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#1540.

Frank Milne

The Australian Energy Policy Debacle

For the past 20 years, Australia has introduced policies encouraging and subsidizing renewable electricity generation. Since the election of the Australian Labor Party government in 2022, these policies have been accelerated. We show that international evidence of the heavy cost of renewable energy projects has been ignored. Cost-benefit studies show that these projects cannot be justified with any reasonable price for carbon dioxide emissions. Consequently, the Australian economy has suffered greatly increased prices for electricity provided by the grid. In turn, this has increased the…

#1539.

visitor_michael_waldman, Jan Zabojnik

Asymmetric Learning and the CEO Labor Market

Many models of the CEO market build on the classic analyses of Lucas (1978) and Rosen (1982) characterized by full information, a limited role for firm-specific human capital, and efficient allocation of workers across jobs and firms. But empirical evidence is not consistent with this approach. We explore an alternative focused on asymmetry of information between an executive's prospective employer and other potential employers, and an important role for firm-specific human capital. We show that our model better captures findings in the empirical literature concerning the CEO labor market…

#1538.

John Hartwick

The Stochastic Matrix Model of Evolution and Linear Programming

We construct a linear programming model of Darwinian evolution, inspired by "the stochastic matrix model". We present a detailed numerical example based on a 3 X 3 stochastic matrix. The linear program uses the stochastic matrix in the specification of its objective function. The program "selects" from an "input" vector to meet a given next period "output" vector. Novel for a model of Darwinian evolution is the presence of costs and shadow prices.

#1537.

Luke Rawling

Improving the Economic Integration of Canadian Immigrants

Immigrants tend to have substantially worse labour market outcomes than Canadian-born workers. This paper provides an overview of immigrants in the Canadian labour market, describing the key barriers that can arise when changing cultures and labour markets and that can hinder immigrants from realizing their economic potential. It then summarizes the efforts Canada has made to alleviate these barriers and highlights some persistent challenges going forward, such as the current state of foreign credential recognition (FCR) and cautioning against the rise of the two-step immigration scheme.…

#1536.

Maria Garcia-Osipendo, Nicholas Vreugdenhil, Nahim Bin Zahur

Endogenous Rigidities and Capital Misallocation: Evidence from Containerships

We investigate how endogenous rigidities inhibit physical capital reallocation. We focus on the role of contract duration - a classic example of an adjustment rigidity. We argue when agents sign longer contracts in booms when markets are thin, they generate a contracting externality which further amplifies thinness and impedes the adjustment of markets to shocks. We develop a framework with booms and busts where agents search and choose match duration. Applying the framework to the containership leasing market, we find substantial misallocation from endogenous rigidities, particularly in…

#1535.

Stelios Arvanitis

Frequentist Model Averaging with Nash Bargaining: A Stochastic Dominance Approach

Within the Frequentist Model Averaging framework for linear models, we introduce a multi-objective model averaging methodology that extends both the generalized Jackknife Model Averaging (JMA) and the Mallows Model Averaging (MMA) criteria. Our approach constructs estimators based on stochastic dominance principles and explores averaging methods that minimize multiple scalarizations of the joint criterion integrating MMA and JMA. Additionally, we propose an estimator that can be interpreted as a Nash bargaining solution between the competing scalar criteria. We establish the asymptotic…

#1534.

Stelios Arvanitis

Universal Choice Spaces and Expected Utility: A Banach-type Functorial Fixed Point

This paper utilizes a Banach-type fixed point theorem in a functorial context to develop Universal Choice Spaces for addressing decision problems, focusing on expected utility and preference uncertainty. This generates an infinite sequence of optimal selection problems involving probability measures on utility sets. Each solution at a given stage addresses the preference ambiguity from the previous stage, enabling optimal choices at that level. The Universal Choice Space is characterized as a collection of finite-dimensional vectors of probability distributions, with the mth component…

#1533.

Stelios Arvanitis

Norm Constrained Empirical Portfolio Optimization with Stochastic Dominance: Robust Optimization Non-Asymptotics

The present note provides an initial theoretical explanation of the way norm regularizations may provide a means of controlling the non-asymptotic probability of False Dominance classification for empirically optimal portfolios satisfying empirical Stochastic Dominance restrictions in an iid setting. It does so via a dual characterization of the norm-constrained problem, as a problem of Distributional Robust Optimization. This enables the use of concentration inequalities involving the Wasserstein distance from the empirical distribution, to obtain an upper bound for the non-asymptotic…

#1532.

Stelios Arvanitis

Sparse spanning portfolios and under-diversification with second-order stochastic dominance

We develop and implement methods for determining whether relaxing sparsity constraints on portfolios improves the investment opportunity set for risk-averse investors.We formulate a new estimation procedure for sparse second-order stochastic spanning based on a greedy algorithm and Linear Programming. We show the optimal recovery of the sparse solution asymptotically whether spanning holds or not. From large equity datasets, we estimate the expected utility loss due to possible under-diversification, and find that there is no benefit from expanding a sparse opportunity set beyond 45 assets…