Felipe Zurita | Pontificia Universidad Catolica de Chile (original) (raw)

Papers by Felipe Zurita

Applied Economics Letters, 2021

International Economic Review, May 1, 2010

Ordinarily labor market equilibrium implies that the marginal worker is indifferent to employment... more Ordinarily labor market equilibrium implies that the marginal worker is indifferent to employment, and that the employer is indifferent between equally productive employees. When the marginal worker is indifferent to employment, employer preferences do not matter. If, however, the marginal worker strictly prefers to be employed, the employer can give favors, and may wish to do so even at some cost to efficient production. Not only may inefficient workers be employed, but also the employer will employ too many workers. We refer to this as the brother-in law effect. When the brother-in-law effect is due to unionization, the employment effect can be sufficiently strong that there is over-employment relative to the workforce that would be employed without unionization. When the employment effect is strong-because brothers-in-law are relatively good workers-this type of nepotism improves efficiency. If the employment effect is weak nepotism hurts efficiency.

RePEc: Research Papers in Economics, 2001

RePEc: Research Papers in Economics, 2013

This article studies the effect of the possibility that firms change their names over their incen... more This article studies the effect of the possibility that firms change their names over their incentives for choosing high quality. A firm may want to start over under a new name in order to avoid market punishment, if the reputation carried by its former name is too low. We find that that the effect of the name-changing option on incentives is ambiguous. Although the ability of avoiding punishment generally hurts incentives, it may sometimes improve them. Moreover, doing so may be the only way out a low-effort trap. The conditions under which each case obtains are explored.

RePEc: Research Papers in Economics, Jun 22, 2009

Latin American Journal of Economics: formerly Cuadernos de Economía, 2009

This essay discusses the status of Financial Economics as a discipline in the face of the current... more This essay discusses the status of Financial Economics as a discipline in the face of the current global crisis. Contrary to some criticisms that have been levied, it defends the thesis that the discipline has not irresponsibly abused the rational man-rational markets paradigm, thereby causing a general unawareness of the dangers conceiled in the real estate bubble.

RePEc: Research Papers in Economics, Apr 1, 2005

Documentos de Trabajo ( Instituto de Economía PUC ), 2004

La selección de una tasa de descuento apropiada es una elección importante en la evaluación de pr... more La selección de una tasa de descuento apropiada es una elección importante en la evaluación de proyectos de inversión, tanto privada como social. Las teorías que racionalizan el uso del criterio del VAN también identifican la tasa apropiada. Sin embargo, queda la pregunta de qué hacer cuando esas teorías no se acercan adecuadamente al escenario en que la decisión se toma. Este ensayo defiende la idea de que, en general, si la tasa a emplear no es obvia, entonces el criterio del VAN no tiene valor normativo. Palabras clave: tasa de descuento, VAN, evaluación de proyectos, tasa social de descuento. Clasificación JEL: D61, G31, H43.

Cuadernos de economía, Nov 1, 2009

This essay discusses the status of Financial Economics as a discipline in the face of the current... more This essay discusses the status of Financial Economics as a discipline in the face of the current global crisis. Contrary to some criticisms that have been levied, it defends the thesis that the discipline has not irresponsibly abused the rational man-rational markets paradigm, thereby causing a general unawareness of the dangers conceiled in the real estate bubble.

RePEc: Research Papers in Economics, 2013

This paper studies the entry-exit dynamics of an experience good industry. Consumers observe nois... more This paper studies the entry-exit dynamics of an experience good industry. Consumers observe noisy signals of past firm behavior and hold common beliefs regarding their types, or reputations. There is a small chance that firms may independently and unobservably be exogenously replaced. The market is perfectly competitive: entry is free, and all participants are price-takers. Entrants have an endogenous reputation uE. In the steady-state equilibrium, uE is the lowest reputation among active firms: firms that have done poorly leave the market, and some re-enter under a new name. This endogenous replacement of names drives the industry dynamics. In particular, exit probabilities are higher for younger firms, for inept firms, and for firms with worse reputations. Competent firms have stochastically larger reputations than inept firms both in the population as a whole and within each cohort, and thus are able to live longer and charge higher prices.

Latin American Journal of Economics: formerly Cuadernos de Economía, Nov 5, 2011

, five research teams gathered in Santiago, Chile, to discuss the growth experiences of Argentina... more , five research teams gathered in Santiago, Chile, to discuss the growth experiences of Argentina, Chile, Colombia, Mexico and Venezuela since independence from Spain was declared in 1810. The five teams answered an invitation from the editors of the Latin American Journal of Economics to explain why these countries' growth experiences lag so far behind those of the developed world, and at the same time, why their trajectories have been so dissimilar. This paper serves as an introduction to the special issue, characterizing the patterns of growth in Latin America, and discussing the teams' answers.

RePEc: Research Papers in Economics, 2008

Este trabajo compara modelos de inestabilidad financiera de naturaleza estadística y basados en l... more Este trabajo compara modelos de inestabilidad financiera de naturaleza estadística y basados en la teoría de opciones, para el conjunto de sociedades anónimas abiertas chilenas. Los modelos estadísticos tienen un ajuste adecuado, aunque la peculiar historia de las quiebras en el período considerado, a saber, su aglomeración al inicio, pone en duda su utilidad como herramienta predictiva. En el segundo caso, en cambio, el promedio de probabilidades de quiebra muestra una alta correlación con indicadores de riesgo bancarios, y los precede hasta en tres trimestres. En suma, este primer esfuerzo de medición es de un éxito moderado, pero señala una serie de caminos cuya exploración aparece promisoria. Palabras clave: insolvencia, riesgo de crédito.

Cuadernos de economía, Nov 1, 2005

Over the past two decades, an enormous amount of work has been done to improve the Expected Utili... more Over the past two decades, an enormous amount of work has been done to improve the Expected Utility model. Two areas have attracted major attention: the possibility of describing unforeseen contingencies and the need to accommodate the kind of behavior referred to in Ellsbergs paradox. This article critically assesses the Expected Utility model and its interpretations, as well as the basic principles underlying the referred extensions, with an emphasis on their applications.

RePEc: Research Papers in Economics, 2002

It is usually thought that network externalities, which are inherent to liquidity, make it desira... more It is usually thought that network externalities, which are inherent to liquidity, make it desirable to concentrate transactions in one stock exchange. This paper shows that when the value of liquidity stems from the ability of potentially reach as many traders as possible, the market is integrated when every broker meets every other broker in at least one exchange. Thus, fragmentation is not about trades being executed in di¤erent exchanges but of connectedness among brokers. An implication of this distinction is that in an integrated market the network externality created by liquidity becomes pecuniary and the optimal number of exchanges depends only on the shape of the (physical) technology to execute trades-whether it exhibits increasing, constant or decreasing returns to scale-as in any standard industry. We characterize the planner's allocation and compare it with that reached by a monopoly. It is shown that when exchanges are natural monopolies a particular ownership structure of the exchange and allocation of voting rights over the exchange fee achieve the planner's optimum. With decreasing returns to scale the Walrasian allocation is e¢cient, provided that the market is integrated. Nevertheless, with few exchanges the price-taking assumption is suspect. If exchanges are not price takers, there are many other equilibria, all of them ine¢cient. Moreover, there are reasons to doubt that the market will become integrated. Fragmentation softens price competition between exchanges and may help a monopolist exchange to erect a barrier to entry even when he has no cost advantage.

Social Science Research Network, 2002

It is usually thought that network externalities, which are inherent to liquidity, make it desira... more It is usually thought that network externalities, which are inherent to liquidity, make it desirable to concentrate transactions in one stock exchange. This paper shows that when the value of liquidity stems from the ability of potentially reach as many traders as possible, the market ...

Annals of Finance, Aug 9, 2007

This note shows that according to Lipmann and McCall's (1986) operational de…nition of liquidity,... more This note shows that according to Lipmann and McCall's (1986) operational de…nition of liquidity, incomplete markets are a necessary condition for illiquidity.

Journal of Financial Intermediation, Jul 1, 2004

Speculation creates an adverse selection cost for utility traders, who will choose not to trade i... more Speculation creates an adverse selection cost for utility traders, who will choose not to trade if this cost exceeds the benefits of using the asset market. However, if they do not participate, the market collapses, since private information alone is not sufficient to create a motive for trade. Therefore, there is a limit to the amount of speculative transactions that a given market can support. We compare this limit in decentralized versus centralized market regimes, finding that the centralized regime is more prone to speculation than the decentralized one: the transaction fees charged by an intermediary diminish the individual return to information, so that for a fixed value of trading, more speculative transactions can be supported. The analysis also suggests a reason for the existence of intermediaries in financial markets. JEL classification numbers: D84, G10.

. We develop a comprehensive probabilistic seismic risk assessment model and apply it to the coas... more . We develop a comprehensive probabilistic seismic risk assessment model and apply it to the coastal city of San Antonio in Chile. We use this model to analyze the implications of various counterfactuals of the exposed building stock, in terms of different risk metrics. We begin by generating a synthetic earthquake catalog via Monte Carlo simulations. We then simulate spatial seismic intensities by using ground motion models, considering correlation parameters specifically estimated for the Chilean subduction zone, to evaluate ground motion intensity measures at each site. Additionally, we develop a high-resolution exposure model that characterizes the building stock and population distribution at the census block level. We use the proposed methodology to obtain risk curves for the current exposed building stock, as well as for four counterfactuals involving changes in building materials and/or design levels. Thus, we quantitatively identify the most effective alternatives for mitigation plans. These alternatives consider not only physical damage but also economic losses and casualties, showing the method's potential for its use as a valuable public policy planning tool for decision-makers. Specifically, we find that changing either the building material or the design level of the predominant building class results in significant reductions in expected annual losses of physical damage, casualties and economic losses.

RePEc: Research Papers in Economics, Aug 11, 2004

This article aims at furthering our understanding of the "participation puzzle"-the fact that mos... more This article aims at furthering our understanding of the "participation puzzle"-the fact that most households do not hold stocks, despite the diversification gains and the significant risk-premium gain it would involve. In particular, it advances one idea: staying out of the market may be a rational response to the own ignorance. Within a stylized example, it shows that ambiguity-averse individuals may hold no stocks, even though they carry a large risk premium. Within a logit model for the 2001 Survey of Consumer Finances, it shows suggesting evidence in favor of this idea.

Applied Economics Letters, 2021

International Economic Review, May 1, 2010

Ordinarily labor market equilibrium implies that the marginal worker is indifferent to employment... more Ordinarily labor market equilibrium implies that the marginal worker is indifferent to employment, and that the employer is indifferent between equally productive employees. When the marginal worker is indifferent to employment, employer preferences do not matter. If, however, the marginal worker strictly prefers to be employed, the employer can give favors, and may wish to do so even at some cost to efficient production. Not only may inefficient workers be employed, but also the employer will employ too many workers. We refer to this as the brother-in law effect. When the brother-in-law effect is due to unionization, the employment effect can be sufficiently strong that there is over-employment relative to the workforce that would be employed without unionization. When the employment effect is strong-because brothers-in-law are relatively good workers-this type of nepotism improves efficiency. If the employment effect is weak nepotism hurts efficiency.

RePEc: Research Papers in Economics, 2001

RePEc: Research Papers in Economics, 2013

This article studies the effect of the possibility that firms change their names over their incen... more This article studies the effect of the possibility that firms change their names over their incentives for choosing high quality. A firm may want to start over under a new name in order to avoid market punishment, if the reputation carried by its former name is too low. We find that that the effect of the name-changing option on incentives is ambiguous. Although the ability of avoiding punishment generally hurts incentives, it may sometimes improve them. Moreover, doing so may be the only way out a low-effort trap. The conditions under which each case obtains are explored.

RePEc: Research Papers in Economics, Jun 22, 2009

Latin American Journal of Economics: formerly Cuadernos de Economía, 2009

This essay discusses the status of Financial Economics as a discipline in the face of the current... more This essay discusses the status of Financial Economics as a discipline in the face of the current global crisis. Contrary to some criticisms that have been levied, it defends the thesis that the discipline has not irresponsibly abused the rational man-rational markets paradigm, thereby causing a general unawareness of the dangers conceiled in the real estate bubble.

RePEc: Research Papers in Economics, Apr 1, 2005

Documentos de Trabajo ( Instituto de Economía PUC ), 2004

La selección de una tasa de descuento apropiada es una elección importante en la evaluación de pr... more La selección de una tasa de descuento apropiada es una elección importante en la evaluación de proyectos de inversión, tanto privada como social. Las teorías que racionalizan el uso del criterio del VAN también identifican la tasa apropiada. Sin embargo, queda la pregunta de qué hacer cuando esas teorías no se acercan adecuadamente al escenario en que la decisión se toma. Este ensayo defiende la idea de que, en general, si la tasa a emplear no es obvia, entonces el criterio del VAN no tiene valor normativo. Palabras clave: tasa de descuento, VAN, evaluación de proyectos, tasa social de descuento. Clasificación JEL: D61, G31, H43.

Cuadernos de economía, Nov 1, 2009

This essay discusses the status of Financial Economics as a discipline in the face of the current... more This essay discusses the status of Financial Economics as a discipline in the face of the current global crisis. Contrary to some criticisms that have been levied, it defends the thesis that the discipline has not irresponsibly abused the rational man-rational markets paradigm, thereby causing a general unawareness of the dangers conceiled in the real estate bubble.

RePEc: Research Papers in Economics, 2013

This paper studies the entry-exit dynamics of an experience good industry. Consumers observe nois... more This paper studies the entry-exit dynamics of an experience good industry. Consumers observe noisy signals of past firm behavior and hold common beliefs regarding their types, or reputations. There is a small chance that firms may independently and unobservably be exogenously replaced. The market is perfectly competitive: entry is free, and all participants are price-takers. Entrants have an endogenous reputation uE. In the steady-state equilibrium, uE is the lowest reputation among active firms: firms that have done poorly leave the market, and some re-enter under a new name. This endogenous replacement of names drives the industry dynamics. In particular, exit probabilities are higher for younger firms, for inept firms, and for firms with worse reputations. Competent firms have stochastically larger reputations than inept firms both in the population as a whole and within each cohort, and thus are able to live longer and charge higher prices.

Latin American Journal of Economics: formerly Cuadernos de Economía, Nov 5, 2011

, five research teams gathered in Santiago, Chile, to discuss the growth experiences of Argentina... more , five research teams gathered in Santiago, Chile, to discuss the growth experiences of Argentina, Chile, Colombia, Mexico and Venezuela since independence from Spain was declared in 1810. The five teams answered an invitation from the editors of the Latin American Journal of Economics to explain why these countries' growth experiences lag so far behind those of the developed world, and at the same time, why their trajectories have been so dissimilar. This paper serves as an introduction to the special issue, characterizing the patterns of growth in Latin America, and discussing the teams' answers.

RePEc: Research Papers in Economics, 2008

Este trabajo compara modelos de inestabilidad financiera de naturaleza estadística y basados en l... more Este trabajo compara modelos de inestabilidad financiera de naturaleza estadística y basados en la teoría de opciones, para el conjunto de sociedades anónimas abiertas chilenas. Los modelos estadísticos tienen un ajuste adecuado, aunque la peculiar historia de las quiebras en el período considerado, a saber, su aglomeración al inicio, pone en duda su utilidad como herramienta predictiva. En el segundo caso, en cambio, el promedio de probabilidades de quiebra muestra una alta correlación con indicadores de riesgo bancarios, y los precede hasta en tres trimestres. En suma, este primer esfuerzo de medición es de un éxito moderado, pero señala una serie de caminos cuya exploración aparece promisoria. Palabras clave: insolvencia, riesgo de crédito.

Cuadernos de economía, Nov 1, 2005

Over the past two decades, an enormous amount of work has been done to improve the Expected Utili... more Over the past two decades, an enormous amount of work has been done to improve the Expected Utility model. Two areas have attracted major attention: the possibility of describing unforeseen contingencies and the need to accommodate the kind of behavior referred to in Ellsbergs paradox. This article critically assesses the Expected Utility model and its interpretations, as well as the basic principles underlying the referred extensions, with an emphasis on their applications.

RePEc: Research Papers in Economics, 2002

It is usually thought that network externalities, which are inherent to liquidity, make it desira... more It is usually thought that network externalities, which are inherent to liquidity, make it desirable to concentrate transactions in one stock exchange. This paper shows that when the value of liquidity stems from the ability of potentially reach as many traders as possible, the market is integrated when every broker meets every other broker in at least one exchange. Thus, fragmentation is not about trades being executed in di¤erent exchanges but of connectedness among brokers. An implication of this distinction is that in an integrated market the network externality created by liquidity becomes pecuniary and the optimal number of exchanges depends only on the shape of the (physical) technology to execute trades-whether it exhibits increasing, constant or decreasing returns to scale-as in any standard industry. We characterize the planner's allocation and compare it with that reached by a monopoly. It is shown that when exchanges are natural monopolies a particular ownership structure of the exchange and allocation of voting rights over the exchange fee achieve the planner's optimum. With decreasing returns to scale the Walrasian allocation is e¢cient, provided that the market is integrated. Nevertheless, with few exchanges the price-taking assumption is suspect. If exchanges are not price takers, there are many other equilibria, all of them ine¢cient. Moreover, there are reasons to doubt that the market will become integrated. Fragmentation softens price competition between exchanges and may help a monopolist exchange to erect a barrier to entry even when he has no cost advantage.

Social Science Research Network, 2002

It is usually thought that network externalities, which are inherent to liquidity, make it desira... more It is usually thought that network externalities, which are inherent to liquidity, make it desirable to concentrate transactions in one stock exchange. This paper shows that when the value of liquidity stems from the ability of potentially reach as many traders as possible, the market ...

Annals of Finance, Aug 9, 2007

This note shows that according to Lipmann and McCall's (1986) operational de…nition of liquidity,... more This note shows that according to Lipmann and McCall's (1986) operational de…nition of liquidity, incomplete markets are a necessary condition for illiquidity.

Journal of Financial Intermediation, Jul 1, 2004

Speculation creates an adverse selection cost for utility traders, who will choose not to trade i... more Speculation creates an adverse selection cost for utility traders, who will choose not to trade if this cost exceeds the benefits of using the asset market. However, if they do not participate, the market collapses, since private information alone is not sufficient to create a motive for trade. Therefore, there is a limit to the amount of speculative transactions that a given market can support. We compare this limit in decentralized versus centralized market regimes, finding that the centralized regime is more prone to speculation than the decentralized one: the transaction fees charged by an intermediary diminish the individual return to information, so that for a fixed value of trading, more speculative transactions can be supported. The analysis also suggests a reason for the existence of intermediaries in financial markets. JEL classification numbers: D84, G10.

. We develop a comprehensive probabilistic seismic risk assessment model and apply it to the coas... more . We develop a comprehensive probabilistic seismic risk assessment model and apply it to the coastal city of San Antonio in Chile. We use this model to analyze the implications of various counterfactuals of the exposed building stock, in terms of different risk metrics. We begin by generating a synthetic earthquake catalog via Monte Carlo simulations. We then simulate spatial seismic intensities by using ground motion models, considering correlation parameters specifically estimated for the Chilean subduction zone, to evaluate ground motion intensity measures at each site. Additionally, we develop a high-resolution exposure model that characterizes the building stock and population distribution at the census block level. We use the proposed methodology to obtain risk curves for the current exposed building stock, as well as for four counterfactuals involving changes in building materials and/or design levels. Thus, we quantitatively identify the most effective alternatives for mitigation plans. These alternatives consider not only physical damage but also economic losses and casualties, showing the method's potential for its use as a valuable public policy planning tool for decision-makers. Specifically, we find that changing either the building material or the design level of the predominant building class results in significant reductions in expected annual losses of physical damage, casualties and economic losses.

RePEc: Research Papers in Economics, Aug 11, 2004

This article aims at furthering our understanding of the "participation puzzle"-the fact that mos... more This article aims at furthering our understanding of the "participation puzzle"-the fact that most households do not hold stocks, despite the diversification gains and the significant risk-premium gain it would involve. In particular, it advances one idea: staying out of the market may be a rational response to the own ignorance. Within a stylized example, it shows that ambiguity-averse individuals may hold no stocks, even though they carry a large risk premium. Within a logit model for the 2001 Survey of Consumer Finances, it shows suggesting evidence in favor of this idea.