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Robert Dekle, Cathy Karnchanasai & Pongsak Hoontrakul. "The Thai Currency Crisis: Financing Constraints, High Fixed Costs, and Corporate Governance", Asian Economic Papers, 2006.
Abstract: We examine the role of financing constraints in depressing output during the Asian financial crisis, using Thai firm-level data. From an output declilne of 3.7 percent in our sample in 1998, we find that tightening financing constraints contributed to lowering output by l.7 percent. We also find evidence of high scale economies or high fixed costs in Thai industries. With high fixed costs, small changes in unit costs or financing costs can lead to large changes in output. We interpret the high fixed costs as evidence of over-investment prior to the crisis.
Richard A. Easterlin. "Building a Better Theory of Well-Being" in Luigino Bruni and Pier Luigi Porta (eds.), Economics & Happiness: Framing the Analysis, New York: Oxford University Press, 2006, 29-64.
Abstract: What do social surveys of life cycle experience tell us about the determinants of subjective well-being? First, that the psychologists' setpoint model is wrong. Life events in the nonpecuniary domain, such as marriage, divorce, and physical disability, have a lasting effect on well-being, and do not simply deflect the average person temporarily above or below a setpoint given by genetics and personality. Second, mainstream economists' inference that in the pecuniary domain "more is better," based on revealed preference theory, is wrong. An increase in income, and thus in the goods at one's disposal, does not bring with it a lasting increase in well-being, because of the negative effect on utility of hedonic adaptation and social comparison. The utility anticipated ex ante from an increase in consumption turns out ex post to be less than expected, as one adapts to the new level of living, and as the living levels of others improve correspondingly. A better theory of well-being builds on the evidence that adaptation and social comparison affect utility more in pecuniary than nonpecuniary domains. The failure of individuals to anticipate that these influences disproportionately undermine utility in the pecuniary domain leads to an excessive allocation of time to pecuniary goals at the expense of nonpecuniary goals, such as family life and health, and reduces well-being. There is need to devise policies that will yield better-informed individual preferences, and thereby increase individual and societal subjective well-being.
JEL Classifications: D60, I10, I31, J12, Z13
Key Words: subjective well-being, living level, health, marital status, aspirations