Category Archives: New Articles

The Deferral of Attacks: SP/A Theory as a Model of Terrorist Choice when Losses Are Inevitable

Authors: Peter J. Phillips, Gabriela Pohl
Published Online: 2017-02-07

When a terrorist group’s aspirations far exceed the outcomes that can be expected to result from any of the available attack methods, an outcome below the terrorist group’s aspiration level is inevitable. A primary prediction of SP/A theory when applied to the study of terrorist behaviour is that when losses are inevitable the terrorist group will be risk averse and inclined to defer further action until expected outcomes improve, new attack method innovations are developed or the memory of the event that shaped aspirations has faded sufficiently that the aspiration level can be ‘reset’. This complements existing predictions of loss aversion and risk seeking behaviour over the domain of avoidable losses and provides a starting point for developing explanations for patterns of behaviour that are observed in the terrorism context, including pauses in violence, even during brutality contests, and time-lags between terrorist attacks.

Keywords: SP/A TheoryTerrorist BehaviourRiskUncertaintyInevitable LossesAspirationBrutalityViolenceContestsAttacksAvoidable Losses

The Shapiro-Stiglitz Model with Non-constant Marginal Utility

Authors: Joseph S. K. Wu / Chi Pui Ho
Published Online: 2017-09-06 |

source: Fig. 3 from presented article


The Shapiro-Stiglitz model plays an important role in the employment theory. Woodford pointed out the theoretic limitation of the linear worker’s utility function in that model. He questioned the model’s implication of the secular decline in the unemployment rate when such rate was in fact trendless. He proposed to resolve this by allowing diminishing marginal utility of income. In this paper, the Shapiro- Stiglitz model is generalized using a nonlinear utility function implicit in the Stiglitz Efficiency-wage paper, thus linking these two well-known models. The nonlinear utility function in this generalized model not only allows for diminishing marginal utility of income but also allows for the analysis of parameters representing various factors affecting the secular unemployment rate. In particular, we can specify the condition under which the diminishing marginal utility can cause such rate to be trendless.

Keywords: MacroeconomicsEfficiency-WageS-shaped Effort SupplyShirking model

Shadow Economy: Estimation Methods, Problems, Results and Open questions

Friedrich Schneider / Andreas Buehn
Published Online: 2017-05-16


This paper presents various methods used for estimating the size of the shadow economy. Each method is evaluated and its strengths and weaknesses are discussed, as well as results each method yields. The purpose of the paper is threefold: Firstly, to demonstrate that there is no single infallible method for estimating the size and development of the shadow economy and results can differ significantly between different approaches. The MIMIC approach, discussed in greater detail, is often used due to its flexibility. Secondly, the paper discusses the very definition of the shadow economy and factors contributing to its growth. Finally, latest estimations of the size of the shadow economies of 143 countries over the period 1996 to 2014 are presented.

Keywords: shadow economy estimatesMIMIC approachmethods to estimate the shadow economyadvantages and disadvantages of the methodsMIMIC-methodcalibration procedurelight intensity approach