This is the accepted version of the paper.This version of the publication may differ from the final published version. and Shied (2002a,b), and its properties lie between those of the exponential and distortion principles, which can be obtained as special cases. Permanent repository link:

This is the submitted version of the paper.This version of the publication may differ from the final published version. Permanent repository link: AbstractThe theory and practice of risk measurement provides a point of intersection between risk management, economic theories of choice under risk, financial economics and actuarial pricing theory.This paper provides a review of these interrelationships, from the perspective of an insurance company seeking to price the risks that it underwrites. We examine three distinct approaches to insurance risk pricing, all being contingent on the concept of risk measures. Risk measures can be interpreted as representations of risk orderings, as well as absolute (monetary) quantifiers of risk. The first approach can be called an 'axiomatic' one, whereby the price for risks is calculated according to a functional determined by a set of desirable properties. The price of a risk is directly interpreted as a risk measure and may be induced by an economic theory of price under risk. The second approach consists in contextualising the considerations of the risk bearer by embedding them in the market where risks are traded. Prices are calculated by equilibrium arguments, where each economic agent's optimisation problem follows from the minimisation of a risk measure. Finally, in the third approach, weaknesses of the equilibrium approach are addressed by invoking alternative valuation techniques, the leading paradigm among which is arbitrage pricing. Such models move the focus from individual decision takers to abstract market price systems and are thus more parsimonious in the amount of information that they require. In this context, risk * We wish to thank two anonymous referees for their insightful observations, which significantly improved the paper. 1Electronic copy available at: http://ssrn.com/abstract=1006633Electronic copy available at: http://ssrn.com/abstract=1006633measures, instead of characterising individual agents, are used for determining the set of price systems that would be viable in a market.

In this paper we introduce technical efficiency via the intercept that evolve over time as a AR(1) process in a stochastic frontier (SF) framework in a panel data framework. Following are the distinguishing features of the model. First, the model is dynamic in nature. Second, it can separate technical inefficiency from fixed firm-specific effects which are not part of inefficiency. Third, the model allows one to estimate technical change separate from change in technical efficiency. We propose the ML method to estimate the parameters of the model. Finally, we derive expressions to calculate/predict technical inefficiency (efficiency).

The relationship and interaction of military spending and economic growth have been theoretically and empirically investigated since the 1970s but it still cannot provide conclusive evidence towards the direction and the quantification of the impact between the two magnitudes. The use of different data sets in terms of time periods, and number and geographic location of countries, different theoretical background leading to different econometric specifications, and single type of econometric methodology, make any comparison impossible. This paper looks into the dynamic interaction between military spending and economic growth during the period 1988–2013 that includes the recent years of economic crisis covering 138 countries without making any prior assumptions about the theoretical channels of influence, while not limited to a single estimation method but employing a wide range of methodologies in order to form a complete picture of the long‐ and short‐run interaction. Furthermore, as such interaction might not be linear, we create three groups of countries based on the countries' income developmental stage. Overall we find no evidence of long‐ and short‐run causality from the military spending to economic growth except for the developing countries (positive in the long run). However, from economic growth to military spending we find a positive impact for all groups except the least developed countries. We also notice the interaction was more prominent prior to the start of the economic crisis.

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