bidder wins and paysher own bid, and introduced a novel format,the second-price or “Vickrey auction,” wherethe winner pays the highest losing bid. Heshowed that the revenues a seller obtainsfrom employing a first- or second-price auc-tion are identical– a result that has sincebeen generalised to other formats. Vickrey’s

Practical AuctioneeringI n d e p t hJacob K. Goeree

●

and Theo Offerman●●

●

Jacob Goeree is a Research Fellow of the Alfred P. Sloan Foundation and theTinbergen Institute, and Professor of Economics at the Universiteit vanAmsterdam, where he received his Ph.D. in 1997. In April 2003 he was the jointwinner of the Tinbergen Prize for the scientifically most successful alumnus.

●●

Theo Offerman is a Research Fellow of the Royal Netherlands Academy of Artsand Sciences (KNAW) and the Tinbergen Institute, and Associate Professor ofEconomics at the Universiteit van Amsterdam, where he received his Ph.D. in 1996.

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tinbergen magazine 8, fall 2003

celebrated revenue equivalence theorem nowforms one of the cornerstones of modernauction theory, as acknowledged by theNobel Prize committee in 1996.

Auction theory has since become anactive area of research, and the assumptionsunderlying the revenue equivalence theoremhave been relaxed considerably. In the lastthree decades, economists have investigatedthe efficiency and revenue-generating prop-erties of different auction formats in thepresence of risk aversion, correlation ofinformation, budget constraints, etc. Otherfactors, such as interdependent valuationsand asymmetries between bidders, have sur-faced in the literature only recently, probablydue to the computational complexities theycreate. These factors are critically importantfor the success of an auction, however, andmany selling mechanisms observed in reallife exhibit sensible ways to deal with them.This article describes some recent develop-ments in “practical auctioneering”: the inter-play between formal economic modelling andpractical auction design.

The Amsterdam auctionLarge asymmetries between bidders can

have devastating consequences for the profit-ability of certain auction formats. Consider, forinstance, the case of a real-estate auction,where speculators out for a bargain competewith buyers that have a genuine interest in thehouse. For concreteness, suppose that specula-tors are willing to pay $200,000 for a house.They may be able to sell it for more on themarket, but they have to take into accounttransaction costs, taxes, the effort of finding abuyer, etc. To make a decent profit, they there-fore won’t bid more than $200,000. Several ofthese speculators compete against a newlymarried couple whose (unknown) value for thehouse lies somewhere between $400,000 and$500,000. When a standard ascending (orEnglish) auction is employed, the price will riseto $200,000, after which all speculators dropout and the auction stops. So the house goes tothe newlyweds for a price of $200,000. Also inthe first-price auction, revenues will be only$200,000 – even though the house is worth atleast twice as much to the newlyweds.

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tinbergen magazine 8, fall 2003

An intriguing and practical solution tothe problem of bidder asymmetries is provid-ed by “premium auctions,” where the highestlosing bidder receives some prize amount.Premium auctions are regularly used to sellland, boats, machinery, and equipment, andmany Belgian and Dutch towns have theirown variant, some dating back to medievaltimes (Sikkel, 2001). Actual premium auc-tions are rich in institutional details. Goereeand Offerman (2003a) consider a stylisedpremium auction with the essential featuresshared by all premium auctions. SinceAmsterdam is the most prominent city hold-ing premium auctions, we refer to this auc-tion as the “Amsterdam auction.”2

Amsterdam auctions consist of twostages. In the first stage, the auctioneer rais-es the price until all but two bidders havedropped out of the auction. The level atwhich the last bidder exits in the first stage,the “bottom price,” acts as a reserve price inthe second stage. In this stage, the two final-ists submit a sealed bid no less than the bot-tom price, the highest bidder gets the object,and both receive a premium proportional tothe difference between the lowest sealed bidof the second stage and the bottom price ofthe first stage (say 20% of this difference).Finally, the winner pays the lowest sealed bidof the second stage.3

The revenue-enhancing effects of theAmsterdam auction can be illustrated in thecontext of the above example where severalspeculators compete against a single“stronger” bidder (i.e. the newly married cou-ple). First, note that the newlyweds have noreason to bid below their value, which liessomewhere between $400,000 and $500,000.If they would, they might lose the auction ata price they would have preferred to win,and they might forgo a possible premium.The speculators, who realise that the newly-weds will not bid below their value, nowhave an incentive to remain in the auctioneven if the price exceeds $200,000. Indeed,suppose all other speculators drop out at$300,000; it then pays for one speculator tostay in the auction a little longer, say to$301,000, in order to win the premium. Inthe second stage this speculator can simplybid $399,000 to make sure the house is wonby the newlyweds, and cashes in on the pre-mium: 10% of $98,000, or $9.800.

Of course, all speculators face the samesituation, and none will want to drop outbefore $400,000. Once the price levelexceeds this amount, however, the incentivesof speculators change, as there is somechance that the newlyweds drop out.4 Forthis reason, a speculator who makes it to thesecond stage may find it optimal to bid$400,000 in this stage as well, in which caseno premium has to be awarded (since the

lowest price of the second stage and the bot-tom price of the first stage coincide). Inother words, the Amsterdam auction pro-vides a cheap way (i.e. no premium) for theseller to double the revenues (from $200,000to $400,000) without having to discriminatebetween bidders or having to gather informa-tion about which reserve prices or biddingcredits to choose.

In a series of experiments using bothsymmetric and asymmetric settings, Goereeand Offerman (2003a) compare the perfor-mance of standard first-price and Englishauctions with that of the Amsterdam auction.Figure 1 shows a histogram of revenues in anasymmetric bidding environment like the onein the above example. Note that theAmsterdam auction clearly outperforms thestandard first-price and English auctions. Thelatter format is not robust in this environ-ment, since it produces low revenues (some-times close to zero) at a high variance.

Figure 1. Revenue histogram for the different

auction formats.

Inefficiencies in auctions It seems fair to say that sellers of real

estate are mainly concerned with the revenueof the auction. In contrast, when a govern-ment decides to privatise public assets bymeans of an auction, they may be especiallyinterested in the efficiency of the resultingallocation. The recent European UMTS auc-tions, for instance, were motivated mainly byefficiency arguments (“put licenses in thehands of those that value them the most”),rather than as a means to alleviate govern-ments’ budget deficits.

Until recently, auctions were assumed toalways yield 100% efficient allocations. Thisbelief partly resulted from the common clas-sification of auctions into one of two cate-gories. In private-value auctions, biddersknow their own value for the commoditywith certainty, but are unsure about the valu-ations of others. The sale of a painting isoften used to illustrate this type of auction.In contrast, common-value auctions pertainto situations in which the object for sale is

6

worth the same to everyone, but bidders havedifferent private information about its truevalue. A well-known example where the com-mon-value set-up applies is the auctioning ofoil drilling rights – since the amount of oil isthe same no matter who wins the auction.

Most real-world auctions, however, arenot exclusively common value or privatevalue. For instance, when a painting is auc-tioned to a private collector, it may be resoldin the future, and the resale price will be thesame for all bidders. This adds a common-value component to the auction. And in theoil-drilling example, private-value differencesmay arise when a superior technologyenables some firms to exploit the rights bet-ter than others.

Efficiency is not an issue in (pure) pri-vate- or common-value auctions. In the pri-vate-value context, Vickrey (1961) hadalready shown that optimal bids are increas-ing in bidders’ values, and hence, that theobject is awarded to the bidder who values itthe most. And in common-value auctions, allbidders value the object the same, so anyallocation rule is (trivially) efficient.However, inefficiencies should be expectedwhen bidders possess both private- and com-mon-value information. The intuition for thisresult is straightforward: a bidder with a

moderate private value and an overly opti-mistic estimate of the common value mayoutbid a rival with a superior private valuebut more realistic conjectures about the com-mon value.

In their analysis of auctions with pri-vate- and common-value elements, Goereeand Offerman (2002, 2003b) show that moreuncertainty about the common value impliesa higher level of expected inefficiency. Whenthe uncertainty about the common value isso large as to override the private-valueinformation, auctions are no more efficientthan a random allocation rule. In the otherextreme (when there is no uncertainty aboutthe common value at all), the auction isreduced to an efficient private-value auction.

Auctioning of licenses to operatein a marketThe observation that more uncertainty

about the object’s value results in more inef-ficiency has important implications for theauctioning of licenses to operate in a market.There, the cost structure of bidding firmsconstitutes a private-value element, while theuncertain demand for consumer productsactually introduces a common-value aspect.The added value of using auctions as ameans of assigning licenses is greater whenthe uncertainty about the common-valueaspect is small than when it is large. Forinstance, vendor locations at fairs are oftenauctioned on an annual basis, which enablesbidders to accumulate information aboutdemand over time. Consequently, the com-mon value of the location can be determinedmore precisely, thereby reducing possibleefficiency losses in license auctions. In con-trast, the recent UMTS auctions provide anexample in which the uncertainty about thecommon-value aspect was likely to be large.First, these auctions are held infrequently.Second, estimating demand is complicated inan emerging market (such as the market formobile phones). As a result, efficiency lossesmay be more pronounced.5

OutlookThe study of auctions has matured con-

siderably since Vickrey’s original paper.Theoretical and experimental research in thisarea is booming, with many spillovers toother fields (e.g. the analysis of litigationsystems, lobbying, fund-raising, and optimaltaxation; see references). However, recentlicense auctions conducted across Europeclearly revealed the limitations in our currentunderstanding. These “natural field experi-ments” will undoubtedly serve as a catalystfor new avenues of research, as they uncov-ered important issues such as signalling,information and payoff externalities, pre-emptive bidding, collusion, etc. Some license

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tinbergen magazine 8, fall 2003

auctions, such as the one planned for wire-less-local-loop frequencies, suggest a com-pletely novel and complex design. Thesedevelopments form a great impetus for“practical auctioneering,” and move researchon auctions beyond the realm of mere aca-demic interest.

ReferencesGoeree, J.K. (2002) Retiring rich, in Essays in Honor

of Claus Weddepohl, C. Hommes et al., eds., Berlin:

Springer-Verlag, 197-207.

Goeree, J.K. (2003) Bidding for the future: Signaling

in auctions with an aftermarket, Journal of

Economic Theory, 108(2), 345-364.

Goeree, J.K. and T. Offerman (2002) Efficiency in

auctions with private and common values: An

experimental study, American Economic Review,

92(3), 625-643.

Goeree, J.K. and T. Offerman (2003a) The

Amsterdam auction, Econometrica, forthcoming.

Goeree, J.K. and T. Offerman (2003b) Competitive

bidding in auctions with private and common val-

ues, Economic Journal, 113 (489), 598-613

Goeree, J.K. and T. Offerman (2003c) Winner’s curse

without overbidding, European Economic Review,

47, 625-644.

Onderstal, S. (2002) Essays in auction theory, Ph.D.

thesis, Tilburg University.

Sikkel, M. (2001) Plokken en mijnen, Parool, April 3, 2.

Vickrey, W. (1961) Counterspeculation, auctions,

and sealed tenders, Journal of Finance, 16, 8-37.

Notes1 Objects sold on the largest Internet auction site,

eBay, include collectibles, electronics, software,

travel services, art, wine, etc. In 2002, the Northern

Californian town Bridgeville was put up for sale

through eBay (“own your own ZIP code: 95526”),

and sold at $1.8 million just seconds before the

auction closed.

2 In the Netherlands these auctions are called

“plokgeld veilingen,” while in Belgium they are

known as “veilingen met het recht van verdieren,”

which is old Dutch for “auctions with the right to

make more expensive.”

3 Goeree and Offerman (2003a) also consider the

case in which the winner pays the highest sealed

bid in the second stage. We use the terminology

“first-price Amsterdam auction” to distinguish this

format from the “second-price Amsterdam auction”

described in the main text.

4 In the actual premium auction used in Amsterdam,

bidders who participate only to win the premium

are known as “premium hunters.” In a typical ses-

sion of the Amsterdam auction, which is held bi-

weekly, there will be about ten premium hunters

present. When a premium hunter ends up winning

the house for sale, he is called a “hanger.” In our

experiments, hangers could incur a loss and possi-

bly go bankrupt, which meant that they had to

leave the experiment without receiving any money.

In former times, the consequences of being a hang-

er in the actual Amsterdam auction could be much

more severe: if a hanger could not pay for the

house he won, he would be sent to prison for one

or two months. If it happened twice, he would be

tortured (Sikkel, 2001).

5 Goeree and Offerman (2002, 2003b) also evaluate

policies to enhance efficiency and revenues. Our

study shows that governments should (i) invest in

gathering and providing information about the

licenses that are sold and (ii) stimulate entry into

the auction, e.g. by having no participation fee (or

even reimbursing bidders for their opportunity

costs).

Up

close

By Robert Mosch

An interview with Robert Dur

Enough work for motivated economists

8

tinbergen magazine 8, fall 2003

Robert Dur is post-doctoral researcher at

the Erasmus Universiteit Rotterdam. In

2000, he was the youngest laureate to

receive a NWO Vernieuwingsimpuls

Research Grant for his project on “Intrinsic

motivation and extrinsic rewards”.

The Dutch Scientific Organisation (NWO)subsidises your research on “intrinsic motiva-tion and extrinsic rewards” with 650,000 eurofor five years. What is your intrinsic motiva-tion to do this research?

My interest in this topic is a directresult of the research I did for my Ph.D. the-sis, which explored political economics. Oneof the basic assumptions in political eco-nomics is that politicians are no angels. Theyare self-interested and behave opportunisti-cally– to ensure, for instance, that they winthe next election. Elections can be seen as aselection procedure in which voters selectthe politicians who seem to be the most com-petent, to have the right policy preferences,

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tinbergen magazine 8, fall 2003

and to have the best motivation to do theirjob. Regarding this motivation, there seem tobe two extremes. The first, which can befound in most of the political economics lit-erature, views politicians as motivated onlyby their narrow self-interest. They takebribes and do not hesitate to abuse theirposition. Sometimes, this can be rather sub-tle. As there is an information asymmetrybetween politicians and citizens, politicianscan decide to withhold information, if it isnot to their advantage. This could be thecase, for example, if a certain policy conduct-ed by an administration proves to be a fail-ure and should be replaced by a new policy.Such a new policy would, however, signal tothe voters that the original policy had some-how fallen short. This would damage thepolitician’s reputation and lower his chanceof re-election. The politician thereforedecides to stick to his earlier inefficient poli-cy. At the other extreme in motivation is theview of government in the public economicsliterature, where a social planner acts in theinterest of society. Of course, most peopleare somewhere in between these extremes. Itis important to take this into account whenthinking about political institutions. If insti-tutions are designed merely to deal withpoliticians with a ‘bad’ motivation, then peo-ple with a ‘good’ motivation may be discour-aged from striving for a political career.

In a recent working paper, you start withthe observation that economic models ofworker behaviour typically assume that peo-ple dislike working. Do you dislike working?

No, certainly not. That paper flows outof my second research interest, labour andpersonnel economics. When an employer islooking for a new employee, he is interestednot only in the diplomas of the applicants,but also in their motivation, how they wouldfit in the team, etc. The traditional theorieson workers’ behaviour assume that all work-ers are lazy and greedy. What we try to do isto think more realistically about people’spreferences. On the one hand, workers canbe motivated by the pride they take (or thefun they have) in their work, and thereforeexert more effort. On the other hand, work-ers can be distracted from doing their workby inherent ‘bad’ habits or character traits,like envy, anger, vanity, and so on.

What contribution do these sins andvirtues make to the traditional analysis?

Well, consider envy as an intrinsic moti-vation for workers, a topic that I’m workingon with Ami Glazer. When it is assumed thatworkers are risk-neutral, the employershould pay the full marginal product so thatthe interests of the employer and employeeare in line with each other. So, no problems.But what about when workers are risk-

averse? Traditional analysis says that the lessrisk-averse employer should take over someof the risks, which means that workersreceive weaker monetary incentives. Butwhen a worker puts in more effort in this sit-uation, part of the extra rents go to his boss,which leads to envy. As a result, the enviousworker puts in less effort. Envy also meansthat the effect of incentives increases.Besides the usual effect that effort becomesmore rewarding, higher incentive pay meansthat the boss gains less from his effort,which promotes worker effort. With thispoint in mind, consider the empirical puzzlethat monetary incentives in the public sectorare lower than in the private sector. Thispuzzle could be explained using the analysisabove if the workers in the public sectorhave less reason to be envious than their pri-vate sector colleagues. That is not a strangethought, because the rents in the public sec-tor are for the society in general, while therents in the private sector end up in thehands of (already rich) shareholders.

Does this imply that workers who arebetter motivated (for example, because theyare not envious or take pride in their work)get punished in the form of lower salaries?

Yes, but you could also argue that sincethey are already so lucky as to have a goodmotivation, it is no problem to take somerents from them. However, competitionbetween employers for the best-motivatedworkers will drive up their wages. Only whenthis competition is lacking (for instance, as aresult of government regulation) mayemployers take advantage of workers’ moti-vation. In a recent paper with JosseDelfgaauw, we showed that this extraction ofworkers’ motivational rents might be analternative explanation for weak incentives inpublic sector jobs. Weak incentives in publicsector jobs can be seen as an implicit tax onmotivation.

Weak incentives in public

sector jobs can be seen as

an implicit tax on motivation

But ‘if you pay them peanuts, you getmonkeys’?

That is more the competence storyinstead of the motivation story. For instance,if you want to attract politicians with highabilities, you have to pay them well. Fromthe motivation side, however, you have to becareful not to pay too much, because a high-er salary gives stronger incentives to stay inoffice. This means stronger incentives for‘bad’ or ‘dishonest’ politicians to fool voters

10

in order to be (re)elected. When salaries arelow, ‘good’ or ‘honest’ politicians can signalto the voters that they are intrinsically moti-vated to take the job.

I am working with Klaas Beniers to try toput this in a formal framework. Elections canbe modelled as tournaments in which politi-cians compete for prizes. The politicianshave different motivations on a continuum ofhonest to dishonest. Both the politicians andvoters have beliefs about the shape of thisdistribution. This forms the political cultureof a country. This political culture influencesthe behaviour of politicians and voters. Forexample, if an honest politician believes thathis colleagues are also honest, he might bewilling to honestly admit that an earlier deci-sion on a certain topic was wrong and tochange that policy in line with his newinsights. However, if the honest politicianbelieves that most of the other politiciansare more or less dishonest, he might fear –with reason – losing his chances of re-elec-tion after admitting a mistake. Higher remu-neration for politicians might strengtheneverybody’s incentive to behave dishonestly,which would in turn make dishonestbehaviour more attractive. So, even when the

motivations are stable, behaviour may be dif-ferent, depending on the institutional envi-ronment. This is in line with the outcry ofmany ex-politicians that the system forcesyou to act in specific ways.

What are the future perspectives for thisresearch field?

The first aim is, of course, to explainthe world. Why do political cultures differ?What is the role of institutions? What moti-vates people’s behaviour? After this, we canconsider the implications for institutionaldesign. As a matter of fact, economists put astamp on society, sometimes far more thanscientists from other disciplines. However,the traditional view of economists regardingthe behaviour of human beings, the homoeconomicus, is too narrow and therefore notfree of danger. Giving economic advice withthis narrow view in mind could result in thedesign of institutions with negative implica-tions for people with good, not purely self-interested intentions and motivations. It istherefore important to extend the traditionalmodels and make them more realistic – inline with behaviour of ‘real’ people. Insightsfrom the field of psychology are helpful inthis regard, while economics could help psy-chology by offering a research method withclear assumptions and modelling. Althoughthis has already led to some very interestingpapers, we are still far away from modellingemotions. In other words, motivatedeconomists will still find plenty of work todo in this field.

A bad political culture may be self-reinforcing:

behaving dishonestly may become the only way to

survive in politics.

11

tinbergen magazine 8, fall 2003

Use of a large data set automaticallyimplies that the empirical validation of aneconomic model is conducted in a statistical-ly sound manner. That was the commonthinking – until recently. The large samplevalidity of statistical inference is often a mis-conception for economic models that containendogenous variables. Endogeneity is a com-monality of many economic variables, andresults from their joint determinedness.Prices and quantities are jointly determinedin markets, for instance; earnings and thelength of education are jointly determined bya person’s ability, since more intelligent peo-ple go to school longer and earn higherwages. Because endogenous variables aredetermined simultaneously, we need toensure that empirical relationships do notrepresent properties arising from other back-ground variables. This leads to the use of“instrumental variables”, or instruments thataffect only one of the involved endogenousvariables. Instrumental variables allow one todetermine the sole effect of one endogenousvariable on the other. With regard to theexample of the return on education for earn-ings, the instruments should be related tothe length of education, but not to wages orintelligence. Examples of such instruments

are proximity-to-school variables (used byCard, 1995), and date-of-birth-related vari-ables (used by Angrist and Krueger, 1991).

Angrist and Krueger (1991) use quarter-of-birth-related variables as instruments todetermine the return on education for earn-ings. Quarter-of-birth-related variables canserve as instruments, since the quarter ofbirth is randomly distributed over the popu-lation and is thus not related directly tointelligence or earnings. Because of the ageat which a person enters school, and USstate-dependent compulsory school atten-dance laws, the quarter of birth does indeedaffect educational attainment. The degree towhich the quarter of birth explains the edu-cational attainment is rather minor, however,and the quarter of birth is therefore a weakinstrument. Staiger and Stock (1997) showthat many statistical procedures are unreli-able in case of weak instruments– even whenthe number of observations is large. Bound,Jaeger and Baker (1995) show that similarempirical results are obtained for the Angristand Krueger data when artificially generatedrandom variables are used as instrumentsinstead of quarter-of-birth variables. Hence,although the dataset of Angrist and Krueger(1991) has more than 300,000 observations,

●

Frank Kleibergen is professor

of economics at Brown

University and associate

professor in econometrics

at the Universiteit van

Amsterdam. He is the joint

winner of the Tinbergen

Prize and is sponsored by

a NWO Vernieuwingsimpuls

research grant. His research

interests include instrumen-

tal variable methods and

Bayesian econometrics.

I n d e p t h

Weak instruments andempirical economicsFrank Kleibergen

●

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tinbergen magazine 8, fall 2003

their empirical results are affected by weakinstruments, and must be interpreted withcaution.

Weak instruments commonly arise inempirical analyses of economic models thatcontain endogenous variables. It is thusimportant to have statistical procedures thatremain trustworthy when the instruments areweak. Economic models with endogenousvariables are prominent and have a long-standing research tradition in econometrics(see Hood and Koopmans, 1953). An exten-sive literature has therefore appeared on thebehaviour of estimators and statistical testsin small samples that are used for statisticalinference in these models (for a review of theliterature, see Phillips, 1983). This extensiveliterature has, however, hardly influenced theempirical analysis of economic models withendogenous variables. The reason for thisneglect is twofold. First, it was thought thatthe convenient large sample theory of esti-mators and statistical tests could be safelyused in large datasets. Second, the smallsample theory is highly mathematical, and isnot geared towards applications. It is surpris-ing, for example, that this literature containsno statistical test that remains trustworthy incase of weak instruments developed afterAnderson and Rubin (1949). The awarenessof the pervasiveness of weak instrumentssince Angrist and Krueger (1991), and the

lack of statistical procedures that are robustto them inspired a rebirth of research oninstrumental variable procedures.

Kleibergen (2002) and Moreira (2003)recently developed two test procedures thatremain trustworthy when instruments areweak. For a long time, the only statistical testprocedure robust to weak instruments wasthe Anderson-Rubin statistic developed byAnderson and Rubin (1949), which tests boththe validity of the economic model and thevalue of the parameters of the endogenousvariables. Usually, we are interested in test-ing only one of these two hypotheses. Whenwe then use the Anderson-Rubin statistic totest this hypothesis, we always have to testthe other hypothesis alongside, which comeswith a loss of discriminatory power. Hence,there was room for improvement on theAnderson-Rubin statistic in the constructionof a test that focuses on only one of thehypotheses involved in the Anderson-Rubinstatistic. This goal was met through the twonovel test procedures that test only the valueof the parameters of the endogenous vari-ables. Kleibergen’s (2002) test procedure,based on the score or Lagrange multiplierprinciple, has an asymptotic distribution thatdoes not depend on the quality of the instru-ments. The asymptotic distribution thereforealso adequately reflects the behaviour of thetest procedure in small samples. Moreira’s(2003) test procedure is based on the likeli-hood ratio principle and has a conditionalasymptotic distribution that depends on anestimable parameter. Both tests remain trust-worthy in case of weak instruments, and testonly the value of the parameters of theendogenous variables. They have typicallymore discriminatory power, therefore, thanthe Anderson-Rubin statistic.

Empirical analyses using statistics thatremain trustworthy in case of weak instru-ments can lead to vastly different conclu-sions. Kleibergen (2002) analyses the Angrist-Krueger data using such statistics, and con-structs 95% confidence sets for the return oneducation. He shows that for some specifica-tions of the model used by Angrist-Krueger(1991), the 95% confidence set contains everypossible value for the return on education.These confidence sets indicate that theinstruments are weak. The amount of infor-mation in the instruments is then meagre,and does not help to determine the return oneducation. Hence, any value for the return oneducation can result, which is reflected bythe 95% confidence set that contains all pos-sible values. Angrist and Krueger (1991) usestatistics that are not trustworthy in case ofweak instruments, and their 95% confidencesets are always finite. Given that there is lit-tle information in the instruments, these 95%confidence sets erroneously imply that some-

13

thing can be said about the return on educa-tion. Kleibergen (2002) also obtains 95% con-fidence sets for the return on education for anumber of specifications that are finite andcentred around plausible values. For thesespecifications, there is information about thereturn on education in the instruments. Thepossibility of an unbounded confidence settherefore helps to discriminate betweenspecifications in which the instruments areweak (and contain little information) andspecifications that are properly identified (sothe instruments do contain information onthe return on education).

The study of weak instruments is cur-rently an active research environment. Thisresearch progresses along two lines. The firstseeks to extend the statistical test proce-dures of Kleibergen (2002) and Moreira(2003). These procedures were developed forjoint tests on all parameters in linear eco-nomic models with endogenous variables.Extensions can therefore be made towardstests on subsets of the parameters (see e.g.Kleibergen, 2003a) and towards a generalizedmethods-of-moments setting that allows fornon-linear models (see Kleibergen, 2003b).Another line of research focuses on applyingthe statistical test procedures in empiricalwork. The weak instrument literature hasbeen motivated, to a large extent, by thereturn on education study of Angrist andKrueger (1991). The occurrence of weakinstruments is not restricted to quarter-of-birth variables, however. Use of statisticaltest procedures that are robust to weakinstruments could also have profound conse-quences in the empirical analysis of othereconomic models such as stochastic discountfactor models (Stock and Wright, 2000, andKleibergen, 2003b), and factor models (Kanand Zhang, 1999a,b).

References

Anderson, T.W. and H. Rubin (1949). Estimators of

the parameters of a single equation in a complete

set of stochastic equations. Annals of Mathematical

Statistics, 21:570-582.

Angrist, J.D. and A.B. Krueger (1991). Does compul-

sory school attendance affect schooling and earn-

ings? Quarterly Journal of Economics, 106:979-

1014.

Bound, J., D.A. Jaeger and R. Baker (1995). Problems

with instrumental variables estimation when the

correlation between the instruments and the

endogenous explanatory variable is weak. Journal

of the American Statistical Association, 90:443-450.

Card, D. (1995). Using geographic variation in col-

lege proximity to estimate the return to schooling.

L.N. Christofides, E.K. Grant and R. Swidinsky, eds.,

Aspects of Labour Market Behaviour: Essays in

Honor of John Vanderkamp, pages 201-222.

University of Toronto Press, Toronto, Canada. (NBER

Working Paper 4483 (1993)).

Hood, W.C. and T.C. Koopmans (1953). Studies in

Econometric Method, Volume 14 of Cowles

Foundation Monograph. Wiley (New York).

Kan, R. and C. Zhang (1999a). Two-pass tests of

asset pricing models with useless factors. Journal

of Finance, 54:203-235.

Kan, R. and C. Zhang (1999b). GMM tests of stochas-

tic discount factor models with useless factors.

Journal of Financial Economics, 54:103-127.

Kleibergen, F. (2002). Pivotal statistics for testing

structural parameters in instrumental variables

regression. Econometrica, 70:1781-1803.

Kleibergen, F. (2003a). Pivotal statistics for testing

subsets of structural parameters in the IV regres-

sion model. Review of Economics and Statistics,

forthcoming.

Kleibergen, F. (2003b). Testing parameters in GMM

without assuming that they are identified.

Tinbergen Institute Discussion Paper TI 2001-67/4,

2003b.

Moreira, M.J. (2003). A conditional likelihood ratio

test for structural models. Econometrica.

Forthcoming.

Phillips, P.C.B. (1983). Exact small sample theory in

the simultaneous equations model. In Z. Griliches

and M.D. Intrilligator, eds., Handbook of

Econometrics, vol. 1. North-Holland Publishing Co.,

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Staiger, D. and J.H. Stock (1997). Instrumental

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Econometrica, 65:557-586.

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identification. Econometrica, 68:1055—1096.

Tin

berg

en

Pri

ze

14

tinbergen magazine 8, fall 2003

The jury awarding the Tinbergen Prize 2003, honouring the scientifically most successfulTI alumnus, had no easy time choosing this year’s winner among the many outstandingresearchers at Tinbergen Institute. To focus our search, we finally decided that only alumni withfull-length publications in top journals (the AA-list of the Tinbergen Institute) could qualify aspotential recipients of the Tinbergen Prize. This view reflects our conviction that quality mat-ters more than quantity, and that peer review by the profession is an adequate way to distin-guish the excellent from the good.

The selection criterion left us with a short-list of four candidates. We then proceeded to readthe major publications of the candidates on the short-list, and narrowed down the list of con-tenders to two. Choosing between the remaining two contenders, both excellent researchers withrapidly growing reputations in their own fields, turned out to be difficult. Comparison betweentheir respective contributions proved complicated because their fields of expertise are disparate.The jury therefore decided to award the Tinbergen Prize to the two candidates jointly, noting thateach is an outstanding researcher and would have deserved to be sole winner of the prize.

The joint winners of the Tinbergen Prize 2003 are Jacob Goeree and Frank Kleibergen.

Jacob Goeree, currently Professor of Economics at the Universiteit van Amsterdam, receivedhis Ph.D. from Tinbergen Institute in 1997. His research work ranges widely across differentaspects of economics. His work is characterised by a common approach that combines a suregrasp of economic theory with rigorous experimental techniques. His research, which has beencarried out with a number of different collaborators here in the Netherlands and abroad, hasyielded interesting results about the functioning of specific mechanisms such as auctions, andhas provided us with rich insights into human behaviour in strategic situations, more generally.In the best traditions of scientific work, his efforts highlight the limits of our existing theoriesand point to avenues for promising research.

Frank Kleibergen graduated from Tinbergen Institute in 1994, and is now AssociateProfessor of Econometrics at the Universiteit van Amsterdam. He has made important contribu-tions in a number of different areas of econometric theory, including the development of a com-plete Bayesian framework for co-integration analysis, pivotal statistics for testing structuralparameters in instrumental variables regression, vector error correction analysis, and economet-ric inference in the presence of weak instruments only. These topics are all timely, and Frank’swork shows a deep understanding of the topics he addresses and the way they are related. Inthe best tradition of the subject, his work combines statistics, classical econometrics andBayesian econometrics at the highest level.

Rotterdam, April 11, 2003The jury for the Tinbergen Prize

Arie Kapteyn (chair)Sanjeev GoyalJan Willem Gunning Jan KivietJan van Ours

Jury report, Tinbergen Prize 2003

15

tinbergen magazine 8, fall 2003

Modelling andforecasting levelshifts in absolutereturns

A well-known feature ofstock market returns is thatthey exhibit volatility cluster-ing: the tendency of outliersto come in sequences.Therefore, a measure ofvolatility, such as absolutereturns, may experiencetemporary level shifts.Absolute returns may thusbe high in some periods,and low in others. Closelyrelated to this feature is thepersistent autocorrelation inabsolute returns.

While existing models (suchas the ARMA and ARFIMAmodels for absolute returns,and the GARCH models forcommon returns) focus onthe autoregressive behaviourof volatility, this paper focus-es on the feature of tempo-rary level shifts in absolutereturns. For this purpose wepropose a switching-regimecensored latent effectautoregression (SR-CLEAR)model. The model assumesthat a censored latent vari-able drives up the volatilityin some periods, while it isabsent in others. Further, ittakes into account the lever-age effect, since bearishmarkets tend to exhibit high-er volatility.

The new model was estimat-ed for nine stock marketreturns. The censored latentvariable is able to explain

most of the autocorrelationin absolute returns. The fore-casts from the new modelare better than those fromARFIMA models, particularlywhen extreme events areconsidered.

Philip Hans Franses, Marco van

der Leij and Richard Paap (EUR)

2002, Modelling and forecasting

level shifts in absolute returns,

Journal of Applied Econometrics,

17(5), 601-616.

The anatomy ofunemploymentdynamics

This paper develops a modelto examine how individualunemployment duration andincidence are affected bytime-varying macroeconomicconditions. The model ana-lyzes aggregate unemploy-ment incidence and durationdata (quarterly French dataover the period 1982-1994).Calendar time effects areallowed to act on the exitprobabilities for all currentlyunemployed, and the com-position of the inflow intounemployment depends oncalendar time at the momentof inflow.

The incidence and durationof unemployment amongmales is shown to be ratherlarge in bad economic times,and a male’s chances of leav-

ing unemployment areshown to depend negligiblyon the date he enteredunemployment. These find-ings contrast with theoriesthat predict that the compo-sition of the inflow will beparticularly unfavourable inbad times because of therestructuring efforts of firms.Our results show, in con-trast, that female cohortsentering at the top of thecycle are more sizable thantheir male counterparts, andhave relatively short unem-ployment spells.

The paper thus provides amixed explanation for thedecline in the rate of leavingunemployment, relative tothe time spent in unemploy-ment. Heterogeneity in exitprobabilities, as well as theinduced deteriorating qualityof workers surviving inunemployment, explain thenegative duration depen-dence in the first six quar-ters of unemployment.However, diminishing indi-vidual opportunities (e.g.because of stigma effects)seem to be important athigher durations.

Jaap H. Abbring (VU), Gerard J.

van den Berg (VU) & Jan C. van

Ours (UvT), 2002, The anatomy

of unemployment dynamics,

European Economic Review, 46,

1785-1824.

Auctions as collusion devices

One of the most debatedquestions concerning therecent wave of spectrumauctions held around theworld is whether auctionsgive rise to higher prices inthe market after the auction.Firms stress that they haveto recover the money theyspend on obtaining a licenseand therefore set higherprices when auction rev-enues are high. Economistsregard payments during anauction as a sunk cost at themoment firms compete inthe marketplace, so thatthere is no relation betweenauction revenues and marketprices. Recent experimentsshow, however, that auction-ing rights to compete in themarket does lead to highermarket prices.This paper develops an eco-nomic argument relatingauctions to high marketprices. At the core of theargument is the claim thatmarket competition and bid-ding in an auction should beanalyzed as part of one biggame. Bidding behavior inthe auction may signal afirm’s intention of settinghigh prices at the marketstage. More formally, theonly equilibrium consistentwith the logic of forwardinduction is one in whichfirms bid an amount (almost)equal to the profits of thecooperative market outcome,and subsequently set highmarket prices.

By Maarten C.W. Janssen (EUR),

Auctions as collusion devices

TI03-017/1

papers in journals

discussionpapers

16

tinbergen magazine 8, fall 2003

A new approach tomodeling economicconvergence

This paper develops a newapproach to modeling eco-nomic convergence, andapplies it to per capita grossdomestic product for five EUmembers: Germany, France,Italy, Spain and theNetherlands. The newapproach is based on multi-variate time series modelswith unobserved componentsthat have dynamic convergingproperties. Various forms ofconvergence are introducedinto the model via mecha-nisms that allow for gradualreductions in the ranks ofcovariance matrices associat-ed with the disturbance vec-tors driving the unobservedcomponents. This makes itpossible to identify varioustypes of convergence, includ-ing convergence in growthrates, in cyclical behavior, andin overall volatility.

The empirical results indicatethat both the slope and cyclecomponents associated withItaly, Spain and theNetherlands began converg-ing towards components incommon with Germany andFrance around the time of theintroduction of the ExchangeRate Mechanism in 1979.Spain’s growth converged tothe common growth compo-nents by the time it joinedthe EU in 1986. The cyclicalcomponents for Italy, Spainand the Netherlands con-verged to the common cyclecomponents by the inceptionof the Common Market in1993. Finally, the results indi-cate substantial convergenceof the common variance,which is still in the process ofconverging.

By Rob Luginbuhl, and Siem Jan

Koopman (VU),

Convergence in European GDP

Series

TI03-031/4

Pricing phenomenaand the switch tothe euro

This paper explores twowell-known pricing phenom-ena: Prices tend to cluster atround numbers (such as 10,20, 30 etc., and to a lesserextent 5, 15, 25, etc.), andprices pass round numbersless frequently than othernumbers (round-numberprice barriers). Althoughthese effects are small, theyare robust (documented invarious markets) and defyany strict definition of theefficient market theory. In anattempt to explain thesephenomena, this paper teststwo competing hypotheses,using data from the Dutchstock market during 1990-2001. After January 1, 1999,stock prices were listed ineuros, while guilders werestill the currency of daily lifeuntil 2002. According to theaspiration-level hypothesis,investors will have targetprices for the stocks theyown. This hypothesis pre-dicts that round-numbereffects in guilders will disap-pear only slowly. The odd-price hypothesis, which orig-inates from cognitive psy-chology and marketing,maintains that humans tendto compare numbers digit-by-digit from left to right,and therefore consider anodd price of 19.90 as con-siderably less than 20.00.This hypothesis predicts anabrupt change in round-number effects after January1, 1999. The results rejectthe aspiration-level hypothe-sis and confirm the odd-price hypothesis.

By Joep Sonnemans (UvA), Price

clustering and natural resistance

points in the dutch stock market:

A natural experiment,

TI03-043/1

The measurement of aca-demic output has become aprofession in itself. Explicitfactors that affect an aca-demic’s performance andthereby her rewards are thenumber, length, and impactof publications. Anotherexplicit factor determiningan academic’s position is thenumber of co-authors on agiven paper. Most of the“accounting systems” divideresearch output by n+1,where n is the number ofauthors. An implicit factorthat is widely believed toaffect individual academicperformance is name order-ing amongst the authorship.Name-order selection formulti-authored papers inleading economics journalsand its effect on individualproductivity is the topic ofthis study.The study distinguishes twoname-ordering strategies:alphabetic and non-alphabet-ic. The investigation centreson two questions (1) Whatare the determinants of anauthor group’s name order-ing strategy? And (2) is sci-entific output affected by therelative alphabetic positionof an academic’s last name(given the dominant usageof alphabetic name orderingin our profession)? We find

that author groups clearlytake the advantages of beingfirst author into accountwhen positioning their mem-bers. Economists are correctin perceiving name orderingas a deliberate decision. Thisis supported by the answerto our second question: Isscientific reputation higherfor authors whose namesrank first in the alphabet?Indeed, career prospectsseem to be better for aca-demic economists whosenames are more likely toappear first in a group. Thiseffect does not become visi-ble at the beginning of aneconomist’s career, but lateron, when her career is moreadvanced, and reputation andvisibility already established.

By C. Mirjam van Praag and

Bernard M.S. van Praag (UvA),

First-author determinants and

the benefits of being Professor A

(not Z):

An empirical analysis,

TI03-045/3

The benefits of being Professor A (not Z)

17

tinbergen magazine 8, fall 2003

Technological change, it is generally known, profoundly influ-ences the natural environment. The direction and the size of thisinfluence are surrounded by uncertainties, however, which sub-stantially complicate environmental policymaking. An illustrationis the current state of affairs with the 1997 Kyoto agreement onlimiting greenhouse gas emissions. Several countries that at thetime signed the agreement now reject or postpone its ratifica-tion. One of the reasons they give is uncertainty about the bene-fits of emission reductions.

This thesis uses game-theoretical models to study environmentalpolicymaking under (technology-related) uncertainty. From a pos-itive point of view, the analysis proposes explanations for envi-ronmental policies in modern democracies. The degree of envi-ronmental policy activism in a country, for example, may beinfluenced by uncertainty about policy consequences and uncer-tainty about the future policymaker’s preferences. From a norma-tive point of view, the analysis recommends ways to improveenvironmental policy. Thus, under uncertainty about the costs oftechnological advances in pollution control, a direct regulationinstrument of environmental policy may perform better thanmarket-based instruments. Direct regulation offers the policy-maker a commitment possibility that hinders the negative conse-quences of firms’ strategic behaviour.

Thesis: ‘Environmental policy and environment-saving technologies.

Economic aspects of policymaking under uncertainty’ by Ioulia Ossokina.

Published in the Tinbergen Institute Research Series #311

Partner selection in business

markets - A structural

embeddedness perspective

The attitudes, behaviour and performance of individuals are afunction of the larger social network in which the actors areembedded. This thesis substantiates empirically the structuralembeddedness effects on marketing contexts. By diffusing infor-mation and by curtailing opportunistic behaviour, social net-works are shown to positively influence the market performanceof individual players.

The thesis examines the first effect by considering the pharma-ceutical industry, which consists of hundreds of firms, each withspecific competencies. Firms gain access to these competenciesthrough alliances. Firms that actively manage their portfolio ofalliances by collaborating with other firms having different tech-nological competences are better able to develop radically newdrugs.

The thesis approaches the second effect through the buyer-sellerrelationship. When the actors are embedded in a network ofmutual contacts, the behaviour of opportunistic individuals islimited. A buyer firm may counter any attempts at opportunisticbehaviour on the part of a vendor by “spreading the word”,thereby damaging the vendor’s reputation as a trustworthyexchange partner.

Thesis: ‘Partner selection in business markets - A structural embeddedness

perspective’ by Stefan Wuyts. Published in the Tinbergen Institute Research

Series #309

theses

How to protect the environment

when we know so little

18

Theses

296 LUCIO VINHAS DE SOUZA (03/04/03), Beyond

Transition: Essays on the Monetary Integration of

the Accession Countries in Eastern Europe.

305 GERWIN GRIFFIOEN (03/03/03), Technical

Analysis in Financial Markets.

306 IRENE LAMMERS (20/05/03), In Conflict: een

Geschiedenis van Kennismanagement.

307 OVIDIU LISTES (12/06/03), Stochastic

Programming Approaches for Strategic Logistics

Problems.

308 ARIANNE DE BLAEIJ (03/04/03), The Value of a

Statistical Life in Road Safety; Stated Preference

Methodologies and Empirical Estimates for the

Netherlands.

309 STEFAN WUYTS (27/03/03), Partner Selection in

Business Markets - A Structural Embeddedness

Perspective.

310 HENRI DEKKER (26/03/03), Control of Inter-

organizational Relationships: The Effects of

Appropriation Concerns, Coordination

Requirements and Social Embeddedness.

311 IOULIA OSSOKINA (20/06/03), Environmental

Policy and Environment-saving Technologies.

Economic Aspects of Policy Making under

Uncertainty.

312 DIRK BROUNEN (13/06/03), Real Estate

Securitization and Corporate Strategy. From Bricks

to Bucks.

313 JAN DE KOK (26/06/03), Human Resource

Management within Small- and Medium-sized

Enterprises.

314 TIBERT VERHAGEN (25/09/03), Towards

Understanding Online Purchase Behavior.

315 RUTGER HOEKSTRA (01/10/03), Structural

Change of the Physical Economy. Decomposition

Analysis of Physical and Hybrid-unit Input-Output

Tables.

316 RUTA AIDIS (14/05/03), By Law and by Custom:

Factors affecting Small- and Medium-sized

Enterprises during the Transition in Lithuania.

317 SEBASTIANO MANZAN (06/06/03), Non-linear

Prediction of Financial Data and Models.

318 KATRIN OLTMER (22/05/03), Agricultural

Policy, Land Use and Environmental Effects -

Studies in Quantitative Research Synthesis.

319 JOB HORBEEK (26/06/03), The Elastic Work

Floor; About the Implementation of Internal

Flexibility Arrangements.

Abbring, J.H., G.J. van den Berg and J.C. van Ours,

2002, The anatomy of unemployment dynamics,

European Economic Review, 46(10), 1785-1824.

Abbring, J.H., 2002, Stayers versus defecting

movers, A note on the identification of defective

duration models, Economics Letters, 74(3), 327-31.

Adam, C.S. and J.W. Gunning, 2002, Redesigning the

aid contract: Donors’ use of performance indicators

in Uganda, World Development, 30(12), 2045-56.

Albrecht, J.W., P.A. Gautier and S.B. Vroman, 2003,

Matching with multiple applications, Economics

Letters, 78(1), 67-70.

Anderson, S.P., J.K. Goeree and C.A. Holt, 2002, The

logit equilibrium: A perspective on intuitive behav-

ioral anomalies, Southern Economic Journal, 69(1),

21-47.

Beetsma, R.M.W.J. and A.L. Bovenberg, 2003,

Strategic debt accumulation in a heterogeneous

monetary union, European Journal of Political

Economy, 19(1), 1-15.

Beetsma, R.M.W.J. and H. Jensen, 2003, Why money

talks and wealth whispers: Monetary uncertainty

and mystique: Comment, Journal of Money, Credit

and Banking, 35(1), 129-36.

Berg, G.J., van den, A. Holm and J.C. van Ours,

2002, Do stepping-stone jobs exist? Early career

paths in the medical profession, Journal of

Population Economics, 15(4), 647-65.

Bergh, J.C.J.M., van den, and J.M. Gowdy, 2003, The

microfoundations of macroeconomics: An evolu-

tionary perspective, Cambridge Journal of

Economics, 27(1), 65-84.

Papers in Journals and books published by TI fellows

19

tinbergen magazine 8, fall 2003

Berk, J.M., 2002, Banca centrale e innovazione

finanziaria. Una rassegna della letteratura recente.

(Centr. banking and financial innovation: A survey

of the modern literature. With English summary.)

Moneta e Credito, 55(220), 345-85.

Berk, J.M., 2002, Central banking and financial innova-

tion: A survey of the modern literature, Banca Nazio-

nale del Lavoro Quarterly Review, 55(222), 263-97.

Beukering, P.J.H., van, H.S.J. Cesar and M.A. Janssen,

2003, Economic valuation of the Leuser National

Park on Sumatra, Indonesia, Ecological Economics,

44(1), 43-62.

Bijl, P.W.J., de, and S. Goyal, 2002, Market integration

and technological change, Netnomics, 4(1), 19-37.

Black, W.R., P. Nijkamp, eds, 2002, Social change

and sustainable transport, Bloomington, Indiana

University Press, xiii, 306.

Bloemen, H.G., 2002, The relations between wealth

and labour market transitions: An empirical study

for the Netherlands, Journal of Applied

Econometrics, 17(3), 249-68.

Boone, J. and R.A. de Mooij, 2003, Tax policy in a

matching model with training, Oxford Economic

Papers. 55(1), 121-47.

Boswijk, H.P. and A. Lucas, 2002, Semi-nonparamet-

ric cointegration testing, Journal of Econometrics,

108(2), 253-80.

Brink, R., van den, 2002, The Apex power measure

for directed networks, Social Choice and Welfare,

19(4), 845-67.

Brito, M.P., de, and R. Dekker, 2003, Modelling prod-

uct returns in inventory control- exploring the

validity of general assumptions, International

Journal of Production Economics, 81-82(0), 225-41.

Canton, E.J.F., H.L.F. de Groot and R. Nahuis, 2002,

Vested interests, population ageing and technology

adoption, European Journal of Political Economy,

18(4), 631-52.

Carree, M.A., 2003, Technological progress, struc-

tural change and productivity growth: A comment,

Structural Change and Economic Dynamics, 14(1),

109-15.

Carsoule, F. and P.H. Franses, 2003, A note on moni-

toring time-varying parameters in an autoregres-

sion, Metrika, 57(1), 51-62.

Claessens, S., S. Djankov and L. Klapper, 2003,

Resolution of corporate distress in East Asia,

Journal of Empirical Finance, 10(1-2), 199-216.

Claessens, S., et al., 2002, Disentangling the incen-

tive and entrenchment effects of large sharehold-

ings, Journal of Finance, 57(6), 2741-71.

Claessens, S., 2002, A European VAT on financial

services? A discussion, Economic Policy: A European

Forum, 0(35), 526-30.

Davis, J.B., 2002, The emperor’s clothes, Journal of

the History of Economic Thought, 24(2), 141-54.

Davis, J.B., 2002, Capabilities and personal identity:

Using Sen to explain personal identity in Folbre’s

‘Structures of Constraint’ analysis, Review of

Political Economy, 14(4), 481-96.

Davis, J.B, 2003, Regional economic integration, the

environment and community: East Asia and APEC,

International Review of Applied Economics, 17(1),

69-83.

Davis, J.B., 2002, Gramsci, Sraffa, Wittgenstein:

Philosophical linkages, European Journal of the

History of Economic Thought, 9(3), 384-401.

Dijk, F., van, J. Sonnemans and F. van Winden, 2002,

Social ties in a public good experiment, Journal of

Public Economics, 85(2), 275-99.

Diks, C. and S. Manzan, 2002, Tests for serial inde-

pendence and linearity based on correlation inte-

grals, Studies in Nonlinear Dynamics and

Econometrics, 6(2), art. 2.

Fase, M.M.G. and R.C.N. Abma, 2003, Financial envi-

ronment and economic growth in selected Asian coun-

tries, Journal of Asian Economics, 14(1), 11-21.

Ferrer-i-Carbonell, A. and B.M.S. van Praag, 2002,

The subjective costs of health losses due to chronic

diseases: An alternative model for monetary

appraisal, Health Economics. 11(8), 709-22.

Florax, R.J.G.M.; P. Nijkamp and K.G. Willis, eds,

2002, Comparative environmental economic assess-

ment, Cheltenham, U.K. and Northampton, MA,

Elgar; distributed by American International

Distribution Corporation, Williston, VT., xxi, 362.

Fong, K. and M. Martens, 2002, Overnight futures

trading: Now even Australia and US have common

trading hours, Journal of International Financial

Markets, Institutions and Money, 12(2), 167-82.

Forsyth, P., K. Button and P. Nijkamp, eds, 2002,

Elgar Reference Collection. Classics in Transport

Analysis, vol. 2. Cheltenham, U.K. and Northampton,

MA, Elgar; distributed by American International

Distribution Corporation, Williston, VT, xix, 673.

Francois, J. and W. Martin, 2003, Formula approach-

es for market access negotiations, World Economy,

26(1), 1-28.

Garderen, K.J. van and C. Shah, 2002, Exact inter-

pretation of dummy variables in semilogarithmic

equations, Econometrics Journal, 5(1), 149-59.

20

tinbergen magazine 8, fall 2003

Goeree, J.K., 2003, Bidding for the future: Signaling

in auctions with an aftermarket, Journal of

Economic Theory, 108(2), 345-64.

Gondzio, J., R. Kouwenberg, and A.C.F. Vorst, 2003,

Hedging options under transaction costs and

stochastic volatility, Journal of Economic Dynamics

and Control. 27(6), 1045-68.

Gooijer, J.G., de, and A. Vidiella-i-Anguera, 2003,

Nonlinear stochastic inflation modelling using

SEASETARs insurance, Mathematics and Economics,

32(1), 3-18.

Hamelink, Foort, et al., 2002, A comparison of UK

equity and property duration, Journal of Property

Research, 19(1), 61-80.

Hart, J., van der, E. Slagter and D. van Dijk, 2003,

Stock selection strategies in emerging markets,

Journal of Empirical Finance, 10(1-2), 105-32.

Hartog, J., 2002, Desperately seeking structure;

Sherwin Rosen (1938-2001), Economic Journal,

112(483), F519-31.

Hinloopen, J., 2003, Innovation performance across

Europe, Economics of Innovation and New

Technology, 12(2), 145-61.

Hochguertel, S., 2003, Precautionary motives and

portfolio decisions, Journal of Applied Econometrics,

18(1), 61-77.

Hommes, C.H., R. Ramer and C.A. Withagen, eds.,

2002, Equilibrium, markets and dynamics: Essays in

honour of Claus Weddepohl, Heidelberg and New

York, Springer, xv, 344.

Janssen, M.C.W. and V.A. Karamychev, 2002, Cycles

and multiple equilibria in the market for durable

lemons, Economic Theory, 20(3), 579-601.

Kaashoek, J.F. and H.K. van Dijk, Neural network

pruning applied to real exchange rate analysis,

Journal of Forecasting, 2002, 21(8), 559-77.

Kawasaki, Y. and P.H. Franses, 2003, Detecting sea-

sonal unit roots in a structural time series model,

Journal of Applied Statistics, 30(4), 373-87.

Keyzer, M. and L. van Wesenbeeck, 2003, The eco-

nomics of strategic defense, De Economist, 151(1),

119-32.

Klaassen, F., 2002, Improving GARCH volatility fore-

casts with regime-switching GARCH, Empirical

Economics, 27(2), 363-94.

Klaauw, B., van der, and R.H. Koning, 2003, Testing

the normality assumption in the sample selection

model with an application to travel demand, Journal

of Business and Economic Statistics, 21(1), 31-42.

Kleibergen, F., 2002, Pivotal statistics for testing

structural parameters in instrumental variables

regression, Econometrica, 70(5), 1781-1803.

Kleibergen, F. and R. Paap, 2002, Priors, posteriors

and Bayes factors for a Bayesian analysis of cointe-

gration, Journal of Econometrics. 111(2), 223-49.

Kleibergen, F. and E. Zivot, 2003, Bayesian and clas-

sical approaches to instrumental variable regres-

sion, Journal of Econometrics, 114(1), 29-72.

Kluitman, R. and P.H. Franses, 2002, Estimating

volatility on overlapping returns when returns are

autocorrelated, Applied Mathematical Finance, 9(3),

179-88.

Koopman, S.J. and A. Harvey, 2003, Computing

observation weights for signal extraction and filter-

ing, Journal of Economic Dynamics and Control,

27(7), 1317-33.

Koopman, S.J. and E.H. Uspensky, 2002, The

stochastic volatility in mean model: Empirical evi-

dence from international stock markets, Journal of

Applied Econometrics, 17(6), 667-89.

Kovenock, D. and C.G. de Vries, 2002, Fiat exchange

in finite economies, Economic Inquiry, 40(2), 147-57.

Kuosmanen, T. and G.T. Post, 2002, Nonparametric

efficiency analysis under price uncertainty: A first-

order stochastic dominance approach, Journal of

Productivity Analysis. 17(3), 183-200.

Laan, G., van der, and R. van den Brink, 2002, A

Banzhaf share function for cooperative games in

coalition structure, Theory and Decision, 53(1), 61-86.

Lundbergh, S., T. Terasvirta and D. van Dijk, 2003,

Time-varying smooth transition autoregressive

models, Journal of Business and Economic Statistics,

21(1), 104-21.

Martens, M., 2002, Measuring and forecasting S&P

500 Index-futures volatility using high-frequency

data, Journal of Futures Markets, 22(6), 497-518.

Martens, M., Y.C. Chang and S.J. Taylor, 2002, A

comparison of seasonal adjustment methods when

forecasting intraday volatility, Journal of Financial

Research, 25(2), 283-99.

McKinnon, A., K. Button and P. Nijkamp, eds, 2002,

Transport logistics, Elgar Reference Collection.

Classics in Transport Analysis, vol. 5. Cheltenham,

U.K. and Northampton, Mass., Elgar; distributed by

American International Distribution Corporation,

Williston, Vt., xxv, 680.

Mulder, P., H.L.F. de Groot and M.W. Hofkes, 2003,

Explaining slow diffusion of energy-saving tech-

nologies; A vintage model with returns to diversity

and learning-by-using, Resource and Energy

Economics, 25(1), 105-26.

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tinbergen magazine 8, fall 2003

Neugart, M. and J. Tuinstra, 2003, Endogenous fluc-

tuations in the demand for education, Journal of

Evolutionary Economics. 13(1), 29-51.

Offerman, T., J. Potters and J. Sonnemans, 2002,

Imitation and belief learning in an oligopoly experi-

ment, Review of Economic Studies. 69(4), 973-97.

Pels, E., P. Nijkamp and P. Rietveld, 2003, Access to

and competition between airports: A case study for

the San Francisco Bay Area, Transportation

Research: Part A: Policy and Practice. 37(1), 71-83.

Perotti, E., 2002, Lessons from the Russian melt-

down: The economics of soft legal constraints,

International Finance. 5(3), 359-99.

Perotti, E.C. and E.L. von Thadden, 2003, Strategic

transparency and informed trading: Will capital

market integration force convergence of corporate

governance?, Journal of Financial and Quantitative

Analysis. 38(1), 61-85.

Perotti, E.C. and J. Suarez, 2002, Last bank stand-

ing: What do I gain if you fail?, European Economic

Review. 46(9), 1599-1622.

Pradhan, M., D.E. Sahn and S.D. Younger, 2003,

Decomposing world health inequality, Journal of

Health Economics, 22(2), 271-93.

Pradhan, M. and M. Ravallion, 2003, Who wants safer

streets? Explaining concern for public safety in

Brazil, Journal of Economic Psychology. 24(1), 17-33.

Pradhan, M., L.B. Rawlings, 2002, The Impact and

Targeting of Social Infrastructure Investments:

Lessons from the Nicaraguan Social Fund, World

Bank Economic Review. 16(2), 275-95.

Ranasinghe, A. and J. Hartog, 2002, Free education

in Sri Lanka: Does it eliminate the family effect?,

Economics of Education Review, 21(6), 623-33.

Rouwendal, J., et al, 2002, A stochastic model of

congestion caused by speed differences, Journal of

Transport Economics and Policy. 36(3), 407-45.

Sandor, Z. and M. Wedel, 2002, Profile construction

in experimental choice designs for mixed logit

models, Marketing Science, 21(4), 455-75.

Schinkel, M.P., J. Tuinstra and D. Vermeulen, 2002,

Convergence of Bayesian learning to general equi-

librium in Mis-specified models, Journal of

Mathematical Economics. 38(4), 483-508.

Schipper, Y., P. Rietveld and P. Nijkamp, 2002,

European airline reform: An empirical welfare anal-

ysis, Journal of Transport Economics and Policy.

36(2), 189-209.

Tuinstra, J., 2003, Beliefs equilibria in an overlap-

ping generations model, Journal of Economic

Behavior and Organization. 50(2), 145-64.

Ubbels, B., P. Rietveld and P. Peeters, 2002,

Environmental effects of a kilometre charge in road

transport: An investigation for the Netherlands,

Transportation Research: Part D: Transport and

Environment, 7(4), 255-64.

Verwaal, E. and B. Donkers, 2002, Firm size and

export intensity: Solving an empirical puzzle, Journal

of International Business Studies, 33(3), 603-13.

Viaene, J.M., 2002, Delocation and European integra-

tion: Is structural spending justified? Discussion,

Economic Policy: A European Forum, 0(35), 353-54.

Wagener, F.O.O., 2003, Skiba points and Heteroclinic

bifurcations, with applications to the Shallow Lake

System, Journal of Economic Dynamics and Control.

27(9), 1533-61.

M. Wedel, 2002, Profile construction in experimen-

tal choice designs for mixed logit models,

Marketing Science, 21(4), 455-75.

22

tinbergen magazine 8, fall 2003

Discussion papers

Institutions and decision processes

03-010/1

Cars Hommes, Joep Sonnemans, Jan Tuinstra, Henk

van de Velden, CeNDEF, Universiteit van Amsterdam,

Coordination of Expectations in Asset Pricing

Experiments

03-011/1

Ioulia V. Ossokina, Otto H. Swank, Erasmus

Universiteit Rotterdam, Environmental Policy Choice

under Uncertainty

03-017/1

Maarten C.W. Janssen, Erasmus Universiteit

Rotterdam, Auctions as Collusion Devices

03-020/1

Cars Hommes, Joep Sonnemans, Jan Tuinstra, Henk

van de Velden, Universiteit van Amsterdam, Learning

in Cobweb Experiments

03-021/1

Otto H. Swank, Bauke Visser, Erasmus Universiteit

Rotterdam, The Consequences of Endogenizing

Information for Herd Behavior

03-033/1

Maarten C.W. Janssen, Vladimir A. Karamychev, Peran

van Reeven, Erasmus Universiteit Rotterdam, Multi-

Store Competition: Market Segmentation or Interlacing?

03-034/1

Hendrik P. van Dalen, OCFEB, Erasmus Universiteit

Rotterdam, and NIDI, The Hague, Pluralism in

Economics: A Public Good or a Public Bad?

03-035/1

Andrea Galeotti, José Luis Moraga-, Erasmus

Universiteit Rotterdam, Strategic Targeted Advertising

03-041/1

Sanjeev Goyal, University of Essex and Erasmus

Universiteit Rotterdam, Alexander Konovalov, and

José Luis Moraga- González, Erasmus Universiteit

Rotterdam, Hybrid R&D

03-043/1

Joep Sonnemans, Universiteit van Amsterdam, Price

Clustering and Natural Resistance Points in the Dutch

Stock Market

03-055/1

Simon Gächter, CESifo and University of St Gallen,

and Arno Riedl, Universiteit van Amsterdam, Moral

Property Rights in Bargaining with Infeasible Claims

03-056/1

Ronald Bosman, De Nederlandsche Bank, Amsterdam,

and Arno Riedl, Universiteit van Amsterdam, Emotions

and Economic Shocks in a First-Price Auction

03-058/1

Arno Riedl and Frans van Winden, CREED,

Universiteit van Amsterdam, Input versus Output

Taxation in an Experimental International Economy

03-065/1

Arno Riedl, CREED, Universiteit van Amsterdam, and

Jean-Robert Tyran, University of St. Gallen, Tax Liability

Side Equivalence in Gift-Exchange Labor Markets

03-066/1

Hendrik P. van Dalen, Aico P. van Vuuren, Erasmus

Universiteit Rotterdam, Greasing the Wheels of Trade

03-067/1

Otto H. Swank, Bauke Visser, Erasmus Universiteit

Rotterdam, Do Elections Lead to Informed Public

Decisions?

Financial and InternationalMarkets

03-015/2

Ruta Aidis, Universiteit van Amsterdam,

Entrepreneurship and Economic Transition

03-016/2

Menno Pradhan, Vrije Universiteit Amsterdam and

World Bank, Jakarta, Fadia Saadah, World Bank,

Jakarta, and Robert Sparrow, Vrije Universiteit

Amsterdam, Did the Healthcard Program ensure

Access to Medical Care for the Poor during Indonesia’s

Economic Crisis?

03-028/2

Patrick Houweling, Albert Mentink, Erasmus

Universiteit Rotterdam and Aegon Asset

Management, and Ton Vorst, Erasmus Universiteit

Rotterdam and ABN-Amro, Valuing Euro Rating-

Triggered Step-Up Telecom Bonds

03-029/2

Paul A. de Hek, Erasmus Universiteit Rotterdam, On

Taxation in a Two-Sector Endogenous Growth Model

with Endogenous Labor Supply

03-030/2

Patrick Houweling, Albert Mentink, Ton Vorst,

Erasmus Universiteit Rotterdam, How to Measure

Corporate Bond Liquidity?

03-032/2

Leon J.H. Bettendorf, D. Peter Broer, OCFEB, Erasmus

Universiteit Rotterdam, Life-time Labor Supply in a

Search Model of Unemployment

03-037/2

Albert J. Menkveld, Siem Jan Koopman and André

Lucas, Vrije Universiteit Amsterdam, Round-the-Clock

Price Discovery for Cross-Listed Stocks: US-Dutch

Evidence

23

tinbergen magazine 8, fall 2003

03-053/2

Jan Marc Berk, De Nederlandsche Bank and Vrije

Universiteit Amsterdam, and Beata K. Bierut, Erasmus

Universiteit Rotterdam, Committee Structure and its

Implications for Monetary Policy Decision-making

03-054/2

Joseph Francois, Erasmus Universiteit Rotterdam

and CEPR, and Gunnar Niels, OXERA and Erasmus

Universiteit Rotterdam, Business Cycles, the Current

Account, and Administered Protection in Mexico

03-060/2

Joseph Francois, Erasmus Universiteit Rotterdam

and CEPR, H. van Meijl, and F. van Tongeren, LEI,

Wageningen University and Research Centre, Trade

Liberalization and Developing Countries under the

Doha Round

03-062/2

Siem Jan Koopman, André Lucas, Vrije Universiteit

Amsterdam, Business and Default Cycles for Credit Risk

03-068/2

Chris Elbers, Jan-Willem Gunning and Bill Kinsey,

Vrije Universiteit Amsterdam, Growth and Risk:

Methodology and Micro Evidence

Labour, Region and Environment

03-013/3

Carla Sá, Raymond J.G.M. Florax and Piet Rietveld,

Vrije Universiteit Amsterdam, Determinants of the

Regional Demand for Higher Education

03-014/3

Niels Bosma and Gerrit de Wit, EIM Business and

Policy Research, Zoetermeer, and Martin Carree,

University of Maastricht and Erasmus Universiteit

Rotterdam, Modelling Entrepreneurship

03-018/3

Bernard M.S. van Praag and Adam S. Booij,

Universiteit van Amsterdam, Risk Aversion and the

Subjective Time Discount Rate: A Joint Approach

03-019/3

Henri L.F. de Groot, Vrije Universiteit Amsterdam,

Peter Mulder, Institute for Environmental Studies,

Vrije Universiteit Amsterdam, and Daan P. van Soest,

Tilburg University, Subsidizing the Adoption of

Energy-Saving Technologies: Analyzing the Impact of

Uncertainty, Learning and Maturation

03-022/3

Galit Cohen-Blankenstain, Harvard University, and

Peter Nijkamp, Vrije Universiteit Amsterdam, The

Appreciative System of Urban ICT Policies

03-023/3

Galit Cohen-Blankenstain, Harvard University, Peter

Nijkamp and Kees van Montfort, Vrije Universiteit

Amsterdam, Modeling ICT Perceptions and Views of

Urban Front Liners

03-024/3

Robert A.J. Dur and Coen N. Teulings, Erasmus

Universiteit Rotterdam, Are Education Subsidies an

Efficient Redistributive Device?

03-025/3

Mark J. Koetse, Arno J. van der Vlist and Henri L.F.

de Groot, Vrije Universiteit Amsterdam, Investment,

Expectations and Uncertainty: Empirical Evidence on

the Relevance of Firm Size

03-026/3

Pieter A. Gautier and Coen N. Teulings, Erasmus Uni-

versiteit Rotterdam, How Large are Search Frictions?

03-027/3

Erik T. Verhoef and Jan Rouwendal, Vrije Universiteit

Amsterdam, Pricing, Capacity Choice and Financing

in Transportation Networks

03-036/3

Piet Rietveld, Vrije Universiteit Amsterdam,

Valuation of Travel Time and TravelIer Information

03-038/3

Judith Y.T. Wang and Hai Yang, Hong Kong University

of Science and Technology, and Erik T. Verhoef, Vrije

Universiteit Amsterdam, Strategic Interactions of

Bilateral Monopoly on a Private Highway

03-039/3

Bernadette Power, University of St. Andrews, Fife,

UK, and Gavin C. Reid, University College Cork,

Ireland, Flexibility, Firm-Specific Turbulence and the

Performance of the Long-lived Small Firm

03-042/3

Maarten Lindeboom, Vrije Universiteit Amsterdam

and IZA, and Eddy van Doorslaer, Erasmus

Universiteit Rotterdam, Cut-point Shift and Index

Shift in Self-reported Health

03-044/3

Henri L.F. de Groot, Gert-Jan Linders and Piet Rietveld,

Vrije Universiteit Amsterdam, and Uma Subramanian,

World Bank, Washington, The Institutional

Determinants of Bilateral Trade Patterns

03-046/3

Justin van der Sluis and Mirjam van Praag,

Universiteit van Amsterdam, and Wim Vijverberg,

University of Texas at Dallas and IZA,

Entrepreneurship Selection and Performance

03-047/3

C. Mirjam van Praag, Universiteit van Amsterdam,

Gerrit de Wit and Niels Bosma, EIM, Zoetermeer,

Initial Capital Constraints Hinder Entrepreneurial

Venture Performance

03-048/3

Marco van Herpen, University of Groningen and the

Boston Consulting Group, C. Mirjam van Praag,

Universiteit van Amsterdam, and Kees Cools,

24

tinbergen magazine 8, fall 2003

University of Groningen and the Boston Consulting

Group, The Effects of Performance Measurement and

Compensation on Motivation

03-049/3

Kees Cools, University of Groningen, The Boston

Consulting Group, and C. Mirjam van Praag,

Universiteit van Amsterdam, The Value Relevance of

Disclosing a Single Corporate Target

03-050/3

C. Mirjam van Praag, Universiteit van Amsterdam,

Business Survival and Success of Young Small

Business Owners

03-051/3

Kees Cools, Groningen University and the Boston

Consulting Group, C. Mirjam van Praag, Universiteit

van Amsterdam, The Value Relevance of Forced Top

Management Departures

03-59/3

Hendrik P. van Dalen, OCFEB, Erasmus Universiteit

Rotterdam, George Groenewold and Jeanette J.

Schoorl, Netherlands Interdisciplinary Demographic

Institute, Out of Africa: What Drives the Pressure to

Emigrate?

03-061/3

Thomas de Graaff and Piet Rietveld, Vrije

Universiteit Amsterdam, ICT and Substitution

between Out-of-home and At-home work; the

Importance of Timing

03-063/3

Rafael Lalive, IEW, University of Zürich, IZA, and

CESifo, Social Interactions in Unemployment

03-064/3

Erik T. Verhoef, Vrije Universiteit Amsterdam,

Speed-Flow Relations and Cost Functions for

Congested Traffic: Theory and Empirical Analysis

Econometrics

03-012/4

Eric Porras Musalem and Rommert Dekker, Erasmus

Universiteit Rotterdam, Controlling Inventories in a

Supply Chain

03-031/4

Rob Luginbuhl and Siem Jan Koopman, Vrije

Universiteit Amsterdam, Convergence in European

GDP Series

03-040/4

Sanjeev Sridharan, Westat, Rockville, MD, USA,

Suncica Vujic and Siem Jan Koopman, Vrije

Universiteit Amsterdam, Intervention Time Series

Analysis of Crime Rates

03-052/4

Siem Jan Koopman and Joao Valle e Azevedo, Vrije

Universiteit Amsterdam, Measuring Synchronisation

and Convergence of Business Cycles

03-057/4

Felisa J. Vazquez-Abad, Université de Montreal, and

Bernd Heidergott, Vrije Universiteit Amsterdam,

Gradient Estimation for a Class of Systems with Bulk

Services: A Problem in Public Transportation

03-069/4

Joao Valle e Azevedo and Siem Jan Koopman, Vrije

Universiteit Amsterdam, and Antonio Rua, Banco de

Portugal, Lisboa, Tracking Growth and the Business

Cycle: a Stochastic Common Cycle Model for the

Euro Area

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tinbergen magazine 8, fall 2003

Colophon

Tinbergen Magazine is published by

the Tinbergen Institute, an economic

research institute operated jointly by

the Economics and Econometrics

faculties of three Dutch universities:

Erasmus Universiteit Rotterdam,

Universiteit van Amsterdam and Vrije

Universiteit Amsterdam. Tinbergen

Magazine highlights on-going

research at the Tinbergen Institute

and is published twice a year.

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tinbergen magazine 8, fall 2003

Tinbergen Research InstituteFour themes distinguish Tinbergen

Institute’s research programme:I. Institutions and Decision AnalysisII. Financial and International MarketsIII. Labour, Region and the EnvironmentIV. Econometrics and Operations Research

Each theme covers the whole spectrumof economic analysis, from theoretical to empirical research. Stimulating discussionson theories, methodologies and empiricalresults arise from the interaction of theInstitute’s faculty–comprised of approximate-ly 96 research fellows. These fellows are fac-ulty members with excellent track records ineconomic research, active in organisingresearch activities, teaching graduate coursesand supervising Ph.D. students.

Discussion PapersResearch is pre-published in the insti-

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The master’s programme offers highquality academic training in economics andeconometrics. The teaching staff is selectedfrom the faculty of the three economics fac-ulties of the participating universities.Foreign experts also teach in the programme.

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BoardA.G.Z. Kemna (Chair), J.-W. Gunning, J. Hartog, J.J.M. Kremers, C.G. de Vries.

General DirectorC.N. Teulings

Director of Graduate StudiesM. Lindeboom

Research Programme Co-ordinatorsInstitutions and Decision Analysis:J.K. Goeree, G. van der LaanFinancial Economics and InternationalMarkets:C.A.M.F. Claessens, C.G. de VriesLabour, Region and the Environment:J.C.J.M. van den Bergh, H. OosterbeekEconometrics:R. Dekker, S.J. Koopman

Scientific Council D.W. Jorgenson (Harvard University,

Chair), M. Dewatripont (CORE), P. de Grauwe(Leuven University), D.F. Hendry (OxfordUniversity), R.C. Merton (Harvard University),D. Mortensen (Northwestern University),S. Nickell (Oxford University), T. Persson(Stockholm University), L. Wolsey (CORE)

Social Advisory CouncilC.A.J. Herkströter (Chair), R.G.C. van

den Brink (ABN-AMRO), H.J. Brouwer (DNB),M.J. Cohen (Mayor of Amsterdam), F.J.H. Don(CPB), C. Maas (ING), F.A. Maljers, I.W. Opstelten (Mayor of Rotterdam), A.H.G. Rinnooy Kan (ING), H. Schreuder (DSM),R.J. in ’t Veld, P.J. Vinken, L.J. de Waal (FNV)

Editorial Board Tinbergen MagazineB. Bierut, T.R. Daniëls, A Galeotti, R.H.J.

Mosch, A.P.C. van der Ploeg, C.N. Teulings

Previous membersJ.-P. Boselie, D. Brounen, M. Bun,

J. Dalhuisen, B. Hof, S. Manzan, E. Mendys.

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subscriptions:Tinbergen Institute RotterdamBurg. Oudlaan 503062 PA Rotterdamthe Netherlands. E-mail: tinbergen-magazine@tinbergen.nl.Address changes may be sent to the above e-mail address.

In this issue Practical Auctioneering

“Enough work for motivated economists”

An interview with Robert Dur

Weak instruments and empirical economics

Jury report Tinbergen Prize 2003

Papers in Journals

Discussion papers

Theses