Microeconomics

Islamic Values ​​in the Theory of Consumption (Indonesian Language)

by Ali Muhayatsyah

This paper is presented in the course of Islamic Economics: Micro and Macro with lecturers Drs. Munrokhim Misanam, MA.Ec., Ph.D. At concentrations of Shariah Finance and Banking, Graduate School UIN Sunan Kalijaga Yogyakarta.

Islam menggariskan bahwa tujuan konsumsi bukan semata-mata memenuhi kepuasan terhadap barang (utilitas), namun yang... more Islam menggariskan bahwa tujuan konsumsi bukan semata-mata memenuhi kepuasan terhadap barang (utilitas), namun yang lebih utama adalah sarana untuk mencapai kepuasan sejati yang utuh dan komprehensif yaitu kepuasan dunia dan akhirat. Kepuasan tidak saja dikaitkan dengan kebendaan tetapi juga dengan ruhiyah atau ruhaniyah atau spiritual, bahkan kepuasan terhadap konsumsi suatu benda yang bertentangan dengan nilai-nilai Islam, maka kepuasaan ini harus ditinggalkan. Oleh karena itu konsumen rasional dalam ekonomi Islam adalah konsumen yang dapat memandu perilakunya supaya dapat mencapai kepuasan maksimum sesuai dengan norma-norma Islam yang dapat pula diistilahkan dengan maslahah. Jadi, tujuan konsumen muslim bukanlah memaksimumkan utility, tetapi memaksiumumkan maslahah.

Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms

by Carlo Migliardo

pubblished in "Economic Modelling" elsevier vol. 29 (4) (2012) pp. 1106-1118

In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large... more In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large part of Italian firms. In our view, “the black boxes” to examine are the relations between price setting, market structure and spatial disparities. The paper aims to extend the empirical literature in several directions. A first goal of the research is to investigate the link between heterogeneity in price changes and spatial dependence. Besides, we compare the price dynamics among sectors, namely manufacturing vs. service. It is irrefutable that prices stickiness is linked to good market rigidities. Consequently, these issues have extremely important policy implications; for instance, the Monetary Authority considers the macro price indexes in order to determine the right policy to stabilize the economy and to improve social welfare. However, the Central Bank does not distinguish the likely aggregation bias source from the cross sector–region–country heterogeneities.

Overall, the purpose of this paper is to provide an analysis of survey data that allows us to collect important aspects for Economic Policy analysis, which could not be drawn from analysis with “mesoeconomic” or aggregate data. Finally, we provide empirical evidence that price dynamic heterogeneity across geographical areas, as well as disparities across industries, are statistically significant in our microeconometric models. Indeed, the probability that industries in the backward areas change prices is 30% less than in more developed regions (Northeast). In addition, we find that sectoral diversity counts especially across goods and service industries, even if this outcome is not always robust across microeconometric specifications.

Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms

by Carlo Migliardo

pubblished in "Economic Modelling" elsevier vol. 29 (4) (2012) pp. 1106-1118

In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large... more In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large part of Italian firms. In our view, “the black boxes” to examine are the relations between price setting, market structure and spatial disparities. The paper aims to extend the empirical literature in several directions. A first goal of the research is to investigate the link between heterogeneity in price changes and spatial dependence. Besides, we compare the price dynamics among sectors, namely manufacturing vs. service. It is irrefutable that prices stickiness is linked to good market rigidities. Consequently, these issues have extremely important policy implications; for instance, the Monetary Authority considers the macro price indexes in order to determine the right policy to stabilize the economy and to improve social welfare. However, the Central Bank does not distinguish the likely aggregation bias source from the cross sector–region–country heterogeneities.

Overall, the purpose of this paper is to provide an analysis of survey data that allows us to collect important aspects for Economic Policy analysis, which could not be drawn from analysis with “mesoeconomic” or aggregate data. Finally, we provide empirical evidence that price dynamic heterogeneity across geographical areas, as well as disparities across industries, are statistically significant in our microeconometric models. Indeed, the probability that industries in the backward areas change prices is 30% less than in more developed regions (Northeast). In addition, we find that sectoral diversity counts especially across goods and service industries, even if this outcome is not always robust across microeconometric specifications.

Small is beautiful. On the efficiency of credit markets in late medieval Holland

by Jaco Zuijderduijn

Co-authored with Jan Luiten van Zanden and Tine de Moor
Published in European Review of Economic History 16 (2012) 3-22

In this paper, we analyse the functioning of private capital markets in Holland in the late medieval period. We argue... more In this paper, we analyse the functioning of private capital markets in Holland in the late medieval period. We argue that in the absence of banks and state agencies involved in the supply of credit, entrepreneurs’ access to credit was determined by two interrelated factors. The first was the quality of property rights protection and the extent to which properties could be used as collateral. The second was the level of interest in borrowing money at the time as well as such borrowing compared with the interest rates on risk-free investments. For our case study, the small town of Edam and its hinterland, De Zeevang, in
the fifteenth and sixteenth centuries, we demonstrate that properties were used as collateral on a large scale and that interest rates on both small and large loans were relatively low
(about 6 percent). As a result, many households (whether headed by men or women) owned financial assets and/or debts, and the degree of financial sophistication was relatively high.

Spending, saving, or investing? Risk management in sixteenth-century Dutch households

by Jaco Zuijderduijn

Co-authored with Tine de Moor
To be published in Economic History Review
First-view article available online

In the past one of the main challenges to households was that of coping with adversity. War, plague, famine, and flood... more In the past one of the main challenges to households was that of coping with adversity. War, plague, famine, and flood were a constant threat, and could reduce what little improvements families had made in productivity. Economic growth therefore required a means of absorbing external adversities. To see how well late medieval households coped with adversity, this investigation focuses on the households of a small town and its surroundings in early modern Holland. Our findings reveal that several severe external shocks around 1500 had little effect on the general level or distribution of wealth, which suggests that certain forms of insurance may have protected the population. The results show that households increasingly invested in capital markets rather than employing such techniques as scattered holdings and hoarding. This fact indicates that such investment played a vital role in a household's risk aversion strategy. The change from unproductive to more productive risk-aversion strategies also provides some clues about progress with respect to insurance during Holland's financial revolution.

Deterministic versus Random Utility: Implied Patterns of Vertical Product Differentiation in a Multi-Product Monopoly

by Mark Lijesen

Co-authored with Christiaan Behrens, Eric Pels and Eric Verhoef

In this article we study patterns of vertical product differentiation in a multi-product monopoly using a random... more In this article we study patterns of vertical product differentiation in a multi-product monopoly using a random utility model. Prior research shows that applying such a model in a multi-product setting implies symmetric patterns of product differentiation in which all product variants of a single firm have the same characteristics. Assuming that preferences differ across consumers and allowing for unobserved demand heterogeneity, we numerically show the existence of asymmetric, fully differentiated, patterns of vertical product differentiation in which the monopolist maximises profits by setting prices and qualities. In particular, we show that the patterns of vertical product differentiation depend crucially on the level of unobserved demand heterogeneity and the observed dispersion of willingness to pay for quality. Only if unobserved demand heterogeneity is small relative to the observed dispersion, asymmetric, fully differentiated, equilibriums exist. Furthermore, we find in our model that the level of unobserved heterogeneity and the dispersion of willingness to pay for quality do not affect the relative welfare efficiency of the monopolist

Representations of Positive Projections on Lipschitz Vector Measure Games"

by Omer Edhan

This paper is a more general and comprehensive version of a previous paper of mine, called "Representation of Positive Projections on Spaces of Market Games".

Among the allocation rules studied in cooperative game theory and economics, positive projections play an important... more Among the allocation rules studied in cooperative game theory and economics, positive projections play an important role. The value, semivalues, and quasivalues of a cooperative game are several examples for allocations which are positive projections which are known to have important applications in economics. These solution concepts are known to have many applications in economics. In many applications the specific positive projection discussed is represented as an expectation of marginal contributions of agents to “random” coalitions. Usually these representations are used to characterize the positive projections
obeying certain additional properties or axioms. It is thus of interest to study the representation theory of positive projections and its relationship with other common axioms. We study positive projections defined over certain spaces of nonatomic Lipschitz vector measure games. To this end, we develop a general notion of “calculus” for such games, which in a manner extends the notion of the Radon-Nykodim derivative for measures. We prove several
representation results for positive projections, which essentially state that the image of a game under the action of a positive projections can be represented as an averaging of its derivative w.r.t. some vector measure. We then introduce a specific calculus for the space CON generated by concave, monotonically non-decreasing, and Lipschitz continuous functions of finitely many nonatomic probability measures, and study in detail the properties of the resulting representations of positive projections on CON , and especially those of values on CON . The latter results are of great importance in various applications in economics.

Proposal for a New Economic Framework Based on Islamic Principles

by Salman Ahmed Shaikh

This book provides a holistic socio-economic framework working in conformity with the Islamic principles. Chapter 2... more This book provides a holistic socio-economic framework working in conformity with the Islamic principles. Chapter 2 builds the ground for the proposed framework by discussing the foundations of the ethical precepts of Islam. It discusses the thesis of religion, answers some of the questions in the comparative study of religion and tries to resolve few of the misconceptions about the faith of Islam.

Chapter 3 outlines the economic teachings of Islam with regard to earning and spending. It discusses at length the ideals Islam set before its adherents in the ethical sphere of life. The ethical principles are discussed based on the study of relevant Quranic text and the narrations of Prophet Muhammad (PBUH).

Chapter 4 studies the comparative economic systems. It analyzes Capitalism, Socialism, Mixed Economy and Islamic economic system. Chapter 5 introduces the salient features of the proposed economic framework with special focus on fiscal reforms. It discusses the potential of the institution of Zakat to meet fiscal needs of the government and to assist it in doing away with deficit financing, fiscal bleeding, crowding out private sector and reducing deadweight loss by parting the way with private sector so as to ensure market economy operating on its own as far as possible and playing an active regulatory role.

Chapter 6 introduces the monetary reforms. It discusses how savings would feature despite discontinuation of interest, how inflation will be checked with central banks not having at their disposal conventional OMO, how liquidity will be managed in banking sector when a central bank wants to inject liquidity or mop up funds. How and to what extent the institution of Zakat would enable the government to meet its fiscal targets and does not crowd out private sector with public borrowing. How balance of payments and exchange rate stability can be managed in an interest free economy. If in the short term, the government or central bank needs alternative source of revenue other than Zakat, they can issue GDP linked bonds. This could replace T-bill and provide a base instrument for OMO and liquidity management in the banking and financial sector.

Chapter 7 introduces the currently practiced Islamic Banking and Finance. Since Islamic economic principles have more prominently been used in banking and finance, much of the discussion centers on Islamic banking and finance in lieu of analyzing the existing practices and then in the next chapter, preferable alternatives in areas where shortcoming is observed and need for improvement is felt are suggested.

Chapter 8 discusses the financial system in the proposed framework with the role of institutions and the discussion on comprehensive need fulfillment mechanisms to serve every major need of a sophisticated contemporary financial system.
Some important novel changes are recommended, such as introduction of options in mortgage financing, which will allow the bank to separate the tenancy and sale contract in a distinctive way. This will still ensure that it locks the sale with the borrower or with the third party without making both contracts dependent on each other. It will benefit the bank as well as the borrower, who will have an option but not an obligation to buy the asset at maturity.

The modified role of bank entering in a Mudarabah contract as a “Rabb-ul-maal” (investor) will ensure that the bank takes on operational risk. It will enable the resources to go into productive avenues rather than in financial instruments. This modification will generate employment and productive activities in the economy in a more direct manner.

The division of Mudarabah corporate and Mudarabah consumer will target two very distinct markets and will result in channeling of funds from saving surplus units to saving-deficient units. Reforms in equity markets and alternatives for insurance are also suggested.

Chapter 9 introduces feasibility and structure of Micro credit as an alternative for interest based micro finance. It discusses how the potential obstacles in the form of lack of trust, funding commitment, lack of collateral arrangement, lack of documentation etc would be handled.

Two Levels of Hedonistic Influence on Microeconomic Theory

by Stavros Drakopoulos

Published in Scottish Journal of Political Economy, vol.37, No.4, 1990

The starting point of this paper is the discrepancy between modern choice theories which cast themselves as... more The starting point of this paper is the discrepancy between modern choice theories which cast themselves as psychology-free and textbook choice theory (especially consumer theory) which is characterized by a high level of hedonistic influence. Three possible explanations for this discrepancy were suggested: (1) Pedagogic Reasons, (2) Friedman's Thesis and (3) Implicit psychology in choice theory itself. The third explanation is put forward as the most plausible. This is supported by a discussion of choice theories and by some recent developments in the literature. Clearly the implicit (and sometimes explicit) existence of hedonistic notions cast serious doubts on the alleged psychological neutrality of modern choice theories.

Mixed Signals: To what extent does wage scarring vary with the characteristics of the local labour market?

by Philip Ball

"Draft only, e-mail for latest version."

Continuous work-life histories are constructed using matched BHPS-LFS data, in order to test for regional variation in... more Continuous work-life histories are constructed using matched BHPS-LFS data, in order to test for regional variation in the impact of unemployment experience on future wage growth. The main hypothesis under test is whether unemployment spells experienced in high unemployment regions are seem by future employers as more a characteristic of the region than a negative productivity signal. Consistent with previous studies, empirical results highlight signicant and persistent average wage penalties due to interruption that depends on previous labour market status. Strong regional dierences are found in the impact of redundancy on wage growth. This is contingent on the labour market tightness and urbanity of the regional in which this unemployment was experienced. However, no evidence is found supporting the main hypothesis in the UK. It is likely that human capital explanations still play a substantial role, given that average unemployment durations are likely to be lower in tight labour markets with better re-employment prospects.

Características De Los Entrantes Y Estructura De Los Mercados

by Federico Pablo-Martí

Continuous Values on Market Games are Conic

by Omer Edhan

We prove that every continuous value on a space of vector measure market games Q, containing the space of nonatomic... more We prove that every continuous value on a space of vector measure market games Q, containing the space of nonatomic measures, has the conic property, i.e., if a game v in Q coincides with a nonatomic measure P on a conical diagonal neighborhood then its value equals to P. We deduce that every continuous value on the linear space spanned by all vector measure market games, M, is determined by its values on LM - the space of market games which are Lipschitz functions of the measures.

Values of Exact Market Games

by Omer Edhan

We show that a single-valued solution of nonatomic exact market games (or perfectly competitive TU economies underling... more We show that a single-valued solution of nonatomic exact market games (or perfectly competitive TU economies underling them) is uniquely determined as the Mertens value by four plausible value-related axioms. Since the Mertens value is always in the core of
an economy, this result provides an axiomatization of a core-selection (or, alternatively, a competitive payoff selection). Previous works in this direction assumed the underlying TU
economies to be either differentiable (e.g., Dubey and Neyman 1984) or of uniform finite type (e.g., Haimanko 2002). Our work does not assume that, thus it contributes to the axiomatic
study of payoffs in nonatomic market games in general. In fact, this is the first contribution in this direction.

Payoffs in Nondifferentiable Perfectly Competitive TU Economies

by Omer Edhan

We characterize a single-valued solution of nonatomic vector measure market games (or the perfectly competitive TU... more We characterize a single-valued solution of nonatomic vector measure market games (or the perfectly competitive TU economies underling them) as the Mertens value by
five plausible value related axioms. Since the Mertens value is always in the core of an economy, this result provides an axiomatization of a core selection (or, alternatively, a
competitive payoff selection). Previous works on this matter assumed the underlying TU economies to be either differentiable (e.g., Dubey and Neyman 1984) or of uniform finite type (e.g., Haimanko 2002). This work does not assume that, thus it contributes to the axiomatic study of payoffs in nonatomic economies in general.

Infinitely-lived agents via two-sided altruism

by Sherif Gamal Salem

SME: A PROSPECT FOR THE DEVELOPINGS

by Muhammad Walid Al Zubayer

Permissibility of Waqf Bank in Islamic Law

by Mohammad Tahir Sabit Mohammad

This is the corrected version of the copy printed in: Feng Tao Ed. International Proceedings of Economic Development and Research, Sociality and Economic Development, IPEDR Vol. 10 2011, IACSIT Press.

This paper looks at the permissibility of establishment of a waqf (a non-profit social bank) in Islamic law.... more This paper looks at the permissibility of establishment of a waqf (a non-profit social bank) in Islamic law. Considering the needs of the poor majority in all Muslim nations, unattended to by current banking system, it explores and extends the views of Muslim jurists regarding the validity of cash waqf to the permissibility of waqf bank. Cash waqf donations and proceeds can be used to form the capital of the bank. The principles of waqf and its perpetuity and the protection of the cash waqf can also apply to the capital of the bank. The structure of this bank and its functions has to be in conformity with waqf principles too.
Keywords: waqf, cash waqf, waqf bank, Islamic law, permissibility

Incorporación de Decisiones Binarias Cruzadas en al Elección del Consumo de Lácteos en un Modelo LA/AIDS

by Rodrigo García Arancibia

Co-authored with G. Rossini and E. Depetris Guiguet
II Congreso de Matemática Aplicada, Computacional e Industrial, Society for Industrial and Applied Mathematics, Rosario, Argentina

El presente trabajo tiene como objetivo mostrar la relevancia sobre las estimaciones de las elasticidades precio y... more El presente trabajo tiene como objetivo mostrar la relevancia sobre las estimaciones de las elasticidades precio y gasto de la demanda, cuando se considera la interacción cruzada entre las elecciones binarias en una primera etapa del proceso de estimación en dos etapas de sistemas de demanda censurados. Para ello se modela la elección binaria con un Probit Multivariado, tomando tales resultados en la segunda etapa para la estimación de los parámetros del modelo LA/AIDS. El análisis está aplicado al consumo de productos lácteos en Argentina, fundamentado en la posible dependencia de la elección de consumo entre pares de productos lácteos al momento en que una familia evalúa las componentes de su dieta. Las conclusiones se basan en las diferencias encontradas entre un modelo que considera tales correlaciones y otro alterno que supone la independencia entre las elecciones de consumir o no el bien.

Individual Determinants of Demand

by Patrice Natalie Delevante

ECON 2072 Principles of Macroeconomics

Individual determinants of demand include income, prices of related goods, tastes, expectations, and the number of... more Individual determinants of demand include income, prices of related goods, tastes, expectations, and the number of buyers (Principles of Economics,) and state that the amount of a given product is influenced long term based upon these determinants.  Income influences consumer demand of a luxury product versus an alternative item, and when there is high income, consumers react slightly to product price increase and with a slight reaction to a high price that is within their income.  The determinants of supply include the consumer demand price and quantity sold, that with the law of supply, “when the price of a good rises, the quantity supplied of the good rises” and consequently, in environmental ruins, prices of necessary products can increase and so too is the quantity with increased consumer demand with urgency.

Elasticity, Demand and Revenue

by Patrice Natalie Delevante

ECON 2072 Principles of Macroeconomics

Elasticity, demand and revenue are central terms that economist utilize to organize with competency the consumption of... more Elasticity, demand and revenue are central terms that economist utilize to organize with competency the consumption of goods and services, buyers response and reaction to a change in price of goods and services, and producers’ inputs and outputs to the increase or lessening of a product based upon consumer reaction and available buying overtime and when the product is considered a substitute, a necessity, or a luxury. When buyers and sellers in an economy increase a demand to produce and sell a particular product and react positively or negatively to the products’ outcome in the market, with either the seller requesting less of the product when consumer demand is in limited amount, or requesting less of the product to increase consumer demand, the term, elasticity is applied. In the demand schedule for a barbeque dinner, for example, the demand for barbeque dinners lessening caused buyers demand to be inelastic to elastic overtime influencing buyers to consume in increase of the limited production, and the total revenue to be influenced (see chart).




Price Quantity Demand Total Revenue Elasticity Coefficient Elastic or Inelastic
$4 100 400 XXXX XXXX
6 80 480 40% Inelastic
8 60 480 23% Elastic
10 40 400 13% Elastic
12 20 240 7% Elastic
14 1 14 3% Elastic